Appropriate FAO

FORESTRY
FORESTRY
PAPER

forest 68
industries

Selected
Selected papers an Expert
papers of an Expert Consultation
Consultation
held Indonesia
held in Jakarta, Indonesia
30 September-6 October 19851985

FINNIDA
FINNIDA

FOOD
AND
AGRICULTURE
ORGANIZATION
OF
OF THE
UNITED NATIONS
NATIONS
Rome, 1986
1986
 The
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ct if f:-ontie~s
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g FAO 1986
 - iii -

BACKGROUND

The B.PD'I-inlard
!"AO/Finland Expert
Expert Consul tation on
Consultation on Appropriate Fo.
Appropriate Forest _Aus-
Ind us-
tries
triei was
we:, held in Jakarta,
held 1r Indonesia, from
J1,srta, Indonesia, from 30
30 September
Septembertoto6 6octr:,c,
october 1985,
985,
with sJpport of the
the financial support
witn In, the Government
Government of of Finland
finland ar and with the
the
Government
Government of Incoresis
Indonesia providing
providing host
host facilities.
facilities.

The objectives
objectives of the the Consultation
Consultation were
were to review i7t;ner
to review issues which
have hO.,;;ri on appropriate
'-ve aa bearing appropriate development
development of
of forest
forest indi.6trirs,
industries, to tL propose
prLoos,.,
means tot
, for eval uat 1ng the
evaluating the appropriateness
appropr iateness of fores t iroist7y
of forFst i prrosqln Cr
already implemented
Cr- pm,PrIted projects and to advise on the
to advise tne activi
aoti:itic .111(h. Far
Sh .a
should undertake to promote
:Kc to promote appropriateness
appropriatenessininto.7e,t
forest-based
tiaird industries.

The main themes

themes to
to be
be discussed
discussed by
by the
the Consultation
Consultation were:
were,

(a) Common features

features of forest
forest industries
industries projects;
projects;
(b) enterprises;
Rural enterprises;
(c) requirements,
Institutional requirements;
(d) and industry;
People and industry,
(e)
le) Education and
and training;
training;
(f)
(f) What is
is appropriate?
appropriate?

Background
Background documents
documents for for each theme
theme had
had been
been sent
sent out
out to
to the
the
participants of
participants the Consultation
of the Consultation before
before the
the meeting,
meeting, together
ther with
with brief
brief
discussion papers
discussion for each theme,
papers for theme, highlighting
highlighting the issues
issues to be
be discussed.
discussed.
Dur ing the
During Cons ul tat ion itself,
the Consultation i tsel f, the papers were
the papers were not
not presented but
but there
there
introduction by
was aa brief introduction by the
the Secretariat
Secretariat for eaceach theme, following
which the theme was was discussed.
discussed. The emphasis
The emphasis of
of the Consultation was,
the Consultation was,
on exchange
therefore, On exchange of of views participants rather
views among the participants rather than
than on
on
presentation papers.
presentation of papers.

In this
this volume
volume the
the documentation
documentation of of the
the Consultation
Consultation hashas been
been
included, together with the introductory
introductuiy presentations ions made by by the
and a
Secretariat and a summary
summary ofof the
the discussion
discussc of each each item.
item. It should be
It be
emphasized that
e.:--i7nd that this
this summary
summary isis not
not aa vrc,
verbatim report but,
tim report but, rather,
rather, high-
high-
lights and emphasizes points which which were raised during the
isrl during the discussions.
discussions.
The discussion originally sent
iscussion papers originally sent to
tothe
the,,,orticipants
partiCipants areare not included
not included
Eirce they
since they would
would serve
serve no specific puinrow
no specific purpose in this context, after
this context, the
after the
Consultation, and the introductory papers by
C.:rsultatlon, the Secretariat
by the Secretariat cover
cover the
carne _ssJes in
same issues in aa more
more detailed
detailed manner.

A number
number of
of re,-om-criaricns
recommendations on 7n specific
spec,r,c details
Jetails were
were put forward
put forward
during ..Ith SOme
the discussions, te..iether with
during the course of the some broader recommen-
dations. The
The contents ofof a:I
all these esert_slly covered
ti.e-,e were essentially covered by
by the
the fol-
fol-
lowing
lowing recommendations toto FI-C,
FAO, slwted the Consultation:
tne .onn;_tation:
In cooperation with
In cooperation wi th the
the appropriate
appropr iate international
international agencies,
agencies, FAO
fAO
should,
should:

1. Emphasize the impoitanLe

nmphasize the importance of
of e^ iateness,= in
in forest indus-
indus-
tries and
and strengtnon
strengthen its
14.9 act
act. es in providing
:,-oviding advice and
advice and
assistance
ass istance to to govo-r,mcn7s
governments aniand industry in this regard.
this regard.
Special emphasis
Special emphasis i,hDuJd
should be give,
given to forest-based industrial
to 2:)re:3t-based industrial
development in the context of
the ronteAt of the tropical
tr,:ical forest action
forest action
programme and its objectives related to
to arresting
deforestation.
 -- iv
iv --

2. Prepare concrete and practical

Prepare concrete guidel ines for identifica-
practical guidelines
tion, design,
tion, design, preparation,
preparation, evaluation
evaluation and
and implementation
implementation of
of
forest industries.
appropriate forest industries. These should
These guidelines should
include economic, social, institutional
institutional and ecological
and ecological
aspects inin addition to conventional
addition to conventional issues normally consi-
issues normally
dered inin the
the above
above activities.
activities. Training should
Training should then
then be
organized at
organized at regional
regional and subregional levels,
and subregional levels, using
using these
these
guidel ines.
guidelines.
3. Pay greater attention to the role that small rural
industries
industries can
can play in the overall
overall development of the the forest
forest
industry sector, and
industry sector, and promote
promote action
action to ensure support
to ensure support for
for
greater sustainability and growth of these
these rural
enterprises~
enterprises,

4. Increase its efforts

Increase its efforts in prov id ing advice
in providing adv ice to
to governments
governments on
necessary adjustments in their legal and institutionalinstitutional
framework forfor the
the creation
creation of of favourable
favourable conditions forfor
appropriate industrial development
appropriate industrial development andand for
for improvements
improvements in
benefits derived
derived from
from forest
forest industries
industries atat national
national and
and
local levels.
local 1 evels •

5. Expand and
Expand and strengthen
strengthen the
the ongoing
ongoing efforts
efforts of FAO for
of FAO for the
the
of people's
promotion of people's participation
participation in
in forestry
forestry with
with regard
regard
to acU vi ties
activities for development of appropriate forest
industries.
industries.

6. Continue to strengthen the education and training capability

and training
of developing
developing countries
countries to
to improve
improve the
the managerial
managerial and
and tech-
tech-
nical skills required by
by appropriate forest industry
enterprises.

7. action to
Take action to improve
improve the
the existing
existing knowledge
knowledge of
of the
the impact
impact
of policy measures within and outside thethe forestry
forestry sector on
sustained
sustained development of appropriate
appropriate forest
forest industries.
industries.
 - v -

TABLE OF CONTENTS

Page

BACKGROUND iii

PART II SUMMARY OF
INTRODUCTORY PAPERS AND SUMMARY OF DISCUSSIONS
DISCUSSIONS

COMMON
COMMON FEATURES
FEATURES OF INDUSTRIES PROJECTS
OF FOREST INDUSTRIES 3
- Introductory Note by the
the Secretariat
Secretariat

COMMON fEATURES OF FOREST INDUSTRIES

COMMON FEATURES INDUSTRIES PROJECTS
PROJECTS 7
7
-- Summary of Discussion

SMALL SCALE PROCESSING ENTERPRISES

ENTERPRISES 99
- Introductory Note by
by the
the Secretariat
Secretariat

SMALL
SMALL SCALE PROCESSING ENTERPRISES
ENTERPRISES 13
-- Summary of Discussion

INSTITUTIONAL
INSTITUTIONAL REQUIREMENTS 16
16
- Introductory Note by the
the Secretariat
Secretariat

INSTITUTIONAL
INSTITUTIONAL REQUIREMENTS 18
- Summary of Discussion
Discussion

PEOPLE AND INDUSTRY

INDUSTRY 20
- Introductory Note
Note by
by the
the Secretariat
Secretariat

PEOPLE
PEOPLE AND
AND INDUSTRY 24
- Summary of Discussion
Discussion

EDUCATION AND TRAINING 29

29
- Introductory Note by the
the Secretariat
Secretariat

EDUCATION AND TRAINING 39

39
-- Summary of Discussion
Discussion

WHAT IS APPROPRIATE? 43
- Introductory Note by the
the Secretariat
Secretariat

WHAT IS APPROPRIATE? 51
- Summary of Discussion
Discussion
 - vi -

PART II
FART II BACKGROUND DOCUMENTS
DOCUMENTS

COMMON FEATURES
!"EATURES OF
O!" FOREST
!"OREST INDUSTRIES
INDUSTRIES PROJECTS
PROJECTS 59
by
by J.S. Bethel
J.S. Bethel

SMALL SCALE !"OREST-BASED PROCESSING ENTERPRISES:

SCALE FOREST-BASED ENTERPRISES,
H1PACT ON RURAL
THEIR CHARACTERISTICS AND IMPACT
EMPLOYMENT AND INCOME
INCOME 71
71
by Secretariat
by the Secretariat

BAMBOO-BASED INDUSTRY IN KERA

KERALA STATE, INDIA
A STATE, INDIA 99
C.T.S. Nair
by C.T.S.
PRODUCTION Of
OF CHARCOAL IN SALTA PROVINCE
(ARGENTINA) III
111
by
by Carlos
Carlos Saravia Toledo

LIBERIA,
LIBERIA: THE
THE LEGAL
LEGAL AND INSTITUTIONAL FRAMEWORK
FRAMEWORK
FOR CITIZEN PARTICIPATION IN
IN FOREST
FOREST INDUSTRIES
INDUSTRIES 133
by f.
F. Kranwe Sio

FOREST INDUSTRY ININ ITALY:

ITALY, SOLUTIONS
CONSTRAINTS, SOLUTIONS
AND POLICY ISSUES
ISSUES 145
145
by F. Pi'istina
F. P6stina

IMPROVING
IMPROVING LEGISLATION FOREST
LEGISLATION FOR APPROPRIATE FOREST
INDUSTRIES 157
157
by the
the Secretariat

TECHNOLOGY AND PEOPLE

PEOPLE AT PAPER
PAPER INDUSTRIES
INDUSTRIES
CORPORATION OF
OF THE
THE PHILIPPINES
PHILIPPINES 169
169
P.M. Picornell
by P.M.

THE KESEDAR PROJECT

PROJECT IN
IN KELANTAN,
KELANTAN, MALAYSIA:
MALAYSIA, A A
STUDY OF
Of THE SOCIO-ECONOMIC DYNAMICS ININ A NEW
NE~I
LAND DEVELOPMENT SCHEME 181
181
by Alexa Webster
PLAN FOR
GENERAL PLAN FOR TIMBER ESTATES
ESTATES DEVELOPMENT
DEVELOPMENT IN
IN
INDONESIA 201
by Apandi Mangundikoro
TRAINING OF
Of LABOUR
LABOUR IN
IN A
A NEW
NEW CELLULOSE
CELLULOSE PULP
PULP MILL
MILL
ALTO PARANA S.A.
S.A. AT PUERTO ESPERANZA,
ESPERANZA, MISIONES
MISIONES -
ARGENTINA 217
based On the
based On the work
work of
of J.E. Balcker
JE. Balcker
EDUCATION
EDUCATION AND
AND TRAINING IN FORESTRY
TRAINING IN 227
by the Secretariat
MEASURING
MEASURING TRAINING REQUIREMENTS AND IMPACT
IMPACT OF
Of
IN FOREST
TRAINING IN FOREST INDUSTRIES
INDUSTRIES 235
by the
the Secretariat
 - vi i --

A STRATEGY
STRV! Y FOR
FOR THE
THE DEVELOPMENT
DEVELCPMENT OF FOREST INDUSTRY
CF FOREST INDUSTRY
IN
IN DEVELOPING
[Y COUNTRIES (THE
(THE CASE CE
OF MEXICO)
MEXICO) 249
249
by AntonioJ Hernandez Murrieta
V rnridez Murrieta

DEVELOPMENT
DEVELC!0! AT OFOF AA FIBREBOARD
FIBREBOARD FACTORY
FACTORY AT
AT ELBURGON,
KENYA 261
by Kamall
F.M. Kamau
by F.M.

THE
THE NIGERIAN-ROMANIAN WOOD
WOOD INDUSTRIES
INDUSTRIES (NIROWI)
(NIRO~II)
DEGREE
DEGREE OF
OF APPROPRIATENESS 275
based on
based on the work of G.O. Igllgll
G.O. Igugu

DEVELOPMENT INTEGRATED FOREST

DrwETOPMENT IMPACT OF AN INTEGRATED FOREST
INDUSTRY IN CHILE
INDNSIFY IN CBILE 2P.7
by Hernan Cortes
F,-rnar Cc' 'tés

A REVIEW
PE1'I OF METHODOLOGY FOR EVALUATION
1 EVALUATION OF
OF
APPROPRIATENESS 311
311
Kari J. M-stanoia
cv Yiri Mllstanoia
RURAL DENDRO-ENERGY PROJECTS
RURAL DENCRO-ENEROY 325
325
by EKONO Cy
Oy

A CASE
CASE HISTORY
HISTORY OF
OF THE ARACRUZ
ARACRUZ PULP MILL PRCJECT
PROJECT
IN
IN BRAZIL 341
341
by P~yry Oy
by Jaakko Pöyry Oy

SOCIO-ECONOMIC APPRAISAL
SOCIO-ECONO~lIC APPRAISAL OF ALTERNATIVE
TECHNOLOGIES SAO
TECHNOLOGIES FOR THE SAWING OF SOFTWOOD AT SAC
HILL
HILL SAWMILL IN TANZANIA
SAWMILL IN TANZANIA 359
by
by Birger Solberg

RECENT
RECENT DEVELOPMENTS IN SAWMILL AND PLYWOOD
DEVELOPMENTS IN
INDUSTRIES IN INDONESIA
IN'"5TRIES IN 383
363
by L.W.M.
L.W.M. Meulenhoff

GUIDING
T. MODERN FOREST-BASED INDUSTRY
'BY DEVELOPMENT
IMPACTS 399
399
by
by the Secretariat
 - 1 -

PART II
PART

INTRODUCTORY PAPERS

AND

SUMMARY OF DISCUSSIONS
 - 3 -

COMMON FEATURES OF FOREST

fOREST INDUSTRIES
INDUSTRIES PROJECTS
PROJECTS

Introductory Note
Note
by the Secretariat

(Consultant.
(Consultant: J.S. Bethell
J.S. Bethel)

1.
1. INTRODUCTION
INTRODUCTION

successful industry projects

Successful industry projects have
have certain
certain features
features in in cr,
common and
=nd
the industries
industries based upon the
based upon the forest
forest are
are not
not exceptions
exceptions to to tho
the general -al
rule. Like other
other natural resource-based industrial projects, project., forest
industry projects
industry project.s involve
involve the
the organization
organization of of aa set of
of technolc
techno :10s
ies to
efficiently use available
available capital,
capital, energy and and personnel
personnel skills to to convert
mvert
the resource
the resource into
into aa commodity
commodity or product that
or produc, that can
can bebe marketed at at aa
profit. The industry
The indus be designed
may be desiqned toto use
use the
the woody
woody portions
portions of of the
the
forest trees
forest trees as the basic ic raw
raw material aand indeed,,'eedthis
this is
is the
the usual case.
usual case.
It
It can
can also
also be
be based
based upon
upon the
the use
use of
of non-wood
,
r d components
components of the the forest
forest
biomass
biomass such as as foliage
foJiage for
for thatch
thatch oror tr.Jre,
forage, honey,
honey, resin,
resin, rattan,
rattan,
bamboo and the
the like.
like.

Because
Becau,a, the
tle wood component of the the forest biomass
li(mars isp the
predominant forest industry
predominant fott:t. material, this is the
industry raw material, primary focus of
the primdt rf
this particular
partiuulat context. Clearly, other components are
ate equally
a'ly
important. In
In any
any case, the basic
case, the basic principles
principles of of sound
sound industrial
industrial
organ ization are
organization are equally
equally applicable
appl icable to
to the
the processing
process ing ofofall
allco:.00dents
components
of the forest
of the forest biomasa.
biomass. One basic tenet
One tenet of
of industrial
industrial project
project design
design is
is
the
the assurance
assurance ofof an adequate
adequate raw
raw material supply
supply base.
base.

2.
2 FOREST RESOURCES
As ation increases,
lulation increases, the
the pressure
pressure upon
upon land
land for nr.n
non-forestry
forestry
use will
will irr.ie0!e.
increase. forest land
The forest ,ae will
land base' w.-1bebediminished
dimirld siland it
it will
be increasiw,17
be increasingly d)fficult
difficult toto control
control the
'..ae use of highl,
use of highly productive land.
prodJ,tive land.
In the
In the long run,
run, thr
the demand
demand for
for forr,
forest products will ir-reae
oroducts will increase ti.t
but it
it will
have to conic
have to come fts.m
from aa smaller area
area of
of poorer7 land.

This raises
This raises the
the question
question of of the
the adequacy
adequacy of of the
the present
present and
and
potential future
potential future of
of the forest
forest supply base for
supply base for industry. Ninety-five
Ninety-five
percent of the industrial
percent of forests of
industrial forests of the tropics
tropics areare natural
natural forests.
forests.
These forests carry no
These forests nO silvicultural costs and and are
are often
often thought
thought to
to be
be an
an
inexpensive SOurce of
inexpensive source of wood.
wood. It is
is sometimes
sometimes said that that planning
planning for
for use
use
of these
of these forests
forests is is relatively
relatively easy easy because
because problems
problems of of harvesting,
harvesting,
processing and marketing
processing and marketing are
are ea-sily
easily identifiable
identifiable and and solutions
solutions are
are well
well
known. But these
But these forests
forests in in the
tbe tropics
tropics areare generally
generally very
very poor
poor sources
sources
of raw *a.crial
of raw material supply.
supply. Rich in
P:qh in biomass, they often
biomass, they often yield
yield less
less than
than 55
percent ui
of that biomass in
that biomasa industrial matfrials.
in .ndustrial matrrials.. Furthermore I they
Furthermore, they are
are
generally low
general low in
in productivity.
product' i. One ne to Iha/a are
to 22 mm /ha/a are t"-'cal
ical growth
growth rates
rates
for
for naturally
naturally occurring fr forests.

Man-made forests
Man-made represent about 55 percent of the industrial
forests represent !

forests of the tropics

forests of tropics but
but the proportion of
the proportion of this
thlz type of forests is is
increasing very
increasing very rapidly. Since plantations
Since plantations are dee.,,ied
designed toto meet
meet the
the
of a
needs of a specific
specific industry, they yield
industry, they yield much higher
higher fractions
...,ctionsof
of their
their
in useful industrial
biomass in industrial materials.
materials. Productivity on man-made foreste
forests
is
is much
much 3higher tban on naturally
higher than naturally occurring,forests.
occurring? forests. Common yields are
are 10
10
to 30
30 m Iha/a and growth rates
m3/ha/a rates up
up to 75 m~/ha/a have
75 m'/ha/a have I,
been reported.
n reported. The
importance
importdncr of the supply of industrial
of the industrial wood
wood from
from nman-made forests
forests inin the
the
Ocel)r,ro countries
developing countries by far exceeds their relativerelative reaas
areas compared
compared to
natural forests.
,atutJ" ferests.
 - 4 -

Industry
Industry pays the bills
pays the bills for forestry.
for forestry. Income from industrl:1
Income from industrial
use of forests
use forests can
can provide
provide governments
goverrunents with the
the funds
funds required
required to to engage
in tropical
in tropical forest
forest conservation
conservation andand rehabilitation
rehabilitation as as called
called for
for by
by zne
the
recent World Forestry
Forestry Congress.
Congress. As opportunities
oppc,rrunities are presented to
develop forest
forest resources forfor industrial h.e, they
industrial use, they should be be located soso as
as
be accessible
to be
to accessible to to manufacturing
,nanufacturing sites
sites and
and within
within the the context
context ofof
transport and
and energy
energy networks.
networks.

3. CAPITAL
CAPITAL SUPPLY
An adequate supply of capital
An adequate capital is
is essential
essential to to the
the developnent
development of
aa new industrial enterprise.
new industrial enterprise. This isis particularly
particularly truetrue of
of large
industrial co!nplexes
complexes of thethe sort
sort required to produce fibre products.
to produce
Capital is is required
required not
not only
only forfor the
the original
or inal installation
installation of of the
the
facilities working capital
facilities but for working capital as as well.
well. This latter
latter requirement
requirement may
be
be most L'noe many
iJuportant since
lnost importan, Ina!1Y new
new industrial
industrial enterprises
enterprises require
require a a
substantial
substantial start-up time, before they they break
break even
even oror begin
begin to
to return
return aa
profit toto capital.
capital. Failure
Fa-:ure toto recognize
recog:1ize this
this phenomenon
phe:)Q,nenon has often led
led to
to
failures in
failures in new
new industries.
industries.

There are essentially three basic sources of of the

the capital
capital
required
re-mo to initiate a
to initiate industrial enterprise;
a new industrial enterpriSE; nanely, equi
nwnelYt equity capi tal,
capital,
borrowed capital and gift
opital and gift capital.
capital.

3.1 Equity Capital

Equ i ty capital
Equity capi tal represents
represents the
the investment
inves bnent of
of individuals
ind i v id uals in
in an
enterprise which givesgives them a share in in its
its ownership and entitles them the,n to
share
share in in its
its profits
profits if
if it
it is
is successful. In
In aa corporation the the investor
investor
has a voice in in the lnanagement of
the management of the
the enterprise
enterprise comnensurate
CO>l"nensurate with
with the
the
number
nt.ilnber of shares
shares owned.
owned. In aa cooperative each investor
cooperative each inv /star has an equal
an equal
vote.

Equity capital is
Equity capital is often scarCe in developing countries
often scal.:e countries where
where
risks are
are frequently
frequently perceived
perceived totobebehint/.
high. Acoordy, many
ACCordi:1gly, develo:;i
,nany developingq
countries encourage
countries encourage the
the inves
investment of foreign capital.
-L foreign This often
creates problems.
proble.ns. In
In order
order toto lOini.nize risks,tho
miniy.e rsks, theforeign
foreignsuppliei/.
suppliers ofof
capital often want
capital often want to exercise
exercise conlot.
control over
ov, lnanagement
management of the firm
of the fir.n to
protect their investments and this is
their investments is someti,nes contrary to
ietimes contrary to national
national
policy. AA plan
plan to
to start
start small
s1nall and
and grow
grow through
through reinvestment
reinvesbnent of profits
profits
is sometimes aa useful
is useful way
way for
fora 'a developing
developing country to to build
build aa menu,'
manu-
facturing
facturing enterprise and
and still retain
retain management control.
control.

3.2 Borrowed Capital

Capital
Capital can be obtained
can be obtained by by borrowing
borrowing inin the financial markets
the financial markets
either of
of the
the developing
developing country
country///-F,lf
itself Or
or in
in world
world markets. If fir,"
If the firm
or its
or its owners have
have aa good
good credit
credit ;:/ting or have collateral
rating Or collateral co to guarantee
guarantee
the loan, capital
the loan, capital can
Can often
often be
be obt./iined
obtai:led fro,n
from com!.ercial
commercial banks. Someti!nes
Sometimes
capital
capital can
can be
be raised
raised byby selling
selling debenture
debenture bonds
bonds to
to interest
interest investors.
investors.
Such bonds are sometimes
Such bonds sometimes nade
made attractive
attractive to
to investors
investors if if the
the purchase
purchase ofof
debentures
debentures gives the investor
gives the investor the right to to purchase some
so,ne of the
the output of of
the
the factory. .

The
The developing
developing countries have
ive access
. access to funds from
to funds from international
international
and regional development
and regional develop!nent banks.
banks. These funds
funds can
.-- can be made available
be nade available for
for
capital
capital support
support of industrial projects where
of industrial where goverrunents
goveranents are participants
in the fir,..
the firm. Often these
Often these funds
funds are
are available
available at at much
,ouch more
,nore attractive
attractive
interest
interest rates than those
rates than those available Itom
from commercial
cOII"nercial banks.
banks.
 - 5 -

3.3 Capital
Gift Capital
A
A not
not insignificant source of capital available in
in some
developing
developing countries is gift capital
countries is capital provided
provided from
from multinational
multinational or bi-
or bi-
lateral
lateral technical
technical assistance programmes. These funds are often available
These funds
to for the
to pay for the cost
cost of
of prefeasibility
prefeasibility oror feasibility
feasibility studies,
studies. for the
for the
development of raw material supplies
supplies or
or for
for market
market studies.
studies. All
All of these
these
are important to project
are important project development
development and,
and, iif financed through
f financed through technical
technical
assistance
assisto leegrants,
grants, make
make scarce
scarce capital
capital available
available for investment in
for investment in
facilities
facilifies or working capital.
capital.

4. ENERGY
ENERGY SUPPLY
An important aspect
An important aspect of of industrial
industrial development
development is is the
the supply
supply of
of
energy for manufacture and
energy for and for
for transport
transport of of materials.
materials. The
The forest-based
primary industries are
primary industries unique position
are in aa unique position to to achieve
achieve energy
energy indepen-
indepen-
dence, an important consideration
important conslder i, in developing
in developing countries
countries with limited
limited
aCcess to
access to fossil
fossil fuels, hydroenergy
nycrok.:', or nuclear energy.
or nuclear
- energy. mechanical
The mechanical
processing
processing manufacturing
manufacturingfacilities
Ic1iti such
such asas sawmills,
sawmills, veneer
veneer plants
plants and
and
plywood mills
plywood mills typically
typically c.:,lqiop
develop more more residues than what
residues than what is required to
is required to
supply the energy nerdec
supply the needed in in manufacture,
manufacture, provideo
provided that
that they
they are
are equipped
equipped
to wood residue.:
to burn wood res idues and
and to to cogenerate
cogenerateenero, in the
energy, in the form of bothboth heat
heat
and electrical energy.
and electrical energy. Fibre
Fibre processing plmts can
processing plants can supply
supply very
very large
large
fractions
fractions of
of their requirements from
their energy requirements from residue
residue utilization
utilization andand peak
peak
surplus can be sold to
surplus to the
the national
national grid.
grid.

5. PERSONNEL SKILL SUPPLY

In the
the design
design of forest-based industry
of forest-based industry for for developing
developing countries,
countries,
it isis often
ofqn desirable
desirable to to create
create an an industrial
industrial designdesign that that is is labour
labour
intens:e to
intensive to reduce
reduce thethe demand
demand on on scarce
scarce capital
capital supplies.
supplies. It is
It is
worthwhile to
worthwhile note that
to note that thethe most
most important
important measure
meanre of of personnel
personnel supply supply
for industry is
for industry not the
is not the number
number of of bodies
bodies availatJe
available in the labour
in the labour force
force
but the size
but the size of thethe pool
pool of of relevan
relevant personnel
rqrsonnl skills. Personnel Personnel can can be
used in industry over aa whole
in industry whole soecr:
spectrum of skill s levels ranging from
ev,ls ranging from thethe
use
use ofof personnel
personnel for for manpower
manpower wi'are
where it it is just muscle
is j..;s% muscle strength
strength that that isis
being purchased,
being purchased, through the the 1,vel
level of of skilled
skilled labour
labour where
where physical
physical
dexterity is is the
the important
important inn,.edient
ingredient to to technical
technical skills
skills requiring
requiring
judgement and
judgement and the
the capacity
capacity for for analytical work. The hioner
The higher levels levels of of
sk ills offer
skills offer the best opportun i ties for
bes t opportunit for development
development of of the..he ind i v idua!.
individual.
The provision
The provision of of muscle power power may- ly provide subsistence but
provide subsistence often very
11,».. often very
little more. In
In developing
developing countries it it is
is often in in the
the higher
higher levelslevels of
skills
skills that
'hat aa shortage makes itself itself felt
felt and
and where
where thi
this isis thethe case these these
positions
positions must filled by
must be filled by expatriates
expatriates if if the
the indust,
industry is is to be viable.viable.
Perhaps the easiest
easiest andand most effective
effective way for for aa developing
dev ig country to to
utilize forest-based
iqi.:,st-based industry
industry to to enhance
enhance the the devel,-q
development of individual
.

citizens is is to
to increase the the size
size ofof the
the pools
poolsofof1.,eiaonnel
personnel skills skills at the the
technical,
technical, scientific, technological and
scientific, technological and management
management levels.
levels.

6. INDUSTRIAL ENVIRONMBNT
ENVIRONMENT
The
The industrial environment in in aa country
country is
is largely
largely aa function
function of
of
the social and
the social and governmental
governmental system.
system. Laws and regulations
Laws and regulations can
can inhibit or
restrict
restrict the
the development
development of industry or
of industry or make
make it so costly to operate that
it
it becomes
becomes economically unviable.
economically unviable. In contrast, some
In contrast, some developing
developing countries
countries
create industrial environments that encourage industry
create industrial industry through
through deliberate
incenti ves.
incentives. For forest products industries
forest products based, as they
industries ba5ed, frequently
they frequently
are, rural areas
are, in rural areas the
the development
development of of an
an adeqL,Ite
adequate infrastructure
infrastructure can
can be
be
powerful
powerful incentive toto industrialization.
industrialization.
 - 6 -

7. MARKETS
Industries
Industries are
are created and some
created to service and supply markets and some of
of
the
the most intractable
intractable problems
problems of
of developing
developing countries
countries have
have their
their origin
in
in the
the marketing sector.
sector.
In
In most of the
the developed
developed countries
countries forest
forest industry
industry has
has its
its base
in
in a
a strong
strong domestic
domestic market for
for forest
forest products.
products. These
These markets provide
markets provide
opportunities
opportunities toto sell low-valued
low-valued products
products that
that cannot
cannot carry
carry the
the costs
costs of
of
transport
transport toto distant
distant export
export markets
markets but that
that carry
carry aa share
share of
of overhead
overhead
costs thus permitting competitive pricing
costs thus pricing of
of export
export items.
items.

Serving export markets

Serving export markets requires
requires very
very sophisticated
sophisr.icated and
and timely
timely
world market intelligence
intelligence, something that is
is sometimes lacking in
in
countr ies.
developing countries. It is extremely important in
extremely important in export
export marketing to
to
reputation for
develop aa reputation for reliability
reliability with respect
respect to to quality,
quality, with
with
respect and the
respect to pricing and the financial
financial aspects
aspects of
of sales.
sales.

8. PROJECT DESIGN
Project
Project designs
designs may
may be very simple
be very simple for
for small
small scale
scale industries
industries
and
and very complex for
for large
large scale
scale industries.
industries. Projects that involve large
Projects that
capital investments and
capital investments commitments of
and commitments forest resources
of forest resources are
are designed
designed onon
the basis of prefeasibility
the basis prefeasibility and
and feasibility
feasibility studies
studies including
including extensive
extensive
analysis.
market analysis. The capital and
The availability of capital and the
the commitment
commitment ofof raw
raw
material resources are
material resources likely to
are likely to be
be aa function
function of the quality
of the quaIl of these
of these
analyses. If they
If they suggest
suggest that
that aa project
project isis in fact unviable
in fact unviable they
they can
can
prevent resources~
prevent substantial waste of resources.
Where capital
capital forfor construction
construction of of the
the manufacturing
manufacturing facility
facility isis
not easily available
not easily available locally,
locally, thethe technology
technology of choice choice may be be one
one that
that
makes
makes maximum use use ofof personnel
personnel skills
skills and and minimizes
minimizes the the demand
demand upon
upon
capital. But this must
But this must bebe carefully
carefully orchestrated.
orchestrated. sometimes
Sometimes machinery
is
is llsed to save
used to save labour.
labour. this is
When this is the
the case and and labour
labour isis plentiful
and inexpensive, substitution
and inexpensive, substit.ution can can be be reasonable.
reasonable. Sometimes highly
highly
sophisticated
sophisticated equipment
equipment is is included
included in in aa manufacturing
manufacturing system not for for the
the
purpose of
purpose of saving
saving labour,
labour, though
though that
that may occur,
occur, butbut for
for the
the purpose
purpose of
of
achieving
achieving aa higher level of uniformity in
higher level in product
product quality.
quality. If
If the
the manu-
facturing
facturing enterprise is is to serve aa very
to serve very demanding
demanding international
international market,
market,
then this capital investment to
capital to achieve quality assuranceassurance maymay bebe
essential though it
essential even though it limits
limits the
the size
size ofof the
the labour
labour force.
force.
 7 -

COMMON FEATURES OF e'OREST INDUSTRIES

COMMON FEATU;'..::: INDUSTRIES PROJECTS

SUtfuUary of Discussion
Discuss ion

L
1. FOREST RESOURCES DEVELOPMENT
DEVELOPMENT AND
AND TECHNOLOGY
TECHNOLOGY
There is
There is sometimes
so.netimes aa conflict between
between the
the objectives
objectives of
of the
the
forest service,
forest service, which
which loay see its
ay see its Inain task to
main task to be
be conservation
conservation of
of the
forest resource
forest resource or tree
tree stand
stand improvement, and the
ilnprOV8!nent, and the industry,
industry, which
which wants
wants
aa supply
supply ofof raw material atat aa constant rate
rate and
and at
at an
an adequate level
level of
of
ql,lality.
quality. However, these conflicts
However, these conflicts have been
bee:! resolved in in many countries,
Inany countries,
although proble,"s still
although problems still exist.
exist. Foresters
Foresters need to understand
need to u:1derstand and realize
that
tbof by
by appropriate
appropriate pIa
planning of the forest
of the forest manageme:1t activities, part of
management activities,
the fr,iest
,ne forest can
can be set as
be sct for production
aside for production ofof raw
raw materials,
,naterials, whereas
whereas
o.her parts
other are r-
parts are rved for
reserved for conservation
conservation for for various
various purposes
purposes andand
reasons.
teasons. Indusri.
Indus tr ial is ts, on the
the other
other hand,
hand, ,:rr, becoming increasingly
are beco,ning increas ingly
aware of the
aware of il!lportance of
the irpor,:,,e lnaintaining aa sustained raw
of maintaining loaterial supply
raw material supply
their r-Aion*ibility
base and of their responsibility in in maintairi:o
illaintaining au
an ecological
ieal balance.
balance.

In fact, in develop.nent of
in the development of forest
forest reso,:rces
reSourCeS for for industrial
use the importance
use the Lnportanee ofof cooperation
cooperation between
between forester,;
foresters and technologists is
;ad technologists is
increasingly recognized,
increasingly recognized, although problems still
although problems still exint
exist in in this
this context.
context.
For instance, in
For instance, in the
the selection
selection of of species
species for
forp1....taions
plantations or or in
in the
the
inventory of natural
inventory natural forests, there is is still
still space
j..n for i.nprove,nent in
or improvement in
cooperation
cooperation between the the two
two interest
interest groups.
groups. Fro.n the
From the industry's
industry's point
point
of view, growth
of view, and yield
growth and yield measurements
illeasurements on their
their own are are ofof little
little value
value
in making industrial
in making industrial judgements.
judgements. It is
It is the supply and
the suppl and yield
yield of rawraw
.naterial
material of
of sllitable
suitable quality which is is important
important inin this
th regard.
regard.

In the context
In the CO:1text of development
develop,nent of
of plantations
plantatio:1s asas aa source of raw raw
,naterials,
materials, there is aa need need for
for paying
paying attentIon
attentio;'} to
to optimal
opti,nal uses
uSeS in in the
the
selection of
selection of species
seci. and rotations.
and The mrk-t,,,
The illarkets ofof the
the origi:1ally
originally
foreseenmanufactured
foresee;'} marc .: goods may have
.......may havechanged
changed considerably
pufol.isrably by by the
the ·tLne
time the
the
plantations are ready forr harvesting.
]-arvesting.
, As aa salmo
sa uard
lard against
against this,this,
allowance should be lnade for -for use
Ase of
of the
the ra, terial resource for
raw Inaterial for
.nanufacture of
manufacture of other
- possible
nls products, as as well.
well.

Included in project design is

in v-.Jject is the
thf choice
p of technology to
cf technology to be
e,"ployed.
employed. In aa particulnr
In case the
icular case the technolg
technologylyselected
iected may
.nay reflect
reflect the
the
relative
relative availabi ity of resources
availability resources such
such asas raw
raw maierial,
material, capital,
capital, energy,
e!1ergy,
personnel
personnel skills
skills asas well asas the
the market
market to to be
be served.
served. With marginal
forests, industry illilst
forests, industry must become more
more efficient
efficient to to compensate
COtnpensate forfor more
illore
variable and
variable and lower quality raw
raw,naterial supply.
material supply.

2.
2 BASE AND
CHANGING RAW MATERIAL BASE AND TECHNOLOGY
TECHNOLOGY
An
An industry designed for for utilization
utilizatio;'} of wood
wood raw
raw material
,naterial from
f1::o,n aa
forest illay
natural forest find it
may find it difficult
difficl,lt toto utilize
utilize plantation-grown
pla:1tation-grown woodwood by
the tiqe the
the p:oniotions
antations areare ready
ready for
for harvesting.
harvesting. One reason for
One for this
this
may ve' s np', be be ,..hat
that thethe industry in the technological planning
industry in planning
has nEg_e't(1 Lo
has to take into account
take into accoIJnt the
the foreseen
foresee;'} change
change in in type
type c,
,naterial.
material. The
.fhr equipment
,qu:nment selected for for the ,nill,
-11, although ideal for
although ideal for 7!..?
type of raw
type of ,naterial used initially,
-ow matviial initiall, .nay not)t be sl"itable for the raw
suitable f,-,r riw
,nater ial available
saterimi avallatle in In the second plase,
the second phase, when pI antat ion-grown M(,1
when plantation-c&own wood is Js
available.
availahlF. The Industrial design
Ine industrial design thorpfore
therefore needsneeds to to 01k, carer d
give careful
consideration
considetation to the the raw
raw material
,naterial which
which isIs foreseen
foreseen to be used used In Votl,U5
in various
stages
stages ofof develop,nent
development of the the overall industrial
industrial project.
project.
 8 -

3.
3. MARKETS
MARKETS AND TECHNOLOGY
The creation of
The creation of new
new forest
forest industries
induries and and expansion
expansion of
of existing
existing
ones must be
ones must be based
based on
on knowledgeable
knowledgeable ands-ci real is tic forecasts
-ialistic forecasts of
of markets
and the
and the competitive
competitive position
position of
of the
the entt
enterprises
i'ises on
on these
these markets.
markets.

The selection
selection of products
products and
and technology
technology for
for manufacturing them
them
is
is by necessity governed by
by necessIty by the
the market
market requirements.
requirements. Local or domestic
Local domestic
markets
markets often provide an
often prvide an outlet
outlet for
for products
products which
which are
are competitive
competitive with
with
imported
imported ones
ones due
aue toto high
high traesport
transport costs.
costs. Local markets
Local markets may
may also
also be
less and thus
less demanding and thus accept
accept pproductsts made from raw
made from raw materials
matorials which
which do
not
not meet the
the requirements
requirements of of exr: mkets. On
export markets. the other hacd,
On the hand, export
markets, although highly
markets, although highly competitive,
competitive, provide
provide important
important foreiss
foreign exchange
exchange
earnings. These
These markets,
markets, however, exhibit considerabT
howevc, exhibit considerable fluctuations
fluctuations and
and
aa mixed
mixed market
market ofof both
both domestic
domestic andand export
export markets
markets may
may provide
Novide more
more
stability for the sale of of the
the output
output of
of the
the industry.
industry.
Product quality
quality is
is not
not necessarily
necessarily achievable
achievable only
only by
by making
making aa
major capital investment
major capital investment in high technology
in high technology equipment.
equipment. If
If the
the labour
pool includes
pool large fraction
includes aa large fraction of individuals with
of individuals with high
high levels
levels of
personnel skills, simplification
-onnel skills, simplification of the mill
of the mill design
design with
with regard
regard to
to
process
:.ess controls
controls may
may be
be feasible.

A reason
reason for
for adopting
adopting aa highly
highly sophisticated
sophisticated manufacturing
technology is to improve
technology is improve upon
upon yield in
in the
the conversion
conversion of
of raw
raw material
material toto
finished
finished product.
product. A very
very expensive
expensive raw
raw material
material provides
provides a a great
great
incentive for improvement in product yield. However,
ier, all these
considerations of application of high technology presume 'te that skills
that skills
exist for
exist for its
its servicing
servicing and
and maintenance.
maintenance. Otherwise,
Otheru,i e, thethe choice
choice of
technology and the type of industry may need to to be completely
be
re-evaluated.
 -- 99 --

SMALL SCALE PROCESSING ENTERPRISES

ENTERPRISES

I!'ltrodllctory
Introductory Note
by the Secretariat
Secretariat

L1. INTRODUCTION

Sinall
S,rall f,-;reO-based processi!'lg
scale forest-based processing enterprises
enterprises exist
exist in all
cO<lntries.
count/re,i. They differ fro.n larger
They diffro . ;urger scale industries in
scale forest industries in aa nwriber
n<:linber
of im,,rtant
i.portant respect...
respects. Ge!'lerally they
they serve
serve markets which
which areare notnot
reached
reached byty the
tr latter; theirth,-tr- linkages
linkages with the rest
with the rest of the
the economy
econolny areare
lnainly with
main11, the rurali-icultural
rural/agricultural sector rather than the urbani
ur;,-1,
industrial sector, and
ind'Jstrial and they
they areare affected
affected byby govermnent
goverrunentpolicies
policiesinino..1'(
quite
than larger
different ways than larger forest
forest industries.
industries.

Small enterprises
SJDall enterprises serve
serve rural
rlJral markets
markets for
for furniture, builde,'
furniture, b\Jilders'
woodwork, wooden
woodwork, wooden and
and cane
cane farm storagestructures,
fannstorage structures,carts,
carts, agricul tllral
agrico:-.,c,:l
p"ements, and
implements, and aa .nllititude other products.
multitude of other products. They thus
They thus meet
;neetthe
thehe,...s
needs
for forest for do;nestic
products for
forest products domestic use
use of the greater part
of the part of ¡Pe
or the
populations which live
developing country populations live in
in rural
rural areas,
areas, and in
in additi,n
addition
provide inputs into agriculture.
important inputs
provide important agricult<lre. S;nall enterprises ci.k0
Small enterprises also
account for
account for the
the greater part
part of the
the manufacture
manufacture of craft
craft goods
goods based
based on
forest
forest raw materials.

The forest-based enterprises (FB-SSI)

The unit size of such small forest-based (FE-SSI) isis
very small
s,nall indeed
indeed -- averaging
averaging less
less than
than three
three persons
persons employed
e,nployed including
including
the proprietor
the proprietor and
and family
family labour.
labour. characteristics include
Other characteristics 1 i ttle
include little
use of powered equipnent,
equipment, high proportion of
of self-financing,
predo;ninantly dispersed
predominantly dispersed and and rural
rural location,
location, significant
significant seasonality
seasonality of of
operation and close
close links
links with
with agriculture.
agrict.lture. Such ~nall enterprises meet
Such small meet
most of
,nost of the needs of
the needs of the
the rural/agriculture
rural/agriculture sector
sector for
for forest
forest products
products
because this
because this market
market is is widely diffused, is
widely diffused, is poorly
poorly served
served by by roads,
roads, and
and
therefore
therefore not easily served
not easily served byby Aore
.,nore centralized
centralized large
large factories.
factories. This
rural market
rural market also
also desanda
de,nands many
;nany low
low cost
cost products
products that
that only
only local
local
ca:1 supply.
enterprises can supply.

As rural
As rural infrastructure
infrastructure improves,
Ilnpt'oves I 9giving
ivi:1g greater
greater access
access to
to
stlpplies of
supplies of products
products fro;n outside, and as
from outside, conS'liner habits
as consumer habits and tastes
Change with rising
change rising rural
rural incomes,
inco,nes, there
there is
is aa tendency for fOr production
production to to
become
beco,ne concentrated
concentrated in larger units units and for these
and for rhee toto locate
locate in in urban
centres.
centres. However, for
for .nany sitllations, and
many situations, and over
over long
long porrodsiods of
of time,
tiill€,
small local
small local processing enterprises offer the the ww,t
;nost rational wayway ofof meeting
;neeting
most rural
Anost rural needs.
needs,. inforlnationon on
Though information
Though effie!
nfts,..ueuucl is scanty, it
in scanty,
s;nall enterprises use
appears that small use both
both labour
labour and
and capital as as efficiently
efficiently
indtlstries.
as larger industries.

The recent work sh.,

work s'M.narizedized in in rqe
the ha:FgrDend
backgro":1d paper
paper ,u)
On small
s,nall
industries has
scale industries has shown
shown that
that tmaii
smallfDre.-t-ho.7rd
forest-based processing
ruoc.s:Ing enterprises
onrerprises
fonn
form aa very large
large part
part of
of ti
the ovet::all foieFt
t- overall forestonerlact.7
prodllcts puprocessing
eces.-i-vi total in
total in
employment terms.
terillS~ recent sllrveys for
Thus recent
ThtlS fet Jamaica
Jamarre and Sleoca
Sierra Leone
Leone
estl;nate e;nploy,nent in
estimate employment in small
s;nall euterorisei
enterprises to ti be
he 22 to 9 ti,nes
'1 higher than
timrn nicher than
in
in larger industries.
larger industries.

In Kerala
In Kerala State
State ofof India,
India, is,nall reed-based
reed-,,esed enterprises
e-d-erprjses help tD to
support about
support about 1515 ti,nes
times ;nore people than what
more peo»le u uchal the
1fr II,;rgoe scale
u,u'e industry
---,custry
based onon this
this raw
raw material
illaterial employ,..
eillploys~ Futnormero, Inn ,00,st
Furthermore, most cOtlntries
FB-SSI constitute the second or third 1larieEt rural
FE-SSI t,Jral ,nanufacturing
,anufact,,tini
indus try.
industry. They thus make
They thus n i f icant cont
,nake aa ssignifio,r,t r but ion to
Lontribdtion to off- fann rdral
off-farm rural
employment -- an an issue
issue ofof growing
grow itnportance at aa time
i,rportance time when a rising
rising
proportion, already ,nore
proportion, than half,
more than hal, of of rural
rural people
people can
can no
nO Ringer
lqnger sustain
sustain
solely from
themselves solely from agricultuxe.
agric.,lture.
 - 10 -
- 10 -

Otherchala,teristics
characteristics which have positive developmental
positive developmental
consequences, in ad.:ition to employment generation and provision oE
consequences, in addition to emploYloent generation and provision of
into agriculture
inputs into
inputs include:
agric1llture incll1de: stabilization
seasonal stabilization of
seasonal rural
of rural
earnings, providirg
earnings, providing a outlet
productive outlet for for sinall rural savings,
small rural savings,
utilization of scattered forest resources which would otherwise be
Iltilization of scattered forest resources which wOllld otherwise be
inaccessible, using
inaccessible, local rather
predominantly local
using predo.ninantly cather than i.nported inputs,
imported inpllts,
transfer of skills into rural areas,
transfer of skills into rural areas, improvementm cavementofof incoine
income equity,
equity, and
and
provision of
provision of low-cost
low-cost goods in locations
goods in locations ric-: served by
not served by larger
larger industries
industries
and to
and to social
social strata
strata often neglected
often by by
neglected normal
nonnalcommerce.
co""nerce. In some
In so.ne cases
cases
they also
they also produce
produce aa major
.najor proportion
proportion ofof goods:
goods: the Argentina
in the Argentina case
case
study prepared
study prepared forfor the
the Consultation,
Consultation, small
s.nall enterprises
enterprises reportedly
reportedlyproduce
produce
60 to 80 percent of all charcoal.
60 to 80 percent of all charcoal.

It
It isisthus becoming
th,.s becoming apparent
apparent that
that small
small scale
scale forest-based
forest-based
processing
processing enterprises
enterprises are
area amuch
.nuch more
tIlore important
i.nportant component
co.nponent ofofthe
the forest
forest
industries sector
industries sector than
than hashasbeen
been generally
generallyrecognized,
recognized, and and require
requiremoremora
attention
attention directed
directed toward
toward meeting their particular
,neeting their particular needs.
needs. Information
Infor.nation
fromselected
fro,n selectedcountries
co rtries isis su:arized
sUHlmari zedin in
thethe
following
followingbackgrouni
background paper'
Small Scale Forest-Based
StIlall Scale ForegnggsedProcessing
Pror;roO Enterprises
Enterprises- - TheirTheir Characteristics
Character;tics
and
and lmitct
Impact on Rural &nploy.nent hhd and income.
Inco.ne. ThisThis isis supported
sllpported by y tw,
two case
srudics which
studies which r. are ...all
co.npare and large
s.nall and large enterprises
enterprises using the se,-
using the sa.ne raw
raw
mai,'ial
,naterial (reeds) or or producing
prodUCing the the sane
sa.ne product
product (.'nnooal).
(charcoal). H-
The irs
first
ce -e s:adv is Saravia
Saravia Toledo's
Toledo'spaperpaperentitled
entitled P33C,1,3C
Production of Charcoal in
", litdaince (Argentina) and and the
the second
second is is Nairls
Nai:r-' s Ba.nboo Based Industry
in netala Stale, India,
2.
2. PROBLEMS

Small forest-based enterprises suffer froc the general neglect

Small forest-based enterprises suffer from the general neglect
shown enterprise end of
shown to the small enterprise end of the industrial industrial spectrelln,
spectrutn, and to to
small rural enterprises in particular.
s,nall rllral enterprises in particular. Most most countries
countries focus
foclls on
on promoting
pro,noting
large industries and
large industries and building infrastructure.
urban/industrial infrastructure.
building up an urban/industrial
Policies and measures to encourage this not only neglect the particular
Policies and ,neasures to encourage this not only neglect the particular
needs of small enterprises, but tnn,n inadvertently discriminate against
needs of s.nall enterprises, bllt often inadvertently discriminate against
Large industries cetren! I.: benefit exclusively or in larger
them. Large industries currently benefit eKclusively or in larger
them.
measure than small ones fron eaty access to institutional credit or
loeasure tha!1 stnall ones froin easy access to institutional credit or
c:..-'i it guarantees,
credit guarantees, favourable iJuportt duties
favourable imp, duties or
orduty
dutyexemption,
exelnption, provisions
provisions
accelerated deprec(ation,
fc: accelerated
for depreciation, tax
LiaX holidays,
holidays, market reservation for
market reservation for
'inani' industries,
"infant U
access
indlJstries, to toforeign
access exchange,
foreign exchange, allocation
allocation of
ofscarce
scarce raw
raw
materthis (especially
.naterials (especially !.nported training systems
imported ones) and training systelns run
rim byby
ç.nivermnents.
govern.nents. In some 'unes, the law lay not specifically exclude small
In so.ne cases, the law .nay not specifically exclude small
enterprises from
enterprises fro,n these
these nenei(ts,
benefi ts,but
blltprocedures
proceduresare
aresosocomplex
co,nplex as
as to
tomaln
,nake
them inaccessible to
the,. inaccessible ',mall firms.
to s.nall finns. Further,nore, the rural locaion
Furthermore, the rural location of
enterprises cakes
many enterprises
mBny makes contact with
contact with the structa
administrative strllctures
the administrative
difficult.
difficult .

The principal
The principal proble facad by
proble,ns faced by small
s,nall forest-based
forest-based enterprises
enterprises
tend to be
be weakness
weakness of
of decano, por access
de,nand, poor access to raw ,oaterials,
to raw materials, 1limited
i,nited
si:nply of
supply of skilled
skilled manpower, and shortage
,nanpower, and shortage ofof finance.
finance. The case studies
The Audies
co::i'lrmall
confir,n all these
these to
to varying
varying cegrees.
degrees. Apart
Apart from
fro.n shortage ofof demand
demand for
for
FB-(:SI products, the case studies show that it fluctuates and that
FB-SSI products, the case studies show that it fluctuates and that
markets are difficult to reach. In both India and Argentina, small
tIlarkets are diffic,.lt to reach. In both India and Argentina, small
elterpnises are
enterprises areshown
shown to
to depend
depend on
on middlemen
.uiddle,nen toto reach
reach their
their markets
.narkets and
and
to capture
t::1 to
so fail full prof
capture full profits for their products.
its for their products. This has
This has general
general
applicahility.
applicabil i ty.

Synthetic
Synthetic substitutes
SUbstitutes are problem, while for
are a proble.n, larger
for larger
enterprises
enterprises markets may bebe .nore
,narkets ,nay morestable
stable but
but can
can be
be risky if .nade
risky if nade "p
ap of
of
only aa limited
only 1i.ni ted number of large
nlhnber of large buyers.
buyers.
 - 11 -

On raw
On raw materials,
materials, the the destructive
destructive and and short-term
sho,t- term nature
nature 15 (5
years) of
years) of operations
operations byby small
small enterprises
enterprises isismentioned
mentioned in in the
the Argentina
Argentina
study as
study as contribut
contributirg to to ecological
ecologicaldamage.
damage. This
This is is contrasted
contrasted to to the
the
long-term, control
long-term, controligd ril,dttple
multiple useuse of
of forests
forests by by larger
largerenterprises
enterprises which
which
permits sustenance
permits sustenanceofif oeneftts.
benefits. This shouij
This should t, viewed in
be viewed in the
the context
context of +

iLlitries especially
!

many
many short-lived large enterprises
short-livei large enterprises in in many
:r. .:v countries especially in
+ in
logging. The
logging. Themost
mostprominent
iror,ir,rt elements
elements c: of raw material supply probl+-:
. problems are
overall shortage
overall tfcr bott
shortage (for both small
small andand large
.+ enterprises) and and freguen
fre,,en
also, allocation of most supplies
also, allocation of most supplies to 'r, to the larger 'r .er industries.
industries. T
allocation of
allocation of 90
90 percentof of the
the reeds
reedsorosbamboo bTlr resources
reoources to the p:p
to the pulp
industry in
industry illustratoi
in the Indian example
example illustrates the th, frequent
freluent lopsided
lopsided raw
material sharing
material sharing between large and
between large small cnterprises.
and small ises.

Financial problems
Financial problems havehavealso
alsobeen
beenreferred
referredto,
to, especially
especially for
for
small enterprises.
small Limited access
enterprises. Limited accesstotoinstitutional
institutional credit
credit isis highlighted
highlighted
the background
in the
in background paper
paper as a majos c-nstraint to small enterprise
as a major constraint to small ente ise
Lackof
development. Lack of skills
skills hashas not
not been
been f+ghlighted
h hlighted as as aa constraint
constra nt in
in
the case
the studies, but
case studies, but it is it
is another
another serious
t roblem. It is
problem. It
is well
wellknown
known
that informal training
that informal training in FB-ESI';
in supplementation to
FB-SSI's needs supplementation to boost
managerialand
managerial andtechnical
technicalskills.
skills.
A -;cleral
A problemwhich
ral problem whichaffects
affect: En-SSI
FB-SSI with
with regard
regard totodemand/
demand/
marketing, inp+ts
marketing, nputs availability and access
availability and acces to manybenefits
to many benefits currently
currently
available mostly to to large
large industries
industries is1+ prrliferation
iferationandand complexity
complexi of
of
laws, r,:gulaLtors,
ulat ions, and
and procedures
procedures which
which exceed
exceed thethe aci_J.t2
abili of
of normally
only semi-literate
only sem literate entrepreneurs
entrepreneurs to to cote.
cope~ It
is in these
It is ir ti
5C areas inin
addition to
addition to financing,
financing, training
training and
and pi.ltcl liberalizatiok tvLit
policy liberalization that FB-SSI's
need most
need most assistance.
assistance.

33.• THE
THE POTENTIAL
POTENTIAL

The background paper gives gives orders of of magnitude on small

enterprise sector
sector growth
growth rates
rateswhich
whichshowshow the
theconsiderable
considerabledynamism
dynamism ofof
these activities
these activities even
even under
under present rather difficult
present rather difficult circumstances
circumstances in
many countries. There is
many countries. also strong
is also strong evidence
evidence that
that small
small enterprises
enterprises
grow as rural
grow as incomesincrease
rural incomes increaseand and demand
demand forfortheir
their pro' +:,r; expands.
products -xpands.
indicatio.is therefore
The indications therefore are that as
are that developing ecoror
as developing economies , ow, the
,

small trterrrioes
small will still
ises will stillhavehave at Important role
an important role to pl,ay.
to play. +his can be
Th
boosted iIf positive official interventions
positive official inteivertions are initiatedinitiat aimed at
barriers relating
Lis key barriers
remov_nc, the
remov relatind to t, policy, institutLns and
poccy, institutions and other
other
aspects referred
aspects rrfcrred totoearlier
earlier which
whichcorEtrain
constrain f.uund
sounddevelopment
development in in absolute
absolute
termsOrorrelative
terms relative to
to larger
larger industries.
industries.

The evidencesuggesting
The evidence suggestinghigh
highlevels
levels of
of effici,,r1.7,,
efficiency in in use
use of
of
scarce capital should
SCarce capital should serve
serve to
to encourage positive i0tervention.
encourage positive intervention. In
In
certain
certain cases in the
cases (as in the charcoal
charcoal study)
study) worker productivity levels
worker productivity levels are
are
high; sometimes
high; theyare
sometimes they areeven
evenhigher.
higherinin small
small than
than in
in cnterprises.
enterprises.
In some
In some typestypesofof focest
forest industry
industry activity,
activity, therefore,
therefore,small
small enterprises
enterprises
will not
will not necessarily
necessarily be be an
an inferior
inferioroption
option byby the
the criteria
criterianormally
normallyused
used
to select
to select investment
investment options
options and
and must
must be
be considered alor,0sideall
considered alongside all other
other
possibilities.
poss ibi l i ties.

4. ITEMS FOR
ITEMS FOR DISCUSSION
DISCUSSION

The following points

The following points for
for discussion
discussion !:should be considered
c L idered in
in
terms of
terms of what
what can
can be
be done within and
done within outside the forestryy sector
and outside sector to
to
improve matters.
improve matters. It also necessary
It is also necessary toto plan cowth
plan small industry growth
which is
is compatible with that
compatible with that of
of larger
larger units,
units, in line with comparative
advantagesof
advantages of both.
 -- 12 -
-

1.
1. What forest
forest products
products processing
processing activities
activities are
are concentrated
concentrated
in
in small
small scale enterprises and what factors
factors favour
favour this?
this?

2.
2. The policy, legal
The policy, legal and
and institutional
institutional environment
environment in
in which
which the
the
enterprises operate
small enterprises operate and
and how
how this
this could
could be
be improved
improved to
to
ensure their greater
greater viability in future so they can
in
contribute more
more to
to development.
development.

3.
3. How to improve the ability of small enterprises
small to
contribute more toto physical
physical development
development of
of their
their environment
environment
to meeting
and to meeting other
other social
social obligations
obligations without
without overloading
overloading
unproductive costs.
them with unproductive costs.

4.
4. regard to
With regard to specific
specific elements:
elements:

(a) how to
to tackle
tackle their
their raw
raw material
material problems
problems including
including
sustainability of supplies;
supplies;

(b) how to
to improve
improve access
access to
to larger
larger and
and more
more stable
stable markets
markets
and finance;
and to finance;

how to
(c) how to improve
improve the skills available
the skills available within
within the
the sector
sector
and through advisory
and those provided through advisory services.
services.

5.
5. to liberalize
How to liberalize conditions
conditions for
for small
small enterprise
enterprise growth in
in
such aa way
way that
that they
they prosper
prosper without
without losing
losing the
the special
special
developmental benefits associated
associated with
with smallness.
smallness.

6.
6. How
How to avoid technological stagnation among small
enterprises.
 - 13
- 13 -
-

SMALL SCALE
SMALL SCALE PROCESSING
PROCESSING ENTERPRISES
ENTERPRISES

Summary of Discussion
Summary of Discussion

1. GENERAL
GENERAL

The inclusion of small scale enterprises in fore=t in"=try

The inclusion of small scale enterprises in forest industry
development pr(
development programmes be pursued
should be
35 should pursued vigorously.
vigorously. To
To ach, this,
achieve this,
specific asCst, is often necessary in planning and
specific assistance is often necessary in planning and impl itation;
implementation;
this should include technical assistance as well as financial and
this should include technical assistance as well as financial and
resource inputs.
resource inputs.

In planning for greater inclusion of small scale enterprises the

In planning for greater inclusion of small scale enterprises the
purpose should
purpose should be to to maximize
maximize the
the specialaldevcicgment
development advantages that
advantages that
they have,
they have, such
such as
as greater
greater employment, stabiliza'ion ofofincome,
employment, stabilization income, provision
provision
of vital agricultural inputs, use of scattered a...I
of vital icultural inputs, use of scattered and limitedlimited raw materials,
raw materials,
transfer of skills to rural areas, and meetino the special needs of
transfer skills to rural areas, and meeting the special needs of
poorer people.
poorer people. The small
The small units
units should
should thus
thus be
be der.'gned
designed to
to meet
meet needs
needs not
not
currently served
currently served adequately
adequately byby larger
larger entel"prises.
enterprises.
Special problems exist, such as small and unstable demand,
Special problems exist, such as small and unstable demand,
excessive competition,
excessive limited finances,
competition, limited shortage of
finances, shortage of skilled
skilledmanpower,
manpowel.-,
and unreliable raw material supplies. There are also problems of
and unreliable raw material supplies. Thet-e are also problems of
identifying new market opportunities and of upgrading technological
identifying new market opportunities and of upgrading technological
levels to be addressed.
levels to be addressed. Small enterprises
Small enterprises also
also have
have poor sustainability
poor sustalnabllity
operations and give
of operations
of give limited contribution to
limited contribution to development social
development of social
iinfrastructure
nfrastructul"e in the communities.
I n the communi ti es. The problems
The probl ems can be looked
can be at in
looked at in
terms of
terms of forest
forest resources,
resources,markets
markets and
and support
support systems.
systems.

2. FOREST
FOREST RESOURCES AND SMALL
RESOURCES AND SmALL ENTERPRISES
ENTERPRISES SUSTAINABILITY
SUSTAINABILITY

units have in the past often failed

Small units have in the past often failed t=. r-ovide for
to provide for
continuity of raw material supplies. As a result, operati
continuity of raw material supplies. As a result, operations have have often
often
been temnorary
been temporary and
and the
theemployment
employment and
and income
income based
based on_A them o has
has been
been
unstable
unstable. Greater stability should be
Greater stabil ity should be sought perhaps by
sought perhaps by encouraging
encourag i ng
tai,ers to manage forests better or to plant trees, rattans and
small farmers to manage forests better or to plant trees, rattans and
other foi-
other forest raw materials.
raw materi als. Suitable
Sui table incentives
i ncentl ves should
should bebe provided
provided for
for
this, LI as technical assistance.
this, as well as technical assistance.

In order
In order to
to conserve
conserve raw materials, greater
raw materials, greater efficiency
efficiency should
should be
be
promoted in the use of resources. Small enterprises
existing resources.
in the use of existing enterprises should
should
therefore be
therefore be encouraged to use
encouraged to use more
more residues
residues from
from forest
forest operations
operations and
and
fromlarger
from larger Industries.
industries.
The observed tendency for small
tendency for enterprises to
small enterprises utilize
to uti li ze
scattered, inaccessible and residual forest resources of limited interest
scattered, inaccessible and residual forest resources of limited interest
to large industries should be encouraged.
to large industries should be encouraged.

Wherelocal
Where local resources
resources are
are ve!-% reverelyy depleted,
very severel depleted, governments
governments or
or
their agents
their agents may
may need
need to
to provide
provide raw
raw materials from rnOl.-e distant sources.
from mor- sources~
Such assistance should be accompH.ed by efforts to esa: lish ,ew local
Such assistance should be accompanied by efforts to establish new local
supplies to
supplies toavoid
avoidlong-term
long-tet~dependency
dependency on c al support.
on official support.

The greater ability of natural aicvide aa wide

The greater ability of natural fOl:ests to provide wide variety
variety
of raw materials other
l:aw materials than wood for
other than for small scale enterprises is
scale enterprises is
recognized.
recognized. Attempts therefore be made to
should therefore
Attempts should ensure their
to ensure their
 - 14
- 14 --

perpetuation through appropriate

perpetuation through appropriate technical
technical and
and institutional
institutional mechanisms.
lnechanistos.
Forest plantation activities should also consider including :lOn-wood non-wood
forest plants of
forest of value
value to
to small
slnaU enterprises.
enterprises.

3. MARKETS
MARKETS AND MARKETING
Many opportunities for
Many cpportunities for development
developlnent ofof small
small scale enterprises
E fprises
are current-iv
currently missed
l.nissed dije to lack
dlle to lack of information
inforloation by by entrep:,
entrepreneurs of
possible darkets and
possible mar.:,-.s P7d how
how to reach them
to reach thed or
or even
evenofofproducts
products which ,fould
whic:-, co"ld be
be
considered
consider(f:, for
f'2r: manufacture on
Inanufacture small scale.
On a s,nall scale. Accordingly, it is
Accordingly,
necessary
necessary te flez:tify potential
to identify new products
potential new products forfor manufacturc
Inar1"facture ty
by small
slnall
enterprisesf and
enter at to
to disselninate infor,nation on these
disseminate information these to
to entrepreneurs
entrepreneurs and
and
their support
their suLL agencies.
)rt .ftencies.

The qllality of existing

The quality existing products
products should
should be
be ilnproved
improved and SOlne
and some
should be
standardization should be sought
sought for
for better
better marketability.
marketability.

Poor market
Poor market intelligence
intelligence isis aa lOajor
major problem
probleln for
for most
most smallsmall
enterprises~
enterprises. Assistance
Assistance inis needed
needed toto improve
improve knowledge
knowledge of of what
what the the
market
lnarket wants,
wants, to
to identify
identify new
new opportunities
opportllnlties andand to
to formulate
formulate better
better
organi zat ional fonna
organizational ts for reaching the markets.
formats The poss ib i l I ty of
The possibility of
sales to
to large
large industries
industries rhould
should be
be explored.
explored.

expanded
Certain
lnarkets
markets
products of
Certain products
in distant
nii
of s,nall scale
urban
:f:in
Industries have
,,cale industries
centres and even
potential for
have potential
In
in
for
export
destinations. Such opportf,
opportunities aree not -)t nOW fully captured,
now fully captured, and
and where
where
they are, the
they are, the net
ri(:i benefit
hr..efit to producers
::,i is
is often limited.
li,nited. This probleln
This problem
has"
has been particlllarly
particula ,narked, for exa,nple,
; : handicraft indllstries
example, for handicraft industries
based on rattans
based on rattans or or wood
wood carvings
carvings but but evrn
even for utility products
for utility products like
like
charcoal. It is is necessary to
necessary to helphelp increase
increase the the share
share of
of benefits
benefits
retained by
retained by producers
prodl.cers through
thro1.gh improved
ilOproved ,,I,anization
organization and and more
lOore direct
direct
access the consuming
access to the centres ~
consll.lning centres.

4. SUPPORT FOR
SUPPORT FOR AND
AND PROMOTION
PROMOTION OF
OF SMALL ENTERPRISES
SMAn ENTERPRISES
Dlle to
Due to varying circumstances
cirClbostances in the countries,
in ti- generalization is
COllntries, generalization is
not
not possible
possible with regard to to tf,e
the degree
degree c)of official irrerention
intervention necessary
necessary
to help s,oall enterprises.
help small enterprises. It is considered possiblc
is cons;jere possible that
that vefy
very high
high
levels of support
levels of support whict
which r-s.cve
rel"OVe all
all key
key supply
supply oc
ormarket
,narketff,:11e.
proble,n. could
erode the
erode the comparative advantage of
cOlnparative adv,--,ge 51oa11 units
of small units relative
relative toto ones~
ones.
In
In that case,
case, they
they could
could be displaced larger units
displaced by larger units and
and their
their special
special
contributions to society would
wOI.ld be
be lost.
lost.

IIt
t seems
seemS essential therefore
therefore that
that some
some competition
cOlnpeti tion and
and hardship
hardship
should
should be
be allowed
allowed among smallslnall enterprises so that that only thethe efficient
efficient
emerge
elnerge which
which cancan then
the;, be
be given
given tailor-made
tailor-Inade support
support packages.
packages. ,nost
The most
successful of
successful of them
them can
can cr,,ao
create nuclei
nuclei ofof dynamic
dynalnic innovation
innovation in in aa sector
that could
that could otherwise
otherwisestagnate.
stagni. The less successful
successf,.l should
should not,
not, however,
however,
abandoned.
be completely abandoned.

Whatever the degree of of intervention proposed,

proposed, it
it will be
he
necessary
neces!. y too recognize
recognize the
the special
special features
featllres of
of small
s.nall enterprises
enterprises and to
to
tailor at
tail,r assistance
.,stance accordingly. Firstly,
Firstly, the considerable differences
the considerable differences
between
between cottage or household-hased
cottage or household-based indstries
industries and
and the
the larger
larger workshops
workshops
will need
will recognition.
need recognition. knong the fonner
Among group the
farmer gro-:p the special
special character-
character-
istics
istics to
to be considered arise from
be co;:sidered frol.!'I. extrr,, f. .-.1.1nE.ss; great control
extred\e stnallness; control and
and
participation by falnily-based
participation rather than
family-based rather tha, free loarket
market labour; limited
operational records; seasonal operation; nl~nerO!lS
numerous enterprises;
geographical dispersion:
dis.frrsion; poor measurability
measurability of assets, outputs and
efficiency; and
efficiency; and highh ;ncidence
incidence of
of reliance
reliance on forest raw materials
hT, forest daterials other
other
than wood,
wood.
 -- 15
15 --

the enterprises
Smallness of the enterprises and
and their
their great
great number
number will
will require
require
adjustments to existing planning
pIanning and
and programming
programming procedures
procedures as
as well
well as
as to
to
management
management systems. Instead of considering enterprises individually
Instead
workabl
workablee procedures
procedures and
and guide lines must
guidelines must be be developed
developed for treatment of
for treatment of
enterprises
enterprises in groups ifif only toto limit
limit the
the overhead
overhead burdens
burdens of
of each
each unit.
unit.
Evaluation procedures and
Evaluation procedures and criteria
criteria for
for financial
financial assistance
assistance should
should also
also
be amended to
be amended to more
more realistic
l"ealistic ones
ones which
which can
can be
be met
met by
by enterprises
enterprises that
that
often have no records and written
written title
title to
to their
their assets.
assets.

Assistance
Assistance measures, programmes
programmes and policies for small
industries furthermore be
industries must furthermore be coordinated
coordinated among
among agencies
agencies dealing
dealing with
with
them alone and those concerned
them alone wi th large
concerned with ] arge seal e industry.
scale industry. Thi
Thiss will
wi I I
ensure efficiency and
ensure efficiency and appropriate
appropriate collaboration
collaboration between
between industry
industry ofof all
all
si zes ~
sizes.
 -- 16
16 --

INSTITUTIONAL REQUIREMENTS

Introductory Note
Note
by
by the Secretariat

L1. INTRODUCTION

Prom the institutional

From the institutional viewpoint, forest
forest industry
industry development is is
nO uenced
iinfluenced by
by or through the the exi stence of
existence proper governmental,
of proper governmental, pare-
para-
sector and
statal, private sector and local
local peoples
peoples' organizations
organizations or agencies. The
roles of all
of such institutions are
lre governed or defined
or through
appropriate legal
legal provisions and statemerts
statements ofof priorities
priorities as as reflected
reflected in
in
formal or informal
ihfo,g,-1:: policies. Both fc,cest-sector
Both forest-sector and and external policies
external policies
be relevant.
may be relevant. Purthermore, efficient
Furthermore, operation of
effi,ient operation of the
the institutions
institutions
and impl,,,eri
implementation policies re,iTires
ion of policies requires suitable and adequate
suitable and adequate manpower;
manpower;
training capacity
ca ty is therefore another key
therefore ar.:-.:er key institutional
institutional consideration.
consideration.
The
The final
final r,Jor
major ingredient
ingredient forfor development
development is is capacity
capacity to to mobilize
mobilize
financial resources
financial resources for for running
running the
the institutions
institutions and for investment
and for investment inin
industrial development.
industrial development. Balance
Balance isis required
required among these
these various
various aspects
aspects
as well
as well as coordination
coordination to to ensure
ensure achievement
achievement ofof objectives.
objectives.

In the
In the presentation given throughthrough the
the background
background documents,
documents,
emphasis is
emphasis is on the
the legal
legal aspects,
aspects, but but this
this should
should not
not be
be taken
taken to
to imply
imply
overriding
overrid i ng importance
import ance of
of this
th is aspect
aspect inin all
all cases.
cases. The exami ne
The papers examine
the subject
the subject in in terms
terms of
of how
how the
the law
law can
can influence
influence the
the level
level of
of benefits
benefits
dedved by
derived by local people from
local people forest industries.
from forest Thus the Secretariat
Thus the secretariat
paper
paper examines
examines subject
subject areas
areas in in which
which changes
changes inin existing
existing laws
laws and
and
regulations are required
reg'Aations required to
to provide
provide more
more direct
direct assistance
assistance and
and technical
technical
support totoappropriate
suji,lr-t appropriate industries,
industries, which
which in
in this
this particular context
context mean
mean
those enterprises
those enterprises which
which help
help toto improve
.:-,rove the lot of
the lot the rural
of the rural people
people byby
returning benefits
returning benefits toto them
them that
that outweigh costs.
:.weigh costs.
Si, re..r
Sio tu on
reports on the
the results
results of
of an
an analysis
analysis of
of the
the legal
legal and
and
organizational framework
ti:.iework within
within which citizens of
which citizens of aa developing
deVeloping country
country
and do
can and do participate
participate in
in logging
logging and
and wood
wood processing
processing activities
activities in
in that
that
country.

It is is worth
worth stressing
stressing that
that the
the law
law should
should inin anyone
any one case
case
address all aspects ranging
address all ranging from
from forest
forest resource
reSOurce owners:do",
ownership/access through
:e::s through
processing
processing to product distribution
to product distribution andand should
should have
have no
no corilicts
conflicts within
within
chain. The law shouid
this chain. should provide
provide reliable
reliable access
access by
by enterprises
enterprises toto all
all
key inputs
key inputs but
but should
should balance
balance this
this against
against the
the needs
needs or
or parallel
parallel claims
claims
on the same resources by other
on other parties,
parties, traditional
traditional oror modern.
modern. There
There
should be assured security for
:ed secuiity ,r- maj or investments
major investments and fair apportionment
and fair apportionment
benefits to
of benefits t all partiem.
all parties.

In
In legislating for increased
legislating ior increased local participation in
local participation industry,
in industry,
however,
however, special
special care is is needed
needed to
to ensure
ensure that
that local
local people
people first
first have
have
the
the capacity
capacity toto effectively
effectively discharge
discharge thethe required
required functions
functions before
before the
the
them responsibility
law gives them responsibility torfor this.
this. Legislation
Legislation should therefore be
should therefore be
accompanied by
accompanied efforts at
by efforts at skills
skills transfer
transfer to people
people and
and their
their groups
groups in
in
all essential
all essential disciplines,
disciplines, otherwise
otherwise the the desired
desired benefits
benefits may
may prove
prove
illusory.
illusory. Detai led analysis
Detailed analysis ofof issues
issues is in subsequent parts
in subsequent parts of
of this
this
report but certain elements are singled out
report out below
below for
for special attention.
attention.
 -e 17 -
-

2.
2. ISSUES
KEY ISSUES

Relatively little
little of
of existing
existing legislation,
legislation. dealing
dealing with
with general
general
Industrial Ices, is
industrial practices, in designed
designed toto enhance
enhance the
the opportunity
opportunity for
for local
local
people ively organize,
people to actively ize, manage
manage and
and benefit
benefit from
from local
local forest-based
forest-based
industries. Legislat on should
Legislation should bebe updated
updated to cover aa number
to cover number of
of issues
issues
have aa direct
which have
which direct bearing
bearing on those
those forest
forest industries
industries which
which rely
rely
primarily on local
primarily local human
human and
and natural
natural resources
resources for
for their
their operation.
operation.
These issues
issues include:
include:

l.
I. Land tenure and land
tenure and availability:
land availability: looal
local people should
people should
have access to
havr arcrss to the
the means of
of production
production (land,
(land, tools,
tools, seeds
seeds
or seedlings) and
or reedlings) and should
should have
have an
an incentive
incentive to
to manage the
manage the
forest reSourceS wisely.
foresl iesources wisely.

2.
2. Customary Ilaws
awa and usage rights: indigenous rural
populations
populations exercise varIous usage
exercise various rights on
usage rights on forest
forest lands
lands
by virtue of
by virtue of custom
custom and
and tradition
tradition which
which in in most
most cases
cases are
unwritten. In
In many countries these unwritten
many countries unwritten rights exist
exist
side by
side side with more recent
by side recent statutory
statutory laws.
laws. It is, how-
It is, how-
ever, often the
ever, the case
case that
that the
the customary
customary laws
laws are
are known
known and
and
exercised by the
exercised by the rural
rural '.co.cple,
people, while
while the
the statutory
statutory laws
laws are
known no:
neither known nor understood
uncc:rt,od or or observed.
observed.

3.
3. harvesting and pl
Timber harvesting pr'oc:es;si;ng: rural should have
rural people should have
access through permit- or licences icences to timber stands
suitable for small
sma 1 scale harvesting or for
':og activities Or for sale
sale
industry.
to large industry.

4. Credit:
Credit; rural people should
rural people sho'.ild also
io have access to
have access credit
to credit
facilities, them to
facilities, enabling them to pu.-
purchase:se the equip-
the required equip-
ment, supplies and materials necessary
and materials ne;,-. for operation of
= of
their enterprises.

5. Timber utilization agreements:

agreements: concession
conoet:sien agreements
acroement.,
should be designed
should designed toto promote
promote dcrneti
domestic processing
p JigwniLh
which
has
has already
already been
been done
done in in many
many ccuntrie5
countries -- therehf
thereby ma,ing
maki ng
them effective instruments of
if social
1:QC1d1 and
ani economic
deve 1 opment •
development.

6. Taxes and
and feest
fees: some countries
some countries imi:ce a wile
impose a wide range
range cf
of
charges, and taxes
fees and
charges, fee:: taxes on various
various Scf
s of 'crestiv-
forestry-
related activity which for small 1 op,,rAt tl'S I15
are
sometimes prchl?:lLive.
sometimes prOhibitive.

7. The large,
large, often
(c:.!en foreign-owned companies operati
foreign-owned co,opaniEs ng forest
opelat;ng forest
industries developing countries
industries in dEveloping countries have
have all
31_ the
the advanage:;,
such
such asas easy
easy access
access to
to forest
forest resources,
rescu.ices, expert ,
credit facilities, technical
credit facilities, technical and
and oagaueital
managerial skills.
ski]]s. This
makes itit extremely
extremely difficult
difficult for
for Lne
the iccal
local ,ptiopt,neur
e to
enter this field of activity
activity even though
thougn under
under the
governing legislation
governing legislation he he has
has just
just asas many
many rights
rights cnd
and
obligations as as the
the foreign
foreign entrepreneur.
entrepreneur.

8. Development local skills

Development of local is aa prerequisite
skills is prerequisite forfor .,.co
success .

should precede
and should precede any
any attempts
attempts toto take
take over
over foreign
foreign-owned
c.
enterprises if success is
enterprises if is to
to be
be ensured.
ensured~
 - 18 -

INSTITUTIONAL REQUIREMENTS

Summary of Discussion
Summary of

1. GENERAL

Many issues influence institutional requirements and national

issues influence
situations
situations considerably so that that generalizations may may be
be misleading.
misleading. It
It is
nevertheless important
nevertheless important in
in all
all cases
cases to eh, ,re that
to ensure that people's
people's institutions
as well as
as well those of
as those of govrrnment
government andand industry adequate.
industry are adequate. Elements of
Elements
the institutional framework
the fr,riework include statements of of overall official
priorities; clear
priorities; clear outl',,,s
outlines ofof policy
policy toto reflect
reflect such priorities;
priorities; aa legal
legal
code as an
code an expression
expression ,i _.Dlicy; and
of policy; and organizations
organizations to to plan
plan and
and implement
implement
the dei,ired
desired goals. To achieve all all this
this it in necessary
it is necessary to to have thethe
capaiLv to train adequate manpower for the institutions and
capaci ari to
coordinate diverse intt,-
coord,nate the diverse 1- related
interests industrial developmer!,
related to industrial developments. In
all cases itit is is essential
essential to mobilize
- adequate financial
-Dbilize adequate financial resources
resoi.:, s to)
finance the inputs
finance the inputs of all institutions
of all institutions who will participate
who will participate in in a given
venture
venture or
or programme.
programme~

with regard
With regard to
to the
the legal
legal aspects
aspects itit is
is necessary
necessary toto ensure that
that
all aspects from
all aspects from forest
forest resource
resource tenure
tenure through
through processing
processing to marketi ng
mark,ting
are
are covered. law should prcvide
The law provide for
for reliable
reliable access
access to
to raw
raw mi.-
materials
-ials
by users
users of
of all
all scales
scalesofof:perLtion
operation without
without neglecting
neglecting vital
vital traditional
tr.....1':iona1
and usages
rights and i 'les of local people.
of local people. It
It should
should also provide for for security
of
of inves-- .,, rights to aa fair
investments, fair return
return and
and provision
provision for
for their
their fair
fair
sharing
sharing between
beten the theentrepreneur,
entrepreneur,his hisworkers,
workers, local
local communities
communities and
and the
the
state
state...

In
In addition toto suitable
suitable laws,
laws, certain
certain institutional
institutional factors
factors can
can
pred i spose a
predispose a project
proj ect toward
toward success.
success. These are
These are for
f-i instance, strong
people's organizations, efficient government f,A-.ties
facilities and well
organized entrepreneurial
entrepreneurial firms. Coordination at
at all stages is also
essential
essential...

Although strong
strong institutions
institutions and
and sound
sound laws
laws are
are very
very important,
important,
the oven'iding role of
the overriding of politics
politics in
in decision-making
decision-making for
f01- the
the sector
sector should
should
be
be recognized.
recognized. is therefore
It is therefore desirable
desirable to develop
develop thethe basis
basis for
for
improved overall long-term
improved overall long-term plans
plans that
that can
can better
better survive
survive political
political
changes.

Key issues of institutional development

institutional deve int relate to increasing
to increasing
local
lt l people's participation and
people's participation and benefits
benefi4- from forest industries, the
role ofS foreign participation, and ensurng
participation, and ensuring successful
successful transition in
promoting
ng greater citizen's
citizen's control
control and
and ownirship
ownership ofof forest
forest industries.
industries.

2. BNHANCING PEOPLB'S PARTICIPATION AND BENEFITS

ENHANCING PEOPLE'S
Close involvement
involvement ofof local
local people
people and
and cooperation
cooperation are
are essential
essential
'cesa and
for success and this
this depends
depends largely
larqely on
on improving
improving the
the benefits
benefits they
they
derive
'lefrom
from forest
forest industry operations.
industry operations.

With regard
regard to
to forest
forest resources
resources for
for industry,
industry, people
people must
must share
share
responsibil i ty for their
responsibility their manai.;,-,ot.
management. They wi 11 often
will need technical
often need techn! cal
assistance and
assistance inputs at
and inputs at least
least initially to enabl
;i::tially to enable them to
e them to take
take on the
the
responsibility and tap
responsibility and tap the
the benefits.
benefits.
 - 19 -
- 19 -

intn1 fement by
Great.P1 involvement
Greate~ local people
tt} local people recniis suitable incentives
requires suitable incentives
as well as
well hrhininn for
h. training ror themeffcrttiniv
tnem to discharge technical,
to effectively discharge teChnical,
managerial and
managerial on theii
int marketing tasksLicl . on their own. nwn. organization into
Ph-i organization into
Their
cooperath,s ni :her torp., of traditionl
cooperatives or other forms of traditional or new ncwassociations
o,suciations is
is usually
usually
best ininondeit'
best order tot,. pool efforts
effn..-s and ,uccess.
enhank'e chances of suCcess.
ar..1 enhance

Skills ,:tA management capabilities Cal only be increased in

Skills and management capabilities can only be increased in
it
stages and it may
stages ,, be bestto promote initia_ly small enterprises which
'iest to promote initially small enterprises which
are within the
are within the reach of the the capabilities
capabilitiesof offno
thepc,onle
people and
and then
then build
build up
up
toward more
toward more complex Sometimesinitial
cowp1., ones. Sometimes initial inv.l.oment
involvement could
could be
be limited
limited
to harvesting f.:.,-*ations but each situation should be evaluated and
to harvesting rations but each situation should be evaluated and
decided upon
decided upon ind
indtzidually.
vidually.

In industrial enterprises, consideration should be given to

In industrial enterprises, consideration should be given to
discriminating in favour of local people in employment for certain
discriminating in favour of local people in employment for certain
categorie-; of t-)rkers and to sharing of revenues with local authorities.
categories of workers and to sharing of revenues with local authorities.
,n, into development activities meeting local priorities,
Such revenue can go into development activities meeting local priorities,
into deve
into t
development ct sustainable forest resources, or can be reinvested in
of sustainable forest resources, or can be reinvested in
new fforest
new 1> 'n,,.,stry capacity.
industry capacity.

,onal rights and procedures should be taken into account

Traditional rights and procedures should be taken into account
le
in legislation for forest utilization and in concession
for forest util ization and in concession agreements
agreements but
but
with re,ci,:ht.n of industry's interests also
with recognition of industry's interests also.

3. FOREIGN PARTICIPATION

there is
Where there is scope [or participation
foreign participation in
for foreign forest
in forest
industries, such investors need to be allowed adequate returns and
industries, sllch investors need to be allowed adequate returns and
stability in operations.
stability in operations. The lawand
The law andinstitutions
institutions should ensure this
should ensure this but
but
also allow
also allow a
a fair
fairsharing
sharingofofbenefits
benefitsforfor
thethe
host country
host andandcommunity.
country community.

4. LOCAL OWNERSHIP OR CONTROL OF INDUSTRIES

TRANSITION TO LOCAL INDOSTRIES

In situations where citizen or local participation in industry

In situations where citizen or local participation in industry
is
IS tto be increased or to replace external ownership, efforts should be
be increased or to replace external ownership, efforts should be
o onsure an adequate transito,n period during which the external
made to ensure an adequate transition period during which the el<ternal
partner
P, , culd be
should be encouraged t
encouraged to riansfer technical, managerial and
transfer technical, managerial and
o.ipability to the local Someincentives
o%nef.... Some
marketing capability to the local owners. incentives may
may be
be needed
needed
'..tt such
tc attract
to such cooperation.
cooperation.

Experience has shown that

El<perience suitanle means eKist
that suitable exist for
f tcal
local
people's organizations
people's organizations to i. I financ:al stake
to hold a financial fol.-it r and
stake in fores
industrial operations under ai_itnpriate legal provisions.
industrial operations under appropriate legal provisions. Local people_e
can increasingly
can increasingly exercise
exercise influence
influenceononoperations
operationsand
andeven':u.t
eventually control
and manage
and managethetheenterprises
enterprises thcm,olves.
themselves.

has been noted that where local participation has been

It has been noted that where local participat ion has been
It
implementedabruptly,
implemented abruptly,very
veryoften
oftenthe
the enterprises
enterprises have
have suffered
suffered loases
losses and
and
the expected
el<pected benefits
benefits have turned into costs
turned into costs so so that
that the local
the local
communities suffer.
suffer. Enterprises
Ent ses sometimes even closeclose down, withwith
unemployment and
unemployment social hardship
and social ha result. The pace of transition
as
as a result. The pace of transition
should therefore be selected
should therefore be selected In in accordance ability to take
accordance with local abili ty to take
wi th local
over effectively and
over effectively and in line line with the enterprise under
with complexity
complexity of the enterprise under
consideration. Training of local people and of staff in supporting
consideration. Training of local people and of staff in supporting
institutions to enable them to shoulder increased responsibility must be
institutions to enable them to shoulder increased responsibili must be
pursued in
pursued in aa timely
timely manner andonona asuitable
manner and suitable scale.
scale.
 -- 20
20 --

PEOPLE AND INDUSTRY

INDUSTRY

Introductory Note
Note
by
by the Secretariat

1. INTRODUCTION
Traditionally, when
Traditionally, when forest industry enterprises are
industry enterprises planned or
are planned or
established, various organizations or groups
various organizations groups are
are contacted.
contacted. Thus land-
Thus land-
owners
owners are
are contacted
contacted toto secure
secure land
land for
for the
the mill
mill site
site and
and township
township andand for
for
possible tree plantations
possible tree plantations if they will be
they will be established
established on on private
private land.
land.
The government,
The government, on on the
the other
other hand,
hand, isis contacted
contacted to
to secure
secure forest
forest conces-
conces-
sions, for
sions, for land
land for
for tree
tree plantations,
plantations, participation
participation inin the
the establishment
establishment
of infrastructure,
in -astructure, to ensure that
to ensure that the
the pollution
pollution abatement
abatement measures
measures sug-
gestedd are acceptable
acceptable andand toto obtain
obtain financing
financing or at least
least guarantees
guarantees for
loans. Banks and lending
Banks and lending organizations
organizations are, of course, approached to
course, approached
obtai n the
obtain the necessary
necessary financing
f i nanci ng of
of the
the project
proj ect and trade
trade uni ons are
unions
; con-
are con-
tacted to ensure
tacted ensure appropriate
appropriate labour
labour relations.
relations. Final
rrnally, ,agents
agents are
are pos-
sibly contacted
sibly contacted to to provide
provide thethe marketing
marketing network
network for
for the products
products toto be
be
manufactured.

Attention
Attention is is also paid to
also paid government and
to government and local regulations to
local regulations to
meet with the
meet with the requirements
requirements on on pollution
pollution abatement
abatement and safety
safetyi'-ieasgr,:s.
measures.
Special attention
Special attention isis often paid
paid to
to the
the requirements
requirements ofof the
the mill
mill st,
staff in
order
order to attract
attract skilled
skilled labour
labour and
and salaried
salaried personnel
personnel so
so that
that tra'ning
training
becomes aa very
becomes very important
important activity
activity in the early
in the stages of
early stages the project,
of the project, as
as
well as
well establishment of
as establishment of the
the neceb,ary
necessary social
social facilities.
facilities. However, very
However, very
little thought
little thought is
in given
given in
in this
this context
context toto people
people -- those
those who lived in
who lived in the
the
before the
area before establ ishment of
the establishment of the
the industry,
ind ..stry, and want to
and want to continue
continue to
to
live there,
live there, or those
those who
who have
have been
been enci-
encouraged
raged toto move there at
move there at an
an early
earl y
stage of the project to to provide
provide the
the requ;led
required infrastructural
infrastructural development.
development.

2. WHO OWNS THE

THE FOREST?
FOREST?

The ownership
ownership structure
structure of of forest
forest land
land in industrialized coun-
in industrialized coun-
tries isis quite clearly defined
quite clearly deti ned although,
al though, eveneven there,
there, somesome controve.
controversial -al
issues
issues may arise. Some forest
Some forest land
land is is owned
owned by private
private landowner
landowners i or
farmers, some of
farmers, of it it is is owned by by the
the industry
industry and and some
somebybythe thegoverr,.
government.nt.
The hr, Friaries between
The boundaries h, the different
.'ven the different land lots are
_and lots are clearly
clearly defined
defined and and
recorded.
rec ; In developing
In .:. countries var
-loping countries various groups may
ca groups may claim
claim the the owne-rship
ownership
of land, SOme
of t r; legal
some with .al support
suppnrt andand e,-rme
some based traditional rights.
based on traditional rights.
Priate
Private landowners
landowners may own rin forest land
fore,r land inin some
some developing
developing countries
countries but but
most commonly
commonly today the t forests
Forests are .1, owned by by the
the governmei:i
government. . Concessions
are granted
granted by by theth, government
gn---F-iment to enterprises for
to various enterprises for logging
:::,,r;ringeither
either
for export
sur export cr *ripply raw
or to supply taw material
material ta to aa forest industry
indïrr ;:y enterprise.
entetprise.
However,
However, the t ri bes agd
the tribes and the peopl e who
the people who live
live in these f;,)rest
in these ores t areas
srran have
done
done so sometimes
somet imes for for scveral
several generations
generat ions and and iitt is very i ff i cuI t for
v, ;y ddiffi,g1t
to undt,:stand
them to understand how how the
the right
right ofof use of of "their"
"their" forest
f i can btbe grs-en
given to
someone else
someone el,- by aa "government"
"government" which which forfor most
most ofof tthem is i, anan entirely
unknown en-
unknown entity.
.'

To avoid
avoid conflicts
conflicts between
between the
the local
local population
population and
and the
the canoes-
conces-
sionnaire/industry enterprise,
sionnaire/indrItry enterprise, it it must be clearly understood
mu-t be understood how far back
of ownership
the claim of ownership goes
goes ininearl.
each ,ase.
case. Although traditional
traditional rights
rights may
have any,
not have any, strictly
strictly speaking, Igdal status
speaking, legal status at government or or enterprise
enterprise
level, they
they may
may have
have aa decisive eriect
effect on
on how
how the
the local
local people
people view
view their
their
75 to the land they
rights they live
live on.
on.
 - 21
- 21 --

Lack of
Lack of recognition
recognition of of the
the fact
fact that
that forest
forest industries
industries are are in
general not
general not only surrounded
sllrrollnded by trees but
by trees bllt also
also by people may
by people calIse aa major
Inay cause
conflict between the
conflict between local population
the local population and and thethe new
new industry.
industry; There is,
accordingly, an
accordingly, an interaction
interaction between
between thethe people
people andand the indllstryo
the industry. Exatnples
Exainples
this are
of this are described
described in i:1 the
the background
background papers,
papers, which
which quote
quote both
both positive
positive
and negative experiences.1/
and negative experiences.ll They
They highlight
highlight problems
proble,ns like
like those
those involved
involved
in
in lnoving
moving people
people as part -of aa land
as part-Of land development
develop!nent scheme
sche!ne toto aa forest
forest area;
areai
the introduction
the introduction of of agro-forestry
agro- forestry to to provide
proll ide raw
raw material
,naterial to to established
establ ished
or future
or future forest
forest industries;
industrieSi introduction
introduction of of a a large
large scale
scale project
project inin aa
rllral area with
rural area an already significant
with an significant population;
pOplllation; the the interaction between
interaction between
the people
the people and
and an
an industry
industry established
established in in anan area
area where
where thethe size
size of thethe
rural
rural population originally was was practically
practically nil.nil.

3
3 • IMPACT OF
SOCIAL IMPACT OF THE
THE INDUSTRY
INDUSTRY

The
The establishment
establisllinent of of industries
industries in in rural
rural areas
areas requi res careful
requires careful
planning regard to
planning with regard to activities
activities which
which relate
relate to to the
the social
social impact
impact which
which
the new
the new industry
industry will
will have
have on on the
the life
life ofof the
the local
local population.
population. Such
populatioils
populations usually have very
usually have very deep rooted
rooted traditions
traditions and and a a set structure
structure
of earning
of earning of thethe family incolne~
falnily income. If
If these cultural traditions
these cultural traditions are are not
not
respected
respected by the project, its its success
Sllccess might
might be be seriously
seriollsly jeopardized.
jeopardized. The
local
local population
population mayInay see
see the
the industry
industry as as an
an intruder,
intruder, encroaching
encroaching on on the
the
rights of
traditional rights of the
the people
people to I1se the forest, threatening
to use threatening their
their
livelihood~
livelihood. This can
Thts can lead
lead to to sabotage,
sabotage, for instance, in the
in the form
forln of
of
destruction
destruction of tree tree plantations
plantations or or outright
outright armed
arilled conflict.
conflict. The industry
The indtlstry
may also
Inay also consider
consider the the presence
presence of of the
the original
original local local population
population as as aa
threat to
threat to its
its security of wood supply and
of wood and take measures
measures to to keep
keep the
the people
people
away froin their
away from their concession
concession areas.
areas. Needless Lo
Needless to say,
say, the
the response
response ofof the
the
local
local population to to such
sllch measures
Ineasures isis usually
usually notnot positive.
positive.

is already some
If there is SOlne rural
rural infrastructure
infrastructure available
available in the
area where
area where the
the industry
ind1lstry is
is being
being established,
established, the
the pressure
pressure of
of the
the project
project
on local facilities
on the local facilities such as water and power
power supply ,nay
may be considerable
not to ,nention
mention on availability of goods and and the
the price food.~1
price of food.2/

Establishment
Establishillent of forestforest industries
indllstrtes should
shotlld essentially aim aiill at
at
rural
rural or
or national
national developlnent rather than
development rather than at industrial
industrial developlnent
development in in its
its
own right.
own right. In
In such
such a a context,
context, "what
"What isis in it for me?"
it for me?" becomes
becolnes aa very
very
relevant question.
relevant question. The The "me"
Hille" referred
referred to to here
here should
should bebe both
both the
the industry
indtlstry
project
project and the rural
and the rural population,
population, so perhapsperhaps it it should
should bebe phrased
phrased more ,nore
appropriately and
appropriately and illore
more positively
positively "What"What isis in
in itit for
for us?".
I1S?". If the needs
If the
and
and cultural
cultural traditions
traditions of of the
the rural
rllral population
population are are respected
respected and and well
well
understood there
understood may be
there lnay be a chance
chance for
for the
the industrial
indostrial project
project to to be
be under-
under-
stood
stood by
by the
the rural
rural population
poplllation as as well.
well. In other
In other words,
words, once the the rural
nlral
realizes that
population realizes that benefits
benefits will
will arise from the
arise from the establishment
establishment of of the
the

11
1/ J.E.
Balcker, J.E. labour in
Training of labour in a
a new
new cellulose
celllllose pulp mill Alto
Parana S.A. at Puerto
S.A. at Puerto Esperanza,
Esperanza, Misiones
Misiones -- Argentina.
Argentina.

Apandi.
Mangundikoro, Apandi. General for timber
General plan for tilnber estates development
developlnent
in Indonesia~
in Indonesia.

Picornell, P.M.
P.M. Technology and people at
at Paper
Paper Industries
Indllstries Corpora-
Corpora-
tion of
tion of the Philippines.

Webster, Alexa.
Alexa. Kesedar Project
The Kesedar Project inin Kelantan,
Kelantan, Malaysia:
Malaysi.a: A study
the socio-economic
of the socio-econolnic dynamics
dyn&nics in
in aa new
new land
land development
developlnent scheme.
schelne.

2/ J.E.
Balcker, J.E. labour in
Training of labour in aa new
new cellulose
cellulose pulp mill Alto
Parana S.A. at Puerto
Pilerto Esperanza, Misiones Argentina.
 -
- 22 -

forest indllstry it bec~nes

enterprise, it
industry enterprise, bec-, their interest
in their
in interest to
to support
support the
the
indllstrial activities.
industrial activities. But how
But how ca ty understand this
Can they unless proper
this unless proper
COIDdlunication is
communication established between
is established beL.. the population and
Jie population and the indllstrial
industrial
ect already at the
project the planning stago!
stage?

TO avoid
To avoid costly
costly conflicts between
between the
the industry
industry and
and the
the rural
rllral
population
populati-, and to
to maXl,nlZe the mutually
maximize the ,""tllally obtainable
obtainable benefits
benefits derived from
fro,.
cooperation,
cooper, 0, aa stratony
strategy ofof ,a;:i:toach
approach to to thetheforeseeable
foreseeableproblems
problems needs to
needs to
designed.
be desigtol. strategy in
This stiategy in turn has to to be
be based
based Hpon
upon a
a thorough study
the local
of the 7 ,c:1 conditions
conditi,r.aatatananearly
eary stage
stage ofof planning.

4. POPULATION
INVOLVEMENT OF RURAL POPULATION
The involvement
involve,nent ofof the
the rural
rHral1,,pul.ilion
population in ti,, the industrial
industrial project
project
duri;)g its
during its various stages can vary
various stages 00:15 derably derending
vary considerably dependi;)g on the nature
on the natlllee
and the size of the the project.
project. The ,ninl,","" involve,nent relates
m,:rmum :nvolvemeut relates of
of COUrSe
course to CO
eluploy,nent in
ewiloyment in the variOlls activities
the various activ:tiuL2 of of the for instance
!nill t for
the mill, instance in the
in the
.o,,ply of
supply of wood
wood raw material but can
raw material can grow
grow...::!.:'erably
considerably from from this
this basic
basic
level.
i.!vel. provision of
Through provision of training,
training, better
better jobs
:.bs and
and consequently better
better
wages can be
ges can be offered.
offered. The
The so-called ,nult ler effects
multiplier effects of establish,nent
of establishment
of forest
of forest industries
industries in in rural
rural areas
areas should
should notnot be forgotten
forgotten in in this
this con-
text, 1. e. where
i.e. where the
the rural
rural population
popula t ion benefits
benef i ts fro,"
i:.;.: supply of ser-
the supply eer-
v ices, not
vices, not only
only toto the
the mill
.nill but
but toto the
the people
people o:employed by the
by the ,ni 11 as
mill
well.

However! is
However, is provis ion of employment
provision eluploYinent in
in oror around thethe enterprise
enterprise
the only way
the way inin which
which rural
rural development
develop,ne:1t can
can bebe achieved?
achieved? Rural institu-
Rural institu-
tions,
tions, such such asas cooperatives,
cooperatives, play play anan important
important part
part atat various
variolls levels
levels ofof
sophistication
sophistication of the industry.
of the industry. Depe;)ding
Depeoding on theirtheir level
level ofof develcIt:
develop,nent
and strength,
and strength, theythey may be be able
able toto manaq,
manage and
and operate,
operate, as as employers,
employers, fairlycje
complex
c-,,,,, ex industrial enterprises. A A blot
high level
level ofof sophistication
sophistication cannoi,
cannot, oiof
course,
,,a, bebe reachod
reached quickly,
quickly, but but there is great great long-term
long-ten. potontial
potential for
for
developmentment in in these
these organis
organiZations. u.u. In
In developing countries,
countries, theti e finan-
cial possibilities
cial ibilituca off rllral
rural organizations
, :lnizations for for involvement in in fotest
forest indus-
indus-
tries may at presentpresent be be liniE,,
limited. It
It may in the
may in the first
first stages be be restric-
ted to to ,nainlyy organizing
organizi71 Lne the sup^ly
supply of raw material to to comparatively
comparatively small
stnall
industries.
indust, uo.. A subseque;)t
A subsc7:,, :It stage
stage wc.would be getting
d ho getting involved
involvedininthetheorr.,,
ownership
,hip
of
of thethe i.l.stry
i;)dllstry itself ,,;)d ld in
in m ,narketing
iag of the products.
of the ucts. This requires
that the
that the necessary
necessary rural institutional fra,nework
rural institut;c.cl framework is developed
developed conclln:e;)tly
concrrenziy
with the the industry
indus itself.
itself.

5. ITEMS FOR DISCUSSION

ITEMS

A. Which are
Which the most
are the JROSt coanon cultural
COJrunon cultural characteristics
characteristics and tradi-
tional usesuses which
which necd
need totu bebe taken
taken into
into account
account in
in planning
planning
forest industries
forest industries in in !ural
rll!:'al areas
areaS and
and how
how should
should the
the problems
problems
ar is ing from
arising fro,n these
these be
be ta(,kled?
tackled?

B. Which are
are the
the best
best means
,neans of
of connunication
cOJ!uuunication with
with the
the rural
rural popula-
popula-
tion
tion which
which have
have been
been successfully
successfully used
used in past in
in the past vario'ls
in various
forest industry
forest industry projects?

C. What types of activities

activities tendtend best
best to attract
attract the cooperation of
rllral population
the rural population inin the implEMentation
imp] non ofof the
the project?
project? For
Por
ins
instance, fann ing f logging,
tance, tree farming, 1099 ing f In i 11 ell1ploYlnent, food production
-nployment, food production
provisio;) of goods
and provision goods andand services.
services.
 - 23
- 23 -
-

D. Which are the

the experiences
experiences of
of training
training the
the local
local rural
rural population
population
for various
for various tasks
tasks in
in the
the mill
mill operation
operation at at unskilled,
unskilled, semi-
semi-
skilled and skilled
skilled skilled levels,
levels, including
including log
log harvesting?
harvesting?

E. Which
Which are the experiences of of involvement
involvement of
of cooperatives
cooperatives and
and
other rural
rural organizations
organizations in
in the
the activities
activities and
and the
the operation
operation of
forest
forest industries
industries at various levels of complexity?
at various
 -- 24 -
-

INDUSTRY
PEOPLE AND INDUSTRY
Summary of Discussion
Discussion

1. RIGHTS OF PEOPLE
TRADITIONAL RIGHTS PEOPLE

The presence
presence and activities of
and activities people in forest
of people forest areas
areas prior
prior to
to
establishment
establi of forest industries are
of forest are based
based on
on traditions.
traditions. Their ususe of
the forest relates to
fo,--,L relates to aa cultural
cultural heritage
heritage which
which goes
goes back
back sev(
several
generations. As far
As far as
as they
they are
are concerned,
concerned, the
the forest
forest belongs
belongs tototr,',
them.
Accordingly,
Ac,c. 'ingly, they very easily question the ownership claimed
claimed by
governments
go,-, ,aents or enterpr who maintain
ises who
enterprises they have
mai ntai n that they have purchased
purchased the
right of
richr use of their
of u.e their forest
forest area
area from
from the
the government.
government.

Regardless of official, :egal

of official, legal aspects, the traditional
aspects, the traditional rights of
of
the people
the and their
people and their cultural
cultural traditions need to be
need to be retoected
respected when
when aa
forest industry is is introduced in
11 what is usually referred to as
"backward" areas.
"backward" - After
, the claim
all, the
After all, claim to to ownership
ownership made
made by the
government
government is ally of
is usually
r. of fairly
fairly recent
recent origin and and the
the population may notnot
even be aware of this
even be this claim.
t claim. Insensitivity
Insensi ti vi ty toto the
the pattern
pattern ofof forest
utilization of the people
of the people cancan cause
cause serious
serious conflicts
conflicts between
between the
the
original
original population
population and and the industrial enterprise
the industrial enterprise thatthat tries
tries to
to establish
itself in
in aa forest
forest area.
area. The
The result
result of
of this
this may in in milder forms
forms lead
lead to
to
sOme sabotage of
some sabotage of the
the industrial
industrial utilization
utilization of of the
the forest
forest resource.
resourCe. In
:n
serious cases,
more serious cases, it it may
may lead
lead to
to security
security problems
problems and
and outright
outright armed
conflicts.

To introduce
introduce an industr~ in
an industry, in aa remote
remote forest
forest area area therefore
therefore
requires
requir, time. In
In the
the preliminary
preliminarystage,
stage,6-126-12months
months of ofdiscussions with
dossions with
rural communities
- 'Lies may
111..w be required.
be required. Meetings,according:'.',
Meeti,s, accordingly, need to be
need to be
organized with the people affected
organized with affected - - not
not village chieftains
ch,.'qtains -- to to
clarify ,t thn
what
clarify wl the indstry
industry can can dodo and
and what IL cannot.
what it . -not. rho same
At the
At s.me time,
time,
it must be
it be ciaritied
clarified to to tne
the original
original p-.oulation
population that
that estab'
establishment the
-t of the
industry
industry in in the
the area
area has has positive
positive ob2,ctives
objectives for for them
them to to ensure
ei ;ure their
acceptance
acceptance of the the project.
project. In other wolds,
In othei words, the
the projectect must
must be adapted
to the local
to the local environment
envi ronment to to maximize
maximi ze benefits
benef its accrued
accrued to to both
both parties.
part i es.
In this
In this context,
context, it it is is especially important
important to to explain
explain to to the
the local
local
population
population what
what the
the benefits
benefits willwill bebe in
in the
the second phase, after
second phase, the trees
after the trees
have felled.
have been felled.

If, on the other

on the other hand,
hand, the
the industry
industry will
will establish itself on
establish itself on
marginal lands through
marginal lands through introduction
introduction of of plantations,
plantations, thethe situation
situation maymay be
be
different.
entirely different. Since
Since aa new
new resource
resource and
and environment
environment is is introduced
introduced
as a
as a first
first step,
step, this
this may bebe c1
c: ,rly seen
seen by the local
by the local population
population as as aa
means
meanS for
for improving
improving their
their lot
lot and earnings.
.rnings. In such aa case,
In case, there is is no
traditional
traditional use
use of the forest,
of the forest, orly
only aa traditional
traditional useuse of
of land,
land, which even
the local population
population maymay consider unsatisfactory from
consio-: unsatisfactory their point of
from their of
view. The situation may therefore
therefore bebe entirely
entirely different
different from
from the
the case
case of
of
establishment of
of forest
forest industries
industries inin aa natural
natural forest
forest area.
area~

2. LACK
LACK OF CONSIDERATION FOR
POR LOCAL
LOCAL REQUIREMENTS
REQUIREMENTS

An industry
industry may be established in in an
an area and
and be
be able
able to
to operate
operate
successfully.
-'ossfully. However, its
However, its main target market
main target market may
may bebe interm,:-otA
international or or
r,
geared toward major
toward maj or urban
urban centres.
centres. meet the
To meet the market
market requi rements,
.ements,
depots built up
c,nots are built up in
in the
the capital
capital or
or in
in Ports
ports for
for exports.
exports. This
:s may be
may be
implemented to
imihemented to the
the extent
extent that
that aa shortage ofof timber arises with regard
,'t,gard to
to
 - 25
25 --

requirements of
the requirements alea where
of the area where thethe industry
industry is local-el. An
is located.
artificial situation might 'ken arise wh(ie the people a:.,urd
artificial situation might then arise where the people around the tne
industry have
industry to purchase
have to timter for
purchase timber for their
theirn,ed:- from the
needs from the major
majir mar,efir.2
marketing
Thetransport
depots. The transportcost
costofotreturn
ieturnfreight
freight then
thenartificially
artificially incieases
increases
the
the price
price of timber so
of timber so that
that it is it
is beyond
beyond thethe limit
limit acceptahl,
acceptable toto the
the
involved. A
population involved.
population certain part
A certain part ofof the
the production
production should,
should, thYryfore,
therefore,
be set
be set aside
aside for
for local
localconsumption.
consumption.

3. "TPY AND
INDUSTRY ANDSETTLERS
SETTLERS

Once roads are built

i)ads are bui 1t and the the iindus'
ndust ry y estabUshe,th,=re
establi shed, there will wi 11
inevitably re
inevitably be an
an influx
influxinto
intothe thearea
areaofofsc(5!
settlers s which
which rf . tnat new
realize that new
land has
land has bnen madeaccessible
been made accessibletoto agriculture.
agricultu.:e, Their activityactivit, ininthethearea
area
in the
in the first
firstinstance
instance takes
takes thethe form
form ofof sh:'
shifting ng cultivation.
cultivation. Although
this is
this is a negative phenomenon
phenomenon from from the iv c,nservation and
forest conservation and forest
forest
industry point
industry point ofof view, it
view, it must be recognizedrecogh, that about
that 200 million
about 200 million
people
people in in the
the world
world depend
depend ononthis thisactivity
activif; for,r theirtheir livelihood.
livelihoOd. The
traditional approach
traditional approach to to solving
solving this problem is trying
thisproblen trying toto stabilize
stabilize the the
population
population andaid to
to involve
involve them
them inin other
other aactivities.
ly, This may
s. This in,: include
include teatea
planting, aniTal
planting, animal husbandry, fishery, tree
husbandry, fishery, tree anting to to st raterial
supply raw material
to the forrst industry, etc.
to the forest industry, etc. It is a very
I t is ve complex
c iaquires
issue which requires
that several Institutions
that several institutions on on a national
national and al level get' involved.
Ictiall level
local
The coordinationofof their
The coordination their efforts,
efforts,however,
however, is is aa must
must and
and c,oeds
needs toto bebe
provided on
provided on aa government level.
government level.

activity which has proved to

An activity to be quite successful
quite successful in
stabilizing the
stabilizing the activities
activities ofof settlers
settlersisistree
treefarming
farming as ctised, for
as practised,
t for
instan, , in
instance, in the
the Philippine-,
Philippines. In
In the
the schemes applied now,
schemes applied 10 percent
now, 10 percent ofof
Pocated t- seftlers is for
1,- allocated to settlers is for f(
the land
the . food crops is for
crops and
and90901!!- rit is for
percent
f..
tree farming.
tree ti...
in-. However, this presupposes that at there
there ih h.ket outlet
is a market outlet
for the
for the wood
wood soso that
that the
the 1..-oe
tree farmers recognize the incom(
ie the p(hential of
income potential of
this activity.
this activity. It could
It could :c
beadded
added intrt that in
in this
t Philippines
context that in the Philippines
tree farming ac:ivities is classified as
r

the
the wood produced in
wood produced in tree farming activities is classified as an
agricultural crop and, therefore, is
agricultural crop and, therefore, is not NO',included
includedinin the
the log
log export
export
quotas which are
quotas which are considered
considered in in the
the case
case of
of harvesting
harvestingofofwoodwood from
from
natural forests.
natural forests.

Well-meaning leghslation
Well-meaning legislation in in this s sphere of activity may,
of activity
however, hr cininterprcduotiva.
however, be counterproductive. i,!,!, settlers
For instance, may
settlers mayhPbeallowed
allowed by
by
gover,wer,t decreesinto
government decrees inta (1eared,
cleared, Int(ocd-:!v,:i
logged-over areas.
areas. (,ud hunger
Land hungermaymay then
cause de=lructionofof industrial
cause destruction indu=trial effort!:
effOrts dofplantation
plantation e7,-.ablishment
establishment aftera('.:
logging. It
logging. It must
must bobebc,InP
borne inin mind that the
mind that the serriors
settlers areare primar
primarily
interested
interested in
inagricultuke
agriculture and
andsystems
systems mu,t
must bebe designed
designed toto be
be adaptable
adaptable to
this.
this.

4. PEOPLE,
PEOPLE, INDUSTRY
INDUSTRY AND
ANDCONSERVATION
CONSERVATION

:re are also political r-f,lica' rrs in e rs htext caused

There are also political implications in this context caused by
by
env'rnr-- ..ist public
envi ronmentalist publ ic opinions.
opinions. 2..2e!,r-iinn
According to dustry is
to these, industry f!: seen
destroyer of
as a major destroyer of forest r,
forest resources sett
ies and settlers are acceptable.
Al: ho,,,a in the latter
Although latter case the ch-,t,uction
case the destruction of of forest per settr..
settler in is
quite overall impact on forest
small, the overall
quite small, depletion is
forest depletion is consider-h.
considerable,e,
simply because
simply because ofof the
the number
number ofof people
people involved.
involved. ,dlhblishment of
Establishment c.f an
an
induslr, . on
industry, on the
the other
other hand,
hand, may considerably contribute
may considerably contribute toto conservation
conservation
of te
of thefrhest,
forest,which
whichin in
that case
that has
case hasa adirect
direct commercial
commercial value.
value.
 - 26
- 26 --

Once tt
the local
local population
population realizes
realizes that the forest
that the forest asas such has aa
ddir--
i reet eornmerci
commef al val ue, thei
value, their i nteres t i n
r interest protect i ng the
in protecting the reso,
resource will
,

increase.
inc,, e. This
TI,Is can
can be
he further through community
further enhanced through community invol\.,'
involvement
clt in
forest
for(,t protection. For instance, in the Philippines, government
incentives
incetives areare provided
provided toto communities
communities toto achieve
achieve fire
fire protecticm.
protection. These
incentives are
incentives are granted
granted on on the
the basis
basis ofof the
the past
past achievements
achievPmnIs of of the
community fire protection in
community in fire in the area forfor which itit isis responsible.
resn,rsible.

5.
S. PROBLEMS IN ATTITUDE TO REGULAR EMPLOYMENT
PROBLEMS IN EMPLOYMENT
In
In aa population
population with
with aa way of life set
way of set to
to Tarting
meeting a subsistence
suhsistence
level, the
level, the regular,
regular, 8-hour
8-hour work-day
work-day with
with 5-6
5-6 days
days aa week is often an
often an
unknown and alien concept.
unknown and concept. Empl,vent is
Employment is in such Cd:5,5
in such cases considered he
considered to be
either aa source income to
source of income to pul
purchase
Ise a
' a specific item item (for
(for instance,
instance, aa
bicycle) or an
bicycle) or an activity
activity totosuppl,.,'-'nt
supplement thethe normal
normal family
family income. Higher
wages have
wages have heen suggested as
. as aa remedy
remedy to
to this,
this, but
but have usually
usually proved
proved
counterproductivea and
counterprodu- .
and led shorter periods
led to even shorter periods of of work.
work.

The industry usually

The industry usually
rea requi res a
....:res a regular,
regular, reliable work-force.
reliable work-force.
In
In some activities,
activities, aa certain
certainfie',
flexihility inin attitude
attitude of the industry may
of the
alleviate the
the problem.
problem. For
For instance,
instance, people can be employed on on aa more or
or
less
less daily
daily basis to carry
basis to out tasks which do
carry out do not
not require
require specific
specific skills.
skills.
However, if
However, requirement of
if the requirement of skills
skills needs
needs to
to be
be met
met byby training,
training,
selection ofof trainees with regard
trainees with regard to their
their attitudes
attitudes toto regular work
regular work
becomes essential.

6. ATTRACTION OF OUTSIDE LABOUR

In
In the
the establishment
establishment ofof an industry or in
an industry in the
the establishment
establishment of of
the prerequisites
the prerequisites of of an industry
industry (infrastructure,
(infrastructure, plantations),
plantations), people
need
need to
to be
be attracted
attracted to
to the
the area
area to meet
meet the
the basic requirement
requirement of of size
size of
of
the force.
the labour force. Experience in
Experience in various
various countries has shown
shown that
that aa very
very
similar pattern
similar pattern of actions is neededneeded to
to meet
meet these requirements.
these requirements. In
general, aa study
study must carried out
must be carried out under
under those
those circumstances
circumstances to to take
take
into account needs of both
account the needs both the
the original
original population
population and
and the
the people
people the
the
expects to
project expects to attract.
attract.

In
In such context, roads
such a context, roads need
need to
to be
be built
huilt to
to get
get the
the original
original
population
population out
out of
of their
their isolation
isolation and
and irrigation
irrigation systems
systems might
might be
be
required for
required for agriculture.
agriculture. Furthermore, the housing
Furthermore, the housing standard needs
needs to
to be
be
improved for the original population
improved for population to be on
to be on the
the level
level which
which will
will be
he
required by the expected
expected immigrant
immigrant labour.
labour. Otherwise, a a counter-
counter-
productive
productive separation
separation of
of the
the two
two groups
groups may result
result if
if better
better housing
housing is
is
to the
only provided to the new
new labour
labour force
force and
and its
its families.
families.

In
In some
some cases
cases government encies have
government agencies have tried
tried toto improve
improve the
the
facilities in villages to
in villages to attract
attract skilled
s lled and
and semi-skilled
semi-skilled labour
labour from
from
areas.
other areas. If the
If facilities supplied
the facilities supplied have
have been
been below
below expectations,
expectations,
the
the efforts
efforts have failed to
have failed to attract
attract industry
Industry which
which instead
instead has
has been
been
established acceptable centres.
established in more acceptable centres. On the
the other
other hand,
hand, the
the cost
cost ofof
land (mill site)
site) and labour in these centres is
these centres usually significantly
is usually significantly
higher. Therefore,
Therefore, it it would seem advisable
advisable to
to develop
develop in
in deficient areas
industries
industries which
which could the labour already
could use the already locally
locally available.
available.
 -- 27 --

7.
7. BETWEEN ORIGINAL AND
CONFLICTS BETWEEN AND IMMIGRANT
IMMIGRANT POPULATION
POPULATION

In
In the
the process
process ofof introducing
introducing aa forest
forest industry,
industry, itit is
is essential
essential
that training
that tlaining is is provided
provided to to the
the local
local population
population toto increase
increase their their
direct benefit from
direct benefit the industrial
from the industrial activity.
activi However, itit is usually
is usually
necessary
necc:-,a:-/totoemploy
employskilled
skilledworkers,
workers, for
fi, instance
instance skidder
skidder operators, from from
the outside.
the co'side. Unless
Urles, ththe crews contai!1 reasonableproportion
contain na reasonable proporn of of local
local
labour, aa confzi
conflict will arise betw,.en
w:l: arise n10cals Mand
between "cal-," "foreigners n *
and"fore:gne:::.". In the
the
case of
case of expatr.a,c.,,
expatriates. The the conflict
conflict may be e,.endeeper,
br even deepez,due Hr toto wider
wider
cultural differences.

Another reason
reason for
for aa conflict
conflict between
between locals
locals and
and immigrant
immigrant
labour may
labour may be that thethe government oror industry,
industry, in
in their
their effort
effort to
to attract
attract
labour to the
labour to the area,
area, provide better facilities
facilities to
to the
the new
new population than
to the
to the old
old one
one whose
whose presence
presence isis taken
taken for
for granted.
granted. also been
This has also been
emphasized in
emphasized in Section
section 6.6. For
For this
this reason,
reason, an effort to to treat
treat these
these
equally is
groups equally is essential.
essential.

B.
6. INDUSTRY AND
AND THE
THE GROWING
GROWING CCHM-!:-7Y
COMMUNITY

The
The development byby the
the indus!.'y
industry of
of an
an infrastructure encourages
the influx
the influx of
of aa new population around
new population around the
the mill
mill complex. This poses
poses aa
different set
set of
of problems.
problems.
(a) The question arises
The question arises as
as to
to who
who is
is responsible
responsible forfor providing
providing for
for
the that is
the community that is created
created when
when the
the area
area is
is opened
opened up.
up. The
company may
company feel responsible for
may feel for its
its own
own employees
employees but
but not
not for
for
the
the other people attracted toto the
the area.
area. TheThe government may not
not
be able in this
bl3 to help in this regard.
regard.

(b) Two
Tw levels
o s of of community quality ity may develop;
develop; aa well appointed
well appointed
community
c r of company
company r7ployoo,-,
employees and and aa poor2",'
poorly appointed
appointed community
community
of immigrants
of i,':iigrants who who are not
net directly employed bv
dizectly empluvcr3 by the company.
the company.
The
The llegal
gal andand practical responsibility
pract-,...-.1 ie,p.nsinility of the the company for this
oompany for this
second community
community is is aa question of of adapt.atton
adaptation to unexpected
to an unexpected
problem. A company
company might
might be be willing
willing to to assume
assume aa role
role of
of
leadership
leadership in in community
community development
development but but may then bebe accused
accused of
try i ng to
trying to control
control the
the community.
communi ty. One might therefore
One therefore ask,
ask, is
industry responsible for
industry for its
its impact
impact upon
upon local
local people
people who
who moved
moved
in after
in after thethe industry was built?

The only possible

The only possible solution to
to this
this set
set of
of problems
problems seems
seems to
to be
be to
to
accept that engineers,
accept that engineers, lawyers,
lawyers, economists,
economists, foresters,
foresters, etc.,
etc .. , are
are unable
unable
at an
to arrive at an answer.
anSwer. specialized social
Specialized social scientists need to
scientis. need to be
be called
called
upon
upon to evaluate the actual needs
needs of
of this
this new
new populat
population. After this,
this, an
an
assessment needs
needs to be made by
to be by the
the management
management toto decide on appropriate
appropriate
measures.

9.
9. CO-OWNERSHIP
CO-OWNERSHIP OF
OF INDUSTRY AND SUBCONTRACTORS
Co-ownership of of the local population in
local population in the
the industry
industry enterprise
enterprise
can take
can take many forms
forms and
and should
should essentially
essentially be
be built
built upon
upon existing
existing local
local
organizations.
organizations. In way, disruption
In this way, disruption of
of existing,
existing, traditional
traditional systems
systems
is avoided.
is avoided. This can, in
This can, in its
its basic
basic form,
form, consist
consist of
of aa cooperative
cooperative type
of enterprise.
ente se.
 - 28
- 28 --

In aa somewhat
somewhat idealized form, the
idealized form. the local
local farmers
farmers could,
could, for
for
instance, be encouraged to
be encouraged to invest
invest in a local
in a local veneer/plywood/blockboard
veneer/plywood/blackboard
mill.
mili. At the same time,
the same time, they
they would
would be
be encouraged
encouraged toto establish
establish and
and
operate small sawmills using small
operate small small diameter WOOd, unsuitable
diameter wood, for the
unsuitable for the
central
central processing facility.
facility.

The above solution

The above solution seems
seems to
to be aa very
very attractive
attractive mOdel, but may
model, but
have its
have its potential
potential dangers
dangers asas well.
well. the farmers,
If the
If farmers, due
due to land
land tenure
tenure
policies,
policies, are in control
are in control of of the
the log
log supply
supply toto the
the sawmills
sawmills and
and the
the
central unit, they decide, after
they may decide, time, that
after some time, that sawing of large
sawing of large
diameter timber is
diameter timber is more cost
cost efficient.
efficient. This may lead
This may lead to lack
lack ofof raw
raw
material
material forfor the
the central
central processing
processing unit.
unit. This is,
This is, of
of course,
course, aa special
special
case
case...

10.
10. OTHER EXPERIENCES
In some cases
cases conventional logging, product transport and
marketing systems
marketing systems may be be inadequate
inadequate forfor aa full utilization of the
full utilization the
industry throughout
industry the year.
throughout the year. Under
Under such circumstances,
ci rcumstances, thethe industry
will unable to
will be unable to provide
provide the
the facilities
facilities required
required byby the
the labour
labour force.
force.
It
rt would impossible to provide full-time
would also be simply impossible full-time employment
employment under
circumstances. Although the
such circumstances. the latter
latter may not
not be
be an
an entirely
entirely negative
negative
aspect, development
aspect, development of new new methods
methods ofof logging
logging andand product
product transport
transport
methods adapted to the local local conditions may prove prove beneficial and
contribute
contribute significantly to to rural
rural development.
development.
 -- 29
29 --

EDUCATION
EDUCATION AND TRAINING

Note
Introductory Note
by the Secretariat
by the
(Consultant:
(Consultant M. Aho)
M. Ahol

1.
1. INTRODUCTION

The success Or
or failure in
in planning and
and organization
organization of
appropriate
appropriate educational
educational and
and training
training components
components as
as part
part of
of aa forest
industrial development programme
industrial development programme may
may be decisive
decisive for
for the
the success
success of
implementation
implementation of
of the
the whole
whole programme.
programme. From
From the
the viewpoint
viewpoint ofof the
the
therefore, it is
decision-maker, therefore,
decision-maker, of great importance
is of importance roto analyze
analyze the
the
quantitative and qualitative needs
quantitative and needs for
for improvement in training
improvement in training services.
services.
In addition
In addition to
to taking
taking into
into account
account the iflc needs
the specific needs of
of the
the programme
programme
under the t.ypes
preparat ion, the
under preparation, types and
and methodologies
met ologies of thethe training
training andand
education
education services
services have
have to be
be planned
planned with
with consideration
consideration given to the
given to the

cultural
social, ethnic
poli tical
political
c,nintional
orqanizational
technical
professional
rro,crrional
economic,
ecoiomic, financial

aspects
aspects of the country concerned
of the concerned.

2. APPROPRIATENESS OF
Of EDUCATION AND TRAINING

Education
Edu,a,ion and
and training for forr,t
trainina for forest industry
industry should be appropriate
should be appropriate
with regard to
with reg,to ,( both existing ._gndirn'c
loth existinA conditions and future reguirements.
future requirements. Its
Its
objective is nc
to de-,-elop
develop human
humanresources
te:-.,t,s to
t) correspond
correspond to
to the
the requirements
requirements
the forect
of the forest irdustries.
industries.

3. FRAMEWORK FOR DECISION-MAKING

FRAMEWORK FOR DECISION-MAKING ON PRIORITIES
ON PRIORITIES
OF TRAINING
OF EDUCATION AND TRAINING

the application
ita the
Despite application of of efficient
efficient planning,
planning, management
management and
and
monitoring
monitoring systems
tems in
in industrial development
development programmes, project
execution is noLmally
normally carried out under difficult field field conditions,
conditions, where
complex situations
.ons arise for reaso
arise for reasons.5 that
that appear
appear to be
he beyond thethe control
of the management.
the r- riient. Therefore, it is true that
is equally tri, additional
that additional
qualifications, in addition to those obtained through the
. t. .! -le traditional
concept crof forestry education, are
.r-!stry education, a being expec'
expected of ,ne the managerial,
managerial,
professional
proriir' and technical staff
ri r and their ive
T.,sre,:tive training
pro77,,-" ;
programmes.

comprehensive framework
A comprehensive ,,work will of assisi
will be of wha preparing
assistance when preparing
for decision-making
d,.:cision-making on prior,
priority
o areas for training development.
fl.opment. The
dimensions of such
such aa framewo,
framework can as:
can be described as:

educational elements
forestry components, and
forestry component-, and
factors
factors of
of technology transfer.
techn,Lqy transfer.
 -- 30
30 --

This three-dimensional approach is

This is demonstrated in F ure 1.
in Figure 1.

Figure 11

fOREST INDUSTRY COMPONENTS

FOREST INDUSTRY COMPONENTs

ELEMENTS
EDUCATIONAL ELEMENTS

PLANNING EVALuATION
PLANNING & EVALUATION

FORMAL
FORMAL EDUCATION

TRAINING WITHIN PROJECTS

TRAINING WITHIN PROJECTS
SPECIAL fURTHER TRAINING
SPECIAL FURTHER 'RAINING TOrle-, ,Iony
COURSES
COURSESAND ANDSEMINARS
.Er;b.ARS MM O'gan~latio" 1-J%,
i$:ch0Ology
CURRICULUM
CURRI ri rrIENT &&
DEVELOPMENT 4,,ona ^ha
PtQI-essiona, Skill

INSTITUTIONAL
IF '1FUTIOr, PROJECTS I 1/ , ." h.d.oay,
.. _ _ _ ~_~ ..~3chinery 1~_?I)nol~~y
,?5HIP && EXCHANGE
SCHOLARSHIP rLoud
PROGRAMMES
FACTORS OF TECHNOLOGY
FACTORS OF TECHNOLOGY
TRANSFER

In above, every
Figure 11 above,
In Figure ever-y "window can again
IIwindow" can again be described
described and
and
interpreted as aa setset of alternative
alternative priority
priority areas
areas for industrial
for industrial
and the
development and the related
related educational
educational andand training
training inputs,
inputs. which
which play
playaa
key role in industrial
industrial development
development and transfer of
and transfer of appropriate
appropriate forest
forest
technology.
industry technology.

It may
It may be
be maintained that
that aa combined
combined application
application of
of these
these
elements, components and
elements, components and f;,.tors
factors ensure; under positive
ensure, under positive ecological,
ecological,
socia-political, organizational,
socio-political, organizatLoral, financial and technical conditions,
introduction
introduction of and aporopriate
of improved and appropriate technologies.
technologies.

4. GRO!;PS
TARGET GROUPS

Even
Even when all the
when all the conditions
ct:ticns referred
referred to
to above
above have
have been
been taken
taken
adequately into
into account,
account. forest rndustrial
industrial development
development programmes
programmes are
are
implemented
implemented under and relative
under uncertainty ano relative or
or absolute
absolute shortages
shortages of
of
 -- 31 --

resources,
resources, especially trained, skilled
especially trained, skilled manpower.
manpower. This is especially
is esp, .ally so
in
in the case of
the case of aa rural forest industry
industry development scheme, where
development scheme, e- new
cultural values are ofte~
often also
aleo introduced to village communities,
con ties,
simultaneously with
with new
new technologies.
technologies.

Especially when adequately covered, education and training

constitute a
constitute a substantial
substantial and
and costly
costly investment
investment in in addition
addition to
to other
necessary investments for
necessary for forest
forest industry
industry development.
development. Therefore, it
Therefore, it is
is
essential to
essential to identify
identi fy target
target groups
grou for
for whom
whom thethe improved
improved training
training
services should
services should be
be produced.
produced. best carried
Th s is best
This carried out
out after
after the
strategic setting of priorities discussed
priorities in
in Section
Section 2 has been
2
completed.

Table I1 ill us tra tes how,

illustrdlet:. for ins tance, roles
for insta.ce, and funct
roles and ions of
functions
trainingo,..:a:-...zers
training organizers vis-)-vis
vis-a-vis target
target groups
groups may be
be analyzed
analyzed bearing
bearing in
mind the
the 1:.,voidable
unavoidable interlinkages that do
interlinkages that between target
do exist between target groups
groups
and within
and within work
,ork organizations.
organization:
Adequate attention should
Adequate attention in aa multi-disciplinary way
should in way be
be paid to
paid to
the important
the important role
role ple
played by linkage agencies.
agencies. These
These are
are not
not directly
directly
involved in
in the implementation
the impler. -est industry
: .tion of forest industry projects,
. projects. but
but produce
produce
technical and
technical and training
training services
vices which
- - an important
can have an
1 can important bearing
bearing on
on
incentives
incentives and
and activation factors wi
actliuu 1.,:ctorb thin the forest industry
vithin project,
industry project,
especially in
in the
the conte,t
context of
of long-tE.,,n
long-term rural
rural development programmes.
development programmes.

lA
TABLE IA

Roles and Functions

' :.)nsofofTraining OrganiZ€LS
Training C-gat u in Forr1. Education
in Formal Edition
Agency E2'Pectedimpact
.acted impact on forest industry
stry
target group

Direct
D Indirect (linkage)
(linkage)

1. Executive Universi
University University
Management - facul
faculty ty of
of - facul ty of
ulty
technology
te ,1 ology engineering
- ifacul -yty of
of - faculty
f6culty of
forestry
es try agriculture

2. Operational Forest
Forest College College of
- College of Business
Business
Management
management Forest
Forest Industry Administration
College - Technical College
- College

3. Supervisors
Supervisors as
as above - as
as above -
- FO7c,nt
Forest Industries - Technical schools
- Training Institute Agricultural schools
(technical-
vocational)

4.
4. Operators -- Vocational schools
- Forest Industrial
Industrial
Training Centre
Centre
 -- 32 -
-

TABLE 15
IB

Roles and
Roles and Functions Trairli~SL Organizers
functions of Training or9anizers in
in In-Service
In-Set"vice Training
Training

Agency Expected i,npact on forest

Expected impact forest industry
industry development
develop,nent
target group
tarqet grollp

Direct Indi
Indirect

1.
1. Executive Indllstry
Forest Industry Agric"ltllral Dept.
Agricultural Dept.
Ma:1agelnent
Management Corporations
Forest Departments
Departffients Wildlife Dept.
Dept.
Dept.
Fisheries Dept.

2.
2. Operational - as
as above - - as
as above -
nagelnen t
Management
Ma - Forestry projects
projects Agro-forestry/social
forestry projects
forestry projects

3. Supervisors as above
as - - as
as above -
Forestry extension - Agro-forestt"y/social
Agro-forestry/social
training
training projects forestry
forestry extension
Training project training projects
training projects
for
for work i:lstrllctors
instructors - Agricultural
training
extension training
- Rural supply
Rural water supply
and
and sanitation
projects
Rnral health
Rural
edllcation projects
education projects

4. Operators Vocational training

training - Fa,nilies target
Families as target
courses for
for upgrading
upgrading groups for
for motiva-
motiva-
On-the-job training
train tional
tional linkage
activities

The analysis
analysis of training req1lirements and
training requirements and impact training in
ilnpact of training in
forest indllstries
industries 1/ is is ct"llcial for effective
crucial for effective formulation
for,nulation of a a sound
sOllrld
progratnlne for
programme for educaTion
education and
and training.
training<0

Methods used
used inin SllCh
such analysis
analysis should
should bebe comparable
co,nparable within
within
regiorls
regions toto enable training
traini:1g institutions i:1 neighbouring
institutions in neighbouring countries
countries to
to co-
co-
operatei:l
operate planning and arranging
in planning ing training
training prograimes
progrslrunes and toto evaluate
their effectiveness
their effectiveness and
and efficiency
eff ciency and
and impact
impact on
on forest
forest industrial
indllstrial
develoPlnent.
development.

As stated the previous

above, the
stated above, previous discussion
discussion refers
refers to
to formal
fonnal
fOt"estry and in-service
forestry education and in-service training.
training.

In the preparatory
In the preparatory phase
phase ofof specific
specific training
training components
co,nponents which
which
form parts
form parts of
of projects,
projects, and special continued
and when special continued training
training courses
courses not
not
covered by
covered by national
national training
training institutions
institlltions are
are planned,
planned, attention
attention should
should
si,nultaneolls1y to
be paid simultaneously to two
two issues.
issues. These are the
the need for and the
possibility of hnprovement
improve,nent of the
the existing
existing technology
technology and
and the
the new
:lew techno-
techno-
logies are planned
logies which are planned to
to be
be introduced.
introduced.

Strict criteria,
criteria, iincluding
nclud Ing Career develop,nent planning
career development pla;)n lng of the
proposed trainees, should
proposed trainees, ShOllld be used when selecting
selecti:;g candidates
ca:;didates for
for continued
continued
training ~
training.

1./ FAO Secretariat.

FAO secretariat. Measuring
Measuring Training
Training Requirements
Require,nents and
and Impact
I,npact of
of
I"orest Industries,
i:o Forest
Training in Industries, (FO:AFI/85/8.3)
(PO:AFI/S5/S.3)
 -- 33 --

In addition to accelerated training programmes needed in

industrial management,
industrial management, production
production management,
management and for
I for supervisors,
supervisors theI

presently inadequate training systems

systems of of skilled workers
workers deserve
deserve our
our
attention.
special attention. lack of training
Hampered by lack training of
of work
work instructors,
instructors, the
the
present
present system training workers
system of mainly training workers on-the-job
on-the-job does
does not
not correspond
correspond
to
to the
the need
need of
of skilled
skilled workers
workers inin the
the industries.
industries. Vocational
vocational training
training
programmes of
programmes of skilled
skilled workers
workers should
should bebe conducted
conducted inin the
the national
national
language spoken
language spoken byby the
the trainees,
trainees, and and curricula
curdcula andand syllabi
syllabi should
should be be
pI anned by
planned profess ional curriculum
by professional curr ieul um development
development experts speci al i zi ng in
experts specializing in
vocational training.
vocational training. Training material
Training material andand educational aids should
educational aids should be
produced and introduced
produced and introduced inin the
the national
national languages.
languages.

The present
present situation
situation in
in this
this key
key area
area of
of appropriate
appropriate training
training
for
for forest leaves much to
forest industry development leaves to be
be desired
desired and,
and, therefore,
therefore f

explains partly
explains partly the
the bottlenecks
bottlenecks in in capacity
capacity utilization
utilization andand output
output
quality of
quality of the
the industries
industries asas well
well as thethe problems
problems ofof transfer
transfer ofof
appropriate technologies.
technologies.

5.
5 CURRICULUM DEVELOPMENT, TEACHERS'
TEACHERS TRAINING AND
TRAINING AND INSTITUTIONAL
DEVELOPMENT

Curriculoo. development and the

Curriculum development the related
related teachers'
teachers' training can
play aa key
key role
role inin the
the development
development of of appropriate
appropriate forest industries.
Even ifif the specific curriculwn development
specific curriculum development workwork can
can only be done
only be done at
at
national
national level
level,r giving
giving due regard to
due regard to cultural
cultural characteristics
characteristics andand special
special
features in the choice
choice of regional cooperation
of alternatives, regional cooperation in in this
this
field,
field, asas well as
as inin management training, can
management training, can bebe of great benefit to to the
the
participating countries.
countries. Through arrangement
arrangement of regional
regional forest
forest industry
industry
technology
technology teachers!
teachers' training
training courses, national cadres
courses, national cadres of instructors
instructors can
can
be formed.
be formed. Training
Training capacity should be established at at the
the national
national level
in
in order to meet
order to the demand
meet the demand ofof industries
industries byby providing
providing adequate
adequate training
training
for the required
for the required number
number ofof trainees
trainees representing
representing selected
selected target
target groups.
groups.
The great
The great number
number of of trainees
trainees prevents
prevents training
training fromfrom being
being organized
organized
regionally, and regional
regionally, and regional training programmes would would not
not adequately
adequately provide
provide
for the specific
for the specific needs of eacheach country
country and
and industry.
industry.

Depending
Depending onon the
the scope
scope and
and objectives
objectives of
of the
the forest
forest industry
industry
development programmes in aa country, training institutions
institutions should be
should be
established
established and
and existing
existing institutions
institutions strengthened through educational
strengthened through educational
planning
planning, f curriculum development,
development teachers'
f training programmes and
investment in physical
investment in facilities and
physical facilities and institutional
institutional development.
development.

6. MODEL ORGANIZATION
TRAINING-ORIENTED MODEL ORGANIZATION FOR
FOR IMPLEMENTATION
IMPLEMENTATION
PROJECTS
OF TRANSFER OF TECHNOLOGY PROJECTS
Below inin Figure
Figure 2,
2 a model is
I is presented for implementation
presented for implementation of
projects where
projects where the
the objective
objective is
is transfer
transfer of
of appropriate
appropriate technology.
technology.
Education
Education and training play
and training play an
an important
important role
role in
in the
the implementation
implementation of
of
projects.
such projects.

As aa result
As result ofof the
the technology
technology transfer,
transfer, aa certain dependency is is
established
established between "owner" of
bet.ween the "owner!! of the
the technology
technology andand the
the recipients.
recipients G

Normally, this dependency is

Normally, this is demonstrated
demonstrated byby the
the release
release of
of the
the "secret"
I!secret ll

know-how relating
know-how relating to the efficient utilization of the
efficient utilization the new
new technology
technology
applied
applied in
in the
the organization of the the recipient.
recipient. In addition to
In to the
the effect
effect
introduction of new
of introduction new technology
technology inin aa physical
physical plant
plant or
or production
production line,
line,
it also has
also has wide-ranging effects on
wide-ranging effects on the
the whole
whole organization of the
organization of the
enterprise, for
enterprise, for instance,
instance, in
in management and
and marketing.
 - 34 -

Figure 22

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the following,
In the following, some
some further
fu rthe r review
review will
will bet made of
made of the
the
stages of
various stages
various of aa project,
act to
to highlight
h hI ight somesome ofof the
t i terns
f ns shown in
in
I"igure 2.
Figure 2.

6.1 Prefeasibility/Feasibilit
Prefeasibility/feasibility Studage
Study Stage

The first
first uhaqc
phase of aa project is is usually
usually an an identification
identification stane
stage
during
during which a a number
number Lf
of facts
facts of local
local importance
importance are are identified.
identified. After-
this, one or
this, one or several
several p,.*-_.ect
eet ideas studied.
ideas are studied. Already in
Already in this
this phase, ,

national andand regional

regiona training
training capability
capability is is reviewed in
reviewed in order ro to
anal
analyze whether the potential implementation of the t: proposed proproject
lect
ShOll
should include investment on on education and train '77. During the
feasibility phase, this
feasibility study phase, this analysis
analysis should
should cove,
cover both r training
training within
the
the project
project as
as well as an impact
well as impact assessment of the 'L_Le project
f,,...ject Ononthe
the overall
overall
educational
educational system
system of forestry in
of forestry i~ the
the country,
country, at at all
all relevant
relevant levels
levels of of
education and
and training.
training.

6.2
6.2 Project Preparation
ration

I ff
If, On
on broad terms, the outcome of the analysis af of the
the
feasibility study is is positive, green light is
green light is shown for the detailed
the detailed
preparation
u,,:.ationof
of the
the project.
project. Setting priorities was
Setting of priorities was already
already discussed
discussed
 - 35
- 35 --

in 2.
in Section 2. In addition
In addition, aa thorough
fthorough analysis
analysis of the
the required
required training
t.raining
inputs is carried
inputs is carried out by an
an independent
independent specialist,
specialist, not
not a
a representative
representative
of technical partner
of the technical partner supplying
supplying technology
technology to
to the
the project.
project.

6.3 Appraisal
An independent
independent team
team is
is appointed
appointed to
to appraise
appraise the
the implementation
implementation
the proposed
plan of the proposed project.
project. The appraisal is
The appraisal is carried
carried out
out in
in respect of
of
ecological,
ecological, technological,
technological, financial,
financial, social
social as
as well
well as
as educational
educational
aspects. An educational planner/evaluator
An educational planner/evaluator should
should asas aa rule
rule be
be aa member
member
of the appraisal
of the appraisal team.
team. The appraisal shall
The appraisal shall as as well
well assess
assess the
the planned
planned
set of
set of priorities
priorities of
of the
the project
project in
in order
order to
t.o form
form an
an opinion
opinion on whether
the objectives set for
the objectives for the
the project
project can
can be
be attained
attained by by the
the requested
requested
resources. This assessment must not exclude education
This assessment education and
and tra'ning.
training.

6~4
6.4 Investment Decision
Decision

After aa positive result. appraisal, the

of appraisal,
result of the national
national executing
executing
agency of
agency of the
the proposed
proposed project
project makes
makes an
an investment
investment decision,
decision, which
which
depends on
depends on the
the availability
availability ofof financial
financial resources
resources for
for the
the implementation
implementation
of the
the project.
project~ The implementation
The implementation of the project
of the project proper
proper does
does not
not yet
yet
at this
start at this point
point in time~
in time.

6.5 Agreements

Following issuance of tenders

tenders for the required services,
technology, etc.
etc.,, for the project, the national executing agency
negotiates and enters
negotiates and into agre~ments
enters into and contracts
agreements and for implementation
contracts for implementation of
the project~
the project. Special agreements
Special agreements are alsoalso concluded on education
concluded on education and
training programmes and
training programmes and components.
components. These agreements
These agreements and
and contracts
contracts do
do
effective as
not become effective as yet.
yet.

6.6 Detailed Preparation Phase

Detailed
During the detailed
During the detailed preparation
preparation phase,
phase, as
as will
will be
be stipulated
stipulated in in
the
the separate agreements to
separate agreements to be
be made
made regarding
regarding this
this phase,
phase, site-level
site-level
will commence as authorized
project preparation will authorized by
by the
the respective
respective Govern-
ment Agency.
Agency. The national
The national executing
executing agency
agency is
is responsible
responsible forfor the
the
successful implementation
successful implementation of the preparatory
of the preparatory phase.
phase. Combined with
Combined with the
the
necessary mobilization of
necessary mobilization of national
national and
and site-level
site-level resources,
resources, ample
ample time
time
should be reserved
should be reserved for
for this
this important
important phase of thethe project.
project.

training programmes
The training programmes specified
specified in the project
in the project plan
plan will
will be
be
implemented at
implemented this stage
at this stage whenever practicable,
practicable, in in order
order to secure
secure that
that.
lack of
lack of training
training is not. causing delay and
not causing and inefficiency
inefficiency during
during the
the main
main
t.he project.
phase of the project. Therefore, training programmes have their
Therefore, training their separate
separat.e
budget and
budget and schedule
schedule ofof execution
execution as
as provided
provided for
for in
in the
the special
special training
training
cont.ract.s, not
contracts, not. excluding
excluding special arrangements
arrangements made withwit.h national
nat.ional training
training
institutions. Training
Training programmes may may include
include specifically
specifically planned
planned
institution-building projects
instit.ut.ion-building projects so
so as
as to raise
to raise the
the level
level of
of national
national
training capability to
training to a
a level
level required
required on
on aa long
long term
term by
by the
the realization
realization
of sectoral
sectoral development plans
plans and
and programmes.
programmes.

During this
During this preparatory
preparatory phase,
phase, resources
resources are
are mobilized
mobilized for
for the
the
implementation
implementation of
of the
the main
main phase
phase of the
the project
project at
at the
the site level
level through
through
an inter-disciplinary team of specialist.s represent.ing both
specialists representing direct.ly
both directly
involved agencies,
involved agencies, linkage
linkage agencies as well
agencies as well as
as local
local communities
communities and
and non-
non-
governmental
governmental organizations
organizations as will be
as will be applicable.
applicable& Special at.tention is
Special attention is
also given to
also to motivat.ional fact.ors and
motivational factors and incentives.
incentives.
 -- 36 --

6.7 Handing-Over IT

When the national executing agency is satisfied that the

preparatory phase has been successfully carded
carried out, the actual
implementation
implementation of the project
of the project will
will be
be handed
handed over
over toto the
the local
loal project
project
management. Financial t,-hnical, managerial and
Financial,t technical. and decis',-.77.King
decision-making power
and resources shall
and resources shall be
be mVmade available
available andand given
given to to
thethe local
local management
7az-,agement
responsible
responsible for
for the attainment of
the attaltont of output
output targets.
targets. The executIng
The executing agency
agency
will maintain
will maintain its
its follow-up
follow-up and
and monitoring
monitoring function,
function, for
for which
which aa system
has
has been
been developed specifically
specifically for
for the
the project.
project.

6.8 lmplementation Phase

Implementation P'
Fo llowi ng the hand ing-over
Following of the responsibility
ng-over of respons ib il i ty for
for project
execution,
ex, :ution, the lmAei,oat
implementation on phase
phase will
will commence
commence by by releacLnç
releasing thethe
project budoct
project budget fcr for disbursement
di,ba,>1.crt by the national executing agency. llency.
Previous
Pr, es have
vious phat.v.,, been abudgeted
have bt.:. budot separately.
separately. the implementaticn
During the implementation
phase, tlala_ag
training will
will hobe an integral
iWo,%a: pepart of the
-t. of the project
project and and it
it will
will be
carried through aa counterpart
cArried out through organization.
counterpart o:-..Aization. The monitoring
The monitoring syst,x
system
feeds back
ha,.k data
data toto the national executing
the natioral .ng agency
agency on the progress,
on the progress, cc,t
cost
and impact
and of
,kt of ect work.
roject work. Adequate resources should be
Adequate -,sources be allocated
allocated torfor
proper follow-up
proper ±Alow-up and and monitoring.
monitoring.

6.9 P, '-o7-Over II

At the projected tr,pination

the projected termination timetime of
of the
the implementation
implementation phase,
phase,
the project
the project will be be handed
handed over to the national
to the national executing
executing agency
agency byby the
the
responsible for
management responsible thC project. By
for the By definition,
definition, the length of the the
implementation phase should
phase not be extended beyond the or
the inal
original
deadline, to
deadline, to ehsure
ensure necessary disc line
,e:e.sary d-J . ine inin project
project execution.
execution. It will
It will
be
Sr simul taneously appr-olated
multsrrirI.y appreciated that, normally, work is carried out in
carried out
difficult field
fl,ld conditions
condiF1c,r, andand therefore,
therefore, timely
timely handing-over
handing-over will
will assist
project management
the projc,....t managementininproject
project execution.
execution.

6.10
6.10 Evaluation

The Headquarters appoints

appoints an
an independent
independent team
team of
of speci&".ists
specialists for
for
the evaluation
ti evaluation ofof the
the project.
project. One of
One of the
the key
key factors,
factors, dete--
determining the
:H.nq the
imfldctofof the
impact the project
project on on the
the set
set objectives, is the success
is the succ,ro of the
the
training
ttain:r... programmes. Therefore, special attention
Therefore, special attention will
will be
be paid to the
to the
evaluan
evaluation of ofthese
thesebybyspecialists.
specialists. The
The evaluation willwill provide an
assest ofof as
assessment as to
to how
how foreign
foreign experts
experts will
will bebe gradually
gradually replaced
replaced by
by
national, trained staff.
natio-ol, staff. This is is aa key
key criterion of technology
technology transfer.
transfer.

In the
In the evaluation,
evaluation, the
the same factors are
same factors are used
used in
in impact
impact assess-
assess-
as those
ment as those which were used
used when the
the project
project plan
plan was
was appraised.
appraised.

6.11
6.11 pecision
Decision on
on Operational
Operational Phase
lose
The national executing
executing agencyy will
will make a decision regarding
regarding the
the
operational
operational phase
phase of
of the
the project.
projecl . This decision is
This decision is based
based onon the
evaluation carried
evaluation can:ied out
out by the independent
id,lependent team apPOinted, and
team appc,nted, and on the
impact
impact assessment
asEement ofofthe theproject
project nade
made by
by the
the managenurt
management of
of the
the executing
executing
agency. The
7nt resources
resources needed
needed in
in the
the operational
operational phabe
phase may
may differ
differ con-
con-
siderably from
fr.o71 those the implementation
those employed during the implementation phase.
phase. Training
and education
and education programmes
programmes continue to to be
be implemented
implemented also
also during
during the
the
operational phase.
phase.

6.12 Resource Mobilization/Fano-Ov,-.! III

The national executing
The national executingsts..ncy
agency handss over the
the responsibility
responsibility for
for
the operational
the operational phase
phase of the project
of the project to
to the
me local
local management, may
management, which may
during evaluation.
have been revised during evaluation.
 -
- 37 --

The content
content of
of the
the operational
operational phase
phase depends on the
depends on the nature
nature of
the project and
the and the
the recommendations
recommendations made
made by
by the
the evaluation,
evaluation, as
as well
well as
as on
on
the subsequently made impact
the impact assessment.
assessment.

6.13 of Projects
Transfer of Projects

At the
the end
end of
of the
the successfully
successfully completed
completed operational
operational phase,
phase, the
the
finalized will be
finalized project will be entirely
entirely transferred
transferred to
to the
the organization
organization of
of the
the
national executing agency
national executing agency and
and project
project functions
functions become
become an
an established
established
that organization.
routine of that organization. Foreign
Foreign partners will disengage
partners will disengage themselves
from
from project activities.
activities.

6.14 as Part of
Training as of Project
Project

An
An example
example is
is shown
shown in
in Figure
Figure 33 of
of how
how training
training components
components
project have
within a project have been
been coordinated
coordinated with
with other
other project
project activities.
activities.

Figure 33
Figure

Coordination of
of Training
Training with
with Other
Other Project
Project Components
Components

ACTUAL WORKING
ACTUALWQRKING
.-
mONTHs_
MONTHS ~-
mmHg=Rio
' 1·1'1-1'1'1'1' mg mum.
. '11011l112113Ial\~ 11 13 mis
20
"" 2Jmom
2. 2, " 21 11,,
1& I~ X 30 JI n )) )6 31 :).6 3i .0
MPJ..O11111"1:11111
J~
«""
, "-0 44
, .,
GjE~ERAL ENG . .J
l.LUU,
I
GENERAL

ENGINEERING
"t:U:"
T7ALUÁTE
, EVALUATE

I~YIA,IE~f
itikiiREr7
DELIVERY TIME

o~TLll
1 TRANspOR
TRANSPO[
OF
'R6RCH'ASE
PURCHASE
SAW
SAW MILL
MILL
MAIN EOUIPmENT
EiG!NEEAING
O TAIL ENGINEERING
CIVIL ENGINEERING
CIVIL

1'-.1
t ~'meJ;o:r-.
-itnEcTioN
1-:- -,1J -l-+- h i'---- I
TEST RUNS
Mf'lrnTI CIVIL WORKS
CIVIL WORKS I NMI III_ STREAm
ON 'STREAM

PLANN NG OF
PLANNING OF MANAGEMENT
MA'NAGEMENT TRAINING
TRAINiNG I I I I i
L if 1J.L
"

..I. J.J J1

Mitt'
i
PLANNING OF
PLANNING
AND
OF TRAINING
AND RECRutTmENT
RECRUITMENT
I PLANNING.I.
PLANNIN'G OF FOREMAN ANO
OF'FOREMAN AND HEAD OPERATOR TRAiNINIG
HEAD OPEIRATOR \RAINING
, I I I I I , I I I
SAW MILI_
MILL WORKER TRAiNING
I I I I I I I I 1I PLANNING OF WORKER TRAINING
BOARD MILL
VRTI8bb BOARD MANPOWER ANALysts
MANPOWER ANALYSIS I I I iI I
Vt.TJ,),SA MILLI 'LI-
LYW
PII0?... III
AND PLANNING
PLANNING OR RE,C~U'ITMEN,T
ORRECRUITmENT
IIPLANNING OF FOLLOw
FOLLOW UP
UP
'"I' ''I' 1 I

IMPLEMENTATION OF
IMPLEMENTATION OF
SELECTION OF
SELECTION
I I I, r'r" J.J¡III
MANAGE~E'NT'
OF MANAGEMENT
SELECTION OF
,f7CTION
I J..l. I JJ I J
OF SUPERNTENDENTS
SUPERINTENDENTS
!
~--
TRAINING
AND RECRUtTmENT
RECRUITMENT I
I

DIVIDUAL
INDIVIDUAL i 1' 11I1
IPROGRAMS
I I I I 1

, ! i
II JIIr
.
1

I i

MANAGEMENT
MANAGEMENT 1 COu'Rsss ANO
11 COU'RSES ANO PRACTICAL
PRACTICAL TRAININ
TRAINING : I
I
'^rI hduds,lS JU. I I I
r
I
ALL MILLS
MILLS

tt I
smenoN SELECTioN I

I I I I
r,;.t"i\ COuRsES
SPECIAL TRAINING FOR
t.,SPECIAL
I
FOR SAW
I
SAWI MILL
I I I I I I I I ,\ I.
SPEct4 TRAINING
.s...t sP,elAl TRAINING Foi/
FO" PARneLE
PARTICLE BOARD MILL
Mill
FOREmEN ANO I I I I I ] , I I ] I I I
FOREMEN AND
WORKERS
KEY WORKERS . M IF.PE7AL
SPECIAL TRAINING FOR PLYWOOD
TRAINIING FOR MI L
PL YWOOD Mill

TR~I~'N61 i I I I I I II
I

Blanz, F.
BLanz, 8 Pelkonen,
& PeLkonen, H.
H.
JOB INS'TRUeTDR TRAiNING
JOD INSTRUCTOR II
~- !!!A:NI,N~ M~L~
F I I I I I I I I
Personnel
PersonneL Management.
Management. FAO/
FAO/ .-6-% THEI J0E
'\. ON THE JOB
I TRAINING
I FOR SAW M LL
F?R, s,:,w,
ALL WORKERS
WORKERS Fi nland Workshop
FinLand Workshop on Manage-
Manage- ---% ON TRAINING FOR PARTICLE
ON THE JOB TRANING

mentofof Forest
ment Forest Industries.
Kotka, Finland.
Kntka,
Industries.
FinLand. 1984.
1984. FOLLOW UP ALL MILLS
MILLS
" "SÓN=77=
IDOARDM~"';
IBOARD MILL

I~~ON THE JOB

THE JOD
PLYWOOD TRMG
MILL
PLYWOOD MIL!;..
I
I I I I I I I
I / I

TRA/NING FOR
.1FD
 -
- 38 --

7.
7. ITEMS DISCUSSION
ITEMS FOR DISCUSSION

1. What
"hat would be the most relevant factors influencing
decision-making on
on priorities
priorities for
for training?
training?

2. ana
Have analyses been carried
been carried out
out on
on training
training requirements
requirements and
and
impact of0 training?
training? Are such analyses
ana es needed
needed and which
and which
institutions should be
be responsible?
responsible?

3. 'ihich
Which types of specialized forest industrial training
institutes
institutes exist at present? Are there
exist at ans to
there plans to establish
establish
such institutes?
institutes?

4. How have
How have various linkage institutions been
been taken into
account in
in forest
forest industries
industries training
training programmes?
programmes?

5. are the
What are the experiences
experiences of
of
technicians'
technicians train
training
training
training of skilled workers
workers
from the
the industries'
industries' point
point of
of view?
view?
 - 39
- 39 --

EDUCATION AND
EDUCATION AND TRAINING

Summary
Summary ofof Discussion

1. PLANNING EDUCATION AND

FOR APPROPRIATEE EDUCAT1:
PLANNING FOR AND TRAINING
TRAINING

In planning
In planning ofof education,
edu,ation, iitt is essential that that the
the viewpoints
viewpoints ofof
industries be
industries be taken into account
taken into pse is
icount as the purpose is to tosatisfy
satisfytheir
theirneeds
needs
of trained
of trainedmanpower.
manpower. over, %1.01,
Moreover, i.ej forfor
there is a need
. improved
improvedmethodology
methodo
of anaLysis
of analysis and impact assess:bert
and impact cl tr_ning in establishing the
assessment of training in establishing t
7-3Jire'rerts. In
requirements. In these
these efforts,
efforts, aoocuarb trention should
te attention should be
be given
given to
to
social, organizatiomel
ecological, social, organizational t',.brol,.aioal
ical and
and financial
financial aspects.
aspects.

2. FIFLDS
FIELDS OF
OF TRAINING
TRAINING

forest operations,
In forest operations, training
training should give special
should give special attention
attention to
to
forest resource
forest resourceassessment,
assessment, inventory and
inventory andmanagement,
management, logging
loggingmethods
methods and
and
organization of harvesting
organization operations.
harvesting operations. Training in
Training selection and
in selection
maintenanceofoftools
maintenance tools and
and machinery
machineryisis also
also essential.
essential.
such as
New approaches, such
New as agro-forestry/social forestry extension
agro-forestry/social forestry extension
and methodology, will
and methodology, role in
will play an important role afforestation in the
in afforestation
future and,
future therefore, should
and, therefore, training programares
should be included in training for
programmes for
forest industry
forest industry together
together with
with conventional
conventional methods of afforestation
methods of afforestation in
in
natural
natural and
and man-made forests.
man-made forests.

The role of
The role of linkage
linkage agencies,
agencies, such
such as
as agricultural
ricultural extension
extension
servi,e,,, should be taken into
services, into account and effective inter-agency
fective inter-agency
co.-,rdin.tionestablished
coordination establishedinin training
training related
related to
to forest
forestoperations
operations and
and in
in
tielO, of
fields of training
trainingdirected
directedtoward
toward the
thepopulations
populations invo.v,
involved. .

w,_iudprocessing
In wood processingand
andmanufacture
manufacture ofof wood products,, balanced
hocld be
attention should
attention be given
given to
to sawmilling,
sawmilling,wood ,-t,re. processes and
wood fibre and wood-
wood-
basedpanels
based panel; technology,
technology, as
as well
wellasassecondarc
secondary wo,d
wood process

Pulp Prd technology deserves

and paper technology deserves sr_ecia tte; ion io
special attention in countries
countries
ard rPol(.ns
and ions which nave raw
wb i.. have raw material
material and
and otner resourL
other resources available for
available for
this in,,stry.
this try. In 0.,_]ition
In addition to to planning
planning of indostrl.',
of indus tining should
,training should be
be
factory design
olo-,olizvi in factory
organized design andand constru,:tion and in
construction training of
in training
erbineers, technologists
engineers, technologists andand chemists.
chemists.

Specialized training
specialized training services
services should
should be
be providPd for training
provided for training of
of
civil
key personnel,, such as mechanical and civil engineeri., engineers, mechanics,
sawdoctors, machine operators
sawdoctors, mech.ni.-s, graders and
operators and maintenance mechanics,
quality controllers,
quality controllers,accountants, production
accountants, supervisors
production supervisorsandandmanagers.
managers.

In
In the
the field
fieldof of
management,
management, training
traininginincorporate
corporatedevelopment
development
should bebe arranged for executives
arranged for executives and
and production
productionmanagers.
ma"~nAr~ Due con-
Due con-
ssideration
ideration should
should bebe given
given toto
personnel management
personnel managementmethods andand career
development systems.
development

Special attention
Special attention should
should be
be given
given to
to training
trainingofofsupervisors
supervisorsand
and
workers involved
workers involved inin wood
wood supply
supply and
and operation
operation and
and maintenance
maintenance ofof plant
machines.
 - 90
40 --

above-mentioned training
organizing the above-mentioned
In organizing services for
training services forest
for forest
ind 7ies, efficient coordination between training institutions such as
industries, efficient coordination between training institutions SJch as
tecrrical universities and colleges
technical universities technical vocational
colleges and technical vocational schools
schools
s,,uld
should be established util-rr
order to utilize hlfectively
establisten in order the Scarce
effectively the Sr3t,71,
resources available
resources ,rr for rtinamlining
training and for
available for training the contenrr
streamlining the contents of
training curricula of tie respective institutio..g.
training curricula of the respective institutions~

3. SELECTION OF TRAINEES
TRAINEES

Training
Training programmes shouldbebebased
programmes should basedononanalysis
analysis of
of requirements
requirements in
in
the fields referred to above, as well as experience gained on impact of
the fields referred to above, as well as experience gained on impact of
various
various types
types of
of training
trainingmethods.
methods.

Trainability
Trainability of
of candidates
candidates isisananimportant
importantaspect
aspectwhich
which should
should be
be
assessed prior
assessed prior to final selection
the final
the selection by using job analysis
analysis and
individual tests. Such trsts should be finally developed nationally to
individual tests. Such tests should be finally developed nationally to
pay due attention to cultural characteristics, even if model tests are
pay due attention to cultural characteristics, even if model tests are
available internationally.
available internationally.

4. FORMAL
FORMAL EDUCATION
EDUCATION IN FOREST INDUSTRY
There is
There a general lack or non-existence of formal training
is a general lack or non-existence of formal training
institutions
institutions especially for
especially forest industry-related
for forest industry-related education
education in in
managementand
management andtechnology,
technology,organization,
organization, accountancy
accountancy and
and marketing.
marketing. In
addition, specialized institutions are required as well
addition, specialized institutions are required as well in in research
research and
and
developmentofofforest
development forest industry
industry products
products and
and wood utilization.
wood utilization.

Becaus,, r,rrlitions differ from one country and/or region to the

Because ccnditions differ from one country and/or region to the
other, such sur: .i::.Cized training institutions should be established for
other, such special'ized training institutions should be established for
each country on
each country onaa national
national level
level and
and in
in the
the form
form and
and size
size required
required by
by the
the
existing 1,-Oustcy
ex is t ing indus justified bynational
try and jus t if led by nat ional development
development plans for
plans for the
the
forest inSgstry sector.
forest industry sector.

Special
Special attention sì old be
attention should given to
be given to starting
starting up up ng,
new industries
when efficient running
when efficient running o -ew mills
of new mills may
may depend
depend on on experier
experienced ,r staff
staff
recruited
recruited from existing industries,
from existing ir,__tries, especially
especially withwith regard
regard to to executive
management. These
These may, ,:r,ing the
may, during the early
early years
years ofof operation,
operation, alsoalso bebe
expatriates, especially
expatriates, especially when the type of
when the of industry
industry isis new
new toto the
the country.
country.

In these
In these cases,
cases, special
special training
traininginputs
inputsmay
may bebe necessary
necessary in in order
order
to
to secure
secure timely
timely transfer
transfer of ofprojects
projects bybyexpatriate
expatriate management
management to to the
the
national
national agency.
agency. in view
In of this,
view of this,experienced
experienced personnel
personnel and and expatriates
expatriates
should be backed up by well-educated well-educated and trained trained nationals
nationals from
universities
universities and
and school,.
schools.

Education
Education is is r.primarily a responsibility
responsibility of of the
the gr., 7.rnt and
government and the
industry ought
industry oughttoto be t, able to to rely
rely on
on the
thegovernment
government tg to supplyly education
education
and training in
and training in cynventional industry-related disciplines.
conventional industry-related disciplines.
Some developing
( 'oping countries , ries cannot afford the expensive and
afford the .

specialize
specialized resources nego....J
resources needed first-class
for
for first-class ...rcation.
graduate
graduate education.
Further7r for certain specialiti may be too small to
Furthermore, the demand [or certain specialities may be too small to
justify
justify the ,uppc.rt of a graduate prr,
support programme. Scholarships and
fellowshi,..c, to insl
fellowships .ons in
institutions in other
other 0 alleviate
r;_ries may alleviate the
countries the
situation,
situation, but but even
even ii such scholarship
if sucr scholarship ano andexchange
exchangeprogrammes
programmes ,have-
,have,
pr, to be
proved to be beneficial
: f'
.al for executiveutive and
and medium-level
medium-level management and for
management and for
special training sucn
spc such asas ....... fors, aa long-term
sawaoctors, term solution
solutionshould
should he
be found
found
, ruer to er. ore efficient training of key personnel through a regional
in order to ensure efficient training of key personnel through a regional
 -- 41
41 -

The
The objective
objective of ofsuch
sucha programme
a programme shoul be toto strengthen
programme.
nati,s
national training institutions,
t,aining
continued training
contr training on
institutions, as
on aa reaional
lonal basis.
basis~
,
as well as to
--are is
There
should be
to arrange
is at
s
:e specia
i;ngly aa need
accordingly
then
specialized
ized
need for
for
effort tb to j,,,ffyifywhich
which33isting
existing training
r

a cob,3nated
coordinated effort institutions
training institutions
could
could partici3ate
partic ininsus':
sucha ,slio;)al net393.rb
a regional and
network andprobramme.
programme. -Le cost
The cost of
of
organizing rxiisnal train:3.)
organizing regional training courses
courses maymay bebe partly
rtly covered
covered by by host
host
institutions QA
institutions on ad rotation
rotation basis,
oasis, toto cover
cover local
loco. costs
costs such
such asas per
perdiem
diem
and facilities, in local currencies.
and facilities, in local currencies~

There is
There is also
also a need for assessing
need for assessing whether
whether establishment
establishment ofof
regional training
regional justified ininsome
institutes is justified
training institutes some cases.
cases. In
In any
any case,
case,
priority should
priority should be
be given
given toto strengthening
strengthening national
national institr3-ons
institutions and
and
exchangeofofexperience
exchange experienceand
andstaff
staff between
betweencountries
countriesand
andinstitutions~
instttsi sns.
progre' esshould
Training programmes should be planned in
Training coope-'3..
in cooperation with
industries, e.g., by entahlishing advisory committees with ,-e-,be!',
industries, e.g., by establishing advisory committees with members from
bcth
both governmental
governmental bodSn and industries to secure good cooperation.
bodies and industries to secure good cooperation.
Industries should
Industries in 1:
should in this context support
,s context training programmes
support training programmes in the
the
provision of lecturers and scholarships.
provision of lecturers and scholarships.

5. CURRICULUM DEVELOPMENT
CURRICULUM DEVELOPMENT AND
AND TEACHERS' TRAINING
TRAININGPROGRAMMES
PROGRAMMES

Some developingcountries
Some developing b.h ntries do
do ne' arovide the breadth of education
not provide the breadth of education
required to forest irs't-are.
!sriort a sound
required to support ss forest i Forestry
Forestry ndu3stion
education in in most
most
ries
developir countries oriet,-A toward bioloby a:t to meeting
developing
the neees
the needs of
i
the govsrAmen,a1
oi the sines.
is heav ily oriented toward biology ,,:;d to
governmental forest services.
technology and 31anagerial skilt--ich is vi''-
technology and managerial skills which is very important to
','he
The education
to Hie
meeting
:b.sation in
the industry
in
industry
is typically
is Insufficient.
typically insufficient. ir
:3:Licion in engineering
Education n inebri3J and business
business
management often lacks background informar ion and case studies that
management often lacks background information and case studies that
pron.-de examples of the types of problets3 and issues faced by the forest
provide examples of the types of problems and issues faced by the forest
industry. This
industry. This isin contrisn to some developed countries where forest
is in contrast to some developed countries where forest
prodLcts technology, pulp iad paper ttchnology and forest products
products technology, pulp and paper technology and forest products
managementareareimportant
management importantcurricula.
cirtiqula.
Education
Education in forestry and forest products extension is most
in forestry and forest products extens ion is most
important, particularly to provide a :.ase for sound development of small
important, particularly to provide a base for sound development of small
scale industries. At present,
scale industries. n-ititutions of higteb educatior
507," institutions of higher education in
At present, some io
forestry are in the process of re%-3si,g curricula in order ti
forestry are in the process of revising their curricula in order to give -13%,-
high Liiority
high priority totosocial/community
social/community fore.cti,,
fores and agro-fste_try
agro-forestry approaLhes.
approaches.
This reflects the fundamental changes tak,bg place ia ti- forest policy
This reflects the fundamental changes tak ng place in the forest policy
of many
of many governments.
governments~ This trend is also r,3sitive from the industries'
This trend is also positive from the industries'
point of view because it will secure in the future the supply of wood raw
point of view because it will secure in the future the supply of wood raw
material
material to the industry, as well as the availability of forestry
to the industry, as well as the availability of forestry
products to the local people, most essentially in the form of fuelwood.
products to the local people, most essentially in the form of fuelwood.

However,
However, thisthis trend
trend makes
makes itit ev,, ,pre justified
ever more justified to to plan
plan for
for
specialized
specialized curriculum develors:t progra,s,'
curriculum development educar ,A and
progrmrunes for education and training
training
in
in the
the field
fieldofoff3res3_
forest indust3l,:b.
industries. Thisobjective
This at3ectiveis isalso
ao jut'fied
justified byby
the
the need
need to more investment to
to directt more to development
development ofof Cd ca:a.-ty
ity in
in
seccndary forest
secondary 6stries. R.gional
forest industries. Reg ional programmes and national
programmes and nat iona biajects
projects
should urgebly designed
sho,,11 be urgently designed and implemented in this this fi3ld,
field, and
cooperation and
cooperation and exchange
exchange ofof views between ongoing
views between ongoingprojects
projects should
should bebe
intensified.
intensified.

Curriculum
Curriculum development procrammesshould
development programmes shouldbebe followed
followed by
by teachers·
teachers'
training
trainingprogrammes forest industrieS6
programmes in forest 500ustries. In the beginning,
In the regional
beginning, regional
teache/:
teachers'' training
training programmes may bc
programmes ma!, be sufficient
sufficient as first attempt,
as a first attempt, but
but
this
this be followed up by training on a national level.
should- be followed up hy training on a national level.
'
 - 42 -

6. TRAINING COURSES
SPECIAL TRAINING COURSES

Where industries
Where industries have
have special
special needs
needs not
not met byhy the
the conventional
conventional
system, it
education system, it may
may be
be necessary
necessary toto provide training by the
provide training the industry
industry
lnvo] vea ~
involved. In some
In some developed
developed countries,
countries f the
the forest
forest products
products industries
industries
have provided
have provided massive
massive support
support to to universities
universities to to encourage
encourage them
them to
to
provide
provide specialized
specialized education forest products
education in forest products management, pulp and
management. pulp and
paper
paper technology.
technology, forest products marketing, and similar
similar fields.
Industries
Industries maymay also
also provide
provide for
for mid-career
mid-career education
education to to upgrade
upgrade the
the
capabilities of individuals
individuals which
which are
are promoted
promoted within
within the
the industry.
industry.

There is
is aa need
need for
for personnel development
development plans
plans in
in industries
industries to
requirements of
meet the requirements of both
both normal
normal staff
staff turnover
turnover and those of
and those
corporate expansion. Industries
Industries should therefo~e actively
should therefore actively participate in
participate in
the organization
c on-the-job internship
nization of on-the-jot internship training
training, t on-leave education
on-leave education
programmes
progr es and
ad off-site conferences, short cou~ses and
short courses seminars~
and seminars.

efficient in-plant
For efficient t~aining as
in-pla:1t training as part
part of
of projects,
projects, training
training of
of
the
the work instructors required
work in,t,uctors required is necessary~
is necessary. Also mobile on-site training
training
and units offer possibilities,
service units
and servir, possibilities, especially
especially inin the
the case
case of rural
rural
forest industries.
forest industties.

Continued training of engineers,

Continued training engineers! foresters,
foresters, industrial
industrial economists,
economists,
etc.,
etc., may
may be
be provided
provided inin the
the form
form of in-service training
of in-service training hy
by the company's
personnel department
personnel department through
through aa specialized agency,
agency, training
training consultants,
consultants,
through contract with training institutions or through technical
programmes.
cooperation programmes.

Tn some countries,
In countries, governments
governments provide
provide tax tax incentives,
incenti-e,, either
either to
the company
the company or to to the
the individual,
individual, to mid-career training
to encourage mid-carec,- training and
training in
training in the
the use
use of
of new technologies
technologies Forfor an
an industry d$ aa whole.
industry as In
In
the selection of
the selection of trainers it it should be recognized
should be iecc,..,ized that education is
that education is ad
profession. Because a
Because a supervisor
supervisor is
is hit.:Inly
highly skilled
r.i,illedand
and very
very competent,
competent,
it
it does he is aa skilled teach,r.
that he
does not mean that teacher.

7. OTHER CONSIDERATIONS

The planning and

The planning and production
production ofof training
training material
material and
and educational
educational
aids in the national languages of developing countries
countries is
is quite
inadequate and
inadequate and this
this activity
activity should
should be
be strengthened
strengthened in
in coordination
coordination with
with
curriculum development and and teachers' training
trainina programmes. Special
attention
attention should
should be
be given te
to vocational education.
education.

In forestry education and

In and training,
training. as
as well
well as
as in
in the
the specialized
specialized
training for forest industries, due consideration should
due consideration should be given to
changes inin the role of
the role of forestry and industry in
forestry and in society. Social
Social and
ecological orientations
ecological orientations make
make it
it more and
and more
more evident
evident that
that training
training
related to ecology,
te ecology, mobilization of human resources and community
participation, organizational
participation, organizational aspects
aspects and
and non-formal extension for
non-formal extension for both
both
rural
rural and
ari urban
urban entrepreneurs, as well as
entrepreneurs, as as occupational health and and safety,
safety.
has become
has become increasingly
increasingly important and they
important and they should
should also be covered
also be covered by the
the
curricula
curricula of training institutions~
training institutions.

Training in
in project design, appraisal,
project design, appraisal, implementation,
implementation, monitoring
monitoring
and
and evaluation should be
evaluation should be arranged
arranged for
for forestry
forestry and
and forest
forest industry
industry
planners and managers. Such training events should incorporate
incorporate
participants and
participants and lecturers
lecturers from sectors closely
closely linked
linked with forestry
forestry and
and
forest industry.
industr Y, in
in order to improve the ability
on the
improve on abili ty of these
these profes-
profes-
sionals to
to cooperate
cooperate with
with each
each other in actual
other in actual field
field implementation
implementation ofof
projects in aa multi-disciplinary organization.
projects in
 -- 43
43 --

WHAT IS APPROPRIATE?
WHAT IS APPROPRIATE?

Introductory
Introductory Note
Note
by the Secretariat
by the Secretariat

(Consultant:
(Consultant: M. Simula)
M. Simulal

1. INTRODUCTION

rr"crq years aa new Cdimension

In recent -,
oilsion has been added to the 'he
traditional crite/io
rheuirerentf and crit.eria for
requirements industri-] development
for industrial leve-ctm,ols
[r( le, IrolTO.ri tAcht ir tte toiestic sector.
projects,, including those in the forestry sector. This
This new
new dimersinn
dimension is it
ru,htt
thh requirement
the r, icCoe whether the industry is "apTropti,te" or
to judge whether the industry is "appropriate" Or
aPE.i ic ..
applying "rptcpri,te" re,Lrclhuy.
iat.e" technology. iiht what exactly
But what exactly doeh
does it
it meen,
mean, in
which sense
which sense steulJ 1-ids,r7
industrydrortechnology
technologybe be"appropriate",
"appropriate",and
andhow
how and
and
by wtch, ii,h1O the
whom should .ne final
final ludee,hht
judgementbebemade?
made?

It isis itofutmcit
utmost importance that aa consensus
importance that consensus be be reached
reached on On the
the
mea,:ng
meaning ot apprcttInto iate dnd
and appropriateness,
appropriateness, so so that
that.this new
this newdimension
dimension
may
may belo in
included in thh requirements
n the re,quirementsandandcriteria
criteria for
for evaluating
evaluating sectorial
sectorial
hevol:ihert
development end and InTihid,.al projects or
individual projects or enterprises.
enterprises. There isis aa need
There need for
for
ah,irhsiiH tre perfermt,nenofofexisting
assess ing the existing industries
industries with
with regard
regard toto broader
broader
critJtia
cr iter ia thin
than in tho putt.

The purpose
The furpse of
of this
this paper
paper is
is to
toexplore
explore the
the definition
definition of
of
appropriate iont industries
appropriate forest
l' industriesand
andhow
how appropriateness
appropriateness could
could be
be evaluated.
evaluated.
A numberofotcriteria
A number criierio will
will be
be suggested
suggested and
and some related issues
some related issues indicated.
indicated.
Finally, selectvd policy issues are identified for further discussion.
Finally, selected policy issues are identified for further discussion.

2. DEFINITION OF
OF APPROPRIATENESS
APPROPRIATENESS

Appropriate industry refers to a production system which is

Appropriate industry refers to a production system which is
suitable for
suitable particular environment
for the particular environment where it operates. it
operates. The
dimensions of thisthis environment are, related to
are, on one hand, related to the
the
necessary elements of of the
the operation inputs, outputs
operation such as inputs, outputs and
their interrelationships,
technology, and their interrelationships, and On the other hand,
on the other hand, thethe
economic, social, institutional and ecological impacts of the activity.
economic, social, institutional and ecological impacts of the activity.
The scope traditional
scope of traditional evaluation
evaluation suitability,
of limited to
of suitability, limited ro
considerations, is
techno-economic considerations, substantially widened through the
is substantially the
concept of appropriateness which covers not only enterprise-related
concept of appropriateness which covers not only enterprise-related
criteria but also the viewpoint of the whole society.
criteria but also the viewpoint of the whole society. The introduction
The introduction
of these broader criteria in planning foreht industries should lead
of these broader criteria in planning forest industries should lead to Lo
more effective strategics, better use
more effective strategies, better use off r, 11Jy measures,
measures, development
development of
of
institutions, and
institutions, andimpr,-ved succe.h in
improved success in p/o,uhth.
acts.

It is important
It is important to to notc jcircpriateres' is
note that appropriateness te be
is to be con-
con-
sidered,
sidered, from
from the
the given
given group
group of
of he,, te,ihe the
peOP'"e facing the c,iiiicular
particular situation,
situation,
not only
not only with
with regard to e,GroTic
regard to economic chir7umsl.inheri, and --dm.lable resources
and available
but
but also
also tote value
value priorities. ,an he
..,e7.r-ptiarenes, can be partial
partial oror
selective,
selective, beneficial
beneficialfor
forsome
SOmeand
and Dd:,,roe r: crl-uve.

Appropriate industry is often

Appropriate industry e-i-oc,etod with
often associated small scale
with !,mall scale
production,
production 1 labour
labour intensity, Jow
intensity f low prpducr auz._11-,,
Quality, rural-based
rural-based
operations,
operations, the use of
the record
of second-hand machinery, , ht,.,
etc., versus the
versus
application
application of
ofmoceru
modern and
and ad:drcec
advanced hechnicuos
techn Aprrhpriete lechnology
technology is
often
often used synon,7pti.1; with
used synonymously " n.rmell'ote" lhchn ev that.
w ri "intermediate" 1 trhet isis midway
midway
between thethe trahililorel
traditional village rechi.dinele-
.111ago technol ies ,.eJ
and the advanced
the
capital-intensive tehnnclegies of the indw,ti)dlized
capital-intensive technologies of the indust ized honlrloh.
countries. In
In the
the
wider context of
wider context of appropriateness,
appropriateness, all inthiprototions may
tiros, interpretations
all these may be
be
misconceptions.
misconcept ions. EachCase
Each caseshou
should
ld bebeeva
ecrilatr,
1 uated sep,r,t ly according
rately according to
to
its own
its own merits.
merits. Both smalland
Both small andlarge
largecan
car,behebeauti
hentlful.
 - 44
44 --

Appropriateness doesdoes not refer to the developing world only.

world only.
There is a
There is a more
more general
general tendency
tendency from
from technological
technological monocultures
monocultures toto
diversity
diversity where
where there is less
there is fragmentation in
less fragmentation in the functions of
the functions of the
the human
component in production
component in production systems.
systems. At time, industrial
At the same time, industrial pollution
has reached
has reached the the proportions
proportions where increasina
increasing attention
attention is
is needed
needed to
to
evaluate the ecological consequences of alternative tech;101ogies.
technologies.
Appropriate industry is
Appropriate industry is an
an equally
equally relevant
relevant concept in the
concept in the industrialized
and
and developing countries, although
although for
for partly
partly different
different reasons.
reasons.

3.
J. EVALUATION OF APPROPRIATENESS
EvALUATION

3.1
3.1 Groups
Interest Groups
'Those
'Those who
who are directly or indirectly
are directly indirectly involved
involved in
in the
the decision-
making
making on industrial choices,
on industrial choices, or who are facing
who are facing the conseque~ces of
the consequences of these
decisions include:
decisions include:
people living inin project
project areas;
areas;
people employed byby the
the activity;
activity;
people
people providing services to to industry;
industry;
owners of the
the activity;
activity;
financing institutions;
financing institutions;
institutions;
government institutions;
society as aa whole.
whole.

The above
above groups
groups are
are not exclusive
exclusive as
as the
the same
same people
people belong
belong to
two more categories.
two or more categories. Each interest group has
Each interest has its
its own criteria of
own criteria
appropriateness
appropriateness which
which may be overlapping,
may be conflicti~g or
overlapping, conflicting or complementary.
complementary.
This
This makes
makes evaluation aa difficult
difficult task.
task. Planning horizons also differ,
Planning horizons
which
which further
further complicates decision-making.

It is
It is the owner of the
the activity who finally
final creates appropriate-
creates
ness
ness and the role of
and the of other
other interest
interest groups may
may be
be contributory,
contributory, neutral
neutral
or
or repressive,
repressive, depending on on the
the case.
case. In the following,
In the following, little attention
attention
is given
is given toto differentiation
differentiation between the the evaluation
evaluation made
made by
by interest
interest
groups as
groups as the
the main
main purpose
purpose is
is to identi
to identify possible criteria
possible criteria but not to
but not to
their priorities.
establish their priorities.

3.2 Dimensions of Industry

The main characteristics of forest industries which have
relevance
relevance to
to the
the evaluation
evaluation of appropriateness include
of appropriateness include (qualitative
(qualitative range
indicated in parentheses):
indicated in parentheses) :

markets (subsistence
(subsistence -- local
local - national
national -- exports);
exports);

wood raw
raw material (natural
(natural -- plantations);
plantations);

scale
scale of
of operations (large
(large -
- small);
small);

in the
intensity in the use
use of
of individual
individual production
production factors,
factors, i.e.
i.e.
labour,
labour, capital, energy, etc.
capital, wood, energy, etc. (high
(high -- low);
low);

in the
efficiency in utilization of
the utilization production factors
of production factors (high
(high --
low)
low);;

technology (modern -
technology (modern - traditional;
traditional; sophisticated simple);
sophisticated - simple);

(proven -- new);
state-of-the-art (proven new);
 -- 45
45 -

source of
source of technology (foreign --
technology (foreig:1 imported);
i,nported);

dependence onimported
dependence 0:1 importedinputs
inputs (high
(high -- low);

focos of organization (centralized - decentralized);

fOCllS of organization (centralized - decentralized);

financing (local
fi:1ancing (local -- foreign;
fore n; loan -- aid).
loan aid).

The list is not exhaustive but it could help in analyzing

The list is not exhaustive but it could help in analyzing
alternatives before
alternatives appropriateness is evaluated
before appropriateness evaluated in tenus of various terms of various
criteria presen'ed in the )wing.
criteria presented in the following.
fc:t:

3.3
3.3 Crit,
Criteria Ev.1
of Evaluation

n criterion of appropriateness should be the contribution

The main criterion of appropriateness should be the contribution
to development of the industry on national and/or local level.
to developlnent of the industry on national and/or local level. This does
This does
not necessarily involve the maximization of the economic returns of the
not necessarily involve the Inaxilnization of the econojnic retllrns of the
sector as
sector as aa whole.
whole. Various i,npacts
various impacts of
of the
the industry
industryshould
shouldbebemeasured
,naasured
before decisitot are nade, and as a continuous activity during and after
before decisions are made, and as a continuous activity during and after
implementati.m.
implelTIentation$
3.3.1
3.3.1 sa-related ia
conoentional enterprise-related
The conventional criteria of
en' ,'';ise-related criteria of evaluation
include
inclllde considerations on
considerations Or wood material, markets,
raw lnaterial, tna:rkets ( prod..ction
production
technology,~ eneiqy,
technology humanresources
energy, hUlnan resi,tues, capital
capital and
and other
I other re_u:,_et.
resources.. AS
these aspects
these aspects hoNe
have been
been discw,ued
discussed elsewhere
elsawhere in
in this Consolt,ttion,
this Consultation, they
they
are not dealt with again in this context.
are not dealt with again in this context.

3.3.2
3.3.2 Economiccri
Economic criteria
tar ia

Finnncial profitability is the most important owner-related

Financial profitability is the most important owner-related
criter:.n, tut not ne,_e%arily the only one.
criterion, bllt not necessarily the only one. Others may include
others Inay include
strate.
strategic ,c such as .;:te',et share, cost competitiveness, et'.
aspects sllch as Inarket share, cost cOlnpetitiveness, etc.

Annlication
Appl ication of of accnuoting
accounting prices
prices in in profitability ions
profi tab!l i ty calc Illations
r.

reveals ;.u
reveals the :.roject's
project'sdE- ílncy from
desirability froLO the
the national
nationaleconomic , oint
econOlnic viewpoint
when capital
when capital is is considered
considered thetia most
,nost limiting
lLniting factor
factor of ofpre..P.eli.
production. The
project's contribution
project's contribution to to otir
othernational
nationaleconomic
economicobjectives
objectives should
should also
also
be measurud
be ,neasured through such in,tjcators
through such indicators as asvalue
valueadded,
added,balance-c,f-payment
balance-of-payment
effect, employment
effect, eluploYlnent genera i n, cost
generation.
; costof ofemployment,
e,nploYlnent, economic diversifica-
econo,nic diversifica-
tion, regional
tion, ional economic
economic dtoa'opment,
developlnent, etc.etc. It It can
can bebe questioned
questioned to to what
what
extent t t-,e dominance
extent demt:;ance of the rate rate of of return
retllrn as asananeconomic criterion
econolnic criterion
reflects the
reflects the true
true a-;t;ir
aspirations of of development.
development.

3.3.3
3.3.3 Social
I critc
criteria

The impact
The i,upact ofof forest
forest industries
indllstries ononpeople,
people, whether
whetheremployed
employed by by
the operation
the operation or or living
living in the the affected
affected areas,
areas. is is measured
."easured by
by means
means ofof
social criteria
social criteriafocusing
focusingboth
bothon onindividuals
individllalsand andcommunities.
c~fununities. The impact
The impact
to be
to be considered
considered can can te
be grouped
grouped e.g.
e.g. under
under the
thefollowing
following headings:
headings:

population structure and

population structure and geographic
geographic distributdon;
distribution;
communi,r
COlfufllln i ty s st:olcture and orga:1
trlJcture and organization;
i zat ion;
land
land tengre:
tenure;
culture and'
clliture and traditions;;
gonditions;
employme. . and working conditions;
e,nploy,nent
income
inc~ne and distribution;
and its distriblltion;
subsistence economy;
Sllbsistence eco~~ny;
coamunityservices,
cOlflln(tnity services, including
including housing;
honsing;
other infrastructure;
other infrastrllctllre;
political stability.
political stability.
 - 46 -

Systematic analysis on on social impacts

iilipacta is
is generally
generally lacking.
lacking.
Past
Past experience shows that
experience shows that at
at least
least the
the following
following items
ite,ns require
require attention
attention
in
in planning
planning and Lnplelllentation of appropriate forest
and implementation forest industries:
industries:

possible conflicts
conflicts and
and tensions
tensions between the
the local
local population
poplJlation
and itfunigrant labour;
and Lmnigrant labour; forest
forest areas
areas and mill site communities
inill site COlfuOl.lnities
reqllire separate approaches;
require approaches;

possible destruction of
possible destruction of indigenous traditions, culture and
cultlJre
power StruCtUre;
structurej

dfunage
damage to trees, featllre of
trees, sites or other feature religiolls or
of religious or other
other
cultural values;
values;

e,nploy,nent
employment arrangements that disrupt traditional liv ing
living
patterns;

excessive strain, stress Or

or deter iora t ion
deterioration in working
cood i t i.ons i
conditions?
who are
are those
those who
who really
really obtain
obtain the
the benefits
benefits and
and how
how the
the
income distribution
distriblltion is
is affected;
affected, whatwhat kind
kind of
of redistributory
redistributory
.nechanistns
mechanisms exist in in the
the community;
co.n.oHnitYi

i!opact
impact on thethe subsistence
subsistence economy of the
econolny of the emerging
e:nerging industrial
industrial
cOlfufilmity
community (e.g.
(e,g. food prices, crop choices, fuelwood
fuelwood,r
construction illaterials,
constrllction materials,etc~J;
etc*
intensification of
intensification shifting cultivation
of shifting cultivation beyond
beyond the
the carrying
carrying
capacity of
of aa region;
region;

need to invest in
to invest in new
new schools,
schools, public
public buildings,
buildings, hospitals,
hospitals,
roads. and recreational/
roads, and recreationaY facilities;

Lnpact the iinmigrant

impact of the i,runigrant population
population on
on the social
the standard of social
and adillinistrative services;
and administrative services7
waste generation
waste generation that
that requires inveSDnent
investment in new
in new disposal
disposal
facilities;

elnergence
emergence of
of new social costs
new social costs sDch as crime,
such as eriine, crowding
crowding,f higher
higher
cost of
cost of living
living and
and housing,
housing, reduced
reduced amenity
alnenity values
values and
and
disease
disease which offset socio-economic
socio-econo,nic benefits.
benef i ts.

When
When social applied, industry
social criteria are applied, is no
indtlstry is no more nelltral to
illore neutral to
value judgements.
value jildge,nents. Quantitative information
Quantitative infor.nation on on social
social factors
factors is is scanty
scanty
and scattered.
and scattered. It can
It can be
be obtained
obtained through
through brief
brief field
field surveys
sllrveys orOr
cOLnprehensiv€ socio-anthropological surveys which are
comprehensive are normally
nonnally very time-
tilne-
conswning and
consuming and costly.
costly. No established
established practice
practice is is available
available to to include
include
social evall!ation in
social evaluation in feasibiUty
feasibility studies
studies on forest indl!stry
on forest projects.
industry projects.
Even less
Even less clear is is the
the weighting
weighting ofof the
the individual
individlJal criteria
criteria which
which has
has to
to
be
be done
done case
case by
by case.
case. Pilot
pilot efforts
efforts should
ShO"ld perhaps
perhaps be carried
carried out in in
typical sl
typical tuations to prepare practical guidelines.
situations guidel ines.

3.3.4 Institutional criteria

industry should
An industry should also
also bebe appropriate
appropriate forfor Its
its institutional
environ,nent
environment which includes the legal
legal fra,nework.
framework, the public
administration, the
administration, the educational
edllcational system,
systeln, etc.
etc. No guidelines exist for for how
to
to deal
deal with
with such an analysis but
but at
at least
least the
the following
following questions
questions should
should
a:1swered:
be answered:
 -- 47
47 --

what inputs are required

what inputs required from the institutional
froto the insti tlltional framework
fra.!.nework and
and
what would
would be
be the
the coste
costs involved,
involved, and
and what
what kind
kind ofof spin-off
spin-off
effects
effects can be expected elsewhere;
what changes wonld
would be
he necessary in the
the institutional
structure to
to Lnplement
i,nplement the
the project;
project; and
and

what wodd be
what would be the
the impact
impact of
of the
the pro
project on institutions.
ect on institutions.

3.3.5 ~_~glogical criteria

Ecological criteria

Forestry and
Forestry and forest
forest industry
industry operations
operations can
can have
have several
several kinds
kinds
of ecological i,npacts
impacts which should be taken into account
accollnt in
in the
evaluation of appropriateness.
appropriatenes . The environ.nental
environmental aspects to
to be
ke
considered incllJde slopes,
tof,idc:ed include slopes, leolrs
banks and
ed shores, sediillentation, water
ores, soils, sedimentation, W4
125:.41C, clidlate
resource, .:imate and ait" calit,,I vvegetation!
aii qllal q.ation, wildlife
wildlife and fish,-
fisheries,
ide,niology conservation,
cricc.rao'ogy conservatfaf, ;elsenoise and aesthetic
,
th 'ric values.
values. Evaluation takes
takes
for.n ff
the f-ra of environmc-ta:
environtnental Impfctt asseSSlnent
: ant which
which isis often rpcning lftOre
nothi:1g a.ie
than syste,natized comsoo
than systematized co,runon eenie
sense but
but thorough investigations ,nay
o eh investigation, also le
aiy al,- be
reql.ired.
required. A r
approach is "s'lally
A stepwise ahjecahl :eplied to obtain tus
applied the netessa:y
necessary
infonnation as In
information in the
the tase
case of
of so-:a.
social analysis.
fa.ysis.

So,ne
Some of ,nain factors
of the main factors to
to be
be considered
considered include:
include:

slopes: landslides;

soils: erosion, nlltrients, organic

erosion, loss of nutrients, organic setter, etc~,
,natter, etc.;

sedilPentation of
sedimentation of reservoirs;
reservoirs;
water resources:
water resources: denudation of forested
forested watersheds,
watersheds, induced
indllced
turbidity, change
turbidity, change in
in water
water quality,
quality, down-basin
down-basin decreases
decreases inin
flows, industrial water pollution;
flows, industrial pollution;

clLnate alld air

climate and air quality:
quality: alteration of ground
alteration oE gr.olllld temperatures
temperatllres
and hlJillidi
and humidity levels, desertification,
levels, elnission of
desertification, emission of gases,
gases,
odours and
and particulates;
part iculates i

vege tatioll:
vegetation: lack
lack ofof regeneration,
regeneration, extinctioll
estip_:...on of species,
n,r,f.es,
da,nage
da,sage to seed species, iavesacn
trees of primary r,nacies, invasion of
per.sistent weeds;
persistent weeds7

wildlife andand fisheries:

fisheries: eli,nination of fare
elimination rare re
or 4 Canceled
spec ilnportantreduction
ies 1 important
species, reduction.in in. lnain
main species, cr
spe,:esee, destruction
efflon of
key habitats,
habitats, creation
creation access
access to to exploirf,ion
exploitation ofof vulnerable
vlJlnerable
species.

It should be
It should be borne
borne in
in mind
,nind that
that forestry
forestry and
and forest
forest industries
industries
(which cannot be
(which cannot be separated
s arated in
i:1 this
this context)
co"textl can
can also
also have
have positive
positive
ecological
ecological i,npacts
impacts whwhich h should
should be
be duly taken into
into account
accolmt and eaphasized
e,nphasized
in decision-,naking.
in decision-making. Furthermore, the
Furthermore, the introduction
introduction of of an
an industry
industry gives
gives
an econOJnic value
an economic value to to aa forest resource and
forest resource this can eventually
and this provide
eventually provide
the means for
the ~eans for illeaSllres
moarures to to protect the
the environment.
environillent.
3.4 App7 of Criteria of Appropriatenass
In general,
gere-al, practical guidelines efo exist to 'o carry Ollt
out the
evall1ation
evaluation inID tenDS of
or technical
lecnnical and econ~nic criteria.
and economic -la. Another thing
thing isis
to what eftcft
to extent tucy are
are ,a,d should be
and should be followee
followed in (e.g., in
e tice (e.g., in the
the
case or
case of smell
small i,ial industry projects wherc
lninstry projects where ion easily
ition
, becomes
easily becomes
,nore costly
more cost I, than the
the project itself).
p,cject itself) . However, aa new effort at
new effort at
international level may be needed
level aa; practical
needed to prepare pract guidelines for
cal guidelines for the
the
 -- 98
48 --

other dirnensio~s
the other
assessment of the Amensions of of development
development in
in forestry
forestry and
and forest
forest
industries paying
industries paying atte-
atte~tion ,t diversity
to the great diversity between
between nations
nations and
and
between regions wi thin ,,div
reg ions within ind i v dual
idual co,.
countries.
. In particular, it
In it appears
that
that the
the evaluation
evaluation ofof social impacts would require
social impacts require further
further guidance.
guidance.

IIf we assume
f we assume the
the following 1- s,ficiently
sequence to
following sequence sufficien represent
represent
social values in
social values in practical
practical decision-making,
decision-making, new
new guidelines may,
may, however,
however,
be necessary in
be not absolutely necessary in this
this respect.
respect.

Item Involves

Social values political institutions

Political institutions

Development strategy National and sectoral

National and
development
development -' ans

Choice industry
Choice of industry Project desion
design

This would mean that aa very close

This .:ould close link
link should
should be
be built between
between
various phase,;
various phases above to ensure the desired contribution
the desired contribution ofof industrial
industrial
operations CD:LiV95. Still the
operations ito national objectives. the problem
problem of
of conflicting
conflicting
objecti ves should be scj.r.:
objectives through value
sol ved through judgement.
value judgement. The experience
The experience onon
individual countries shows
individual Z:3Z some
shows that come improvement inin the current situation
situation
be justified.
could be justified.

There is
is a
a danger that
that the
the amount
amount of
of necessary
necessary information
information for
for
comprehensive evaluation of appropriateness
comprehensive appropriateness increases
increases beyond
beyond proportions
proportions
and can
and can no
no more
more he
be handled
handled in
in practical decision-making.
decision-mak Solutions not
not
alternative) for
necessarily alternative) for this
this problem
problem include:
include:

set threshold values

set threshold values for
for critical
critical criteria
criteria and
and drop
drop out
out all
all
those alternativ,
alternatives which do not
not meet
meet these;
these;

.mum amount
express the maximum amount ofof social,
social, institutional
institutional and
and
ecological impacts
ir s in money
in money terms,
terms, and
and incorporate
incorporate them
them as
as
externalities in z..e
externalities the economic
economic aAalysis
analysis -- even
even artifical price
price
tags on various
tags various non-economic
non-economic factors
factors tend
tend toto facilitate
decision-making; and
decision-makirv,;

establish trade-offs
establish trade-offs between
between criteria, so that it it becomes
clear, e.g.,
e~g~r what
what economic
economic costs
costs have
have to
to be
be borne
borne if
if an
an
increase
increase in
in social
social desirability is is envisaged;
envisaged; use
use sensitivity
sensitivity
analysis
analysis extensively for
for this
this purpose.
purpose.

More extensive project

More extensive project preparation
preparation efforts
efforts than
than those
those employed
employed
at appear to
at present appear to be
be justified,
justified, particularly
particularly inin large
large forest
forest industry
industry
projects, while
projects, the small
while the small ones may have
have to
to be evaluated in in the
the context
context of
a programme to
a to avoid
avoid disproportional
disproportional project
project preparation
preparation costs.
costs. In
In such
programmes,
programmes, policy issues
issues would
would have
have to
to be
be considered
considered in in broader
broader context
context
in the
than in the case
case of individual projects.
of individual

4.
4 ISSUES DISCUSSION
ISSUES FOR DISCUSSION
Government
Government policies
policies influence
influence the
the choice
choice of
of industries and
industries and
technologies
technol-iiies and the
the ways
ways and means
mea;;s for their acquisition and
and
development. In
In aa highly simplified way it it could bebe said that
governments would like
goverbwents would like to
to have
have technically
technically and and financially
financially sound
sound forest
forest
industries
i:-.d,-tries which
whichwould,
would,within
withinthese
these limits,
limits, maximize
maximize economic
economic and
and social
development at
dev,..,:lfient at loe,
large,which
whichwould
would lebe coherent
coherent withwith the prevailing
the prevailing
institutional framework, and and which would
would either
either contribute
contribute toto ecological
ecological
effects or at
e!;:ects at ...ast
least not have
...)t negative impacts
undue negative
have undue impacts onon the environrnent~
the environment.
 -- 49
49 --

Policy
Policy measures
measures have
have aa tremendous
tremendous potential
potential for influencing technological
for influencing technological
and industrial choices, and
and industrial and the
the use
use of
of these
these measures
measures would
would often
often be
be less
less
and risky than
costly and than direct
direct public
public investment
investment in
in productive
productive activities.
activities.

A whole
A whole range
range of
of policy
policy instruments
instruments isis available
available asas explained
explained in
in
the Secretariat paper on
the on the
the impacts
impacts ofof modern
modern forest-based industries. II
forest-based industries.1/
These instruments
instruments are are generally
generallyexpressed
expressedin inthethe form
form of of regulations
regulations or
-(13r
incenti ves .
incentives. In the following,
In the following, only those instruments
only those instruments which are specific
which are specific
the forestry
to the forestry sector are are included
included in
in the
the list
list ofof key
key issues.
issues.

Has appropriateness been suff ic iently

sufficiently def ined
defined for an
operational
op erational concept,
concept, and
and would
would the
the suggested
suggested criteria
criteria of
of
guide toward
evaluation guide toward more
more appropriate
appropriate development;
development;

Is there
Is there a need
need for
for better
better guidelines
guidelines to
to incorporate
incorporate social,
social,
institutional and ecological effects in our decision
criteria, be developed;
these guidelines be
criteria, and how should these developed;

Is
Is improvement
improvement needed
needed in
in evaluating
evaluating forest
forest industries
industries in
in
terms
terms of c riteria;
of traditional enterprise-related criteria;

Is
Is the
the current
current supply
supply of
of technology
technology in in forest
forest industries
industries
appropriate for the prevailing
prevailing conditions
conditi o ns in developing
countries with
countries with particular
particular reference
reference to t o small
small scale
scale produc-
produc-
tion; ifif not,
not, isis the
the market
market for
for such
s u c h technologies
technologies large
large
enough
enough to attract development efforts on commercial basis; basis; if
if
the
the market is too
market is too small,
small, what
what should
should be
be done
done to develop these
develop these
technologies;
new technologies;

Is the current
the current access
access to
to appropriate
appropriate technology
technology in forest
industries satisfactory for
industries satisfactory for developing countries~ what
developing countries; what could
could
be done to eliminate bottlenecks, in particular in
facilitating transfer
transfer between
between developing
developing countries;
countries;

Are the methods and approaches of technology transfer

transfer
appropriate and
appropriate and do
do they
they sufficiently
suff iciently address
address the
the specific
problems in
in developing
developing countries;
countries;

To what
what extent
extent does
does tying
tying financing
financing and
and the
the source
source of
of
technology influence appropriateness and how possible
be eliminated in
negative consequences can be in advance;
advance; and
and

appropriateness influence
Does appropriateness influen ce the
the preference
preference between
between private
private
and public
public ownership
owne rship of
of forest
forest industry
industry operations;
operations; have
have
been more appropriate
parastatals been appropriate than
than private
private companies;
companies;

How appropriate
appropriate are
are tariff
tariff and and duty
duty barriers
barriers protecting
protecting
f o rest industries
forest in countries~
in developing countries; what is the
importance
importance of ho riz o n and of
of time horizon of knowing
knowing the
the total
total economic
economic
costs
costs ofof such measures toto the
the society;
society;

are price
How appropriate are price regulations
regulations in
in domestic
domesti c market;
market;

II
1/ FAO
FAO Secretariat. Institutional Requirements.
Requirements.
 -- 50 -
50 -

- To what
To what extent
extent could regulations and taxes concerning the
taxes concernina
logs and
exports of logs and industrial
industrial forest
forest products
products contribute
contribute to
to
appropriate industrial development; how could the present
approaches be improved (e.g., bases of export quotas,
specification
specification ofof species,
species, value
value added,
added, etc.).
etc.), bearing in mind
bearing in mind
needs for and
needs for and possibilities of effective
effective administration;
administration;

- what extent
To what extent should
should the
the costs
costs of infrastructure
infrastructure and
and social
services be borne
borne by
by forest indus companies in logging
industry companies ing
areas and mill
areas and communities;
mill site communities;

TO what extent
To what do the
e~tent do the current
current environmental
environmental regulations
regulations in
developing countries affect
developina countries affect the
the forest industries.
industries, and how
the likely
will the likely trends
trends in these ations impact
these regulations impact the
existing production andand technological
technological development;
lopment; and
and

What should international organizations and financing

institutions do to improve
improve the
the appropriateness
appropriateness of
of forest
industries
industries development.
 51 --
- 51

WHAT IS
WHAT IS APPROPRIATE?
Surnmary of Discussion
SUlnlnary of Discu,sion

1. DEFINITION

Several definitions
Several definitions can
ca~ bebe formulated
fonnulated for
for appropriatene5s,
appropriateness, but
but few
few
of
of them are simple
them are si.ple and
and pPerational.
operational. On On the
the other
other hand,
hand. aaJW-Q
mOre exhaustive
exhaustive
definition is
definition is li,eiv
likelyl5to
bebemore
illorepragmatic
pragillatic than
than a simplifre,' dne.
a simplified one. It is
It is
impossible
bopossible to to find Jniversal definition
find a nniversal definition which
which wouic reflect the
would reflect the
particular
icular cond:tPpr
cond it ions ,r1.;
and prviorities
lor i ties inin various
var iotts countries.
countr ies ..

industry should
Appropriate Indllstry
Appropriate should refer
refer to product ion system
to a prodllctio:1 syste,n which
which
wouldbebesuitable
would suitable forfor the
the particular
particlJlarenvironment
environloent where
where it it operates,
operates 1
meeting various
toeeti:1g social, institutional
economic, social
various eco!1o!nic, f institutional and and ecological
ecological needs.needs~
The time
The time factor
factor in an important
is an elementinin this
important eleillent this context
context and
and thethe industry
ind'lstry
should have a built-in
should capacity to adapt to changing
built-in capacity conditions.
changing conditions.
Industry is
Industry is truly
trilly appropriate
appropriate ifif itit
cancanprovide
providelong-term
long-term benefits
benefits to rrhe
the
1largest possible
possible number of people
nthober of people and developand
and develop andexpand
expanditsits activities.
ac,,-,Ities.
Appropriateness of
Appropriateness industrial development
of industrial development also emphasizes balanre and
e.-.pna3izes balance and
harmrn}
hannony with the eLuical, social,
the ecological, ,pituticnal and economio
social, institutional econo,nic
cb2eclivos of
objectives rf the
the sr,let%.
society. Approprratenes, cannot
Appropriateness _anjst 5e reduced to
be reduced to one
one
ssipole inOicator
indicator but )- eries
but it tries to iCertif the
to identify th tetype
cf activitias
of activities which
which
have the
have roe larriest
largest number ot positive
nluober of positive elements
eleillents over
over various
variolls dimensions.
di~ensions.

The level
The level ofofassessment
asseSSlnent isis Lnportant
bnportant as an industry
as an industry may
lnay be
be
inappropriate at the
inappropriate at the local
local level
level but
but appropriate at the
appropriate at the national
national level,
level,
or vice
Or vice versa.
versa.

Industry
Industry is
is the key word in the definition,
incorporating
the definitiO:1, incorporating
products,
products fmarkets,
toarkets, materials,
raw loaterials, resources, etc.,
resources, etc ~ f which fonn
form an
essePtial part of the social md ecological s7rtem.
essential part of the social and ecological

indu,;try ca:;-.:'
An industry cannot bebe considered
considered aE. -opriate
riate if if itit is
is not
not inin
.,tr tne
harmony, with cvarnment pol5.
the prevailing govern,oent polic :;s
As they
they tend
tend totocd,
change
flexibily
over t i,ne, flex is also
ibi 1 i ty is associatec,' with
:,15o associated appropriateness.
oh appropr iateness • i ch
Such
c ,nay
ma% uccor in
occur the institutional
in the institutional framework governing the
fra,nework the
fdc,ft-t3'ed raw
forest-based material supply
raw ,oaterial supply syste,n,
system, imports
bnports of
of technology,
technology,
efficiency
eff iciency in the utilization
1,1 the util ization of of resources,
resources, etc.
etc. It is
It important that
in Lnportant that
companies try to foresee such
co,npanies try to foreseestich changes and adjust
changes and adjust their
their operations
operations
accordingly
accordingly early
early enough.
enough.

The prevailingpolitical
The prevailing political syste,n
systemororpriorities
priorities are
are also
also part
part of
of
appropriateness.
appropriateness. Difficulties arise
Difficulties priorities of the
arise when these- priorities
political system
political syste,o and industry are
the industry
and the ,erging and
are not converging
c lead to
and lead
conflicting policy
conflicting policymeasures.
ineasures '"

evaluation of
The evaluation of appropriateness limited to
cannot be limited
iateness cannot to the
viewpoints at
viewpOints at the
the country
country level alone.
alone. The
The environment
environtnent where
where the
the
industry operates has also an international dimension since, through the
indllstry operates has also an international d[,nension since, through the
participation in the world markets for forest products, individual
participation in the world ,oarkets for forest prodllcts, individual
producers or consumers have to consider themselves in the international
producers or conSlllners have to consider thelnselves in the international
context, as well.
context, as well.

FinaF
Finally, appropriateness
appropriateness also depends on the
also depends the interest
interest group
grol,p
involved. People
involved. 1n-, living
livi~g in
inproject
projectareas,
areas,employed
employed by
by the
the activity
activity or
or
rr _as to it~
providin services
providing financing institlltions,
it-, finanCing institutions, the
the owners of the
owners of the
 - 52 -
- 52 -

industry or governments may all have different criteria for appropriate-

industry or governments may all have different criteria for appropriate-
The one who bears the risk - usually the owner - a special
ness. The one who bears the risk - usually the owner - has a special
role to play in this since he eventually
role to play in this since he eventually isis the
the one
one who
who has
has to
to provide
provide
appropriateness.
appropriateness.

2. CRITERIA OF
CRITERIA OF APPROPRIATENESS
APPROPRIATENESS

The criteria of appropriateness can be divided into two main

The criteria of appropriateness can be divided into two main
grour-,:
groups, those related the industry or the enterprise itself, and
related to the industry or the enterprise itself, and
tno,,,- related to the econc-lic, social, institutional and ecological
those related to the economic, social, institutional and ecological
eruii_nment outsil- it.'
envirorunent outside it~ distinctions are
Clear distinctions are difficult
difficultto to
makelnakebetween
between
individual elemctr
individual ele.nents. asas the
the same
saine criteria
criteriamay
Inayat.7,ear
appear under
under more
lflore than
than one
one
group of
group criteila.
of cr i tel ia ~ For
For instance, an enterprise-related
employment is an enterprise-related
insta;)ce r etnploytuent
criteriou, trI it
criterion, but it is also Lnportant
is also important in assing the
in assessing industry'ss
the industry'
appropriaten,-, from
appropriateness the viewpoint
fro,n the viewpointofof the
the national
national economy
econo,ny ororasas aa social
social
issue.
issue.

The ,a,."estudies
The case sthiies pr-,ided
provided ininthe
thebackground
background docuauats
doclbnents show
show aa large
large
number
nu,nber of of ele.nents
elerent,, ofof appropriateness
appropriateness and and aa fewfew examOes
exa.nples of of certain
certain
elementsofof inappropriateness.
elelnents ir,apeiopriatrr,ss, However,
However these casos
these
t cases are not not necessarily
necessarily
representatn,c of
representative curr-- sittlation
Pt the CIJrrent situation in general gen r,- , in developing
in developing
countries Projects which are, in
countries.~ Projects , in many
!nany respects,
respects f :'o..prcpriate,tare
inappropriate are
often mere
often ,nore ,,, 'non. The
CO.nmon. The case
case oLudies highlight
studies highl ight the
the OVE'
overall al importance
i,nporta:1ce of
of
the enterte-related criteria,
enterprise-related criteria, particularly
particularly financial viability.
financial viability.
Social
Social issues
isslles are
are also
also clearly
cl positive,
positive, even
eVen though
thol~h it it isis apparent
apparent that
that
the introduction of
the introduction of large scale industrial
large scale industrial operations
operations in rural rural areas
areas
cannct take
cannot take place
place without
without some conflicts. They
SOlne conflicts~ can, however,
They can, however, be be resolved
resolved
or ameliorated
or alneliorated by by various
various means thro%Ththetheinitiative
lneans through initiative of the industry.
of the industry"
Theecological
The ,)ological impacts ;Athese
i,npacts i:1 ti- o area:
areas have alsoalso been
been positive,
positive. mainlyInainly due
due
!,,astation. InOlstr
to reforestation. Ind<lstrial pollution can
7 ca':. be
be effectively
effectively controlled
controlled by by
proper mitigation.
proper mitigation. The costs
The costs ofof pollution
polilltion control
control cannot
cannot be be considered
cO:1sidered
excessive and they
excessive they have not jec:.ardized
jeopardized the industry's
indllstry's financial
financial
viability in
viability in the
the cases
cases sti,Jied.
studied.

The eeconomic
The cono.nic crcriteria
iter ia onon appropriateness
appropr iateness have
have a a broader
broader scope
scope as as
they evaluate the industry's impact on the whole nat...,1 economy.
they evaluate the ind1lstry's i.npact on the whole national econo,.y. The
economic rate of return, based on shadow prices, has td the central role
econ~Dic rate of retl1rn, based on shadow prices, has had the central role
but other f.7.rprtant elements include value added, f.oreign exchange
engs,
but other ilnportant elements include value added, foreign exchange
earnings, eil1ploytnent, eco
international cost
international
diversification,
,mic diversification, regional develoro,ent,
econoloic
costcompetit-iveness,
canpetitiveness, forward
forward and
andbackward
backward linkage
developtoent,
linkage effects
E ects
which may be considered at local and national level and infrastr, -are -
which may be considered at local and national level and infrastructure -
particularly for transport,
particularly for tra:1sport. Improved efficiencycreates
Lnproved efficiency createspossibil
possibilities
i ties to
to
reduce the output prices of the industry for the benefit of the consumer,
reduce the output prices of the industry for the benefit of the conSlllner,
which
wh fch can be
be important, provided
ilnportant, prov ided that the competitive
that situation
competitive situation
contributes
contr ibutes toto such
such behaviour.
behav iour,. Economic benef
Econotnic benefits .an take
i ts can take many
.Ioany fiims,
forins,
i.e. wages
i*8. wages and salaries, stumpage
and salaries, value, long-term
sttllnpage vaIne, lease of
long-tenn lease of forest
forest :a-ais,
lands,
etc. Each
etc. Each nation
nation should find appropriate fora loe
should find appropriate fonnulae to to channel
channel va'riaus
various
economic benefits
econo,nic to participants and interest ',ouwps.
benefit,' to participants and interest grollps. The The qualitative
qualitative
nature of
:lature te 4ard or backward linkage effc of forest
the forward Or backward li:lkage effects-; of forest industries
of the ,

may, inin some si--ntions,r be

SOtne situations be aa much
such lnore
moreilnportant
importantaspect
aspect than
than their
tt, . value
valta
bin monetary
monetary terms.
terms. Theyshould
shouldbebecO:lsidered
consideredbotht)th atat national
:lational andand local
local
levels.
levels.

Forest industries
Forest often need pcotectio:1
industries often protection through duties and
through duties
tariffs.
tariffs. Such protection may be motivated by the adverse cyclical
Sllch protection illay be illotivated by the adverse cyclical
conditions in
conditions the world market or just the government's desire to have
in the world market or jllSt the governlnent l s desire to have
that type of forest It
industries. It is
that type of forest industries. rarely established what total
is rarely establ ished what total
costs are
costs are involved in such situations compared to the various benefits
involved in sllch situations cOlnpared to the various benefits
that the forest industries directly or indirectly create.
that the forest industries directly or indirectly create. Sllch Such exercises
exercises
could be useflll
could be useful inin guiding
glliding future
fllture decisions.
decisions.
 - 53
- 53 -
-

The social impacts of forest industries are considerable and,

The social impacts of forest industries are considerable a~d,
therefore, criteria on this aspect should be developed.
therefore, criteria on this aspect should be developed. They could
They cOllld
issues relating
include issues
incillde population structure and regional distribu-
relatino to population stxllcture and regio::;al distribu-
conminity struct, and organization, land tenure,
tion, cOl!uflunity structure aiid organ.iz8tion,
tion, culture and
tenllre f culture
traditions, empyment
traditionS f e.uploYln€mt and working conditions iicluding occupational
rordLt:ols, including occupational
riterla e :rcomv and its distribution,
j

health and safet

health and safety. r criteria are income and its distribution,
Other
I
impact on subni9tn,-.0 economy incluiiz-c znc rupply of minor forest
i.npact on subsistence econo.ny including the sllpply of minor forest
products, social and coanunity services,
snd COtfunnnity ini,astructure, political
serviLes, infrastructure, political
stability, etc,
stability, etc.

It is
It of utmost
is of lltlnost importance identify the
to identify
importance to real needs
the real needs and
expectations of the local population with regard to industrial develop-
expectations of the local pop'llation with regard to indllstrial develop-
ment. plans.
.nent plans. Their positive or negative attitudes may depend on very
Their positive or negative attitudes .nay depend on very
small inputs
s.nall inpllts which are easy
which are easy to
to incorporate
incorporate inindevelopment
develop,nent plans. Special
pla:1s. Special
efforts, often in the form of socio-economic surveys, are necessary to
efforts f often in the ronn of socio-econoloic surveys, are necessary to
obtain this information. It is apparent that forest industry cannot and
obtain this information. It is appare~t that forest industry ca:1not and
should not address all possible social problems and issues and, there-
should not address all possible social proble.sand isslles and, there-
fore, such stud: - be limited to the relevant issues only.
fore, such studies can be li.nited to the relevant issues only.

Need ior ,i.ersation to

for co,npensation the local
to the local population
popUlation is is apparent
apparent when
when
industry is ,established
industry ' inD new
:1ew areas.
areas. It
It can
can take
take various
various forms but it
for.ns but it
is
is i.nportant to arrangee it
impoil__,n,r, to it without
without nec-,.sary
necessary delays,
delays.

Sufficient guidelines
guidelines do do no ,y, for addressing
not exist addressing so.L'ial ::',4Ph in
social issues in
planning ioJe:-: industries
plannir: of forest industries develop,nent in In developing 2ourtlie,,. The
developing countries. TLe
approacn used by
approach y the
theWorld
World Bank in f)e
Bank in the preparation
rationofof
sCih_eil
social
iv,n some
projects gives
projects , guidanceand
SOlne guidance andaa nUlnber
number ofcase
casestudies
studies can
can be
be found
found in
in
research literature.
research literatllre. A review
A reviewofof this
this information
information would be necessary
wOI.ld be necessary to
to
establish their applicability in forest industries projects.
establish their applicability in forest ind',stries projects.

Enough timeshould
Enough time shouldbebe reserved
reserved for
for planning
planning the
thesocial
socialcomponents
co.nponents
in
in forest
forest industries
indllstriesbecause
because of
ofthe
thecomplexities
complexities involved.
involved.

Very little guidance also exists with regard toto dealing

Very little guidance also exists with regard dealing with
with
':uti,'nal criteria assessing appropriateness. The
in assess ing appropriateness.
lnsti tutional cr i tecia in legslative
The leg islati ve
,Ind-stcucture
fr~neworks and of institutions
strllctilre of institlltionsvary
varyextensively
extensivelybetween
between regions
ions
an countries.
and The responsibili
The responsibility ofof resource
resource sustainabili
sustainability m a ybeaan
n
unclear issue iif f govermnent policies are
goverrunent polic are not
not sufficiently ad in
sufficiently reflected I
le i 1.onand
legislation andinininstitutional
institutional structures.
structures.

:le rate
The rate atatwhich
which the
the peri lar_cnsisis able
lc al populations
local able to
to adapt
adapt to
to
chi,.uino social conditions
changing social conditions can can v,my ,onride-inl_ for
vary considerably for cultural
cultllralre.:ifors
reaSOns snd
and
th":, needs
their h, ,ds have
havetoto bebe taken
taken into
int., aeCOllnt
accountinin setting
setting the
the tio, fime fcr
ti.e frame for
i-H,meration. Lack
impleillentation. Lackofof efficiency
efficieni of ot the
the institutional
institutionalframewcri
framework cancan be
be
deti.huntal to
detrimental to both
both the
the industry's
indllstry's success and its
Sllccess and its efficiency.
efficien:l. The Te
inf:titutions,
insti tutions, therefore,
therefore, playplay anan important
i."portant role
role in
in appropriate
appropciate industrial
indllstr ial
development. These
development. These insti
institutions
tilt ions can
canbe beboth
bothgovernmental
governlnental and and non-
nOn-
governmental.
governlnental. Local public
Local public agencies
agencies are are also
also important
important in in dealing
dealing with
with
develop.nent. All
industrial development.
industrial All these
these institutions
institutions need
needdynamism,
dynamis,n, efficiency
eff iciency
and ,notivation
and motivationtoto copecopewith
withtheir
their tasks
tasks and
and forest
focest industries
indllstries could
could give
give
themsllpport
them supportinintheir
their efforts.
efforts.
Education
Ed Ilca tion andand training
tra in ing is is aa particularly
pacticlliarly important
ilnportant ares
area of the
of the
institutional
insti tutionalframework
fraloework because
because of its direct
of its direct impact
impact onon the
the quality
quality ofof
the industry's
the indus try'shuman
hUloan resources.
resources.

Ecological impacts to be taken into account in evaluating the

Ecological i,npacts to be taken into aCCOllnt in eval.,ating the
appropriateness of fares-u ,nd forest industries ccei .ide range of
appropriateness of fores and forest industries cover a wide range of
aspects froin
aspects soil
from soil erosion
r water resources t: a.r quality and
and
und water resources to air quality and
aesthetic
aesthetic val mes. These
val"es. Ir ivacts cannot be measured inlependently from
i,npacts cannot be ,neasured independently fro,n
social issues.
social issues ..
 -- 54
54 --

Rational forest utilization is

is aa precondition for positive
ecological
ecological impacts
impacts inin forest
forest areas.
areas. long as
As long as resources
resources are
are not
not
utilized or
utilized their use
or their use is
is irrational,
irrational, the result tends
the result tends to
to be
be ecological
ecological
deterioration. If the resource
If the resource has
has an
an economic
economic value,
value, people
people tend
tend to
to
look
look after it
it better, if
if its
its rational
rational utilization
utilization is
is not
not in
in conflict
conflict with
with
needs.
their basic needs.

Inter-agency coordination
coordination is
is essential
essential in
in the
the task
task of
of taking
taking the
the
environmental aspects into account in planning appropriate forest
industries. This
This can
can often
often bebe simply
simply reached
reached byby contacting
contacting various
various
authorities at local
authorities at local levels
levels to
to find
find out
out what
what the
the critical
critical factors
factors are.
are.

In the
In t design stage of
,sign stage of aa project
project and
and in
in the
the phase
phase preparatory
preparatory to
to
its
its implementation,
implem, _on, ample
ample time (three(three to nine months)
months) should bebe allocated
allocated
for preparation
prepar.'r on on aa site level
level,r including socio-economic and
environmental
environment ,1 surveys. In
In addition,
addition, the the criteria
criteria for
for monitoring should
should
be
be checked at this stage
at this stage in in field
field conditions
conditions in in collaboration
collaboration with
with
various agencies involved, such as those relating to agricultural
aspects, water supply, wildlife, watershed management, health and
education.

3.
3. EVALUATION
EVALuATION OF
OF APPROPRIATENESS
The
The evaluation of
of appropriatene:
appropriateness involves
involves several interest groups
several interest
or
or participants ("stakeholders")
(:',:Ieholder- who
io have multiple objectives.
objectiy,
Development forest industries
Development of forest :n,)ustries can hardly take place
,ordly take place withou,-
without conf:
conflicts
between these
these groups.
groups. This
This isis bec.
because they differ
differ in this r
in thi,7 Lact from
respect
other industries which rr
other industries rarelyy involve social issues
involv- social issues to the the same,
,, large
extent. Conflict
extent. Conflict resolution between participants
participants isis mostly
mostly impi7iit,
implicit, but
but
there
there is
is perhaps
perhaps aa need
need to
to make it it even
even more explicit.
explicit. As As the establish-
ment forest industries
ment of forest industries is
is aa social
social intervention,
intervention, itsitstechnolc.gy
teChnology isis not
not
value neutral.

Analysis of of appropriateness
,opriateness reveals
reveals who pays,
pays, who benefits
benefits and
and how
much. Several met'
methodologies exist for
dogies exist for evaluation,
evaluation, suchsuch asas goal
goal setting
setting
and comparison (predominantly
(pr iominantly quantitative objectives), institutional
network
r '4ork models (structural approach),
models (structural approach), process
process models
modelS andand conflict
conflict models.
models.
are not
They are
TI' not exclusive
exclusive and
and thethe problem
problem isis how
how totocolotine
combine them
them into
into an
an
opt imum approach
optimum approach 1in n each individual
i nd i vi dual case.
case. Such anan a::Pzoach
approach would
would make
those
those who know their priorities to
who know to articulate
articulate them.them. It
It would,
would, inin aa
holistic
holistic way, reveal the
way, reveal the interrelationships
interrelationships between between p6rticipants,
participants, andand it
it
could also
could also include
include thethe necessary
necessary long-term
long-term time time element.
element. This is
particularly important
important in in forestry
forestry where
where industrial
industrial development
development hashas to
to
consider
consider thethe intergenerational
i ntergenerat ional equity.
equi ty. In pri ncipl e, forests
In principle, forests should be be
handed over
handed over to the the next
next generation
generation in in aa better
better shape
shape than
than they
they were
were
received.

Financial evaluation is
is the most critical element from the
the
investorls and
investor's and financier's
financierls point
point of
of view,
view, even
even though
though they
they may
may have
have
different emphasis.
emphasis. The scope of evaluation may be wider at at the
the level
level of
ffinancing
i nanei ng institution
i nst i t ut i on co,-,-,ed
compared to
to owners as they
owners as they are
are more
more concerned wi th
concerned with
the long-term sustainability of
long-term sustoinabi'l'y of industry
industry which
which also depends
depends on other
factors thanthan business
business profitability.
profitability. The public
The public sector
sector asas the third
party brings in the
party brings institutional framework
the i,stitutional framework and
and norms
normS which,
which, as design
design
criteria,
criteria, have direct 1;fluence influence on
on planning.
planning.

Feas i bi 1 ity
Feasibility studi es
studies prepared by investors often tend
tPrid to
excessively reflect
ref° their own objecti%,,,,
ectives, having
having aa heavy
heavy empha,.d:
emphasis on On
technical and eonunercial
technical and , -cial aspects. The 6r:t..ia1 ava!
The actual labi 1 i ty of
availability of w(,c....1
wood raw
 - 55
- 55 -
-

materials may
materials may be
be overlooked and various
overlooked and various development indicators have
development indicators have a low
low
priority.
priority. The people
The people affected
affected by the project are
the project are often
often forgotten
forgotten in
these evaluations.
these evaluations.

viability is
Financial viability
Financial is different
different from
from business profitability as
business profitabili as
local equity
local equity or
or risk
risk capital
capitaland
and local
localloans
loanshave
have to
tobe
befound
found to
to reach an
an
adequate financing
adequate financing package.
package.

The role of internal rate of return as the first c-'lerion in

The role of internal rate of return as the first criterion in
project appraisal
appraisalcannot
cannotbebeover-emphasized.
over-emphasized. Project Project boundaries
boands, crployed
employed
the calculation
in the calculation of of this
thisparameter
parametermay may need
need adaptation
adaptation to ' s.--iopote
to incorporate
forward and
forward and backward
backwardlinkagelinkageeffects
effects in in the
the national
nationaleconomy.
economy.

Evaluation
Evaluation should
should provide
provide objective
objective information
information on on several
several levels
of impact. Therefore, multi-disciplinary team
Therefore, a multi-disciplinary team with
with an indep.
an independent
status is in
status in the
the best
best position
position to toevaluate
evaluate industry
industry ex ex post. The
The main
main
responsibility
responsibility of of the
theex exanteanteevaluation
evaluationlies ononthetheowner
lies Ownerororpromoti.
promoter of
the
the industry.
industry. Twoimportant
Two importantaspects
aspects deserve
deserve attention: reliability and
attention: reliability and
validity
validity of of the
theinformation
informationprovidedprovided for fordecision-makers.
decision-makers.

Successful evaluation
Successful evaluation can can best
best be be reached
reached if if the local partici-
local partici-
pation is
pation included as
is included as much
much as as possible.
possible. Experience has
Experience has shown that iilen
shown that when
designing projects
designing projects withwith imported
imported technology,
technology, the thelocal
localplanning
planningcompor.mt
component
can eliminate many
can eliminate commonpitfalls,
many common which often
pitfalls, which often jeopardize
jeopardize the -t- whole ile
viability of
viability of the
the industry.
industry. Local knowledge
Local knowledge ononsocial
social and
and environmental
envir,,
conditions
cond i ti ons cannot be substituted
subst i tuted by professional
high professi onal sNiil
skills of
expatriates.
exn",tri ates.

Dependingononthe
Depending the country,
country, evaluation
evaluation may may involve
involve a a large
large number
number of of
agencies organizations, ee.g.,
agencies and organizations, .. g~, the company itself,
the itself, industry
industry
associations, national
associations, national board board ofofinvestment,
investment,nationalnational development
development bank bank oror
corporation, various
corporation, various ministries,
ministries, etc. etc~ Furthermore,
Furthermore; non-governmental
non-governmental or or
unnific:il organizations
unofficial organizations and and groins
groups may often bebe ofof great
may often great value
value if if
Fv,,e ed in in evaluation
evaluation teams. F:aluation should
teams. Evaluation should take
take into
into account
account the the
teda and intorm.ation requirements
and information require.Tentsofof each each body
body to to avoid
avoid delays
delays and and
duplication of e'f,rt.
duplication of effort.

Fta.uatiot slould
Evaluation should be bn pragmatic and avoid
pragmatic and avoid excessive
excessive theory.
theory. The
main f,.rect ircustries
of forest industriesis is
to produce
to producegoods
goodswhich
whichare
areneeded
needed byby
the .oviety, not to to pro,,/de cocial services.
provide social services. The main
The main emphasis
emphasis in in the
the
ihouls be
ev-41natioi should
evaluation r., uei ro towhat
given whatextent
extentthe
theindustry
industrymeets
meets its
itsprimary
primary
P.-nost. Az
purpose. the =e7oTri
At the stage,itit can
second stage, can be
be assessed
assessed as
as to
to what
what extent
extent
var-oui,demands,
various ki,iusis, expectations
ations and
and limitations
limitations of
of the
thesurrounding
surrounding society
society
can bP
be mPt.
met. The flail usion is
nal conclusion is always
always based
based on
on these
thesetwo
two main
main
elements.
elements.

In practice,
In actice,among
among the
the various
various criteria
criteriawhich
which can
can be
be considered,
considered,
the following
the foIl three items
ng three items can
can be
be identified
identified as
asthe
themost
mostimportant
important ones:
ones:

profitability
itabil ity
market (volume
market andquality
(volume and quality of
of products)
products)
employment.
After these, the subsequent ranking of other criteria such as
After these, the subsequent ranking of other criteria such as
economic, social, institutional and ecological
social, institutional criteria
ecological criteria may vary
considerably, depending
considerably, onlocal
depending on local conditions.
conditions.

The pol
The political
i ti cal aspirations may
may often
often be in project
overwhelming
be overwhelmi ng in proj ect
This can be dangcrons and lead to disastrous projects.
design. This can be
design. erous and lead to disastrous projects. A
A
maximumeffort
maximum by pr)fp.ilonals is necessary to avoid technically and
effort by onals is necessary to avoid technically and
financially unviable
financially unviable proiectA and to proceed too far where it is,
projects,, and to proceed too far where it IS, forfor
political reasons, no longer poesible to stop or restructure projects.
political reasons, nO longer possible to stop or restructure projects.
 -- 56 -
-

Schematic approaches may

Schematic approaches be dangerous
may be dangerous inin evaluating
evaluating appropriate-
appropriate-
ness, and imagination
ness, and imagination and
and creativity
creativity is
is needed
needed in
in each
each case.
case, Universal
solutions
solutions to
to establish
establish weights between criteria
weights between criteria or their
their application
application do
not
not exist. However, for better
However, the need for better guidelines
guidelines is is apparent.
apparent.
 - 5577 --
-

II
PART II

BACKGROUND DOCUMENTS
DOCUMENTS
 -- 59 --

COMMON FOREST INDUSTRIES

COMMON FEATURES OF FOREST INDUSTRIES PROJECTS
PROJECTS

by

JJ.S.
.S. Bethel*
Bethel·

CONTENTS

Page

1. INTRODUCTION 60

2. RESOURCE BASE FOR

RESOURCE FOR FOREST
FOREST INDUSTRY
INDUSTRY 60

3. INDUSTRY BASED ON NATURAL

NATURAL FOREST
FOREST 61
61

3.1 Relation Resource, Forest

Relation Between Forest Resource, Forest
Industries' Products and
Industries' and Markets
Markets 62

3.2 Production
Production Components Required to Convert
Components Required Convert
the Forest Resource
the 62

3.2.1 Logging
Logging component 62
3.2.2 Manufacturing
Manufacturing component 62
3.2.3 Choice of technology
Choice of 63

4. INDUSTRY BASED ON MAN-MADE

MAN-MADE FOREST
FOREST 64

4.1 Product.ion
Production Component
Component of Forest Industries
of Forest Industries 65

5. FORESTRY TO
TRANSITION FROM EXPLOITATION FORESTRY TO
PRODUCTION FORESTRY 65

6. LONG-TERM
LONG-TERM OBJECTIVES OF NATIONS'
NATIONS' FOREST
INDUSTRY PROJECTS 67

7• "APPROPRIATENESS" OF FOREST
"APPROPRIATENESS" FOREST INDUSTRY
INDUSTRY 67

7.1 "Appropriate Mean?

What Does "Appropriate"l
Mean?
' 67

7.2
7.2 Environmental of Propriety
Environmental Criteria of Propriety 67

7.3 Dimensional
Dimensional Criteria
Criteria of Propriety 68

7.4
7.4 Effect
Effect of
of National
National and Community Goals on
Industrial Propriety
Industrial 68

• university
University of Washington, College of
Washington, College of Forest
Forest Resources,
Resources, Seattle,
Seattle,
Washington (U.S.A.
(U.S.A.).
 60 --
- 60

L
1, INTRODUCTION
Forest industry
Forest industry projects,
projects, likelike other
other natural resource based
natural resource
industrial projects, involve
involve thethe orgar ; Aion of
organization of aa set ofof technologies
that can efficiently use available
can efficiently i,, 1,The capital. energy
energy and
and personnel
personnel to
to con-
vert the
the resource into O a
' commodity
a co-.' .ty or product
.-uct that
: can be marketed
that can marketed at
at aa
profit. Mo;f industrial
Most ind, .al forestry
fo.!,' systems have 'ave as objectives the
as objectives the conver-
conver-
sion forest trees
sion of f-rest tr,, ,ito such
into 'ch commodities
--J ,tties as
as lumber, plywood, particle
lumber, plywood, particle
board,
board, fibreboard :
fibiebpard or pulp or into products 1 derived from these commodities.
derived from

Occasionally the output

occasionally the output of a a forest-based
forest-based industry
industry isis aa non-
non-
timber
timber product
product such as resin,
such as resin; rattan,
rattan, thatch,
thatch, wild etc~, but
honey, :,c.,
wild honey, but since
these
these commodities make up a rather small
small fraction
fraction of
of the
the industrial
industrial output
output
of this paper will
forests, this
of forests, will deal
deal with
with timber-based
timber-based commodities.
commodities. In any
In
case, the
case, the basic elements of industrial
industrial project
project design
design are
are the
the same.
same.

The nature of the raw material crucial to the design of

material supply is crucial of
an industrial materials
an industrial materials project.
project. Forests vary in their their structure
structure andand
organization
organization and this variation
and this variation poses
poses a a challenge
challenge to the the industrial
industrial pro-
ject designer as
ject as he
he undertakes
undertakes to toadapt
adaptmandta...uring
manufacturing technol,
technology iy and
and
marketing strategy
strategy to to the avaiJable forest reSource.
available forest nrource. A manu-..
A manufacturing
-uring
subsystem
sub,.j.steri which
whichisishighly
highlysatisfactory
satisfactory when
when matched with one
matohed with onefo,:-
forest';may
may be
an
an industrial disasterwhen
ind,r1al disaster when matched
matched with
with another.
another. Just Just asas forests vary as
forts ,Jary as
sources
sources of raw
j 4 material, industrial environments
material, industrial environments vary vary with
with rJp,,ict
respect to the the
availability
availabili1J of ')f capital, thethe supply
supply ofof processing
processingenergy
energyar/.1
and the quantity
and quality of employable
and quality personnel. The
oloyable personnel. industrial project
The industrial project designer
.1igne-r must
blend these ingredients
blend these into aa technically
-lients into technically and and economically
economically vim):viable enter-
- enter-
pri se.
prise. Somet imes th,is
Somet...1... is cannot
cannot bebe done.
done. f thi
IIf s iis
this s the
the case
case, irr..onrop-
an approp-
riate
riate outcome
outcome of of the
the industrial
industrialproject
projectdesign
designeffort
effort is is
to terecommend that
recorc that
the
the project be be dropped.
iropped. But as often as not a
But as a first
first rate
rate industrial
industrial
design
design technologist can can find
find a viable solution to to the
the problem.
problem.

Perhaps the most

Perhaps the most inappropriate
inappropriate of of all
all industrial
industrial design
design efforts
is
is one
one which involves lifting
which involves lifting the
the design forfor a a manufacturing component
component ofof
aa highly
highly successful industrial
industrial enterprise,
enterprise, ti transplanting
lanting it
it into aa totally
different forest environment, a quite different cliff, , industrial
industrial and social
environment andand then
then expecting
expecting it it to
to work.
work. Many examples of inappropriate
inappropriate
technology,
technology, that
that have been reported
have been reported from
from developing
developing countries
countries undergoing
undergoi ng
industrialization,
industrialization, originate
originate from
from this
this kind
kind of technically flawed
of technically flawed indus-
indus-
trial design.
trial project design. Here technology is
Here is transferred
transferred from
from a developed
developed toto
aa developing
developing country
country without
without regard
regard toto the
the technical,
technical, social
social oror political
political
setting into which the industry
setting industry isis being
being introduced.
introduced.

This kind
kind of
of industrial
industrial project
project design
design error
errOr is,
is, of
of ccourse, not
unique countries.
unique to developing countries. It
It occurs '1E J91,ed
industrially developed
occurs in industrlally
countries asas well,
well. Wherever
v,' it
it occurs,
occurs, it it represents
represents inappropriate indus-
in:J.:-ciate indus-
trial
trial design. quences of
The cconsequences of such
such anan industrial
industrial project
Jrcject design
error,
error, however, can can be
be m_,ch
much more
more serious
serious inin aa developing coontry
country than
than in
in aa
developed country,
developed country, pa', icula.
icularly ifif the
= the project
project isis very 1,He, very expen-
very large,
siva and located
sive and 1 oea ted in
in aa poor
poor country.
ntry, Count ri es I whose
Countries, economi es are not
whose economies not
strong, cannot
strong, cannot afford the co
afford the Lly mistakes
costly mistakes thatthat can
can be
be absorbed
absorbed byby more
mOre
robust economies~
robust economies.

2. FOR FOREST
RESOURCE BASE FOR FOREST INDUSTRY
INDUSTRY

In approaching a
In approaching a forest
forest industry
industry project
project design
design it it is
is of
of crucial
importance that the
importance that the designing
designing techr):_Juist
technologist have thorough understanding
have a thorough understanding
of
of the nature of the
the nature the forest
forest that i= s
that is heduled to
scheduled to be
be the
the raw
raw material
material base
base
ton the industry.
for industry. Two major
Two major categories
categories of forests
forests thatthat form
form such
such bases
bases
are
are those
those that
that are
are naturally
naturally cocuiring
occurring and
and those
those that
that are
areman-maCo
man-made.. The
.e
designs
designs of industrial forestry T.q.ects
of industrial eets appropriate
appropriate to1naturally
to naturally occ
occurring
forests
forests are
are quite
quite different
different frOm
from those appropriate to man-made forests.
forests.
 - 61 --
-

Industrial design projects

Industrial design projects based
based onon naturally
naturally occurring
occurring forests
forests
have much in
have much common with
in common wi th the
the so-called
so-called non-renewable
non-renewable materials
materials projects
projects
such as those based on
such as on minerals or or fossil
fossil fuels.
fuels. When
When aa forestry
forestry utiliza-
tion system
tion system isis to
to be
be designed
designed around
around aa naturally
naturally occurring forest, the
occurring forest, the
task is
task is to
to seek
seek out the usable components
out the components of the forest
of the forest and
and then
`hen create
create an
an
extraction and
and conversion
conversion facility
facility that
that is
is matched
matched to
to th,
the rco-Lrce.
resource.

The design of forestry

The forestry utilization
utilization systems
systems based
based on
on man-made
man-made
forests is guite diEferent.
is quite different. Here the commodity
Here the commodity to
to be
be produced
produced is
is iden-
iden-
tified and aa system
tified and is designed
system is designed to to produce
produce it.
it. These tor,sr
These forest production
production
projects have counterparts
projects have counterparts in agricultural systems.
in agricultural systems. The
Tie design ofof the
forest is just
just as important as
as important as the
the design
design of
of the component
the manufacturing component
or of the marketing component.
or of component.

3.
3. INDUSTRY FOREST
INDUSTW" BASED ON NATURAL FOREST
Naturallc occurring
Naturally -ccrrring forests
forests may
may be
be natural forests of
natural forests of the
the kind
kind
that rred to
often referred
that are often . to as
as virgin
virgin forests.
forests. These forests
These forests areare the
the
products of of biological evolution
evolution where
where human
human influence
influence is is minimal.
minimal. They
be secondary
may be secondary forests,
forests, i.e.
i.e. the residual forests
the residual forests that
that are the evolu-
are the evolu-
tionary
tionary products .1 of the
the prior exploitation of of natural
natural forests.
forests. Such
naturally occurring forests are the type that
naturally occurring characterizes the
that characterizes the timber
timber
stands
stands onon more
more than
than 98 percent
percent ofof the
the commercial
commercial forest
forest land
land in the tro-
in the tro-
pical regions
pical regions ofof the world where
the world where most,st developing
. countries are
developing countries are located.
located.
They
They are
are often
often all-aged,
all-aged, mixed
mixed species forests that
specs forests that are
are extremely
extremely variable
variable
in
in organization and structure.
structure. species may
Some ..,ecies may be
be long-lived
long-lived andand grow to
very large dimensions.
very large dimensions. Some are short-Ii
Some a:- ved and
'-lived and may never get beyond
beyond the
the
size of shrubs or or brush.
brush.

All trees contribute

All trees contribute toto the
the vegetative
vegetative biomass
biomass of
of the
the forest
forest but
but
contribute little
many contribute little to
to the
the materials
materials supply
supply base.
base. They
They may bebe of
of no
use
use as
as aa materials
materials resource because theythey are
are too
too small,
small, too
too defective, too
too
rare or because
rare or because they
they have
have poor
poor anatomical,
anatomi cal, physical
physi calor chemical proper-
or chemical proper-
ties. Some forests
Some forests of
of this
this type
type are
a~e rich
rich resources,
resources, because
because aa large
large
proportion of
of the trees are
the trees are useful
useful for production.
for materials production. Some are
Some are
rich resources because
rich resources because aa large
large fraction
fraction of useful tree
of each useful tree is
is recovered
recovered
as
as commodity. Still others may be
Still others be considered
considered rich,
rich, simply
simply because
because they
they
include
include aa very small quanti
very small of trees
quantity of is, however,
trees which is, of very
however, of very high
high
value. Such
value. forests can often be exploited for
Such forests for their
their useful
useful components
components at
at
aa profit.

Still other naturally

Still other naturally occurring
occurri ng forests
forests are poor in
are so poor in useful
useful
trees or tree
trees or tree components
components that convers i on to
that conversion commod i ty is
to commodity is not
not economically
economi call y
feast bl e even
feasible they support
even though they support aa 1large
arge biomass.
bi Omass. Such
Such forests are are not
not
resources.
materials resources. But
But the
the vast majority of
vast majority of commercially
commercially available
available
forests are neither rich
are neither rich resources nor poor
resources nOr poor resources.
resourCes... They are
They are good
good
resources provided that
resources prnvided that an appropriate industrial
an appropriate industrial project
project design
design can
can be
developed
developed to to use
,oe them.

One problem
b...emencountered
encountered in the exploitation of
the exploitation of naturli../
naturally ocaur-
occur-
ring forests
fore,;ts that must deal t with
must be dealt wi th by
by the
the forestry
forestry system
system designer is
r:signer is
the task of dealing with
the task with the
the residual
residual stands.
stands. These are
These are the weeds
weeds of of the
the
commercial forest. They may be
They may be weeds
weeds because
because th(:they cannot
cannot beb, feasibly
converted
conver .ed intointo a
a marketable product.
product. They may be be weeds3 h,cause
because they
they are
are
too young and
too youna therefore too
and therefore too small.
small. Because forests
fr 's ..rxe are renewable,
renewable, thethe
young -trees -- in
in an
an exploitation forest
forest may
may ultimat
ultimately ly be
be commercial
Qummercial in in some
some
future
futul- exploitation
-loitation projectproject but
but for
for the
the initial
in1 tial project they are weeds.
they are weeds.
Unlike fa.t:'m weeds
unIe t,-:rid weeds they
they cannot
cannot bebe easily
easily andand inexi,
inexpensively
,sively removed with with aa
hoe or
or aa cultivator.
cultivator. The more of
The of them
them there
there are,
are, 'hethe poorer
poorer isis the
the mate-
mate-
rials
rials resource
iesource from
from an standpoint~
industrial standpoint.
an industrial
 - 62
62 --

Itis this
It is thisphenomenon thatleads
phenomenon that leadsindustrial
industrial project
project d igners to
designers to
seek opportunities
seek opportunities totomarket
marketthese unused
these unusedoror
underused
underusedweed
weed sr. , s. This
species.
the origin
is the
is origin of the the so-called
so-calJed secondary
secondary species
species problem
problem oi tti. moist
of the moist
tropical
tropical forest.
forest.

3.1 Relation Between

Relation Forest Resource,
Between Forest Resource,Forest
ForestIndustries'
Industries' Products
Products and
and
Markets

Clearly
Clearly thethe quality
quality of of the
the forest
forest asas aamaterials
materials resource
reSOUrce is is not
not
just
just aa function
function ofof its
itsstructure,
structure,properties
propertiesand and organization,
organization, but but also
also of
of
the
the markets available to
markets available to the
the forest
forest enterprise.
enterprise. It matters
It little that
matters little that a
forest may
forest may have muchbiomass
have much biomass thatcan
that cantechnically
technicallybe beconverted
convertedtotoparticle
particle
board if there is
if there is no
no market
market for for particle
particleboard
board inin which
which this forestry
this forestry
enterprise would
enterprise would have competitive
have a competi ti ve advantage.
advantage. Regardless of how
Regardless how much
much
biomassisiscontained
biomass contained in in
thetheforest,
forest,itit is
is the
the portion
portion ofofthe
thebiomass that
biomass that
can ultimately
Can ultimately be sold that
be sold that has
has toto pay
pay the
the costs
costs ofof harvesting,
harvesting, transport
transport
and manufacturing
and manufacturing operations.
operations. It It is
is the
the market
market value
value ofof this
this usable
usable
biomassand
biomass andthethecost
costofofextracting
extracting and andconverting
convertingitit that
that establishes
establishes the the
economic viability of
economic viability of the
the forestry
forestry utilization
utilization system
systembased
based onon aa naturally
naturally
occurring forest.
occurring forest.
3.2 Production Components Required to Convert the Forest Resource
3.2.1
3.2.1 Logging comoru it
component

The logging
The logging systems
systemsrequired
requiredtotoexploit
exploit naturally
naturally occurring
occurring
forertr for
forests indiii7trial commodities
for industrial commodities are are commonly comprisedofof large
commonly comprised large and
expE,i.ve
expensive road,ad, rilroad
railroadoror water
watertransport
transportnetworks.
networks. This is true for a
This is true for a
numir of
number of ,-,ASOU
reasons. As previously
As ii.reviously noted,
noted, naturally
naturally occurring
occurring forests
forests
,:rg,rization and
typically are varied in organization and structure
structure and and they
they yield
yield round-
round-
the fir- of logs.
:

wood in the form of logs, blocks and

wc.,d b'r;l'a that
and bolts that vary
vary inin sine
sizeand
and weight
weight
across aa consid,-iable
across considerable spectrum.
spectrum. Thelogging
The looingi facilities
iiacilities must
must bebebuilt
built to
to
i:ccommodate the
accommodate the largest
largest and
and heaviest
heaviest loadload ]ikely
likelytoto come
come outout over
over the
the
transport network
transport networkand andtotododoitit without
without damage
damage to to thefacilities
the facilities and at aa
and at
reasonable cost.
reasonable cost.
lince naturally
Since naturally occurring forests are
occurr; ng forests are often
often locatEe
located in remote
removedfrom
areas far removed frommajor
majorcentres
centresofof population,
population, general
general per: ose trans-
purpose trans-
typically not available for use in iivploitation
,c"..ation networks are typically not available for use in exploitation
portation
in naturally
.i,igging in
logging naturally occurring
occurring fcrests.
forests. These frequently havE
These frequently to be
have to built
be built
andpaid
and paidfor
for as
as aa part
part of
of the
the lofiJing
logging component
component ofof the
the exploitation
exploitation fores-
fores-
try system
try system though they may
though they maybebeuseduuodasasa ageneral
generalsocial
social infrastructure
infrastru'iture once
Once
they are
they are in
in place.
place.

3.2.2
3.2.2 Manufacturing component
Manufacturing component

The
The manufacturing component of an
manufacturi n9 component an exploitation
exploi tation forestry
forestrysystem
system
must be
must be designed
designed to to link
link the
theforest
forestwith thethemarket.s.
with markets. In designing
In designing aa
forestry industrial
forest"ry system based
indus tr i al system basedononexpl
,:ixploitation
oi tat i on ol nat;:illy occurring
of naturally occurri ng
forests, the project
forests, project designer, in ,io,ising
designer J in devisi ng a manufactnr:., subsystem,I
manufacturi ng subsystem
encounters
encounters manymanyofof the
the same problem!:that
same problems tnathe
he confronted
confronted in
in designing
designing aa
logging subsystem.
logging subsystem.

Once again
Once again the
the fact
fact that
thatthe
theusable
usableroundwood logs are
roundwood logs are highly
highly
variable in
variable in properties,
properties,size
sizeand
andweight
weightmeans
means that
that the
themanufacturing
manufacturing plant
plant
has to
has to be
bevery
very versatile
versatile and
andthis
this is
is generally
generally costly.
costly. Drying
Drying operations
operations
must bebe designed
designed for mix of
for a mix species with
of species with substantial differences in
substantial differences in
drying characteristics.
drying characteristics. and cutting
Sawing and cutting properties
properties maymay vary
vary over
over aa
wide range
wide requiring elaborate
range requiring elaborate knife
knife and
and saw
saw maintenance facilities and
maintenance facilities and
large stocks
large stocks ofof knives
knivesand
and saws.
saws. The cooking and
The cooking and bleaching
bleaching properties
properties ofof
woods may
woods may vary across aa considerable
vary across considerable spectrum
spectrum when fibre commodities
when fibre commodities are
are
being
bei ng produced.
produced.
 -- 63 --

This need to accommodate a

This need a highly
highly va:nni.,
variable raw
raw material
material nenerally
generally
means that the
means that the manuf,..Auring
manufacturing subsystem
subsystem design is is expensive.
expensive. In addition,
. l_tion,
1-,

factory production
factory production lines
'Inc..: that built to
that are built handle aa highly
to handle highly variable
\ ;e raw
material are rarely
matarial are rarely asas efficient
efficient inin tt'rms
terms cf
of the utilization of time
the utilization t--Je or
materials is possible when the
.;:.;ttals as is the raw
raw r-- al is
material is less
less variable.
variable.

3.2.3
3.2.; Choice
Choice ofoftr.:1-r;clogy
technology

Despite the
Despite the !,ct
fact that
that the
the nature
nature ofof the
the ra,
raw material
material mix
mix avail-
avail-
able in
able in naturally
naturally oc,:urring
occurring forests influences the
forests heavily influ-ices the choice
choice of
of
manufacturi
manufacturingng technologies
technol og ies used
used in exploi tat ion forestry systems, there
in exploitation
are
ar, usually aa number
number of
of alternative
alternative technologies
technologies available
v.- ,Hle to
to the indus-
the indus-
t-i,;.
trial project designer.
project designer. technologies may depend
Choices of technologies depend upon such
upon such
factors as:

(a) relative of capital

relative availability of capital and
and labour;
labour;

(b) availabllty process energy;

availablity of process energy;

( c) ava i 1 abi Ii ty of skilled

availability ski 11 ed labour
labour and
and experienced
experi enced technical
techni cal and
and
personnel~ and
managerial personnel; and

(d) the
the rigour of quality demands in
in the
the market
market to
to be
be served.
served.

Where capital
capita] for construction of
for construction (; the manufacturing facili,y
the manufacturing facility is
is
not easily i;vailable
not easil; locali, the
available locally, the approu;,
appropriate technology from
-te technology from aa system
t tem
design st:;ndpoint
standpoint may
mav be one ;hat
be oro that makes
makes maximum utilIz,.tion
utilization of
.,;_; of labour and
JabooT and
minimum demands
mínimum demands opon
upon the
thesoii-;,;.
sources of capit-
capi tal.. But these Finds
But these ki nds of
of choices
choices
have to
to be
be caretu.ly
carefullyorchestraL,?;¡
orchestrated in industrial
in induu tial project
project design
design by a very
by a very
competent
competent system designer.

Some highly
highly sophisticated
sophisticated manufacturing
manufacturing equipment
equipment isis included
included inin
aa system,
system, not not for
for the purpose of of saving
saving labour,
labour, though
though that
that may occur,
occur, but
but
for the purpose of
for t!'; of achieving an an elevated
elevated level
level ofof product
product quality.
quality. If
If the
mar;; ;oing enterprise
manufacturing enterpriseisistotoserve
servea avery
verydemanding
demanding international
international mar-
mar-
ket, then
;- - this capital
this capital investment,
investment, to
to achieve
achieve an
an acceptable
acceptable quality level,
level,
may bebe essent
, i al even
sential even though
though it
it 1limit
imi ts the si ze of
the size of the
the labour
labour force.
force. If
it
the entorprise is
the enterprise is to
to serve
seve aa less
less dem ;ing local
demanding loca] market,
market, itit may
may be fea-
fea-
sible to
sible to forego
forego the
the sophisticated
sophi equipment in favour
ant in favour ofof the
the greater
greater use
use
of labour.
labour.

Is product
Is product quality achievable
achievable only
only by by making
making aa major
major capital
capital
investment
investment in in high
high technolcgy
technology equipment?
equipment? Not necessarily;
Not necessarily ~ aa very high] y
very highly
skilled and
skilled and well-managed
well-managed manufacturing team team cancan sometimes
sometimes use use well-
well-
designed and welJ-bull t, but simple Pmanufacturing
and well-built, equipment to
ufacturing equipment produce
to produce
high
high quality forest products such
quality forest such as
as lumber and plywood.
and plywood. ;- The key to
The to such
such
aa trade-off
trade-off between labour and
between labour and capi
capital investment is
31 investment is the quality of
the ,juality the
of the
labour and
labour and management
management available
availabletotothe themanufacturing
manufacturing erteise.
enterprise. It is
1 .

not substitute low

not feasible to substitute low ttechnology and unskilled
Jology and unskilledp-:;-;-,rtel
personnel for
for high
technology
technolPçti equipment,
equipment, andand still
still sustain
tain aa high
high level
level of
of quality
quality' cont.
control.
unfortunately, the
Untort,;tely, the developing countries 'les that
that cannot
cannot internally
internally generate
generate
investment
the i:. capital required to purchase sophisticated
it capital
, - sophisticated equipmu,nt
equipment are as
fr;que ly on
frequently as not
not the
the same
same countries
countries that
that do
do not
not have
have aa pool
pool of
of skilled
labour,
labour, expert technologists
technologists and and competent
competent managers.
managers. The opportut
opportunities to
tties to
substi tute personnel
substitute personnel for tal demanding equipment
for capital equipment without
without loss
loss inin the
level
level ofof product
product quality varyvary from
from industry
industry to to industry.
industry.

Another reason
Another reason for
for adopting
adopting aa highly
highly sophisticated
sophisticated manufacturing
manufacturing
technology
technology is
is to
to improve
improve upon
upon yield in the
yield in the conversion
conversion of raw
raw material
material to
to
finished product..
finished product. A very
very expensive material provides
oensive raw material provides aa great
great incen-
incen-
tive to
tive improvement in
to improvement in proO,Yt
product yield.
yield. When raw
-,;;;,-1 material
raw ;.,alct 1 is costly, the
is costly, the
development of
of large
large qua.;.
quantities; of uh,.t._:.
unutilized processingj residues
.:ed proc,;; can be
residues can be
very expensive indeed.
very expensive In
In many developing countr
many developing countries the price ice of
of raw
material for
material for forest
forest industries
industries has
has been
been veuy
very low low and,
and, accordingly,
ngly. there
there
 -- 64
64 -
-

has been
has been little
1 HUe financial
financial incentive to make substantial
incentive to substantial investments of
capital and
capital and labour
Jabot- for the purpose
for the purpose of
of irroving
improving ononproduct
product 7..o!d.
yield. This
condition isJ.; rapidly
r changing in
lly changing develcping countries.
in develo-,..ng countries. The unique
r....que re-
re-
sources of
sources of the
the naturally
naturally occurring
occurring forests
foris are
are becoming
becoming increasingly
increasingly
scarce~
scarce. Greatr demand
Greater demand for
for these
these sce? resources results
SCarce resourCeS results in
in higher
prices in
in the
the market place.
place.

utilization efficiency
Greater utilization efficiency and improved yield
id improved in processing
yield in processing
the materials components
components of
of aa forest
forest can
can be
be achieved
achieved in
in several ways~
several ways. An
obvious way is
obvious way is to improve on
to improve on manufacturing
manufacturing techniques
techniques so
so that
that commodity
commodl ty
and product yield
and product yield from
from the
the logs,
logs, blocks
blocks and
and bolts,
bolts, fed into the
fed into the factory,
factory,
is
is increased. This
This can be accomplished
can be accomplished by by improving
improving the quality
quality of
of manu-
facturing equipment, factory
facturing equipment, factory layout
layout and
and construction,
construction, and and the
the competence
competence
of and management personnel utilized
of labour and utilized in in the
the production
production operation.
operation.

efforts totoimprove
Often efF.7-rts improveyield
yield take
take the
the form
form of
of introduction
introduction of
of
sophisticated equipment.
sophisticated equipment. But just as in in the
the case
case ofof caali,7
quality control,
control,
highly skilled labour,
highly skilled labour, able
able technologists
technologists and
and very
very competent
competent .,nagers
managers can
can
often
often substi tute for
substituto high technology
fOr high technology pr'kessing
processing equipment
equipment inin efforts
efforts to
to
yield.
improve yield. The choice for
The choice for the
the developing
deveping country,
country, which
which is
is under-
taking to
taking achieve industrialization
to achieve industrialization through
through the
the exploitation
exploitation of forestry
of forestry
systems
systems based
based on naturally occurring forests,
on naturally forests, may
may often
often be between the
be between the use
of
of capital buy education and training
capital to buy training versus
versus thethe use
use of
of capital
capital to
to buy
buy
sophisticated
sophisticated machinery and and instrumentation,
instrumentation. IItt is
is not
not really
really surprising
that this
that this should
should be be so.
so. This is aa case of of substituting
substituting highhigh technology
technology
personnel for
personnel for high
high technology
technology equipment.
equipment.

Another wayway toto improve on the utilization efficiency of an indus-

trial forestry system is
forestry system is to provide aa mix
to provide mix ofof manufacturing
manufacturing facilities
facilities
designed
designed to to produce
produce a a variety
variety of
of products.
',1,roducts. This
Thi is o: oftenen seen
seen toto bebe aa
solution
so- Lion of of the problem posed
the problem posed by
by thethe great variability of
great variability of the
the all-aged,
all-aged,
d-s:ecies forests
mixed-species forests of the the humid
humid tropics.
tropics. The requirements
:,...ire,-nents in in raw
raw
materials
r teria. , for one
for one product convert'on are
product conversion di- '. 1 from
are different f those
those ofof another
another
product
,'uct conversion.
ccv,:sion. Theoret ically one produ,
Theoretica'lv product'
! s weeds become brome another
another
product's grif,t.
ieoduct's grist. The residues
residues ofof one conversion are the raw
one conversion tx., material
-aterial of
another conversio:',,
anoth,_ conversion. Certainly some
.t,o,:e of the
the world'._
world's great:._eat forest
forest industry
projects
projects havehave consisted
consisted of of groups
groups of of integrated cuversion facilities
integrated conversion facilities of of
this type.
this type. But these present
But these some of
present some of the
the most
most complex
complex industrial
industrial design
design
problems
problems that that can be posed posed toto aa forest
forest products
products' technolcgist.
technol ist. Such
integrated
integrated conversion
conversion industries
industries must
must be be not
not only internally
internally elficient icient but
but
they must
they must also be matched together
be matched together in in such
such aa way
way as as toto be
be etticient
efficient as as an
an
industrial complex.
industrial complex. Demand
Demand for raw raw materials must be be matohed
matched to to raw
raw
product outputs from
product from thethe forests
forests andand residues
residues from
from the
the factcries
factories thatthat are
are
linked together.
linked together. A reduction
reduction in in demand
demand for for one
one product
product can can result
result in aa
diminished
diminished supply of raw raW material for for another.
another.

The
The design
design and
and successful
successful operation of aa highly integrated
Integrated forest
forest
industrial complex
industrial complex requires
requires the use of
the use of sophisticated equipment and
sophisticated equipment and the
the
highest level
highest level of technological
technological and
and managerial
managerial talent.
talent. The latter two
two are
are
frequently
frequently not available to exploitation
not available exploitation forestry
forestry systems,
systems, because
because these
these
systems are often developed
systems are developed in
in remote
remote areas
areas far
far from
from centres
centres of
of business
business
activity and
activity and of education
education and
and training.
training. Here the quality of
Here the of personnel
personnel is
is
crucial.

4. INDUSTRY
INDUSTRY BASED
BASED ON
ON MAN-MADE
MAN-MADE FOREST
The problem of
The problem of designing
designing an industrial
industrial project
project which
which isis based
based on
on
man-made production forests
man-made production forests isis quite
quite different
different from
from that
that ofof designing
designing anan
exploitation forestry system.
exploitation forestry Here the
Here the creation
creation of the forest
of the forest is io the
'he
first
first element
element inin the
the design.
design. This permits
permits the
the project
projectdesigner
designertotoh:',,ass
bypass
many of the
the ccostly raw materials
,tly raw materials constraints
constraintsthatthatare
area apart
partofof
thethe design
de,:igr,
process in
in ef;,.f-dtation
oitation forestry systems~
forestry systems. The
The organization and structure
af the an-mode
of man-made !:orest
forest isis much simplified compared
much simplified compared to to that
that of
of the
the typical
typical
 -- 65 --

naturally
natttall( occurring forests.
fr,rests, Most
ri,,At frequently
frequently these are single-species
these are single-species
forests.
)re,t,. selection is _s made for for the purpose providing aa raw
purpose of providing
d3te..1,1 tna. Is from
material f..om the inning adapted
tne peainnirg adapted toto the
the production
production ofof the
the
commodi or
et ll,r0o,t that
.nat isu the Objective of the industrial project.
Lne ,ajective
This
is sice,cies
ies may be exotic and, inr fact, quite
may br quite different
different inin its
its wood
wood
propert es from any
prcper;-ics iry endemic
crder.1,. species.
.pnctEr. MP production
The produ,-t:on system
system thus
thus created
may
- iy provide
nto-Idc the opportuni
thv oLpQrtunitv toto mec._ local need
meet aa :oral neec. or
or to serve aa lucrative
lucrative
market in aa way tL,t
markkt ir that might not be possible
poss.:1,1eatatallal:using
using aa naturally
naturally occur-
ring es.
rho ,,recies.

forest site
The foi :e in a production forest
a production forest is
is more completely
completely occu-
occu-
pied
pied by trees o
by trees of commercial value than is the
alue than with an
the case with an exploitation
exploitation
forest. The OCCurrence of weed trees is is minimized. forest is
The forest is most
likely
likely to be an stand where
,.ere tree
tree sizes smaller and
sizes are sma:ler and much
much more
more
uniform
uniform than
than would
would be case
r,,3e with
with aa naturally
naturally occurring
occurr_Nd stand. They are
converted logs, blocks
converted to logs, and bolts
s and bolts that
that tend
tend to
to be
be small
s"^a_l and
and relatively
uniform in
in size.

4 . IPr()(fuSlionC:C>ini2()ne
4.1 , n t of
Component 0 f Forest
For est Industries
In d us t ri e s

The equipment for

Tne equipment for logging,
logging, transport
transport andand manufacturing
manufacturing c does not
not
have to
have to be
be so large
large as
as to
to accommodate
accommodate raw
raw material
material units
units far
far larger
1, than
r than
the
the average. Uniformity
Uniformity inin the
the anatomical,
anatomical, physical
physical andand chemical
chemical proper-
-:-oper-
ties wood supplies
ties of the wood supplies also
also simplifies
simplifies the
the selection
selectionofofmanuf,ct
manufacturing
:ring
processes.
processes. The greater uniformity
The uniformity inin raw
raw material
material tends
tends toto make
make quality
quali
control
control and
and yield easier tasks.
yield control easier tasks.

The of these
The implications of these differences
differences in
in the
the basis
basis for
for industrial
industrial
project design are
project are profound.
profound. Since the forest
Since the forest isis man-made,
man-made, there
there is
is
choice
choice as
as to
to its location. I t is not
It not always
always necessary
necessary to
to harvest
harvest the
the
trees from
trees from aa remote
remote location
location which
which requires
requires the
the construction
construction of
of aa large
1
and expensive virgin
and virgin transport
transport network
network toto move
move raw
rawmaterial
material totofa,tot,*
factory and
i ni shed product
ffinished product to to shipping
sh i ppi ng point
poi nt or
or market.
market. Si nee much less
Since le!"-F Ilan,1
and isis
required to produce the
to produce the same
same annual
annual requirement
requirement for raw material, tr1P
raw materi,l, the
project, including
project, including raw material
material supply, manufacture, transport ond and matket-
market-
ng, can
iing, can often
often bebe included
i ncl uded inina much smaller
a much small er geographical
geograph i area.
area, General
(,eneral
purpose transport
purpose transport networks
networks are are often
often already
already in place and
in place and available
available ter for
use. Infrastructure in
Infrastructure in the
the form
form ofof employee
employee housing,
housing, schools,
schools, churches,
churches,
service
service businesses
bus i nesses and local government
and loeal government services
servi ces may exist,
exist, whereas
whereas .iitt
often has
often has to be be created
created whenwhen aa project
project is establiShed in
is to be established in aa remote
remote
area to exploit a a naturally
naturally occurring
occurring forest.
forest.

5.
5. TRANSITION FROM
FROM EXPLOITATION
EXPLOITATION FORESTRY
FORESTRY TO
TO PRODUCTION
PRODUCTION FORESTRY
FORESTRY

Since about 9898 percent

percent ofof the
the commercial
commercial forest
forest land
land inin the
the
developing countries is in
developing countries in an
an exploitation fares
exploitation forestry status, current
status, current acti-
acti-
vities in forest
vities in forest industrial
industrial design inin these
these countries
countr es relate
relate to
to exploita-
exploita-
tion forestry.
tion forestry. This is,
This is, however,
however, changing
changing rapidly
rapidly and
and the
the technological
technological
challenge
challenge for
for the
the future is likely
future is likely to
to lie
lie in
in the
the direction
direction ofof designing
designing
production forestry
production forests.
forestry systems based upon man-made forests.
During the past
During the past thirty
thirty years,
years, vast
vast areas
areas ofof essentially undis-
undis-
turbed
turbed hardwood
hardwood forests
forests of
of the humid tropics,
the humid tropics, located for tUr the
fhr most in
most part in
developing countries,
developing countries, have
have bee:.
been committed
,,ommitted to exploitati..n.
exploitation. This is the
crux
crux of the tropical
of the tropical deforeEta::an
deforestation Lrbl,.
problem that
that 11,,
has re.reived
received much
much world-
wide
wide attention
attention in
in the
the recent
recent' s.,
Some of this oitation has been for
this exLlollPticn
the
the purpose
purpose of
of providing
providing fuelwood.
felw for sconversion to agriculture -- either
, either
permanent or
permanent or transitory - or for ,r the purposee of providinq supplies
of providing supplies of
of
industrial wood.
industrial wood. In cases al]
In some cases all thre,,
three purposes involved.
urposes were involved. While
 -- 66
66 --

some of this
some oE this land
land will
will gradually
gradually revert
revert to
to secondary
secondary forest
forest and
and be
be avail-
avail-
able for another exploitatio
for another exploitation at a a future
future time,
time, some
some will
will be
be permanently
permanently
removed from
removed from forest
forest usu.
use. It
!- seems that, if
seems clear that, if the 0.1-indieg wood
the expanding
requirements of the developing
r,-.'uirements de.elop:,.; countries
countries are to be flirt
are to trem a
met from a rapidly
rapidly
declining forest land
Ceelining forest landhi,e,
base,t?..in
then itit will be
be necessary
necessarytotot9k'..
take advantage of
Id-outage of
the high
high productivity availab,e
available from man-made production
' production totests.
forests.

A major task
A task in developing
developing production forestry systems
production forestry is that
systems is that of
of
achieving
achieving an orderly transition
an orderly transition from exploitation forestry
icm exploitation forestry toto production
production
forestry. This is aa problem that
This is that has
has been
been confronted by by many ofof the
the
developed countries of
developed countries of the
the world, and is
world, and is still
still being
being confronted
confronted byby some.
some.
is a
It is
It a major task
task for
for the
the developing
developing countries
countries for
for the
the next
next several
decades.
It takes
It takes aa relatively long time
relatively long time to grow a a new
new and
and different crop
crop
of trees; the
of trees; the manufacturiu
manufacturing andand marketing subsystems,
subsystems. that
that are
are appropriate
appropriate
to an exploitation
to an exploitation forestry
fores"/ system, tern, are often completely
are often completely different
different from
from
those necessary
those necessary forfor aa r-
product-ionon forestry system.
forestry system. Therefore, the time
Therrfr-,re, tne time
required to achieve
required to achievetrans,',.
transi tion
)n can
can hebe long
long and
and painful.
painful. Indeed,
Indeud, in11 some
some
countries where institutional structures are incapable of
countries where dealing with
oh dea2ieo
this problem, the
this problem, the transition
transition may
may become
become stalled
stalled and
and not
not croceed to pro-
duction forestry
forestry systems
systems at
at ail.
all.

In other cases
In other Cases the
the piaayers in the exploitation
in the exploitation forestry systems
systems
including
incl ino labour, technologists, managers
labour, technologists, r and
ai,d the
the supporting communities
supporting communities
move
r ve smoothly into the
othly into the prcductice
production forestry systems. In yet other
In yet other cases,
cases,
the e.1,i'.:ation
exploitation forestry
forestry syster,
systems exhaust their
their industrial
industrial opportunities
opportunities
and abandon the 1land,
-,i.iandon the and, the
the facto,
factories and sometimes the
and sometimes the communities.
commun i ties. New
production
produ, ion forestry systems are are i-luaied
created with new players
wih new players on the stage.
On the stage.

This sort of transition

This sort transition has has occurred
occurred inin the
the south-eastern
south-eastern United
United
States,
States, which was the
which was the major
major centre
centre of of forest
foreJt product
product manufacture
manufacture inin the
the
Uni ted States
United States atat the end of the
the end the last
last century.
century. Production
Production WaS primari ly
was primarily
lumber, based
lumber, based onon naturally
naturally occurring
occurring F,rests
forests andand itit peaked
peaked inin 1909.
1909.
Following
Following this
this peak,
peak, the
the industry
industry declined
declined rapidly
rapidly and
and was replaced in
was replaced in the
United States
united States byby an
an industry
industry based
based onon the
the r,diurally
naturally occurring
occurring forests
forests of
of
,the
the western united
united States.
States. But the west
But the west isis now going through
through transition
transition
and the
and the dominant
dominant position
positionhas hasbeenbeenregained
rejq,f !7:y
by the
the south-east withwith aa
totally
totally new mix
mix ofof forests,
forests, factories
factories and prc.,.Cts. The
and products. The modern transition
in west is
in the west is less
less traumatic
traumaticthan thantt'.at
that which occurred
occirred seventy-five yearsyears
ago in the south-east
south-east and and it
i t is
is taking
takier place at a a much faster pace.
nuch faster pace.

A challenge to
A challenge to the
the develc,:-
developing countries and
and their
their industries
industries is
is
to advance the
the technology
technology of
of trap
transition
ii as the need
confront the need for
for it.
it.

One i'roblem
problem faced
faced by the pr(
by the production
ion forestry
forestry system designer is is
that of remov! ng from
r,,nevii.; the land
from the 1 and the
the remnants
remnants ofof the
the naturally
na turall y occurring
occurr i ng
forest
fo,-tst so that as man-made
so thal forest can
man-made forest can be
be grown.
grown. Sometimes thi s has
Sometimes this has been
been
accomplished
accrmp,lvhrd r1 by deliberately removing
removing thethe naturally
naturally occurring
occurring forest
forest inin aa
massive
maFoyivr land-clearing
land-:inaring operation
operation and planting a
and planting a crop
crop of
of trees.
trees. This waS
This was
the pattern for
the patt,rn for example
example in
in the
the Jan
Jari
i project in Brazil.
in Brazil. Such a
Such a process
process
provides
provides a a very fast
fast transition but but it
it is
is often
often costly
costly and
and technologically
difficult
difficult.•

A common procedure
A more common procedure isis to
to attempt
at to effect
to effect aa gradual
gradual tran-
tran-
sition from natural
sition from natural forest
forest through secondary forestt to
through secondary to production
production forest.
forest.
This is feasible
This in feasible ifif the
the production
production forest
forest is
is likely
likely toto be
be similar
similar to
to the
the
natural forest in
natural foreJt in Jpecies
species composition,
composition, structur,
structure and organization. Such a
pattern otof transition
transition has been used
has been used in
in piar
places like the north-western
like the north-western
United States
United States and
and western
western Canada.
Canada. of the
One of c most effective
- transition
--ictive transition
patterns has
patterns the use of abandoned but
has been the but nott r raded agricultural land.
zrricultural land.
 -- 67
67 --

Here the
Here the clearing
clearing had
had already
already been
been accomplished
accomplished forfor the
the purpose
purpose ofof farming
farming
the forest
and the forest could
could be established relatively low
established at relativeJy low cost.
cost. The very
The very
extensive stands
extensive stands ofof Monterey pine in
Monterey pine in the
thesouth-eastern
south-eastern United
United States
States and
and
the eucalyptus
the eucalyptusforests
forestsofof Chile
Chile are
are examples
examples of of thissort
this sortofof transition.
transition.

6. LONG-TERM OHJECTIVES OF
LONG-TERM OBJECTIVES OF NATIONS' FOREST
FOREST INDUSTP(
INDUSTRYPROJECTS
PROJECTS

A very
A very important feature of
important feature of forest
forest industr,/
ind design in
4, the deve-
in the deve-
loping countries
Joping countries is is a
a determination
determination of of the
the long. ces'L,Lijectives
long-term objectives of of a
nation's forest industry projects.
nation's forest industry projects. What needs
What needs areire they
they dosiGned
designed toto
satisfy and
satisfy andwhat
whatdemands
demands do
do they
they respond
respond tgi7 Wien exrlyttation
to? When oitation ofof natur-
natur-
ally occurring forests is the Sais gf fgrkt .nluarry oroicct, loe
ally occurring forests is the basis of forest industry projects, the
industrial project
industrial projectdesigner
designer has chJiou but ,c
has little choice to ux,Tann
examine ,he the matoriaia
materials
potential of the forest and tu
potential of the forest and to seek t,e0i aa mailset
market forf.1 the
the so7mcdities
commodities and
products
products that
that can
can feasibly
feasiblybebemahi.facfJten.
manufactured. lOit thi!, is
But this it not
not',Le
thecase
case with
production forests.
production forests.

It is conventional wisdom
It wisdom in in m. -hat the
that the developing
developing
countries are
countries are playing
playingthetherole
role of
of the
the wood
-: ,he world.
the They are
world. They
being asked, it
being asked. it is
is said,
said, tetosupply
supply the
the r,wraw materials
materials required
required to to satisfy
satisfy
the insatiable
the insatiabledemands
demands of of the
the develuped coun,fiel, for
developed countries f.r wood. Nothing could
wood. Nothing coLli
be farther from
be farther the truth.
from the truth. Of Of the
the ii,netv
ninety de'eloping
developing countries
countriesanalyzed
analyzed by
:ii,,
FAOinin its
FAO its study
study Agriculture
AgricultureTowardToward 2000,
2000, 75 78 percent
percent had negative
had a negative
balance
balance ofof trade
trade in forest pioducls
in forest products in in 1981. Even the countries
Even the countries with
with
positive
positive wood
wood trade
trade balances
balances imported
imported very
very large
largeamounts
amounts ofof wood.
wood. Exports
from developing countries
from developing countries tend
tend to
to bebe inin michanically
mechanicallyprocessed
processed wood,
wood, and
and
imports
imports areare generally
generally in in fibre
fibreproducL.,.
products. The
The former
former products
products maymay be
be
exported
exported to to help
help earn
earn the
the foreign
forei ex,:hanLie required to to purchase
purchase other
other
forest
forest products
products not not produced
produced 1locally.ly. As the developing
developing countries
countries proceed
proceed
through transition from
through transition exploitation forestry
from exploitation forestry to to production
production forestry,
forestry, they
they
will find it possible te match the output of their forest industrial
will find it possible to match the output of their forest industrial
projects to
projects to their
theirdomestic
domesticrequirements
irements for for wood-based
wood-based commodities
commodities and
products whether
products whetherthese thesearearefor
for local
ocal useuse or or for
for export.
export.

7. "APPROPRINUW:SS" OF
"APPROPRIATENESS" OF FOREST
~OREST INDUSTRY
INDUSTRY

7.1 What Docg t rooqciate" Mean?

Overlayed on the conventional
u. the conventional criteriacriteria for industrial project
for industrial project
design is
design is now
now thethe need
need to to consider
consider the the propriety
propriety of of an
an industry.
industry. In
recent
recent years literature ofofdevelopment
years the literature development has has been replete with
been replete with refe-
refe-
rences
rences tote what
what hashas come
,ometote be he called
called appropriate
appropriate technology
technology or or appropriate
appropriate
industry. These
industry. These terms
trrnai serm
seem ncrnoimee,
sometimes to fo have
have acquired
acquired aa generic connota-
connota-
tion. i.e.
tion, I.e. anan appr,priateiate ttehniIioy
technology or oran anappropriate
appropriate industry
industry isissome-
sorne-
thing
thi ng unique
uni que or or diffetent
i rent fromfrom other technol og i es or industries.
other technologies i ndustri es. The
other side
other sidp ofof this
this cr,in,
coin by implication,
by implication, would would seem
seem totobe bethat
that all
all other
other
technologies ,ir
technologies Or iiniutries esareareinapplopriate.
inappropriate. A dictionary
A dictionary definition
definition ofof
the wordgives
the word ()I e, as
JSits zis first
f.rst meaning, "1-.uitable
meaning" "suitable or or fitting for
fitting for aa particular
particular
purpose,person,
purpose, pern, ocgas)go,
occasion, etc etc.".. " Wheaused
When usedtotodefine
define aa technology
technology oror anan
tne term
-151,7frY, the
industry, term irprcrrnas .mri:les aa judgement
iate implies judgement asas totosuitability
suitability ofof
titi 0.5. The
fitness. outgom( wi
Thf outcome Sill depprid
depend Loon upon whowho isis making
making thethe judgement
judgement con-
con-
cetpinj
cerning the suitabi:i,v off the
the suitability the ,echno:ogy
technology or or industry
industry andand upon whatcrite-
upon what crite-
ti, nt tithcu, ark
ria of fitness are being r,g1nn 0cc
usedi tolo -rake tne decision.
make the decision.

7.2 Envi -aJ Criteria

Environmental of Propriety
Criteria

Ti some
In o of the he developed
developed countries,
countries, where
where the
the environmental
environmental
movement originated
movement origH o inc twenty
some twenty years
years ago, industry has
ago, industry has been
been viewed a-
viewed as
inappropriate
inappr ate because - itit inisa asource
source of
of pollution
pollution deriving
deriving fruei
from the
the dis-
dis-
position
position ofof gase, AS,liquid
gaseous, liquid oror solid
solidresidues
residues ofofthe
themanufacturlig
manufacturing opera-
tion. It
I t has
has son times been
sometimes considered to
been considered to be
be inappropriate
inappropriate oecaLse its
because its
 -- 68 --

re! Ated in
installations resulted in major
major modifications
modifications of of the physical and
the physical and bio-
bio-
logical composition
logical compos of the
ion of the industrial
industrial sitesite and
and its
its envirdns.
environs. These
These con-
cerns
cerns often f. .,ed upon
often focused upon such
such activities
act i vi ties as
as land clear i ng excavation,
land clearing, excavation,
I

building constr
construction,
in, road
i rfdd and
and railroad
railroad installation and the
installation and the like.

These environmental
These enviro ntal impacts
impacts often
often became criteria
became ex post facto criteria
of
of propri
propriety. Establ ri
Est,-r ished manufacturi
manufacturingng installations
i nstallat were suddenlyy found
to be inappropriate
to inappropriate when
when criteria
criteria of
of propriety
propri were applied which
were which were
unknown
unknown or
or not in vogue at
not in at the
the time
time the facrories
factories were
were built. Substantial
Substantial
non-producti ve capi
non-productive tal investments freg.evtly
capital frequently had
had toto be
be made to
to permit
permi t
older installations
older installations toto conform
conform toto new ,4.
new criteria.
cr-
The propo:
proponents
at of environmentally based
of environmentally based propriety
propriety standards
standards for
for
developing countric cr-rn wish
countries often wish to to avoid what they
avoid what they view
view as as the
the develop-
develop-
mental
mental mistakes of of currrnrly
currently developed
developed countries.
countries. There isis merit in thiF
merit in this
position. It is
It is le-s
less exoen.,..ve
expensive totobuildbuild effluent
effluent controls
controls into a a projcrl
project
at its
its inception thanthan itit isis to
to add
add it
it to project later.
to the project later. But
But theve
these
environmental
,frronmental control components generally
control components represent investments
generally represent investments thatthat do
not contribute
not conti,bute directly to to anan increase
increase in in the
the quality
quality or or quantity
quantity of
of
conunodity vroduced.
commodity produced. If
If such j nstallations
installations are too expensive
are too expensive then
then the
the
project might
projec, dlt be found
i ff,..3 to -ically unfeasible.
to be reconomically ua-,ible. In the final
In the final ana-
lysis
lysis; tjudgements
rr)ements concerning
-:,ncerning environmental
sx onmenta, restrictions
re.trictions on industrial
development
fevelv)men-r must be be made by by the
the country
country in involved
r and implemented through
and implemented
government
-rnment action. ~'lhere such
action .. WHere such ac!
action is taF,,
:dn is taken, it
, it becomes
becomes aa criterion forfor
industrial
ir dtrial propriety and and aa constraint
constraint on On project design.

7.3 Dimensional Criteria of Propriety

In apply!
In applying the concept
the concept of of "appropriate
"appropriate technology"
technology" or "appro-
or 'appro-
priate industry"
industryH to industrialization
ndustrialization in in developing countries,
countries, the of
the size of
ihe installation
the installation is is sometimes
sometimes proposed
proposed as a a criterion
criterion of of propriety.
?ropriety.
rsdustry has
Industry has sometimes
sometimes beenbeen seen
seen as
as too
too large
large and
and dominant
dominant inIn society.
SOCl
' se who propose
rThose propose aa size
size criterion
criterion for industriliz,tion
industrialization are are often
often ins-
ins-
1pired by S.F.
red by F.F. SchumaCler's
Schumacher's treatise
treatise r I is B r.. The enthusiastic
enthusiastic
proponents of
prrroirents small mills
of small mUls are are usua y see seekinrog r ng that is
ging unob-
is unob-
trusive,
trus v.:, low in in ital
CI and energy
and ennrgy requirements
rdvireverir and inA the
, the need
need for
for tech-
tech-
nically skilled 1 but rela,'vely
but relatively higo
high in frv1,,,,d
demand forforunskilled
unskilled labour.
labour.
These latter speoif.fations
These tatter specifications con can be
be legitiz,
legitimate criteria but
e criteria but size
size alora
alone is
is
geneially
generally aa simplistic criteion.
Simplistic criterion. The U.S,
U.S. t.ifice
Office ofofTechnology
Technology Assess-
7,,f,.e. s-
ment in
ment in addressing
addressing the
the "Small
"Small is is Beautiful"
Beautiful" viewview of
of technology
technology noted
noted,

"Over the
"Over the last decade
decade a a broader
broader and and more
more pragmatic
pragmatic
concept of
concept of appropriat-
appropriate technology
technology has has emerged side by
emerged side by
side
side with thethe first. A growing
gro,<,ling number
number ofof observers
observers
have
have pointed outout ttthat, while
, small may be
.rile small be beautiful
beautiful in
many ways
many ways itit is
is not
not always sensible.
sensible. For
For some it
some jobs it
possible to
is possible to scale
scale down
down oror decentralize
decentralize aa large
technology bw.but impossible
impossible or undesirable to
or undesirable to do
do awav
away
with it
it entirc:!.
enti In this view
In view appropriate technologyr
appropriate technolo,
embodies
embodies the pvciple
the pr ncipleofofselectivity
selectivity in in assigning,
assigning, or
developing, aa mix of of large and small
large and technologies to
small technologies
meet tasks and
meet specific tasks and conditions."
conditions."

If one
If One accepts
accepts this
this view
view of
of appropriate
appropriate technology,
technology, then
then it
it must
must
be concluded
be concluded that is not
that size alone is not a
a proper criterion.
criterion. What is needed
What is needed is
is
to
to match to tasks
match technologies to tasks and
and conditions.
conditions.

7.4 Effect National rind

Effect of National and Community
Community Goals
Goals On Industrial Propriety
on Indu rrpriety

that
that related
related to
set of
Another set of c't:.
to national
criteria
nationalgoals.
r,, used
gcF, Developing countrie,
iff
define industrial
used to define propriety
.11 prr,-friety
countries with high
high population
is
is

densities and often

densities and often high
high levels
levels ofof unemployment
unemployments...setimes
sometimes havehave asas aa
national goal encouragement
encouragemef,t of labour intensive industries, which which can
can
provide employment for
provide employment unskilled people.
for many unskilled people. Similarly national goals
Similarly national Goals
 - 69
69 --

impact industrialization may relate to re uirements for use of

tf,ut impact industrialization may relate to requirements for use of
that
currency or
foreign currency or opportunities
opportunities to to earn
earn foreion Aneffort
---:ency. An
foreign currency. '-ffort to
.nztoase
increase value
value aided
added in
in manufirfure
manufacture may be aa nat,,
may be national goal. The g,,ire to
The desire to
rsiliption of
m,simize the consumption
minimize i.:f of invit-ed
imported fuels
fuelsmz i,tional objettve in
may be a national obJective in
a 'eel short ontry. AA comí
a fuel short country. t-,tional goal
cornmon-i national to ingustriil deve-
goal related- to industrial deve-
.

lopment isis minimization

lopment minimization ofof foreign capital Inv'. t and control of the
i.-f t capital investment and control of the
level of foreign equity in a
level of foreign equity in a manufacturing:cturing corpt
corporation.

When these are

When these are stateU
stated andand implemented national goals,
implemented national goals, they
they con-
con-
stitute criteria for industrial propriety.
stitute criteria for industrial propriety. in the case of environ-
AS
As in the case of environ-
mental criteria, which define piopriety, these goals must be imposed by
mental criteria, which define propdety, these oals must be imposed by
goterttent as social restriifti
government as social restrictions~ in:ff, And
And as is the case
as is case with
with most
most social
social
ri,iitracz..tix on
restrictions manufacture, ff-su
on manufactur these -,ay influence the cost of doing busi-
may influence the cost of doing busi-
ness and,
ness and, ,iccordingly, the profitability
accordingly, the i.t.,-(,:f.ab:lityofofthe
the industrial
industrial enterprise.
enterprise.

Other criteria for tptiopriateness of

Other criteria for appropriateness of industry industry can adse arise from
confrontation with
confrontation with community
community goals. This refers to the community of
goals. This refers to the community of
forest dwellers
forest dwellers inin the
the vicinity
vi cini tyofofthe proposed
the proposedmanufacturing
manufacturi ng enterprise
enterpri se
as contrasted with the national population.
as contrasted with the national population. For forest pro-
F'or example,
example, a forest pro-
ducts manufacturing installation may satisty national goals with respect
ducts manufacturi ng i nstallati on may sat i sfy nat i onal goals wi th respect
to employmeti
to of domestic labour, but fail
employment of domesti c labour, but fail to to meet
meet communit-
communi aoals for
goals for
employment of
employment 'he local for-st dwellers.
of the local forest dwellers. an enterprise, if
Stei. an enterprise, if it
Such it does
does
not benet:7
not t
:1 forest d''
benefit local forest dwellers,.r' maybebeviewed
may
, viwu.' negatively
negatively ty by that
:fot commu-
nity. Situations of
nity. S't' thie eitd arise when
'3f this kind arise when the 7ocal fore.i-t dwellers
local forest
' -fees use
the same tcitet for other
the same forest for other purposes ' oses ano see tile industriaHvation as
- and see the industrialization as
threatening ifi-
threatening se other
these other us tnis is sometimes a restrictic- on indus-
uses..
t. This is sometimes a restriction on indus-
trialization Luat arises frsi,i historic and ,ustomary rights to tiaditional
trialization that arises from historic and customary rights to traditional
uses of the forest as a source of free gris. Such rights are often
uses of the forest as a source of free goods. Such rights are often
protected by
protected by law. Wherethese
law. Where thesecommunity
community goals
goals areare institutionalized, they
institutionalized, they
may constitute criteria for industrial propriety.
may constitute criteria for industrial propriety.

Tf the
If the introduction
introduction ofof new
new forest Lased industry
forest-based industryinto
intoa community
a community
:act infringe
will in fact
will infringe upon
upon other
other uses
uses of forest that
of the forest that are
arerinstomary
customary for
for
local ::-)rQt dwellers
local forest dwellers, then hen the
the ind,.: tr:
industrial reward
reward systlm
system may have to
mLy have to
provide thee citizens c
provide these citizens of the the communit% mpensatien for such
community with compensation such losses
losses
in
in the form of
the form of emplet' --Huity
employment equi or some
ty or other value
some other val ue ae,r ir ir'
accrui from the
ng from the
establishment of
establishment of the
the pr,
project.

Industries met be judged

Industries may be judged to
to be
be appropriate
appropriate or
or inappropriate
inappropriate
whether
whether the the technology
technology isis developed
developed domestically
domestically oror is transferred from
is transferred from
another
another country.
country. historically these
But historically these issues
issues have
have often
oftenarisen
arisenwhen
when
there isis transfer
there transferofof
teehnology
technologyfrom
from a adeveloped
developed toto aadeve,oning
developing country.
country.
In the context of the i tiustrialization of developing c ntries, the
In the context of the industrialization of developing countries, the
situation is in fact u fly a question of industry or tsnology trans-
situation is in fact usuallyt. a question of industry or technology trans-
plant;
pI is,
that is, the
ant; that the iit'.tion into one country of t ' nology or
ntroduc t i on into one count ry of a technology or an
an
industry that
industry that was
was dev-'
devel in another
in another country.
country.

Sometimes
Sometimes the thequestion
e,astion of industrial propriety
of industrial propriety in 'a a developing
country
count gets
gets confused
confused withwithsuchsucharguments
argumentsasaswhether
whetherdevelopment
development and and
economic growth is
econom c growth itself appropriate
is itself appropriate or or whether
whether industry
industry is is inherently
inherently
good or
good or bad.
bad. If the
If the efelch
search forforan anappropriate
appropriate industry
industry develops
develops into
into aa
search for
search for an indu t' whose
an industry vLose technology
technology will will make
make no no adverse
adverse impact
impact on
on
anyone, then
anyone, then the
the search
search is fi an
an exercise
exercise in in futility.
futility. Whenever rever aa newnew ind -
indus-
try is introduced
try is introduced into society, there
int a society, there will
will be an ,pact upon
,n impact upon that
that
society and
society and itsitsmembers.
members. This isis as
This as true
true for
for the systems of
the social systems
i of deve-
'
loped countries
loped countries asas it it is
is for
for the
the socia]
social systems
systems of cieveJipfnq count
of developing countries.
Somemembers
Some members of of
thethe impacted
impacted societywill
society willsee
see the
the chaque
cha indieed ty
induced by indus-
1, -
trialization as
trialization as positive
positive and and some will see
some will see it
it as
as negative.
negat ve.

One
one of of thethe costs
costs of ofdevelopment,
development, that that accrues
accrues to to aa developing
developing
society, is
society, is some level ofof social
some level social stress
stress forfor some
some of of its
its citizens.
citizens. A A sound
industrial development
industrial project would
development project favourablyimpact
would favourably impacta afar far larger
larger frac-
frac-
tion of society than the percentage that
tion of society than the percent thatwere
werenegatively
negati velyimpacted.
impacted.
Clearly some societies are more robustt than
ClearlY some societies are more than others
others and
and can
can absorb
absorb aa
 -- 70 --

greater impact as
gre,t.er the price
as the p of de,-1
development.
-ent. Within a
Within a society,
society, some
SOme
groups, generally the
, the poor,
poor, aree more fragile
fi 3 terms of
in terms
1£1 of their ability to
their ability
absorb a negative
abs:.:zz, impact.
a negative It .L
impact is is
this
thisgroup
;o that oftenmust
tt often must be
be protected
protected
by government.

The introduction into

The introduction into project
project planning
planning eEforts
efforts of criteria for
of criteria for
social propriety
propriety doesdoes not change fundamentally
not change fundamentally the basic principles
the basic principles of
of
industrial
inri ,,-.design.
design. Such propriety criteria
Such propriety criteria constitute
constitute restrictions
restrictions on
on the
processing
pro. , '1gsystem
system toto which
which aa cost
cost must attached.
must be attached. If such
If such restrictions
are
are too limiting and,
to_ limiting and, therefore,
therefore, too
too costly,
costly, they
they may
may foreclose
foreclose the
the oppor-
oppor-
tunity to develop an economically
economically viable
viable industrial
industrial enterprise.
enterprise.

It has
It has been
been pointed
pointed out
out several
several times in in this
this paper that
that the
the
availability of
availability skilled labour,
of skilled labour, competent
competent technolo4,ts
technologists and
and able indus-
1- indus-
trial managers
tria] can contribute
managers can contribute much
much to the develorment
to the development of
of sound
s, forest
torest
l

industry proj sets.

industry projects. Thi
Thiss quality
quaJi ty of
of professional
professional personnel can increase
pei,onnel cAn increase
the available to
the options available to the
the project
project designer
designerasasheheImdert;,,,
undertakes to
; to de.,.1,4,
develop
aa project that is
project that is fiscally
fiscally sound
sound and
and that
that meets
meets the
the soci
social restrictions
restrict:,na
that
that define
define propriety in in aa particular country.
country. The devel.:
development
ent of such aa
cadre personnel provides
cadre of personnel provides the
the best
best assurance
assuranCe that
that aa country
i r i will be
y will be the
the
master of
of its
its own
own fate
fate in
in the
the development
development of
of forest
forest industry
industry projects.
projects.
 - 71 -
- -

FOREST-BASED PROCESSING
SMALL SCALE FOREST-BASED PROCESSING ENTERPRISES:
ENTERPRISES:
THEIR CHARACTERISTICS
CHARACTERISTICS AND
AND IMPACT
IMPACT ON
ON RURAL
RURAL EMPLOYMENT
EMPLOYMENT
AND INCOME
INCOME

by

Secretariat
the Secretariat

CONTENTS

Page

1. INTRODUCTION 73

2. DEFINITIONS AND COVERAGE

COVERAGE 73
73

3. IMPORTANCE OF SMALL
SMALL SCALE
SCALE ENTERPRISES
ENTERPRISES 73

4. SMALL SCALE
THE TOTAL SMALL SCALE ENTERPRISES
ENTERPRISES SECTOR
SECTOR 74

5. MAGNITUDE AND CHARACTERISTICS

CHARACTERISTICS OF FB-SSI'S 75
75

5.1 The Place of FB-SSI

FB-SSI in
in Total
Total Forest-Based
Forest-Based
Processing 75

5.2 Composition and

and Magnitude of
of FB-SSI
FB-SSI 75

5.3 Characteristics of
Selected Characteristics of FB-SSI
FB-SSI 75

6. SECTOR POTENTIAL
SECTOR DEVELOPMENT POTENTIAL 76

6.1 Trends
Past Trends 76

6.2 Inherent
Inherent Sector Dynamism and its
its Determinants 77

7. SELECTED ISSUES
SELECTED ISSUES 78

7.1 Demand-Side Issues

Issues 79
7.1.1 size
Market size 79
7.1.
7.1.22 Market instability
instability 79
7.1. 3
7.1.3 of products
Non-uniformity of products demanded
demanded 79
7.1.
7.1.44 Competition
CompetitiOn 79
7.1.
7.1.55 The impact
The impact of incomes
incomes on
on demand
demand 80

7.2 Supply-Side Issues

Issues 81

7.2.1 Raw material supply

Raw 81
7.2.2 Finance 82
7.2.3 Manpower 83

8. SOUND SECTOR
HOW TO ACHIEVE SOUND SECTOR DEVELOPMENT
DEVELOPMENT 84

8.1 Policy Changes

Demand-Side Policy Changes 84

B. 1. 1
8.1.1 for FB-SSI
Expanding markets for ~B-SSI products
products 84
B.1.
8.1.22 Unstable markets 85

8.2 Supply-Side Policy

Policy Changes
Changes 86
 -- 72
72 --

8.2.1
8.2.] Improving
Improving availability of forest-based
availability of forest-based
raw materials 86
8.2.2 Improving availability of non-forest
Improving non-forest
raw materials 86
8.2.3 Improving the basis for
Improving the for financing
financing F8-SSI
FB-SSI
development 87
8.2.4 Improving
Improving manpower
manpower supply for
for FB-SSI's 87

9.
9. CONCLUSION 87
87

ANNEX 11 - Employment
Emi nys: ininKB-SSS
FB-SSI in
in perspective
perspective of
of that
that
in
in two otherr top
' top small enter-
small scale processing enter-
prise activities
'íes 89

ANNEX 22 - Estimates of o.reflt

Er,lra,r, of direct contribution to rural
contribution to rural
employment
emfdo,a,entby various specific small
of,,tious small scale
scale wood-
wood-
based processing activities
based pt:,.e.s,.ng 7tivities -- by country. 90
ANNEX 33 - Estimated ition of
Estimated composition FB-SSI's by
of FB-SSI's by enterprise
enterprise
numbers in selected
numbers in cted countries 91

ANNEX 44 - Estimates
Estimates of
of employment
employment inin small
small scale
scale enter-
enter-
prises (SSE's) based
prises (SSE's) based on
on wood
wood processing:
processing:
stratified
stratified by degree ofof SSE
SSE dominance
dominance in
in total
total
for aa given
employment for given activity.
activity. S. data
S. Korea data
for
for 1975 92
92

ANNEX 55 - Estimates
Estimates of growth rates
rates in
in employment
employment for
for
small
small scale
scale wood processing activities
activities 93

ANNEX 66 - Selected characte-istics

characteristics of
of FB-SSI's
FB-SSI's 94

ANN~X 7 - Selected market-related

Selected mnarket-r Ieri data
data for FB-SSI
for FB-SSI 95

ANN~X 8 - Geographical distribution

c,r1ofofsales
sales and
and channels
channels
for
for SSI marketing-data for
SSI marketinc,o,:ta for Haiti 95

ANNEX 99 - Banking of
Banking FB-SSI problems according
of F8-SSI according to
to
perceptions
entrepreneur perceptions 96

ANNEX 10
10 -- Competition as a
a problem for
for small
small enterprises 96

11 --
ANNEX 11 Sources
Sources of funds for
of funds for SSI's in selected
SSI's in
countries 97

REFERENC~S 98
 - 73 --
-

1. INTRODUCTION

This paper
paper is intended to
is intended to increase
increase awareness
awareness about
about magnitudes
magnitudes
and characteristics of
and of small
small scale
scale rural
rural non-farm
non-farm enterprisesl/
enterprisesl/ based
based on
on
processing
proceor forest produce.
produce. Such enterprises are
such are now
now knoTqn
known to
to have
have
considerable potential
considerable potential in increasing employment and
increasing employment income as
and income as well
well as
as
production, but
but have
have so far suffered
so far suffered relative
relative neglect
neglect by
by official
official
agencies.

It is
It intended to
is intended to highlight
highlt poli.Jv
policy issues
issues relating
relating toto these
these
activi ties especially
activities those which
especially those which can be addressed within
be ad.:!:,ssed within the
the forestry
sector context.
sector context. By concentrati
By concentrating small scale enterprises,
on siria'!
on enterprises, the
intention
intention is not not to imply that
to imply that these e should
should d'splace
displace conventional
conventional
industries nOW or
industries now or in
in future,
future, but
but that
that an
an appropr).-!.:
appropriate balance
balance be
be struck
struck to
ensure
ensure that the complementary
that the complementary and and favourable
favourable characteristics
cha'.'eristics of both both can
be tapped to
be tapped to best
best advantage
advantage forfor improved
jmproved forestry sector contribution
foretry r,ctor contribution to
development. The achievement of such balance requires roquires that the
information
information base small enterprises
base on small enterprises bebe improved:
improved: this
this paper is is based
On
on preliminary
preliminary work in
in ~AO,
FAO, some of which is
is included
included in the
the
bibliography.

2. DEFINITIONS AND COVERAGE

The terminology
terminology used
used in literature is
in literature is yet to be standardized
to be standardized
but, in in th is paper,
this scale enterprises
paper, small scale enterprises wi will
11 generally mean only
generally mean only
those employing
those employing 50 50 people
people or
or less.
less. Only comme.:-Lal
commercial units are included
units are
and lI'Iincorne u refers only to
and "income" to cash
cash earnings.
earnings~ It is rc necessary to to emphasize
emphasize
that
that in in aa study
study covering
covering many countries, exact ce:]Ritions
many countries, definitions havehave tended
tended to
to
vary. Thus
Thus the threshold size of of "small"
"small" enterpriso
enterprise is is not
not uniform.
uniform. The
activities
activities to to be included under "forest-based"
iv included "forest-based" have also varied with some
studies
stddirs only considering WOOd, otl,c,-; accommodating other
wood, others other forest produce~
forest produce;
deurcv
degree of of inclusion for secondseconclaT.: processing
'.-rocessinghas has also
also varied.
varied. An
important omission in
impottant om1!,ion in all stUdies
studies 3 of activities which
of mobile activities which often
often
include important
include important activites
activites suca
such as ,3 charcoal-making. Despite th,se these
shortcomings, useful information can can be given for forest-based small
for forest-based pmall
processing enterprises (FB-SSI).
processing enterprises "Employment" will include
"Emplcv:.':.:..nt" part-time
include part-time
act i vi ty
activity bu
butt wherever poss ible
possible reported
repoy's3 as full- time
full-time employment
equivalent.

3. IMPORTANCE OF SMALL
IMPORTANCE OF SMALL SCALE
SCALE ENTI:RD.JSES
ENTERPRISES

The backdrop for FAO's interest

FAo's iotei,s_ in small scale non-farm
enterprises is
enterprises is the
the worsening
worsening unemploymeWJ
unemployment and poverty
poverty in
in most developing
developing
countries. Even
Even simple jobs are in
simple unskilled jobs in desperatelv
desperately short supply in
in
many countries.
countries. Open unemployment
Open unemployment as as well
well asas und.
underemployment 't are
commonplace. Agriculture, which
Agriculture, which has
has hitherto
hi therto absorb.
absorbed most
, .t new 1labour,
ur,
is not
is not now
now able
able to
to cope
cope with
with labour
labour force
force growth:
growth: the World Bank..ank
recently
recently estimated that two
estimated that two in three new
in three new jobs
jobs will
will have
have to come from Irom
non-farm sources
non-farm (World Bank
sources (World Bank 1978).
1978). Forestry in
Forestry in g-general and.nd its
its
processing activities
procePsing activities inin particular cancan provide
provide just
just such
such opportunities.
tunities,
Small
Small scale
scale enterprises
enterprises areare also
also expected
expected to t, contribute to IL development
Jevelopment
in 01--J
in other ways: they supply inputs
they inputs toto agriculture,
',Julture, theythey stabilize
stabilize
seasonal
seas:,, ' production/income cycles,
production/income provide goods
cles, provide
. and servi-es
,u,35 and services to poorer
poorer
strata
strata ofof society
society which
which larger industries 5.1
Jc-r industries fail totoreach,
reach, andand introduce
introduce

!/ Small scale
Small scale processing
processing enterprises in
in general will be referred
will be toas
referred to as
"SSI·~
"SSI"; those based
those based on forest produce
on forest produce will be
be labelled
labelled "FB-SSI",
"FH-SSI", to
to
mean industries"~
mean "forest-based small scale industries".
 -- 74
"4 -

vital into rural

skills into
vital skills rural areas. Furthermore, being
Furthermore, being small,
small, such
such enter-
prises are able
prises are able toto utilize
utilize valuable
valuable but
but scattered
scatt. (.d pockets
pockets ofof resourCes
resources
which would
which would otherwise
otherwise go go to
to waste.
waste. in Tn this .,-3pe-t, small
thin respect, enterprises
small enterprises
appear to be anan essential
essential element
element inin any
any stra-.
strategy forfc, add
adding value
value to
to the
kind
kind of
of scattered resources created
scattered resources through many
created thrnugh no social
s.,2ial forestry
forestry efforts.
efforts.
They can
can also
also support
support wholesome
wholesome development
development of of larger
larger industries
industries through
through
subcontracting to to them.
them.

Furthermore,
Furthermore r previous concern
previous concern that
that investment
investment in in SSE's
ss~rs may
may
represgnt an
represent an inefficient
inefficient oror unprofitable
unprofitable resource
resource allocation c,tion now
allocation optlon
appea:s
appears toto be
be ill-founded:
ill-founded: small enterprises are
small in fact
are in fact often
often as
as
proYble
profitable and healthy as larger ones and could probablypro( - ly be aa
significant factor
sign..:_,iart factorinindeveloping
developing country
country industry they e,,,,yed
industry if they enjoyed equal
equal
official 6upport
support as
as larger
larger scale
scale enterprises.
enterprises. Their abili to supply
to
markets which
mar..ats which large
large scale
scaleenterprises
enterprises are
are unable
unable to
to reach
rci is an important
]

feature.

4,
4 THE TOTAL SMbfA.
SMALL SCALE
SCALE ENTERPRISES
ENTERPRISES SECTOR

By way of of background,
I .round, it useful to
it is useful ,- give
g 7e orders
orders of
of magnitude
On sector size
on sector size andand On
on nature
nature of of small
small scale
scalee.,-.
enterprises generally.
prises generally. In
In
terms of employment,
tenis empl, , total small
small scale enterprises provide principal
scale enterprises
employment
emplo 7 for
f. between 20":1 and
and 30 percent of tto
30 percent the total
total rural
rural labour
labour force
force
in many
in mann cDuntrie'.
countries for for which
which recent
recent information
information was was collected.
collected. For
Jamaica and
Jamaica and Sierrn
Sierra Leone
Leone in in recent years FAO
recent years has estimated
FAO has employment in
estimated employment.
rural and
rural urban forest-based
and urban forest-based SSI's to be
SSI's to be two
two and
and nine
nine times
times higher
higher than
than
in
in larger industries (FAO,
larger industries (FAD, 1985).
1985).

The !,,D0.
reported propcrtion
proportion of
. total rural
of total rural cash income
income derived from
from
small scale
small scale ent,,r7risc, ranged from
enterprises ranged from 22 22 to
to 70
70 percent.
percent, The poor and
The
landless s4
seem toto depend
d(Tend on non~farm SSE's
on non-farm SSE1s more
more than
than normal,
normal, with
with some
some of
of
them earni
them vo-irds or
earning two-thirds or more
more ofof their
their income from non-farm
income from non-farm sources
sources
(FAD, 1984).
(FAO, Thus in
Thus Sierra Leone households
in Sierra households with almost
almost nono land
land had
had 64
64
percent
percent of
of income enterprises~ those
income from non-farm enterprises; those with moderate landland had
had
income from
only aa third of income from non-farm
non-farm sources.
sources. The largest
The largest landowners
landowners
obtained
obtained only percent of
only 17 percent of income
income from
from this
this source.
source. Similar
Similar patterns
were detected
were detected in in Taiwan Province of of China,
China, South
South Korea andand northern
northern
Nigeria. contribution to
In terms of contribution to the
the national
national economy, non-farm
econorl-, non-farm
SSE's accounted for
SSE-E Jccounted for between
between 2.5
2.5 percent
percent of of GDP
GDP (Honduras,
(Bonduras, 19'4',1)
1979/81) and
and 77
perc,nt (Bangladesh
percent (Bangladesh 1981)
1981) which
which was
was equivalent
equivalent to to 22
22 perc,nt
percent and
and 45
45
percent
per,ent respectively of of manufacturing
manufacturing sector
sector GDP.
GDP.

manufacturing/crafti, pair activities1/

Manufacturing/craft/repair seem to
activitiesl/ seem to dominate
dominate among
among
non-farm small
rural non-farm small scale
scale e,-erprises and in
enterprises and in some
some cases
cases appear
appear toto bebe
especially important among lowest-income
especially important housebolds.
1,.west-income households. In his survey in
his survey
Northern Nigeria, Nation
Northern Nigeria, Matlon (1979) for
for example showed
showed that
that the
the proportion
proportion of of
households engaged in
households engaged in manufacturing
manufacturing as non-farm
non-farm SSE
SSE activity
activity ranged
ranged from
from
33 percent for
33 percent for low-income
low-income households
households to
to 88 percent
percent for
for high-income
higb-income ones.
Ones,
In
In most
most of the countries
of the surveyed, the
countries surveyed, the top
top three
three commercial
commercial manuficturino
manufacturing
activities in
activities in employment
employment terms
termsappear
appearononaverage
averagetotobebetextiles/apparel,
textiles/arel,
food
food processing
processing andand forest
forest products
products processing
processing in in descending
descending order
order for
for
the countries
the countries studied
studied although,
although, since
since rural
rural people
people often
often engage in in mOre
more
than one non-farm enterprise, precise proportions are not. easily
determined.

In the sections which follow, emphasis will be

t, given to
information on
in,prmation On forest-based
forest-based processing
processing enterprises
enterprises except
except when
when relevant
relevant
F:l-SSI
FB-SSI datadata are
are missing,
missing, inin which
which case
case reference
reference is
is made roto similar
similar
non-forest
.1-forest based
based activities,
activities. The will first
The paper will first outline magnitude,
magnitude, key
characterist
..-nar,.,-.eristics sector development
ies and sector development potential of FB-SSI' s,
FB-SSI's. Their
inherent dynamism
Inherent dynamism and growth determinants
and growth determinants will tben be
will then be analyzed,
analyzed, after
after
which key
which key issues
issues affecting
affecting sector
sector performance
performance and
and prospects
prospects will
will be

!/ Hereafter called simply ~manufacturingH~

simply "manufacturing".
 -- 75 --

h hI hted. The
The paper concludes
ccr with
vith preliminary
preliminary f e ions
ar,: on
creating
(reat...njconditions for bettel;
conditions for better sector growth;
rowth: emphasis is on
emphasis is rl y and
on policy and
institutional
1,14Lilut.ional improvements~
improvements.

5.
5. MAGNITUDE AND CHARACTERISTICS OF
OF FB-SSI'S
FB-SSI'S

5,1
5.1 The Place
Place of
of FB-SSI
FB-S8I ininTotal
TotalForest-Based
Forest-BasedPrc,--o.
Processing
-17

The relative magnitude or

The relative or contribution
contribution of of FB-35I's
FB-SSI's in
in total
total
forest-based
forest-based processing context is is not
not documented.
documented. estimates
Preliminary estimates
show that
that they
they can
can be
be far
far more
more important
important than
than conventional
conventional industries
industries in
in
some respects.
some respects. As mentiord
As mentioned narlier,
earlier, surveys
surveysininJamair-,
Jamaica (1978/80)
(1978/80) and
Sierra
S...-rra Leone (1974/75) showed
Leone (1974/75) sti:wed small
small forest-based enterprises
forest-based processing enterprises
to
to employ far more people
employ far people than
:rian large
large ones
ones even
even after
after adjusting for the
adjusting for the
former's nature~
frrmr-'s seasonal nature. This
This section gives orders of of ,,anitude
magnitude for
for the
the
sector and key
s,e_tor and key characteristics
characteristics (including
(including size, association
size, as ,rion with other
with other
enterprises,
ei,::::prises, use
use of
of mach
machin 'y and
and nature
nature of
of markets
markets served).
ser,

5.2 Composition an
and Magnitude
:11 e of FB-SSI

It that among
It appears th,t forest-based enterprises
q forest-based enterprises thethe most common
common
are carpentry/joinery, Aling and wood carving.
sawmilling carvini. Others are
straw-based basket,
basket, mat
m, orr hat-making,
it-making, production
production of
of cane furniture and
cae furniture and
charcoaling. 1/
charcoaling. 1/ In terms
,, of
r' enterprise numbers in
enterprise numbers Honduras and
in Hondrraz and Sierra
Sierra
Leone over 70-percent
70-percent ,: H,e,1 were wood-based while in
of them in Jamaica
Jamaica and
and Egypt,
Egypt,
over 70
70 percent
percent were
were based
based instead
instead onon bamboo/cane/straw
bamboo/cane/straw (FAO,
(FAO, 1985).
1985). In
In
Bangladesh, there was Ja more
there was more even
even spread
spread between
between wood-based
wood-based andand other
other
forest-based 8SI's.
SSI's. The variation may reflect relative resource
market profile.
endowment or market profile.

,lith regard to
With regard to magnitude
magnitude of of the
the FB-SSI
FB-SSI activities
activities in broader
in broader
context, the following examples illustrate
the following illustrate thethe orders
orders of
of magnitude:
magnitude: in
(1974/75), employment in
Sierra Leone (1974/75), in FB-SSI
FB-SSI was
was about
about 18
18 percent
percent ofof the
the
total for
total for all manufacturing, most of of this being in
this being in rural
rural areas and and
settlements of of under 2 000 inhabitants.
inhabitants. In Haiti (1979),
In (1979), 1414 percent
percent ofof
all employment
er,-::1 was in FB-SSI,I, of about aa rhird
which about
of which third was
was in
in towns
towns oror
settlements of 5 000 or fewer ':vier inhabi tants.
inhabitants, In
I a small
all area northern
area of northern
Nigeria (1966/67), a fifth
a fifth of total nar,taLtdring
of total manufacturing employment
employment waswas
in wood processing,
in pr c most of this being ir
this being in truly rural areas
t' i, rural areas (Matlon,
1979).

In more industrialized developing countries information is is

for the
available for Philippines (1972) and
the Philippines for Taiwan
and for Taiwan Province
Province of
of China
China
(1966). For the
For the Philippines,
Philippines, FB-SSI's
FB-SSI's accounted
accounted forfor 66 percent
percent of
of total
total
manufacturing employment in
in household enterprises
en ises and very small
workshops. In
In Taiwan
Taiwan Province of China
China the
the ratio
ratio was
was 10
10 percent
percent of
of total
total
manufacturing
manufacturir jobs
jobs with
with over these in
over half of these in rural
rural areas
areas (FAO,
(FAO, 1985e).
1985al.

5.3 -,rteristics of FB-SSI

The most prominent
i pt-,minent feature
feature is size:
is small size: for countries
for five countries
recently s i, ,t.ther. average
recently average employment
employment per 551
SSI firm
firm ranged
ranged from 1.8 to
3.B persono
3.8 persons ol wnow
whom up to 71 percent
percent areare the entrepreneur
entrepreneur himself
himself and
and his
his
family. Another
Aro^ner 17 to 35
I percent are
35 percent are hhired skilled employees
:ed skilled employees and
and the
are applentlies
rest are appren t ices andand unskilled
unsk i lIedwor!,,
workers. In about
In about 90
90 percent
percent of
of the
the
FB-S8I firms,
FB-SSI firm-. the
ti-e' entrepreneur was W6 sole owner
dner of the
the enterprise.
enterpr

1/ Due to its
Due to its frequently itinerant
itinerant nature,
r ,ture, charcoal-making
charcoal-making is often
omitted
omitted from surveys intO
into FB-SSI'o
FB-SSI's which
which tend
tend to
to concentra
concentrate on
enterprises with fixed
fixed location.
location.
 -
- 76 -

Forest-based SS1' s especially

Fci.st-based SSI's especially in sawmilling
sawmilling andand carpentry
carpentry appeared
appe:I. on
average to be larger than
avera,e than other
other SSI's
SSI's but
but the
the overall
overall range
range for
for =,FB-SSI's
?SI's
is 1.7 to
is 1. 2.7 employees
to 2.7 employees (FAO 1985). The second
The second key
key feature
feature ofof FB-SSI
r,i.1 isis
the ir predominantly
their predominant ly rural
rural location:
loea lion: 80 to
from BO nearly 100
to nearly 100 poi-cent
percent Qfof
being located
enterprises being located in
in such
such areas
areas (FAO,
(FAO, 1984).
1984),

Another important
important characteristic is is that
that FB-SSI
FB-SSI enterprises
rarely e"ist in
rarely exist in isolation: it
it is
is not unusual to
not unusual have the
to have the motor of
of aa
sawmill also
sawmill used to
also used to mill grain
grain or for
for the
the owner
owner of
of aa carpentry
carpentry shop toto
also grocery, teashop/restaurant,
operate aa grocery.
also operate teashop/restaurant, maize maize mill
mill Oror small
small scale
tailoring shop.
tailoring shop. It is therefore
It is therefore difficult
difficult to to stUdy
study them
them individually
individually and
and
one should in the
one should the long
long run
run seek
seek to
to know
know the
the nature
nature and
and frequency
frequency of the
the
various combinations so
various so as
as to
to deal
deal with FB-SSI's in
with FB-SSI's in correct perspective.
perspective.

FB-SSI's differ
FB-SSI's differ inin degree
degree of
of dependency
dependency on
on machinery:
machinery: in
general the enterprises
general the enterp-ises use
use few or no machines but considerable variation
exists inin this. Rural handicrafts,
Rural handicrafts, carving and mat/hat/basket
carving and mat/hat/basket weaving
use almost no
use almost no machines while certain
certain carpentry and
carpentry furniture works
and furniture works rely
rely
on
on machines
machines to aa cc:,:derable
considerable degree.
degree.

In production, FB-SSI's characteristically adopt

In terms of production, adopt an "on
o -> :" rather
order" rather than
than batch
batch system
system due
due to
to their
their non-uniform
non-uniform andand small
small
markets.
m...ets. This system is
This system is well adapted for
well adapted for survival
survival under
under limited
limited markets
markets
but limits
but limits level
level ofof efficiency
efficiency achievable.
achievable. They have little
They have little aCCeSS to
institutional markets.
institutional markets. of what
Much of what they
they produce
produce isis similar
similar to to what
what
other FB-SSI's nearby
nearby also
also market that competition
market so that competition is
is severe.
se'.'are. With
few
few exceptions,
exceptions, the FB-SSI's tend
the FB-SSI's tend to have geographically limited markets
and sources forfor their
their inputs.
inputs.

There is
is little
little information
information onon how
how they
they are
are organizod
organized and
and it
it is
at present assumed
. imed that many
many work independently rather than in
associations/cooperatives;
associations/( catives; many are informal
many are and the
informal and smallest ones
the smallest ones may
even unregistered~
even be unregistered.

6. SECTOR DEVELOPMENT
DEVELOPMENT POTENTIAL
POTENTIAL

6.1 Past Trends

IIn
n this
this section,
section, information
information will
will be
be given
given on growth ratesrates for
for
SSI's observed
SSI's observed in in the
the recent
recent past.
past. This will
This will indicate
indicate thethe order of of
magnitude
magni tude on on whose
whose basis
basis one
one can gauge possible
can gauge possible futurefuture performance
performance of of
this
this kind of of enterprise.
enterprise. Total SST's
Total SSI's show
show considerable
considerable growth over over time
time
both in absolute terms
in absolute terms and
and inin share
share of
of total
total rural
rural employment:
employment: their
reported annual employment increase
reported annual increase rates
rates range
range fromfrom about
about 33 percent
percent (S.(S.
Korea 1960-74) to
Korea 1960-74) around 9 percent
to around percent (Taiwan
(Taiwan 1955-66),
1955-66), (FAO 1984). In
Jamaica, woodworking only (carpentry
woodworking only (carpentry plus
plus carving)
car' 'ng) has recently
recently grown
very slowly
very slowly in in rural
rural towns
towns but
but at
at nearly
nearly 99 percent
r, -It annually
annually inin medium
medium
sized towns and about
sized towns about 88 percent
percent inin Kingston,
Kingston, th. the largest
, 79l.5t city.
city. It
It is not
possible to
possible to generalize
generalize forfor all
all countries,
countries, however,
however, that that rural
rural towns
towns
rather
rather than truly rural
than truly rural areas
areas themselves
themselves areare the
the main
main growth
growth points
points forfor
SS1's.
SSI's. Annex 55 gives details for
gives details for other
other countries
countries and and also
also illustrates
illustrates
the
the variation
variation in growth rates rates by type
type of
of activity in in one
one locality.
locality.

Relative growth rates

Relative growth rates of
of enterprises
enterprises of of different
different operational
operational
scale were
scale were estimated
estimated in in studies
studies forfor S.
S. Korea (1963-75)
(1963 75) andand Taiwan
Taiwan
Province
Province ofof China, (1961-71).
(1961-71). For Korean "furniture
"furniture andand fixtures",
fixtures",
enterprises with
enterprises with over
over 500
500 employees
employees each
each grew
grew fastest
fastest followed
followed by by the
the
smallest
smallest enterprises
enterprises with all other categories
with all categories showing
showing intermediate
intermediate
performance. InIn Taiwan
Taiwan Province
Prov ince of
of China,
China, for
for the
the whole
whole "wood,
"wood I baohJo,
bamboo I
cane and
cane and cork"
cork" processing
processing sector,
sector I the
the smallest
smallest enterprises
enterprises declined
declined to to
 -- 77 -
-

varying degrees, medium

varying degrees, medium scale ones ones grew,
,grew, but
but more
more slowly
slowly than
than the
the
industry average
industry average while
while enterprises
,drises in the 500
I. plus category
500 plus category increased
increased
most. In cases aa shiftt to
In both cases large enterprises ,eems
to large Seems to have
have been
been in
in
progress
progress butbut in the
t! absence ofof data
!data on
on relativee magnitude
magnitude ofof the
operational scale
operational scale strata,
stri,, the
the importance
importance _fof this
tiir.development
development is
is not
clear.
clear.

The evidence on
The evidence on relative
relative growth rates of
growth rates of SSI's
SST'S versus
versus larger
larger
scale ones is
scale ones is not
not always
always clear
clear andand consistent
consistent and
and inin many
many cases
cases does
does not
not
permit comparisons.
permit valid comparisons. It appears that
It appears that the
the FB-SSI
FE-SST sector
sector may
may be
be
just as
growing just as fast
fast or
or f,ster
faster than
than the
the large
large enterprise
enterprise sector
sector for
for some
some
products
products oror in
in certain
certain localities
localities but but not for others.
for others. relative
The relative
dominance of
dom.naace of SSI's
SST'S and
and their
their faster
faster growth
growth in in aa given
given activity
activity may
may
reflect
rrflecr. inherent SSI comparative superiority in in it, and therefore of
therefore of
growth potential, but could
pctential, but c reflect instead
rqflect instead the
the technologicil
technological iitatus
status of
of
the
th, country
cpletry and
ar' the
- structure
,tructure of relevant laws, incentives or
or
institutions
iostif,i'icns favouring
favour , small
11 over largor
larger enterprises or "iec vice versa
versa in
in aa
situation. Fur.:
given situation. Further dr study
study isis required
required on this.
or this.

For South
South torea,
Korea, anan analysis
analysis forfor 1975 shows
shows that
that out
out of
of 23
23
forest-based activity
forest-based activity types,
types, 43
43 percent
percent existed
existed only
only as
as enterprises
enterprises with
with
100 or fewer employees.
Or fewer employees. ForFor another 2222 percent,
percent, over
over half
half the
the employment
employment
was in
was in small
small enterprises.
enterprises. the remaining
For the remaining products,
products, sector
sector employment
employment
w. - principally in
was principally in ,nterprises
enterprises of of over
over 100
100 employees.
employees. On the whole
On the whole
therefore, more fore-t-based
i, more forest-based activities
activities were
were associated
associated with
with relatively
relatively
small than
th-n with larcve
larger scale processing units.
units.

6.2 Inherent Sect.',-

Sector Dynamism
Dynamism and
and its
its Determinants
Determinants

The avail',
available information
ii:'ormation hashas with
with few
few exceptions
exceptions shown FB-SSI's
FB-SSI's
be growing.
to be growing. It has also shown
It shown that
that certain
certainproduc.i
products,,:%7,
seem toto be
be more
often made byby small
small ,edle
scale units
units than
than by
by larger
largerenterprise.i,
enterprises, re so indicating
indicating
possible greater suitability
possible suitability ofof SSI
SST than
than larger
larger scale
scale formats
formats forfor making
making
these items
items under
under the conditions existing
the conditions existing for aa particular
particular situation.
sltuatlon.
These recorded
These recorded patterns
patterns cannot
cannot bebe fully
fully explained,
explained, but
but it
it is
is proposed
proposed to
outline briefly
outline briefly below some of the
below some the determinants
determinants of of growth
growth such
such asas
efficiency, profitability, linkages
efficiency, profitability, linkages withwith other
other enterprises
enterprises andand sectors,
sectors,
adaptability of
and adaptability of SSI's
SSI'S in
in changing
changing circumstances.
circumstances.
(a) Efficiency and productivity

Due
Due to generally low low use
use ofof equipment,
equipment, SSI
!..:11 productivity per
¡Iroductivity per
unit labour
unit labour time
time isis lower thanthan for
for larget
larger iapital-intensive
capital-intensive
enterprises. However, for
for aa given cost of .ap,tal,
given cost capital, SSI's
SST's tend
tend
to produce more
to more; they are
they are also apparently generally ly superior inin
terms value of
terms of value of production
production per per combined
combined unit
unit cost
cost of
of capital
capital
plus labour.
labour. The level of
The of overall
overall technical
technical efficiency
efficiency isis high
high
73 percent of expected output
with 73 output being
being achieved
achieved for for furniture/
furniture/
carpentry in Thailand for
in Thailand example.
for example. The capacity
The capacity utilization
utilization
.(rved has
rate observed
c) has in
in many
many cases
cases been
been of
of similar
similar orders
orders ofof
magnitude
magnituf',, to that found in
that found in larger
larger enterprises.
enterprises.

(b) profitability
-
ility

Returns
Returns toto capital
capital are
are reportedly
reportedly hhigher
her for surviving
surviving
SSE's than
Lnan for their large
large scale counterparts (Chuta and
Liedholm, 1979). Actual levels
Actual levels ofof economic
economic profit
profit calculated
calculated
for carpentry
for carpentry in in Sierra
Sierra Leone
Leone were
were 21 percent
percent forfor modern
modern
processes
processes andand 169
169 Tercent
percent forfor traditional
traditional ones.
ones. The returns
The returns
were
were shown
shown toto vary
vary wi-h
with locality,
locality, truly
truly rural
rural firms
firms being
being
apparently less
apparently lessprofitable
.r T' than ones.
Clan urban ones. In
In his for
his analysis for
Kenva, Child (If',
Kenya, Child (1976) recorded very
' levels of net
very high levels net returns
returns toto
cap tal for
capital for the
the smallest
ii iie-t enterprises and and suggested
suggested that
that the
the
 -- 78 -
-

miniscule amounts
miniscule amounts of of capital
capital invested
invested in in them explained the
them explained
misleadingly high "pro''.tability"
misleadingly high "profitability" estimates.
estimates. Other surveys have
also revealed
revealed high
high f,S1
SSI returns
returns toto capital
capital investment.
investment. FAO-

(l985)
(1985) reported
reported ave rage F5-SSI
average FB-SSI ret urns
returns to total cap i ta 1
capft..11
investment ranging
ranging fr.m
from about
about 27
27 percent
percent toto 54
54 percent.
percent. These
"profitability" estimates would
"profitability" estimates would doubtless
doubtless be be much
much lower
lower if if
reported as
as aa ratio of total
total costs oror of sales.
sales.

In terms of
In terms net returns
of net returns toto proprietor
proprietor and
and family,
family, SSI's
SSI' s
yield substantially
yield higher incomes
sUbstantially higher than wage
incomes than wage employment
employment in in
agr icul t ure in
agriculture in all
all the
the countries
countries surveyed.
surveyed. However, the
the wage
wage
rates
rates for paid labour in in FB-SSI's
FB-SSI's areare in general apparently
in general
than in
lower than in agriculture.
agriculture. This
This may
may well reflect the
well reflect the fact
fact that
that
FB-SS I' s often
FB-SSI's often operate
operate most
most during
during slack agriculture periods
slack agriculture periods
when labour
when labour cancan be
be 7-id least due
['aid least due toto limited
1 imited alternative
alternative
employment opportunitu.
employment opportunities.

(c)
(c) Market and input --,9C'S

Sector
Sector growth prospects depend
growth prospects depend on availability
availability of markets
and inputs for
and inputs for production.
production. Both
Both sets
sets of factors are
of factors are considered
in depth
in MIssues· below,
depth under "Issues" below, but in in brief
brief the
the existence
existence of of an
an
adequate and growing
adequate and growing market
market for
for FI-SSI preregoi dte for
FB-SSI is a prerequisite
success. At present, many
At present, many rural
rural enterprises
enterprises fa,face, 1 imi.ted
ted and
seasonal demand
seasonal demand but but nevertheless
nevertheless showshow growth
growth becti-i
because rural
rural
incomes
incomes are
are increasing
increasing in in many countries.
countries. riculture as
Agriculture e:- the
principal income
principal income determinant often often controls
contro demar
demand for SSI
fol SSI
goodsl it is
goods; is also aa major
major market
market for
for forest-based
forest-baseda,ricu'.tural
agricultural
inputs like tools,
inputs like tools, cases,
cases, carts
carts or or basketware
basketware prod.:
produced by
FB-SSI. For some of of these and other FB-SSI pduct5,
products,
alternative
alternative materials processes are
materials or processes are emerging
emerging which
which FB-SSI's
FB-SSI's
should adapt to to in
in order
order to
to cope.
cope.

Wi th improvement
With improvement of infrastructure and
of infrastructure and growth
growth of of towns,
towns,
access to
access to more
more distant markets'in, uding institutional
markets 'including institutional and and
subcontract ones
subcontract ones isis becoming
becoming possible,
possible, but at the the same time
time
reverSe
reverse penetration rural ma',,t
,tral on of rural markets by larger
3. Irger urban
urban iindustries
'ustries
is
is increasing.
incre The future
The future pro
pro its will
cts will thus
thus depend
depend onon
developments in in rural incomes, in
rural incomes, in nfrastructure t urbanization
infrastructure, u.' ,nization
and in
in the
the ability
ability of SSI's to
of SST's to cope
cope with
with changing
changing market
,rket and
competition situations.
situations. Adaptability
Adaptability to changes on
to changes on all these
ali these
will be
fronts will be aa major factor
factor and
and must
must apply
apply toto technological
technological
and
and organizational aspects.
aspects.

On the supply side,

the supply side, prospects
prospects areare heavily
heavily influenced
influenced by
by
availability within reach
reach of raw materials at at affordable
affordable prices,
prices,
finance and
finance and manpower (especially
(especially skilled
skilled andand managerial).
managerial). The
The
relationship of each of these inputs with the sector is
discussed under
under "Issues"
"Issues" below.
below. Central policies within or or
the forestry
outside the forestry sector
sector often
often determine
determine whether
whethw oror not
not these
these
factors
factors favour
favour SSI
SSI prosperity.
proerrIt'. Pol lc les also
Policies also de-e:ei;,e
determine growth
rural incomes,
of rural incomes, devolopment
development of of infrastructure
infrastructure -.ni and other key
other key
parameters of the
parameters the economic
economic environment
env ironment in in which
which SSI's
SSI' s operate.
operate.
The effectiveness
The effectiveness of of such
su policies
icies inin turn
turn depends
depends on
on suiteble
suitable
government institutions
institutions belig ing in
in place
place to to "deliver"
"deliver" suppert
support
services and
and producers'
producers' organizations to to improve
improve entreprFneurs'
entrepreneurs'
acces~
acces to them,
them.

7.
7. SELECTED ISSUES
SELECTED ISSUES

issues are
The issues are conveniently
conveniently introduced
introduced byby outlining
outlining entrepreneur
entrepreneur
perceptions of their
perceptions of problems as
their key problems as determined
determined from
from surveys.
surveys. the
On the
basis
basis of
of country
country surveys (~AO 1985),
surveys (FAO 1985), it
it appears
a['pears that
that the
the main
main concerns
concerns of
of
the entrepreneurs relate
the relate to;
to,
 -- 79
79 --

demand for their

demand for their products;
products;
problems to raw
problems of access to raw materials and
and skilled
skilled manpower;
manpower7
problems finding adequate
problems of finding adequate finance.
finance.

several cases
In several cases entrepreneurs
entrepreneurs have
have also
also pcinted
pointed to laws and
laws and
regulations
repu'aticns creating barriers to successful operation
npeiot,nn and to lack of of
know-how.
ki Chuta and
Chuta and Liedholm
Liedholm (1979) suggest that
(1979) suggest thar most
rrr SSI
55I problems
problems can
can
be linked
lih,:ed to
to policy-induced
policy-induced distortions.

7.1 Demand-Side Issues

7.1.1 Market size

Field surveys
Field surveys reveal
reveal that
that smallness
smallness of of markets
markets duedue to
to the
the
generally
canerally low purchasing power
low purchasing power ofof rural
rural people
people isis aa major
major problem
problem for
for
S51's.
s. problem is
The problem is worsened
worsened byby seasonal
seasonal fluctuation
fluctuation of of demand
demand inin line
line
with changes in
1 in agricultural incomes. Products with aa significant
Products significant
,st market
tourist market (e.g. handicrafts) also have seasonality problems.
ni(ises closer
Enterprises closer to major roads
to mm,,r roads or larger settlements
or larger settlements have
have access
access toto
other, more stable and
and prnaberous
prosperous markets.
markets. Some 7.B
FB-S51
SSI products
products are
are sold
nre wide77read
to more widespread ma'rk,t,
markets than
than others:
others: thus
tnni in
ir Haiti
Haiti local sales
local
fo; between
account for on 38 and
arc 83
L',E percent deienJiha
83 percent ing on
on access
access toto external
external
tourist markets (Haggblade
«.,iggbladeet et al.,
al., 1979).
1979).

The geographical narrowness of the

thw market base suggests
suag,rtr
inability
inability to
to capture
capture more distant opportunit_v_.
opportunities. Thus,
Thus, one
one can
can generally
gervrollv
only expect
only expect rural
rural 551s
SSI's totobenefit
benefit from
from potentially
entially larger
larger market,
markets on1b
only
if the change
if the change occurs inin their
their vicinity
vicinity unless
un s infrastructure
infrastructure development
development
or better
better organization
organization for marketing gives improved
for marketing improved access
access to distant
to distant
outlets.

Limited oaccess to institutional markets

to institutional (government, parastatal,
morkets (government, parastatal,
corporate)
corporate) also contributes
c ',lnites to to smallne-,
smallness nf
of demand.
demand. This results
This results from
from
isolation of
relative isolatla.'. .f the enterprises, entrepreneurs
the SSI enterpri,,,, entrepreneurs' unfamiliarity
with this
with this type
tyr.- J.,et, and inabilit
of market, inability toto cope with
with its
its quantity,
quantity,
quality and
and del
d, time requirements, as well as
o, well with often
as with often delayed
delayed
by inst
payment by institut onal ti. buyers.

7.1.2 Market

Severe
Severe sseasonal
,ional changes cause strains
changes cause ztrains on production capacity:
on production cdaoity:
in ba tch product
batch ion, peak
production, paak rna rket pericl-
market periods demand high work
demand high working ,aotal
i ng cap i tal
resources
resources which are difficult
which are difficult toto raise.
raise. Advance productionfor
Advance production for:Ico.-E
stock isis
rarely
rarely aa feasible
feasible option asas it
it ties
ties up working capital
capital unproductively
unproductively for for
long periods.
long periods. For "job-order" production,
For "job-order" production, SSI's
5SI's also fail
fail to
to cope
cope with
with
the peak level of orders. An ironical
An ironical situation
situation may
may therefore
therefore exist
exist
whereby
whereby a a sector that is
is generally short
short of
of demand
demand fails
fails to
to meet
meet even
even the
the
limited requirements fully, so possibly losing
losing some customers to
large
large scale competition and
scalc co(n--tition and reducing
reducing itsits own
own market further.
further.

7.1.
7.1.33 ton -re,ity of products demanded

Lack
Lii of standardization has has
........-.dardization contributed to to
contributed dominance
domioah:o ofof "made
"malF to
order" ape;
operation. In
In Jamaica and
and Egypt,
Egypt, for
for example, 58 F., percent
Force-.t and 47
and 47
percent of total
percent respectively is "made
L. cl output respectively to ociet"
"made to order" t which
hin' reduces
redw_vs
effective
effective SS1 productive capacity
SSI Froductive capacity and
and ability
ability to
to attiicr
attract the n rot of
hr interest
I of
institutional markets.
institutionoL :,;.rkets.

7.1.4
7,1.4

C-moe".ition is reported
Competition is reported to
to be
be severe
severe among
among SST's
SSI's especially
especially as
as
they a:!I
they all tend
te to similar items
, produce similar items for
for limited
limited local
local markets.
markets. Thus
in Bangladesh
Ban., A FB-SSI entrepreneurs
FB-SSI entrepreneurs estimate that
that 89
89 percent
percent of
of main
main
 -- 60
80 --

competitors
competitors are other
other small
small scale
scale producers
producers compared
compared to
to only
only 99 percent
of lame
of large industry
industry competitors.
compet i tors. IInformation
nforma t ion from
from Jamaica sugges ts that
Jamaica suggests tha t
inter-S8I competit1,1
inter-'T competition isis more severe
severe in rural than in in more
more urbanized
urbanized
areas
areas while that From
wille that from large
large industry
industry is
is greater in urbanized areas (FAO,
(FAO,
1985).
1985).

While competition is normally an incentive to greater

efficiency, the
efficiency, the observed
observed levels
levels ofof inter-SSI competition may
inter-I competition may be
be excessive
excessive
and so dPstroy
and destroy SST
SSI ability
ability to
to accumulatA
accumulate capital and to grow.
and to grow. The more
competition from
modest competition from conventional
conventional ind..r.Jes
industries and
and from
from imports
imports has
has the
the
following
followinr4 features:
features:

(a) For rural

rural FB-SSI'S
FB-SSI's its severity increases when
accessibility
accessibility ofof rural areas to large industry
industry products
improves for
for any
any reason.
reason~ In
In urban areas this
urban areas this competition
competition
is
is always
always considerable.

(b) The
The competition is is gr-t,:er
greater where
where degree
degree of
of qualitative
cvorlap
overlap in in the
the produc,-
products of of small
small andand large
large industry
industry is
is
great.
c:eat. House (1981)
(1981) reports
,rts for
for Kenyan furniture markets
Kenyan furniture
that
C.at at the extremes
at the extremes of the price
of ige range, little
price range, little competition
e)sts.
exists. competition is
Significant competition is inin the
the middle quality/
quality!
price brackets
brackets and
and therefore
therefore is is most serious
serious for
for small
firms aspiring to ngraduate"
"graduate" into more sophisticated
sophisticated
markets or vice versa~
mi,jets or versa.

7.1.5
7,1.5 Thc -t of it on dm
All surveys report positive income le elasticities for SST
SSI
products. In the case
In the case of
of Sierra
Sierra Leone
Leone and
e. Bangladesh, the elasl...city
elasticity
levels
levels were to 2.2
were about 1.6 to 2.2 for
for forest-bas,d
forest-based SSI
SSI products.
products.

Although
Althc cì these
these high
high positive
positive coefficients indicate an inevitable
coefficients indicate inevitable
increase in demand,,nd for SST products iiff incomes rise, the
for SSS the analysis
analysis of
of
prospects when
future prospec.:, ..ihenincomes
incomesincrease
increase is
is far
far from
from straightforward.
straightforward. It
is currently suggested (FAO,
currently suggested (FAO, 1985)
19?') that the exact
exact nature
nature of
of income's
impact
impact will depend not
will depend not only
only on
on,,agnitude
magnitude of increase
increase but perhaps
perhaps on
on
distribution of such
such income
income as follows:
follows,

(i) At anyone
At any one time, the the lower-income
lower-income strata
strata of the population
of the
purchase exclusively
J,J.J..__ively or relatively more SSI products.
or rroducts.
High-income
High-income ones
ones rely more on products of large entPtptises
enterprises
or on
on imports.
imports. 'The middle-income
The middle-income groups use use both, in
proportions
proportions which depend J.j.-pend on relative
on relative availability,
availability, price
price
and other
other elements
elements affecting consumer
..,:..feet.:ng consumer choice.
choice.

(ii) If earnings rise more than proportionately for the

strata, aa shift
higher-income strata, shift toward products
products of
of large
large
industries and to
industries to imports
imports may well
well occur.
occur. Depending on howhow
fast this
fast this occurs,
occurs, the
the SSI's
SST'S would
would then
then probably
probably not
not adjust
adjust
their
their quality
quality and product range enough tc to cope.

(iii) If
If future
future earnings rise more than
earnings rise than proportionately
proportionately for for the
the
strata, a
lowest-income strata, a major boost
boost for
for SSI
SSI products
products could
could
be especially if
be expected, especially if poor
poor people's
people's access
access toto the
the
other products
other products or imports continue to be
imports continue be constrained
constrained byby
poor infrastructure or by quality quality or or price barriers.
However, normally
However, normally aa significant
significant rise rise inin poor
poor people's
people's
incoes
incomes would be accompanied by infrastructural
improvements, so
j-provements, greater penetration
so greater penetration of of large enterprise
enterprise
products
cc...:uctsinto
intorural
rural areas
areas could
could be
be expected. TheThe prospects
for SSI
SSI product
product markets would then
markets would then depend
depend on how
how well
well SSI
SST
production adjusts in
in quality, product range and
and
distribution toto face
face the
the threat.
threat.
 - 81 -
-

(iv) If
if in incomes rise
future, incomes
in future, rise in
in the
the same
same proportion
proportion for
for all
all
strata, it it is
is thought
thought that
that the
themarket
marketfor
forSSISSIproducts
o,ucts
expand, but
would expand, the degree
but the degree would
would depend
depend onon changes in
relative availability ofofSSI
relative ovail,...nility SSSand
and competing
competing products
products and on
quality and p!..-iuct
quality and product range improvement uf of SSI
SSI products.
products. If
If
these fail
fail tcto adapt,
ciapt, customer
customer loyalty
loyalty could be be lost.
lost. The
question of technolog lcal
technological adaptabil ity
adaptaoility to cope wi th
with
changinq quality requirements
changing quality requirements w,1111
would thus bebe aa key
key one.
one.

The implication
implication of of the
the above
above analysis
analysis isis that
that if one assumes
if one assumes
that future rural
that most future rural income
income changes
changes will
will be
be due
due toto agriculture,
agriculture, thenthen
the
the strategies
strategies ofof agricultural
agricultural development
development willwill determine
determine prospects
prospects for for
SSI markets.
SSS markets. Thus, if agricultural
Thus, if agricultural incomes
incomes are raised
raised on the
the basis
basis of
of aa
few
few large
large scale
scale farms, income may
farms, income tend to be
may tend be concentrated
concentrated in in favour
favour ofof
the upper strata,
the upper strata. In this case
In this case market
market prospeyh,.
prospects forfor SSI products may
SSS iriOucts may
well not
well not be
be bright.
bright. On the other
On the other hand,
hand, if smallholder
svp..'':olderdevelopment
de,ei.Tment is is
emphasized,
emphasized, more income would
more income tend to go to
would tend to the
the poor
T:oor and
and prospects
prospects forfor
SSI product
SSS product markets
markets would
would thereby
thereby be be improved.
improved. SAlarly, , the
Simi the impact
impact of
of
higher agricultural
higher agricultural prices
prices would
would depend
depend on on whether
whether these
these are
are targeted
targeted atat
raised by
products usually raised by the
the lower
lower income
income strata
strata oror higher
higher ones.
ones.

It is noteworthy that in
noteworthy that several industrialized
in several industrialized countries
countries and
and
especially in Japan,
Japan, small scale enterprises continue to to thrive
thrive alongside
alongside
very
very large ones
ones and
and are
are aa source
source of
of key
key inputs
inputs for
for the
the latter.
latter. The
analysis should therefore not
above analysis not be understood to to imply
imply that
that SSI's are
are
enterprises relevant
relevant only
only to
to poor
poor countries
countries or
or poor
poor people.
people.

7.2 §upply-Side Issues

Supply-Side Issues

7.2.1 Raw m;'

Forest-based
Forest-h., SSI''ss often face location-specific raw material
often face
problems especially in
problems especia.iy relation to
in re_ation to the forest produce.
the forest produce. In In his
lis limited
1981 survey of Thai
1981 furniture
fu-niture manufacture, Boomgard reports r sorts high
entrepreneur concern
entrepreneur concern about
about wood
wood shortages,
shortages, rising rising prices
pr.', .
and about
and about
forestry regulations.
forestry regulations. The impact
impact of of such
such problems
problems c,n
can be very very great
since forest
Since forest raw
raw materials
materials are are often
often aa dominant
dominant production input.
lotion input.
However, even
However, even shortage
shortage of of non-forest
non-forest rawraw materials
mterials can halt or severely severely
production.
reduce production. The major issues
issues in in forest
:7,-..rest raw material
- 'al supply are
supply are
interrelated ones
the interrelated ones ofof availability,
availability, ao;:-ssibili,
accessibility and reliability
ieliability ofof
for which
supply, for which key
key aspecl
aspects areIre as follows:

(i) There is is inc7, ,iT,7 overall

increasing overall shorrane
shortage ofof woc.:
wood and
ar.,.)other
other
forest-based
forest-baied raw raw mat'ol:
materials or or
of of desirablespe._ic.i
ilv,irdble species which is is
particularly seriousr.,r
particularly serious forSST's
SSI'sbee*,,uie
because they
they c,;n.,ot
cannot finance
finance
creation of
creation of their own ciwn resources.
resources~ for example,
Thus I for
Thus, example I
shortages of of straws,
straws, palm leaves, hathans rattans (and other
canes)
canes),, etc.,
etc., are lead
leading to increased
incre,,,e adoption of
non-forest inputs such
non-forest inputs such asas plastics
plastics inin some traditional
e traditional
crafts but,
crafts but, where alternatives
alternatives are are lacking,
lacking, enterprise
enterprise
decline sets
sets in.
in.

(ii) Poor accessibility

ac ty of raw materials
of raw due to
materials due to distance
distance or to
to
legal, administrative. infrastructural barriers
:._trative, price or infrastructural barriers is
is
another problem. The following are some
following are some examples:
examples,

legal restrictions or
legal Or strict harvesting bans as
harvesting bans as in
in state
state
forest reserves;
reserves: denial of access
access due
rights due to
exclusive to large
exclusive allocation of rights to scale concession
large scale concession
holders;
 - 82 --

administrative barric
administrative such as
barriers such as elahorate
elaborate li-cnsing
licensing oror
auction
auctioning procedures
proced,', including
includin: requirements for
substanti
substantial financial deposits, guarantees cr
financ: : or other
beyond SSI
preconditions beyond SSI capacity;
n ,city; sales
sales may
may also be in
also be in
minimum lots
lots that
that ato
are bey(
beyond
- SSII reach;

high prices
high prices due
due to
to monopoly
monopoly position
position by
by state
state forestry
forestry
agencies (note
(note that
that some large concessions
some large concessions may
may at the
at the
same time attract low
time attract royalty rates due
low royalty due to
to long-term
agreements} ;
agreements);

poor transport infrastructore

poor transport infrastructure often wor=ened
worsened by
by opening
opening
of only a few
of distant arca-,
few distant areas for ex[1,-_tation;
itation; on the
on the
hand, SSI's
other hand, SSl's are obi,
are able toto use
use ,mal
small pockets
pockets ofof
resources existing on ',Fmlands
resources existino farmlands and
and so
so conti
continue to have
raw materials
materials when
when block forests have disapF,-
t,rests have disappeared.
-

(iii)
(iii) Instability ofot sulies can be caused by predictable
supplies
seasonal/climatic ,r rots but
season;1 climatic factors can often
but u,- often siso
also result
result fLom
from
more ir,tricient and uneven
more inefficient ,.rcement of
uneven enforcement of state forest
agency regulations.
agency regulaLon. In such
su, n cases SSI's
cases SSl's are at at aa
particular
particular disadvantage
-.:ivantage as they
L.Ley have relatively few
official cor.:,,:Ls
contacts or leverage on the decision-making
process while Hie
the larger
larger industries
industries do.do.

With regard to non-fore'

With regara r non-forest raw
:aw materials,
matariali, problems
proble75 often relate
often relate
to distributional
te distributional wc . weaknesses
. L.;.:,2es which make access particularly difficult
acce. ,ei-rticulat.y for
difficult tor
small enterprises.
small enterprises. Where items are
Where items are importad
imported inder
under condirLons
conditions ofof scarce
scarce
foreign exchange,
foreign exchange, allocation quotas ,ay may tand
tend to
to exclude SSI's
58I' s . Problems
.

are also significant for rut"al

siso significant rural FB-SSI' s when only
1)3-SSI's only a few distt"ibution
few distribution
points exist in in distant
distant urban
urban centres.
centres.

For all
For all raw
raw materials,
materials,-1,,,rtages
shortages or
or supply
supply inst.,.
instability
ility can lead
can ;ni0
to
tu cash flow
flow problems
problems duedue to
to htin
high [_tices
prices and
and through
through increased
increased tyiru
tying up
up
of capital in
in hoarded
hoarded stocks.
stocks. What starts
Whut starts off
off as
as aa raw
raw waterial
materialprofJen:
problem
thus have as
may thus as main symptom
symptom aa demand
demand for
for financing
financing ot or credit.
credit.

7.2.2
7.2.2 Finance

Funds
Funds are
are required
rcouired to to pay
N for capital investment
or capital investment or for
for working
working
capi taL
capital. In the
the can-
case of Jamaican
Jamar SSE's, for example,
SSE's, for example, 90 percent
90 percent of
of
finance problems relate,:
finance problems related to work:, capital (Fisseha
working capital (Fisseha and
and Davies,
Davies, 1981).
1981).
The level uf of total
to!:,1 capital input 1/1/ per
per enterprise
enterprise and and ratio
ratio between
between
investmentt and
in; and ooperating funds
irating funds varies considerably
varIes considerably between
between activities,
activities,
technologies, scale
tech.,Dlogies, nle ofof operation and and countries.
countries. Estimates of total
total
capital
capi tal input
input forfor the
the "average
flaverage forest-based enterprise n range
forest-based enterprise" range from
from
US$ 225
US$ 225 in
in Bangladesh
Bangladesh to to US$
USS 33 030
030 in
in Jamaica
Jamaica with capital 5-'ng
with working capital being
third of
about aa third of this
this in in each case.
case. terms of
In terms of cost
cost per
per worker
employed, these investment levels are
employed, these are often less
less than
than 10
10 percent ofof th(7e
those
in
in conventional
conventional large enterprises.

Selected observations on finance aspects of SSI's are as

follows:

((i)
i ) profitability is
SSI profitability is particu
particul.- Ly sensitive to overhead
costs. In
In many
many cases, er
cases, ;.reneurs reduce overhead
entrepreneurs
burdens
burdens by
by sharing personal housirs.
sharing personal hous ing with
with the enterprise.
the enterprise.

Capital
Capital input investment plus
input = investment plus operating
operating expenses.
expenses.
 -- 83 --

This has serious

',pus implications in terms
terms of
of not account i n9
not accounting
for ente 5e expenditures on
on tire
the house
house and
and so introducing
introducing
financi al leakages.
leakages. There
There may also be
may also be transfer
transfer of
of capital
capi t al
tr
to household which goes
old consumption which goes unrecorded.
unrecorded.

(ii) Where
4.7htie ipment is used, the
eq,ipment ,a p9,), / of the
thr capacity the minimum
avail
a i e items
,lole may exceed
terns may exceed the needs
,,,Jr of an'6r- SSI
DE: so that
that the
the
C-,S,S in
effective costs in use
use of capital
e'ani,:i) equipment
,di,:pmrn,- can high
can be high
unless other SST's share
othei SSI's share in
in the
ti... use.

(iii) Ir ive ofofthe

-1%:,ctive the purpose for which
purpose for which t)--
the finance is used,
finance is used,
en,:eneurs think
entrepreneurs they need
think they need more
more funds
fu' t8 through
through credit.
However, in all countries surveye.J,
su t SSI!s
:'s have enormous
have enormous
problems borrowing on the
problems borrowing the institutional
institut onal c,edit
credit market.
market. The
chief problem is
chief is that
that the
the SSI's
SSI's are
are nwaelous
numerous andand therefore
therefore
costly
costly to lend to,
to lend to, especially as as lending
lending institutions
institutions often
often
apply the
the same
same elaborate
elaborate appraisal
appraisal procedures
procedures to to SSI
SSI loans
loans
as lending. Other problems arise
as to larger scale lending. arise from:
from:

their inability tO
their inability to meet requirements
meet standard collateral requirements
or
or to obtain official
official guarantees as
as an
an alternative;
alternative;

their failure
failure to
to furni
furnish documented
documented proof viabili
proof of viability
(due to poor record
(due record ing);
IF

their lack
lack of
of offici.,
official and other
,,ther useful
useful contacts;

their inability
inability to
to fa'
face or
)r understand
understand the elaborate
the elab ite and
time-consuming loan
loan pprocedures; furthermore, official
,dures; furthermore, or
.cial or
institutional lendir
lending agencies
',ncies are
E are often not r_ ically
not physically
near.
near~

(iv) Consequently SSI's

Consequently SSI's tend
tend to
to rely
rely for
for their
their finanee:
finances on
on
unofficial sources. In the case of
the case of initial investment
inve,lment,
personal
personal savings (from(from agriculture,
agriculture, other SSI's or or i,ff-farm
wage employment)
employment) are are paramount
paramount followed
followed by by loan_
loans from
from
relations/friends and and from
from money
money lenders,
lenders. The
Tire latter
latter
source is used in in spite
spite ofof high
high interest
interest rates.
rates. In the
case of expansion
case expansion capital,
capital, the
the overwhelming
overwhelming proportion
proportion is is
reinvestment of an enterprise's own profits but
supplemented with loans. Tabulated information for
Tatulated information for Sierra
Sierra
Leone,
Leone, Bangladesh
Bangladesh ano M4Iti is given
and Haiti en in Annex 11.
11. For
worki ng
working capi
canittal, commerci 611 GL,dit
credl t from supp1 iers
suppliers is
is
reported}
reportedlyy limi ted but lur oatt:ali a1 advance customer payments
advance customer payments
for
for goods provic
provide additional financing.
adcW-tinal fl,arcing.

7.2.3 Manpower

Household
Household and enterprise seem to
and enterprise to bebe often
often poorly
poorly separated in
terms for SSI's.
terms of manpower for SSI's. Of thethe average
average total
total 1.8
1.8 to
to 3.8
3.8 workers
workers per
per
firm reported
firm reported in FAO (1985), the
FAO (1985), proprietor plus
the proprietor plus his
his immediate family
immediate family
accounts for 40 to 70
accounts for 70 percent
percent in
in terms
terms of
of number
number of
of workers.
workers.

Significant proportions of entrepreneurs undergo informal

informal
apprenticeship
apprenticeship within the SSI
within the SST sector but,
but, since
since this
this emphasizes technical
technical
skills, many enterprises have
many enterprises have managerial
managerial weaknesses,
weaknesses, a key symptom of
key symptom of
which isis poor
poor record
record keepi
keeping.1. Availability
Availability of skilled manpower is is often
often
rt.LICai, problem but in
a serious in aa few cases, even unskilled
few cases, unskilled laboer
labour can
can be
be scarce
scarce
due to competition
,xrpetition wit). ,y, Oture in
with agriculture in peak
peak seasons.
seasons. Competition
I
I
on for
manpower with agriculture
mierdwc_ w:th be3 one
cre cause of reportedly hIghhigh turnover of
ver of
manpower but
manpower but urban
urbanmigrat
migr?tion
on to tomore 'more remunerative
remunerative err.,)i
employment may bebe
another. Low levels
levels of re,Lnei,tiDn
remuneration for for hired
hired workers
workers ar
and -11,- also
a so
poor
poor working conditions a.-0are other causes.
rirr ciuses.
 -- 84 -
-

8.
8. HOW TO ACHIEVE SOUND
SOUNO SECTOR
SECTOR DEVELOPMENT
OEVELOPMENT

it has
Although it has been
been shown
shown earlier
earlier teat
that SSI's
SSI's have
have the
the inherent
inherent
ability to
ability to grow,
grow, they
they face
face certain
certain conii-
constraints in achieving
lits in achieving their
their full
full
potential development, but
potential development, but above
above all
all the;
they seem to
, i face discrimination
to face discrimination in
industrial development policies relative to larger enterprises.
larger enterprises, The
latter
latter are
are at present
present often heavily subsidized
often heavily subsidized and
and protected,
protected, asas well
well as
being lightly taxed
being only lightly taxed and
and otherwise
otherwise cosseted.
cosseted. This isis a costly and
a costly
often
often unwise path to to development
development ofof any
any kind,
kind, and
and while
while it
it could
could be
be
extended to
to SSI's,
SS1's, it
it would
would probably
probably only
only lead to the
lead to kind of
the kind of dependency
which many
which many large
large enterprises
enterprises have
have acquired
acquired in in developing
developing countries.
BeSides,
Besides, many governments have
many governments have enough
enough problems
problems financing
financing large
large industry
industry
support programmes
support programmes without taking
taking on
on the
the additional
additional burden
burden of
of small
small
enterprises.

AA prime thrust of of any policies to permit

permit sound FB-S5I
FB-SSI
development and their consequent greater developmental
consegu, nt greater deVelopmental impact should
therefore be to remOVeremove or reduce discriminatory assistance
uce discriminatory assistance to Larger
larger
enterprises and and let enterprises of
let enterpri all operational
of all operational scale
scale compete
compete on
on an
equal footing. resultant relative
The resultara dominance of
relative dominance of one
one oror other
other
operational
nr, ret-onal scale
scale or organizational format would
organi it ,onal format would then
then more accurately
more accurately
reflect
[eci. the inherent i.cale-response
scale-response and factor-mix characteri sties of
factor-mis characteristics of
each product and
.cn product and the
the .Tarket
market niche intended to
niche it is intended to occupy.
occupy. The
technolog ical level tx.yar-
technological toward which each enterprise
which each ente type would gravitate
type would gravi tate
then tend
would then tend to
to be
be decided
decided automatically.
automatically.

approach raises
This approach raises certain
certain issues,
issues, the
the principal
principal oneone of which
is
is whether reduction or
whether with reduction or removal
removal of of incentives
incentives large
large enterprise
enterprise
investment would
investment would continue
continue at
at present
present levels
levels and,
and, if if not,
not, whether
whether such
decline is necessarily
decline is necessarily bad for forestry sect.nr
for the forestry sector oror would bebe a4 blessing
in the sense
in the sense ofof eliminating parasitic industriero
industries. seec-ed issue is
The second
in many
whether in many count/
countries the
,the small
small enterprise sectorwould
enterpme sector wouldr.0
be capable
capable of
of
effectively and
effectively and gainfully
gainfully seizing
seizing the
the expar.Jed
expanded opportunities
opportunities presented
presented
and, if
if not,
not, what assistance they
what assistance they would need to
would need to prepare
prepare them
them for
for their
their
greater role.
greater role.

The third
third issue
issue isis the
thetechnical
technicaloneOneof of whether,
whet'nez , under the
under the
improved environment
improved environment (which
(which would
would among
among other
other things
things 7oroit
permit greater
greater
access
access by
by SSI's
SSI's to capital),
tal), FB-SSI's
FB-SSI's would small or would tend to
would remain small to
large and
grow large and so
so lose
lose some
some ofof the
the key
key beneficial
beneficial characteristics
characteristics which
which
currently
currently make
make them aa valuable rural development.
valuable contributor to rural development.

Having the above,

Having said the above, much cancan still be
be done now
now to
to ensure
ensure
sustained subsector
subsector growth evenbefore
owth even before elements
elements which
which lopsidedly
lopsidedly favour
favour
large enterprises
enterprisesare
arerep,i.'ed.
removed. These briefly below.
These are discussed briefly below.

8.1 policy Changes

Demand-Side Policy
The main
main demand-side
demand-side issues
issues were identified earlier
were identified as market
earlier as
inadequacy, instability and
inadequacy, instability and non-uniformity.
non-uniformity. Interventions which can help
help
ameliorate
ameliorate the
the situation and promote sector growth are outlined below.
and so prom,te below.

8.1.1 ~anding
Expanding markets for
markets for FP-qq-
FB-SSI ,i'oducts
products
(a)
(a) Increasing rural purch, -ower

The problems
The problems of
of market
marot inadequacy
inadeGuacy require
require coordinated
coordinated
policy
policy interventions
interventions from
from many
many sectors.
sectors. The first
The fin problem is
problem is
one of
one low incomes
of low incomes and in many
and in many cases
cases this
this would call for
-.....1 call
increases in
increases in agricultural
agricultural produce
produce prices
prices and
and greater
gres- emphasis on
 - 85 -
- 85 -

agricultural
agricultural development generally, but wiwith
th emphasis
is on
achieving higher purchasing
achieving higher purchasingpower
powerfor
forthe
the poorer
poorer soc
social
al strata
strata
which habitually
which habitually use
use SSS
SSI products
products by
by favouring
favouring development
development ofof
cash agriculture
cash agriculture among smallholders instead
among smallholders instead of large scale
of large scale
operators.
operators~

(b) Improving access to Lr:

Institutional marker
Institutional markets are aa v7Lecti,11!,
ntially 1,.
largee extra a outlet
outlet
for some
for some FB-SSI
FB-SSI products. he interventions
The inteuentices heio
here ,iuld
would include
include
both policy and :nsitAtional ch, lge,, the latter being to
both policy and institutional cha the latter being to
organize
purchasing
the prcru
organize the producers 3fld
purchasing agents
agents inin uhe
and to
the octential if
potential of FB-SSr's.
institutional
te edicite the institutional
Firs:y.
Firstly,
policies
policies should be made to permit pet,it iwernmehL agencies to
purchase from
purchase from less
less formal adiust their
ritic,is, to adjust
formal sources, their procedures
accordingly and
accordingly and to
to advertise
advertise the,i
theirzeciu,r,,racrt,
requirements througi.
through channels
At th, tft
.

FB-Sil have
FB-SST have access to. At the same time, the FB-SST'S would
access to.
need to
need to be
be educated the special ,hara,teristics oith
educated in the special characteristics of this
market
market and
and how to to meet them through :e:hne.;_e;oical,
meet them org..niza-
ical, organiza-
tional and
tional and other
othermeans.
means~

With
With regard
regard to to industrial
industrial markets,
,
5, FB-SSI's
FB-SSI's can
can act
act as
as
subcontractorstoto larger
subcontractors larger ectabliC
establishments,
t , fnc example
for through the
example through
manufacture of
manufacture of component:,
components oi subas:
or subassembl lies for furniture.
ies for furniture. To
Te
tap this
tap this kind
kind of
of market effe,tively, the
market effectively, re legal
legal framework
framework should
should
permit fair
permit faircooperation
cooperation without
without financial
financialenslavement
enslavement ofof small
small
enterprises or hardship
enterprises fiom delayed payment and/or
hardship from and/or from
restrictive agreements.
restrictive agreernents~

( c) Improving
i access to -arkets
Policies r
Policies to promote penetration tratin institutional and
of institutional
industrial subcontract makets
industrial markets auuomatically expand the
automatically
geographical market horizon
geographical horizon and boost the potential potential for
for
expanding the
expanding the product
product range. Access to
range. Access to distant
distantconsumer
consumer markets
markets
should also
should also be
be expanded,
expanded, however,
however, asas most
most FB-SSI
FB-Sil products
products are
are
consumer
consumer goods.
goods. The major
The major thrust
thrust would
would in this case
in this case be
institutional improvement for
institutional intelligence, product
for market intelligence,
promotion
promotion andandidentification
identification ororcreation
creationofof marketing
marketingchannels
channels
in cities,
in cities,tourist spots,ts,
tourist etc., not not
etc*, necessarily
necessarily by government
by government
but through
but through ;iodu,:ers'
producers ownown marketing
marketing bodies.
bodies.
(d) FB-SSI

This
This is5 on, of the
one of the most
most powerful
powerful policy
policy instruments
instruments Lc
to
ensure creation of markets
markets for for SSI
SBIproducts
products especially
especially if ifit
it in
is
a,czmpanied by st,oport
accompanied support forfor access
access toto institutional
institutionalmarkets
markets as as
ont.Iied un,ler
outlined (1,1 abo,e.
under (b) above. India isisaaprime
India prime example of aa country
example of country
w.:11 ae v-igercus (cricy
with icy cfof product
product reservation for small
reservation for small enter-
enter-
il,wwcec.such
rlSeS. However,
prises. such aa policy
policy discriminates
discriminates against
against large
large
eetet[_ilse
enterprises and sncild be
artil should be as
as objectionable
objectionable as the current
as the current
1_,.erse favouritism~ It
reverse :t may
may also
alsonot
notbebenecessary
necessaryand
andmay
may even
even
be harmful
be narmtu) totc c,insumer interests.
consumer interests.

8.1.2
8. L 2

seasonality or instability ofofdemand

.r other instability demand is
is probably
probably the
seto 1 larges t market-s ide probl em after
second small market
after small market size for rural
size for
FB-SI's.
FB-SSI's. The overall solution is :s diversification
diversification of ofproduct
product range and
market p:o,ot:on of
market expansion through promotion of institutional
institutional and
and distau
distant (urban) .icl
consumer
censuran markets. could also
Seasonality could also be
be reduced
reduced by
by promotion of t

pursuits
low-season commercial pursu or diversifying
i ts or diversifying agriculture
agricul te ensure
ture to
lo market:,ble
yicad of some
yield product at
marketable product at all
all seasons.
seasons.
 - 86
e6 -

8.2 Policy Changes

8.2.1 ,v, raw materials

ability of forest-based raw materials

(a)
(a( Shortage of raw
raw materials

With regard..cdtotoshortage
shortage ofof forest-based
forest-based rawraw materials, the
materials, the
policy changes should
po)icy ,-,anges should aim
aim at
at ensuring
ensuring FE-SSI
FB-PSI access
access toto raw
raw
materials while maintaining
materials while maintaining conservation/management
conservation/management of existing
existing
and creation
resources and creation ofof new
new ones.
ones. Since each
Since each SSI entrepreneur
cannot create
cannot create his
his own
own resources
resources at at present,
present t government
government policy
policy
should focused on
should be focused on creating
creating or managing resources
resources inin required
required
quantities (as
quantities (as is
is currently
currently done
done for
for large
large industry)
industry) but
but with
with aa
spatial distribution
distribution thatthat permits ras; FB-SSI
permits easy thSSl access.
access. Where
dispersed small scale resources
small scale resources already
alrea,ly exist (such as as those
created
created through social forestry effitLi., efforts), governments
-overnments should
support
support FB-SSI
FB-55I efforts to to process Clem
them itably.

Where onl prime

erkme species are inin shortt supply,
l the solutions
the
are not
are not so
so , i,t of of aa policy
policy nature -3 educational:r
nature as SSI's
SST'S must
be given
be given enough
Er-Ri.d", correct timely inf
and timely
correct and nation on
information on use of
secondary species.ies. Normally information
Normally such infor is available
al. h is available from
from
research efforts
research ef s but
but it
it rarely
rarely reaches
reaches small
small industry.
industry.

{(b)
b) Access to forest raw materials

Policy
policy and and legal
legal as well as institutional
as well institu, rn adjustments are
adjustments
1 are
necessary to
necessary to improve
improve FB-PSI
FB-SSI acces,i
access to
to forest
For, ,t reserves and
reserves and to
comme rC i a] concessions.
commercial con cess ions. forest reserves I tth-,e
On foreFt here may need
may be need
in SOme cases
in some cases to torelax
relaxrestrictlo,-.i
restrictions on ', harvesting
h. of selected
h..ting of selected
products
products and local SSI's
and allow local SSI' s controlled access under Ii
h.i. under cence
licence
since they
since they cannot
cannot easily
easily afford
afford distant
distant rawr material sourcing.
material sourcing.
With regard to to for,ir
forest concessions, while it it is
is normal
.imal to provide
privide
for subsistence~aivesting
subsistence hatvesl)nn tv by local people
people .f of most products,
commercial FB-SSI's Co do rot
not have
have such
such rights.
rights. This tradition
'ral tion
could bebe changed
changed -o sotn-it
that rE1-55I
FB-SSI could atat least
lea.'t harvest
hi,veei discarded
cl-arded
material,se,-%:riir,
material, secondary wood 2.pecies
species and
and non-tire
non-tree rawraw mitei,als
materials --
all of these being of
these heloo Dt little interest to most concession
litt;e interest -,n-ession
holders.

Finally,
Finally, to ensure continued
to en-ut, continued future
future SST
S8I access
access to
to wood,
wood, it
it
is to enc:uilile
is necessary to encourage dispersed
dispersed tree
tree planting
planting as as mentioned
earlier,
earlier, wherever SSI's are
ate or an important
or can be made an important sector.
sector~

To succeed, all policy adjustments would need to be

be
preceded
preceded or
or accompanied
accompani ed by
by adequate
adequate organization
organi zalion ofof beonle
people for
for
greater say
greater say in
in use of local
local forest
forest resources
resourCes incl,i,
including those in
ttose in :

reserved forests~ On
reserved state forests. On governments'
governments' side,
side, the.e
there,iust
must be
be
political to aa fair
political commitment to fair deal
deal for
for the
the sector.
sector.

8.2.2
6.2.2 Improving availability of
Improving availabili non-forest raw
of :on-forest raw materials

Most problems relate

Most problems rel- to distribution and require institutional
and require
solutions but, where shortages are common,
solutions .ommon, policy chz.nyer
changes may be
necessary
necessary to
to give
give SSI's
SSI's access
accii to official allocaticns of
Lcial allocations of prociec,!.
products or
or of
foreign exchange to
the foreign purchase
to.,-.ur4 : them with,
a. e them wi th, as happens fo-
as happens for larger
larger
en sas.
enterprises.
 - 87 -
- 87 -

8.2.3 Tm :Jving
i the basis For B-SSI development
just as ..r.ay other industrial
For SSI's just as for any . category,
category, some
some ofof the
the
for funds or loans
demand for funds or loans isr a symptom of operationa (or market)
sNmpto of opet:ational (or market)
problems.
problems. Inus only a few
Thus only a few of finance can be hanHled usefully
of finance ean be handled usefully
through broad policy decision- Lather than on
through broad policy decisions rather than On a casest t basis.
i . Iff
I
on the basis of analysis it
on the basis of analysis it is determined that
Ir determined that financing,'ci-d, any
financing is needed. any
policy decisions and their follow-up must often be
policy decisions and their follow-up must often be accompanied ned by
agc( by
assistance to
technical assistance
technical help remove the
to help the technical priatl
technical problem ling to
leading to
demandfor
demand for funds.
funds.
ProgrammesforforSSI
programmes SSIfinancing
financingshould
should take
take into
into account
account the
the need
need
to permit loans for working cclii,a1 as well as capital investment funds.
to permit loans for working capital as well as capital investment funds.
They should also cater for the inencial needs of the target enterprise
They should also cater for the financial needs of the target enterprise
and for the entrepreneur's ot - cc atergial and household activities or
and for the entrepreneur's other commercial and household activities Or
needs which
needs which may
mayoften
often be
be iat'L` ly iinked to the enterprise.
intimately linked to the enterprise.

With
l'Ii regard to
th regard to sourc:
sources ofof finance, there isis still
finance, there still insufficient
insufficient
evidence to suggest that
to suggest that foi-.J:
formal financing inetitati-Jri wuld
financing institutions would provide
provide
ervice thanthan the credit source_
sources :uirentle
.

better service inform;:j credit

the informal ,.sed. Until
currently used. Until
this
ti is
is ascertained,
ascertained, polic: should prch-Lly
policy changes should probably aim at no more
;- no more than
than
irj,-oving access
improving access toto formal sources and/or
formal credit- sources and/Jr pi, provision of gt guarantees
guarantees
for major
for major loans
loans from
from them
them asas currently
currently done lizuet enterprises.
fi i. Jarger
done for si:iprises. In In
some cases, it
some cases, it would
would also
also bebe beneficial
beneficialto to cm tn.
'-i,study the pc.sEibility
possibility of of
linking "informal"
link.ing channel.-toto formal
"informal" channels formalcredit
credit institutions
last;ti,ticn.- withwith suitably
suitably
modified lending
modified lending criteria
criteila andand procedures.
procedures. Institutp_nJl lending
InstJtutional itseff
lending itself
could improve its its accessibility
Je.,eJiLility even even without majar policy
without major policy change
change by
merely simplifying ,mall
merely simplifying Joan appraisal
small-loan appraisal systems
systems totomakemake them
them more
more cost-
cost-
effective. The
effective. heavy demands
The heavy demandsofofloan
loanagencies
agencies for for formal
formal accounts data,
accounts data,
elaborate feasibili
elaborate feasibil i cHpraisals,
appraisals, recorded of collateral, etc.,
recorded values
values of collateral, etc.,
need to be simplifil to match the smallness of loans SSI's seek.
need to be simplif ed to match the smallness of loans SSI's seek.
Schemes for
Schemes for risk
cis,: insurance may
may need to be created when such liberali-
need to be created when such liberali-
zation occurs,
zation occurs, to
t encourage
P" voluntary participation by lending agencies.
voluntary participation by lending agencies.

8.2.4
8.2.4 Improvi' ,pply for FEJ-'SI's
The major
The maicr SSI'T Tan(_ower
manpower aspect intervention is
aspect irequiring intervention is shortage
shortage
of technical
of technical as ,e_l as
as well as managerial/administrative
mlnagerial/admini. skills. At
skills. present th,
At present the
sector is
sector is un t
unable attia:F and
to' attract
i and retain a Hy manpower
ic! quality
retain good and there-
manpower and th e
fore risks
fore risks techi.oloni.:)_/organizational
technological/organizational st ion~
i Manpower issues
Manpower issus-i are
however not yet
however or well
Not so 'll studied
studied that
that eve-
even Ainary proposals
iminary
. proposals can be
madefor
made for broad
broad policy
p,l,iv ohanges,
changes. The lack
The lack of skills is
( is however eviinr and
however evident
this at
this at least
leastcan
canbebe addressed
addressed by 'ling facilities
creatic, of training
by creation facilities and1(1 by
greater official support
greater official support for
for the
the existing
existing inH,
informal11 apprenticeship
apprenticeship schemes
in aa similar
in similar manner
manner toto support
support currently
currently given
given to
ro formal sector training~
formal sector traini.
However, by
However, by making
making SST
S8I trainees even
trainees even more ,i-ketable, this
more marketable, thismight
might welwell
lead to
lead to even
even gieater
greater "skills
"skillsdrain"
drain"from
from SST's.
8S1's. To improve
TO SSI skills
improve 8S1 skills
retention thr
retention AAh enforcement
through enforcement of of"minimum wage",
"minimum wage" I worker social security
worker social security
and other fa
and other factory , regulations
regulations wouldprobably
would proP.bly be
be impracticable
impracticable given
given the
the
large ent
large ente se --nbers
numbers and
and dominance
dominance of Inily labour in the subsector.
of family labour in the subsector.
It would also :!,bly raise operating
I t would also probably raise operati ng costs beyond Jyond reach
reach of
of many
many SSI's
S8I' s
and instead
and :ng to retain skills ecimate employment
instead of helping to retain skills mightt decimate employment inin the
the
sector throuyu
sector through e, ,rpiise collapses.
enterprise collapses.

9. CONCLUSION

purpose of
The this
p-itei has
of this paper l,J:1 Leer
been to give
to prel
give prelimina
information
information the magnitude,
on the ch,tag-eri
magnitude. characteristics ll,,s and growth potent:
an.] growth potentialI (
scJle processing enterprisce t.1-,a on i-roLassing
small scale process i ng enterpri ses based
small forest pro
processi ng forest 1CP
produce
which have so
which F far been relativel, nvole,teJi asu one
so far been relatively neglected one additional
additional way to
commercializeforest
commercialize forest resources.
resources. indi,ated that:
Thi_ paper has indicated that:
This
 - 88 -
- 88 -

1. Such enterprises already exist in

Such enterprises already exist in significant
significantnumbers
numbers and
and
contribute a lot totorural
contribute a lot employment
rural employment and
and income. Much of
Much of
the employment
the is seasonal but, when it is adjusted to
employment is seasonal but, when it is adjusted to
full-time work
full-time equivalent, seems
work equivalent, seemstotobebeatat least
least as
as great
great and
and
often greater than in large enterprises.
often greater than in large enterprises.

2. The enterprises
The enterpri are very
are small and cf.:et
very small of the
nu,.h of
offer much
employmert they generate to
employment t to the
the entreprerear
entrepreneur ano lis family.
and his family.
For this
For this qr
group t provide higher
provide higherincmmes than could
incomes than could be
be
made from
made - htural wage
from agricultural wage work.
work. Pavievet,
However, forfor hired
hired
workers, the
workers. ans may
the returns may often
often be
be worse hah to
worse than lo agricul
ayticultural
tural
wage labour.
wage labour.
3. The processing activities
The processing activities are
are based
based on
on aa broad
broad range
range of
of
forest raw
forest raw materials
materials and only on
and not only on wood.
wood. Depending on
Depending
what isis being
being processed,, the
the level
level ofofequipment
equipment useuse ranges
ranges
from negligible
from negligible to
to quite
quite significant
significantbut buton
onaverage
average isismuch
much
lower than in larger enterprises.
lower than in larger enterprises. OutputOutputper per unit
unit labour is
labour is
thus low
thus but nevertheless
low but returns per
nevertheless returns per unit
unit investment
investment cancan be
be
quite high.
quite high.

4. Surveysshow
Surveys showthat
thatthe
thesector
sertot _s
is in
in many cases gtcwinj,
many cases ng, often
often
quite rapidly althc specific products
quite rapidly although specific ir dpcl:ne
products ma:
may pe in decline
some localities.
in some local i t i es. The oetformance of
Ine performance etterptises
sr 71 enterpr i ses
of small
shows their consiP, thle ,esilience and r continued
shows their considerable resilience and -their continued
existence even
existence Industrially develcT, countries
even ininmc'n-
more industrially developed countries
suggests that
suggests that thty
they areare not a transient pase
transient phase to to be
inevitably replaced
inevitably larger enterprises.
replaced by larger enterprises. The degree
The degree toto
which small enterpi,J,s contribute to total output seems to
which small enterprises contribute to total output seems to
vary however with product, but the determinants of such
vary however with product, but the determinants of such
variation are
variation are only
only now
now being
being studied.
studied.

5. In their operations, small enterprises face

In their operations, sman enterprises face a range range ofof
pf-hlems especially related to limited markets, poor access
problems especially related to limited markets, poor access
to forest
forest and other materials, limited
raw materials,
raw finanrial
limited financial
ources and short -ge -f manp,.er.
resources and shortage of manpower. tiene
.5,-,10 oft these
For some
items, the problem
ff;, the by official diwrinination
wmr.;ened by official discrimination
problem is worsened
policies that, favour easier
ti. ough policies
through easier access
access by larger
hy larger
hntetprises evet ,i-? the l,testly sector.
enterprises even wi thin the forestry sector. This Ths popet ha, has
sa-ageleo that thatremov
removal ofot 5d,h
such d.s.-rimination
discrimination scne
alone mighl ght go
go
long way to ensulirj itealthier small-enterptisk grow,n.
:

a way to ensuring healthier small-enterprise growth.

l' has been sugge!,,,d that this be done by rom.:ving or
It has been suggested that this be done by removing or
tedhcing subsidies
reducing subsidies and privileges currently offered to
and ..1h-f
other privileges currently offered to
larje enterprises rathe, thza, extending these costly support
large enterprises rather than extending these costly support
sy%lems
s andincentives
and incentives toto small
small ones.
ones. A numberofof specific
A number specific
policy
policy changes
changes have
have also
also been
been suggested
suggested to
to reduce
reduce avoidable
avoidable
markot, raw
market, raw material
material andand financial
financial problems.
problems. IIt
t hashas also
also
boon suggested that the small enterprises capacity to
been suggested that the small enterprises' capacity to
benefit
benef i t from
from policy
pol i cychanges
changes would
would be
be enhanced
enhanced if they are
if they are
ort,nized into
organized intogroupings.
groupings.
 -- 89
89 --

AKNEX
ANNE< 1
1

Employment
Employment ininFB-SSI
FB-SSIin in perspective of that in
perspective
two other top small scale process. inc, activities

'4
w
of SSI
'0 of SSI manufacturing
manufacturing '4 of
7~ of SSI
SSI manufacturing
manufacturing!
Employment Employment
Country Country

Text. Pooe
Food For,
For. To.t,
Text. Food Fwr.
for.

1978/80)
Jamaica (1978/80)
,
25 77 35 (196],)
India (1961 39 20 16
16

lras (1179/81)
Hondur3S (1979/81) 25 38 lb
16 Taliwan
18: -, ''`,, )
(1966 26 17.
17* 11
11

Eojpr (1981/82)
Egypt (1981/82 ) 38 12 24 S. Korea (1970) 41 20*
20" 55

Sierra Leone
Sierra Leone (1974/75i
(1974/75) 51 55 20 Kenya (1979) 24 42* 18

Bangladesh (1978t80)
Bangladesh (1978/80) 58 22
22 13
----------------------

Text. ~
-a. textilesiapparel
textiles/apparel
Food
Food = food processing
food
For
For = forest-based
forest-based processing
processing

*
* Includes beverages
Includes beverages and
and tobacco
tobacco

Source,
Source, FAO(1985),
fAO (1985), Table
Table 3.
 Estimates
Es timate s ooff direct contribution
contributio ntot orutal
rutaemployment
l employment byby various
" ariou s specific
speci ficsmall
smallscale
sca lewood-based p rocess ln!!>
wood- ba sed processing o .... ,dvll
viLies
ies -- oy cou ntry.
oy country. (Note,
AN
ANNEX
NEX 22
tha
thatt as
a s activity li sts
ac tivit ylists areare
incomplete, , t he se
in com pletethese arearminimum
e mi nimum estimates
estima tes of
of contribution \
co ntri butio n 1_

% ooff Employment
Employmen t l-/ by Cou ncr y
by Country

Type woo d
Type ooff wood 8/ ILN
TA IWAN~/
TAlwAN- I GER IA 10/ (1966/7)
W.N10ERIA--10 W.MALAYSI A..!.!.! S.KORE~
/(1966/7) W.MALAYS1ALI TAIW AN13/ S.KOREA..!.!:./
S.K0REA11// TA1WAN13/ S.KOREA1.1.1/ S .LEONEI 5/ HA
S.LEONE15/ I Tl1 61 KENyAl2/
HA1T116/ KENYAI2/ EGY PT I 6 / ( 1982)
EGYPT18/(1982)
process ing
processing 19S6
1956 1966
1966True
True Rural
Rura l Rural To ..... n
RUora 1Towns 1970 1970 1971 1<17]
1973 1974
1974 19 76/7
1976/7 1919
1979 Fa youm Kul
Fayoum yub iya
Kulyubiya
Ail 88 A
B~ A B A B A
A B
II A
A B
B A
A B
B A
A B A B
B A B A B A B A B A B
9/ BABABABAB
.7
00.7 2.~
2.-4 1-=0
1,0 172
102 -- -
- -- -- - - 33.7
.766.9
.9 --
-- -- -
1.
1. Forestry
For est r y and Loggi ng ~/
and Logging V - - - - - - -- - -- -
-- -- - - -- -
- - -- 66.111.5
.1 It S --
-- - -
2. Charcoa li ng
2 . Charcoaling - - - - - - " - -- -- -- -- -
3. Sa\</fllil ling
3 . Sawmilling - - -_ -_ -_ - -- - -- - - - -- -
" -- - -- 00.6
.6 L1.1I --
-- - -
- - -_ - -
4. veneer,
venee r , plywood, pane l s
pl ywoo d, panels - -- - - - - - - - -- -- - -- -- -- -- - --
- -
- - - - -
Woo den too ls - - - - - - - - - - - - - -- - -- 0.' 0.4 - 0.1
0.1
5. Wooden tools - -
- - - - -
6. Wood arving s / handicr af ts
Wood ccarvings/handicrafts - - -- - - - - - - - - -- - -- 2.0 - - - - - - - -
- - - -_ 17.1
17.1
2.0 ------- -
10.9 1.
1.99
7. Carpe n t r y
7. Carpentry -- -- -- - -- - -- -- -- -- - - -- - - -_ --t0.9 -- -- - \.1.00 --
0.1 0.2 - - - - -- "- -- 22.7.75.0 .) --
5.0 -- 22.3 1.6
1.6
8.
8. Furniture
Furni t ur e & fix t ures
& fixtures .52 6.6
00.52 6.6 0.48
0.48 4A4 -- - -- -- - - -
9. buil ding - - - - - - -- -- -- -- - - - -_ -_ -_ -_ -_ -
9. Boat/ship/vehicle
Bo at/ship /ve hi c le building - - - - -- - - - -
10 Wooden cas
10.. Wooden es pack
cases ing ~I
packing -- -- -- - - - - -- -- -- - -- - - - - - - -- -
2/ 'I 4/ -- - -- -- - - -
11.
I I. Wood,
Wood, cane,bamboo
can e, bamboo product74 0.45 5.7
p ro duc ts 0.45 5.7 0.67 6'
0.676..2 - -- - - - -- - -- -_ -_ -_ - - - -- -- - - - --
.4 I. .3 0.2 .7
44.7 8.4 -- 6.
6.33 -- .0
-- 33.0 -- - -- 00.2 . 2 -- 1.
1.55
12.
12. Other
Other or o r unspecified
uns pecif iedwoodwood - - - - - 17.
17.1- - 88.4 1.3) 33.3 - --
products
produc ts 51 5 .1
5/ 8.4 1.
1.44 .5
33.5 0.2 .7
44.7 - B.
8.4' -- 6.3
6.3 -- 19.1 13 .9
-- 13.9 9.4
9.4 17
17b 3.9
b -- 3.9 --5.1
3. Sub
113. Subtotal
t o ta l Wood Pr ocess ing
Wood Processin-g 0.90
0.90 123
123 L15
1. 15 10 104 -- 17.
17.1 -- 8.4 -_.- ..-_
.. .. ... . - - - '"o
.3
22.3
'-.1 -- -
61 _ - - - - - - - -_ - - - -- 13 .7
13.7 1.11
-- 1. - - -- 77.1
14
14.. Cane,
Can e, straw,
st raw,bamboo prod s
bamboo prodS- .- -1-
U IP LOYED ,
15.
15 . NUMBERS
NU~lBERS ('000)
('000)EMPLOYED
Over all tot
- Overall totalal 19
1956.6 2897 . 4 '
56.6 2897.4 .2
)3.2 1.5
1.5 1716 .1
1716.1 55 )5.8
5535.8 -- - - -- -- -- -
man ufac cur i ng L'
2/ 15).6
153.6 313.
313.5S , 2.7 0.9
0.9 710.
710.77 29 ) .I
293.1 428 .0
428.0 490 .6
490.8 88.6
88.6 -- -- H.I
71.1 66 .2
66.2
-- InIn all
all manufacturing
17.6
17 .6 )) .2
33.2 .5
00.5 .1
00.1 24 .9
24.9 13 .6
13.8 )5 .9
35.9 30.9 16.9 - - 2.
2.88 ).,
3.4
-- IInn wood r ocessing
wood pprocessing ,
Sour ce
Source FAO
FAO(196 ~) - Compi
(1985a)- led from
Compi ed from ous so urc
varivarious es l is ted
sources listed
in inthe
theororiginal ep ort .
igina l rreport.

Noc es :
Notes: ~1/ Th e %
/ The %ofof empl
employment
o yment is isg igiven
ven asasa apropor
proporniont ion ofoftot
total
al rural empl oyme nt (A
rur al employment (A) r of
) oor of empl
employment
oymen t i ninmanuf act u r i ng/ repai t onl
manufacturing/repait y (B)
only (B)- -see not e 99..
see note
'!:.,/
2/ For Ke nya read
For Kenya readononly
ly ""tree
tree cutting".
cu t ting ". 3/~ /Includes
I nc lu desnon-assembled pr oducts, ':,.1
non-a ssembled products. The
4/ Th ratio
e ra t io of
o f wood
woo d to other
to othe r isis not
(lo t indicated.
i ndic a te d.
~I
5/ This
Thi s obviously
obv io us l y totals
to tals onlyonl yrecorded
r ecor de d items
ite ms butbut other
ot herwood processi ng often
wood processing often exists
exis ts ini nthethecountries
cou n t rie swhich
which aa specific
specif i cstudy st udymay may not
not have
ha ve detected
d e t ec ted
oor
r been
been iinterested i n. £/
n t ere s t e d in. Unlike it
6/ Unlike em ~I
item 4/ the c ane-bamboo-str aw p roducts
t h e cane-bamboo-straw productsar are e rep or ted separa
reported separately
tely inin thi case . 77/
thiss case. / Manufacturing
Hanufac turl ng of often
ten includes
includes
repair ac tiviti
repair acttvities. 8/ es . ~/ See ms
Seems to
to inc l ude
include c i t ie
cities s of
of under
under 4545 000
000 peo p
people.l e . ~/
9/ A
A == a s
as propor t
proportion i on of
of t otal
total ru ra
rural l employme
employment nt ininal l
all sec t
sectors;or s;
BB ~. as
as % % of
o r employment
emp l oymen t o onlynl y in in ma nufact ur i ng (see
manufacturing (seenote /) . lQ/
note !1/). 10/ Based
Basedononlimitedlimited sampl
sample e inin 33 didistricts only. !!/
s tric~ only. 11/ AA smalL
small eelement
lement oof f cork
co rk
processing i s
processing is included.i nc luded. Agricu l
Agriculturaltura l processing
processing has
has bee
been n add
addeded t
too ma nufacturing
manufacturing t
coo c omply
comply wi th
with no rma
normall prac ti
practicec e i
inn other
o th er countries.
co untri es .
!.Y
12/ Rural
Ruralincludes
i ncludes ccities iti es of o f under
unde r 20 20 000 peo ple. .!2/
000 people. 13/ RurRural
al sseems o inc
eems t to lude cit
include cities
ies of o f under
u nder 45
4 5 000. Enterprises
000 . Enterp ri ses of of up up to
to 9999 employees
empl oyees are are
inc lu ded. ~/
included. 14/ Th re s hold city
Threshold ize unc
city ssize unclear; in c ludes enterp
l e ar; includes enterprisesri ses with
wi th up up to 99 empLoyees. 15/ Includes only rural areas
to 99 employees. ~I In cLudes only [ ura l areas p lu s t owns t o 22 000 plus towns to 000
people . ~I In for mat ion on Ly
people. 16/ information only for setnlements of overf or sett lement S of over 11 000
000 people
people. . 121
17/ %'ges
%'ges aare
r e of h ou se ho ld s prac
o f households practicing
tici ng aa given
g i ve n activity,
act ivit y,not no of f emp loymen t ,
t oemployment,
~/
18/ Includes
lnclude s aLL
al l ttownships
own s hips inin che
the area.
N.B
N.B.. l)ln ases the
1.)Inallallccases the %%f for
or (forestry
o restry and l ogging is
and logging is excluded from the
exclude d from the wood
woodproces s ing subt
processing ota ls / t ota l s .
subtotals/totals.
2)
2) For
For Taiwan ead "Ch
Taiwa n rread "China
in a -- Province
P ro v inc e of Taiwan".
of Taiwan".
 - 91 -

ANNEX 33

Estimated
Estimated composition
composition of
of FB-SSI's enternrise numbers
by enterprise
FBSSI's by numbers
in selected countries
in countries

Approx ate 1,
Approximate % of all FB-SSI
of all FBSSI enterprises
enterprises numbers
numbers
Activity
Jamaica)',
Jamaica* Honduras Egypt Sierra Leone*
Leone~'~ Bangladesh
(1978/80) (1979/80) (1981/82) (1974/75) (1978/80)
(1978/80)

Sawmi 11 i ng)Hr
Sawmilling** 11 33 n.
na 0 11

Carpentry, cabinet
Carpentry, cabinet
making, upholstery
making, 23 71
71 24 67 27

Wood carving
13
0**)',
0*** n.
na 66 1
1

Bamboo,
Bamboo, cane works 1 na na na 11

Mat/basket/hat
Mat/basket/hat making 63 11 70 24 32

Other 0 26
26 6
6 33 28

Toe.
Total1 100 100 100 100
100 100

** where the whole country

where the country was surveyed
surveyed
**
** only motorized mills
only
7'dn~
))** "0" means
lion present but
means present but insignificant
os
na = information not
information not available

Source: FAO (1985), Table

FAO (1985), Table 7.
7.
 --92
91 --

ANNEX
ANNEX 4
Estimates of employment in sea ll scale enteri ( (SSE's) based (r wood
Frlcessing stratIfied by dt ee a' don . in total. emp, -. for a_
31 en arri,,ty. S. Korea dal for (le, ' an ' 10 workers co red
small)
mall

N.. at
Activity!
Activity Product
/ Product of empluYmant
wcr/rra
cf all wo!Kers in in SSE wood/cane
this (i ity at alt in FB-SSI .17
opera, aLfs

A.
A. Where SSE employment in K -4 paat, a, roductry total,

Salolmilling
1- Sawmilling 8 DM.,
8 083 66
66 35.7
35.7
2. Furniture making -- not
nct upholst,.ed
uphoLstered 4 843 73
73 21.4
21.4
3. Handmade paper
Handmade paper 1 322 60
60 5.8
4. Ship-building/repa';r
Shipubuildingirepair 1 073 91
91 4.7
5.
5, euHdets' carpentry} jo inery
Builders'carpentryijoinery 792 100 3.5
6. Cane products
Cane products 471
471 100
103 2.1
7. Too ls
Tools 393
393 67
67 1.,
8. Lacquered articles
Lacquered articles 344
344 100
100 1.5
9. Cases, emcluding
Cases, packiog,s
e~cluding pacKings 222
227 100
100 1.0
11 (100) 1/
10. Preservation
Preservation (l8D
11911 2' (130)
11 . Pulp manufacture
Putp 179
179 100
100 0.8
12. Straw products
Otras products 178
178 100
100 0.8
13. Cooper. product
Cooper, productss 38
38 100
100 0.2
14. Store fixtures
Store 1) xtures 20
20 100
100 0.1
21
2!
1S. Other wood products
woed products n.e.s. 31 100 .1

SUbtotal
al 17 989
17 989 73
73 79.4

S. KK to 49% of particular industry total,

16. Pulp,
F.)n, paper, board, n.e.s.
paper, boa 1 132
132 35
35 5.0
5.0
17.
17, 31
Matches 51 741 43
43 3.3
3.3
13. Wooden pa'aings, (see oleo
packings~ (see also 8>
8) 736
736 47
47 3.3
3.3
19. Brushes? and
Brushes, and broces
brooms 585
585 34
34 2.6
2.6
20. Woeden/cane containers
Wooden/cane containers 291 39 1.2

Subtotal
Subtotal 3 455 39
39 15.3
15.3

C.
C. Where SSE
SSE employment
employment is
i . Leso
Less than 25% of
than 25% particular
of paro/cola totaL:
indust ry total:
r Industry

Veneers, plywood~
21. Veneers, panels
plywood, other panels 1 078 55 4.8
4,8
manuf at tu re
22. Newspript manufacture 72 5
5 0.3
0.3
23. Reconstituted wood 31 3/ 41 13 0.2

Subtotal
Subtotal 11 191 55 5.3
5.3

4
D. TOTAL wood and cane pro< , 22 635 64

E. processing as % of all
Wood/Cane processing Category A = 1. r
uf activity total.)
manuf~cturing
manufacturing SSE emPlOYment
SSE employment: Category
Category B = ,.4 4, of "
Category C = 1.5 (under 2555

Source: FAO (198)~)- Table

FAD (1985a)- ';:able 7.
7.

Notes 1/ Data for

Data for 1971
1971 -- not
not given
given forfor 1975.
1975.
2( n.€.s:::;
n.e.s elsewhere specified
= not elsewhere F., ?cified
Presumably
Presumably mostly
most(y prepressed
pre,. furniture components etc,
Kniture components etc. butbut also
also
sheet
sheet particLebcard~
parn4Leboard.
41
4/ Exclvdes activities where
Excludes where wood processing is
wood processing ;13 only
only aa minor
minor e(ement
el"ement or one which
or one which
cannot be traced
traced inin U.e
the aggregate
aggregatestatistics
statisticse.g.e.g.ininthe
'theCoto:.
totaiforfer''toys".
·'toys".
 Estimates
Estimates of growth
of growt rates in
h rates in eemployment
mployment for
for small
small scale
scale wood
wood processing activities
processing activiti es

Rate of increase in
Rate of in employment (% per annum)
(% per annum)

S/LEONE 1974/80
S/LEONE 1974 / 80 l/
1/ S.KOREA
S TAIWAN**
. KOREA TAIWAN*' PHILIPPINES
PHILIPPINES
Type of
Type of wood processing
processing -
By city population
By city populatio n ('000)
(1000) 1961-72 1967-72
1966 / 7}
1968/75 1966171
1968/75
Under
UndE; 10
r 10
'
Over
Under
Under 10
10 10
10 or
or more Ove r 10
2 -- 20
20 20-250 over 250 ouseholds
"ouseholds very
ver y small
workers
workers-, workers
worke rs large
Large scale
scale

1.
1. Forestry and logging
l ogging
2.
2. Charcoaling
Cha rcoali ng
8/
8/
33.. Sawmilling
Sawmill ing -- - 00.9
.9
4.
4. Veneer, plywood,
Veneer, plywood, panels
pane ls 0.0
0.0 1.3
1.3
5.
5. tools
Wooden tools
6.
6. Wood carvi ngs /handicrafts
Wood carvings/handicrafts n.e. 'k
n.e. l/
_3/ * 24.0 15.0
24.0 15.0
7.
7. Carpentry -0.6 8.6
8.6 3.6
3.6 1.1
1.1
8.
8. Furniture/fixtures
Fur nitu re / fixtures 1.2
1.2 7.7
7. 7 4.4
4.4 27.9
27.92.1 5.9 7/
5.9 2.1
9.
9. Boat/ship/vehicle
Boat/ship /ve hicle building
building '"w
10.
10. Wooden
Wooden cases/packing
11.
11. Wood,
Wood, cane
cane,, bamboo products
products
12.
12. Other
Oth or unspecified
e r or unspecifi e d wood
products 10/
7.6
7.6 4.4
4.4 24.3':.1
24.3/ 123~/
123/ 14.5 i2/
14.5 10 / 7.0
7.0 ---
113.
13. SUBTOTAL
13. SUBTOTAL WOOD PROCESSING
WOOD PROCESSING 0.5
0.5 8.8
8.8
6/
6/ 99// 9/
14.
14. Other
Other wood-based
wood-based products 55
55 'lJ 68'l.
682// n.a.-
n.a.- 12.0
12.0 6.2
6.2 -_ - 36.7
36.7 'if
-
15.
15. Cane produc t s
traw, bamboo products
Cane,, sstraw,

Source:
Source: FAO,
FAO, 1985 ( a ) Table
1985(a) 5:
Table 5: compil
compiled
e d from several listed
se ve ral sources list in the
e d' in report.
the original report.

1/
1/ There
There were only
on l y 33 towns
towns eeach
ach in population ranges
in population ranges 2 000-20 000 ~/
000-20 000 6/ Not accurat e .
Not accurate.
and
and 20
20 000-250 000 but but only
onl y 11 town
town over 250 250 000,
000. ~
7// Furnit
Furniture
ure -- including upholst e red.
including upholstered.
2/ A =
2/ A . increase
increa s e in
in employment;
employment; B B = increase
increas e in numbers
numbers of
of ~/
8/ Rates
Rates ofof change
change very
ve ry large
large but
but initial
initial bases
bas es or abso lut e
or absolute
enterprises.
e nterprises. changes too small t o be meaningful.
changes too small ro be meaningful.
3/ n.e..=
3/ n.e· ~ non existent.
exist e nt. 9/
9/ In
In this
thi s case
case paper mi ll s .
pap er mills.
activity
** = activity existed but accou nt ed f or inSignifi cant e mp
but accounted for insignificant employment. 10/ lo yment. 10/ Ot her wo
Other wood furnitur e .
od and furniture.
~4/
/ Gross increase
in c rease over
over the
tile 77 years (5 ye
years (.5 years
ar s for
f or Taiwan)
Taiwan ) not annual
not annual
rate;
rat e; this
thi s applies
applie s also
also to t o 5/.
1/.
5/ Pulp,
5/ Pulp, paper,
paper, printing
printi ng and publishing
pllblishi ng in in this case.
this case.

N.B.: ;*
;'** For
For Taiwan
Taiwan read
rea d "China,
"China, Province
,Province of Taiwan",
o f Taiwan".
 ANNEX 6
6

,
Selected characteristics ot FB-SS1's

Country 1
Country 11
Sierra
Characteristic
Characterist ic Jamaica Honduras Eewpt Leone Bangladesh
((1975/60) 1979/51) 1951/52) ( 1974/75 1
((1978/F0)

A.
A. KirRIS

1.
1. Sh:::-"l'c
Chape in in tot8~1
total S3I
031 firn duelers ()
firm ltu.rnoers '7
0,
37 15
n 25 15
1) 21

2. Loc':,3;(~d.
:<. Locyted in rural
rur::tl areas (%) 55
88 100
100 80
80 9: 97
\vith no
:;3... With no mc·:,chines
mchines (A 69 09 'I')
93 ? 99

IL
TI. Employme.nt
1..
1. 3hare inall.
Shahe in all (mnufacturing)SSSl!'s(%) 35 1(
16 24
?4 20 117)

2" Shard in rural

2. Sh.?:re lur,J,l erhas
B.!"ec.s (%)
(%) 79 100
lup 65 96 ?7
'""
C.
C. Labour force
Average Horkorn
workers per firm (No)
(a0) 22.0
.0 2.7
2.~ 11.5 1.7
1.7 2.4
2.4
1 Horker (ifc of
worker (5c cf firms) 58 -59 69
G9 ?7 36
pi ) 25
2B ?? (.0
6u
?2 -
- 55 (( " 38
38 37
37
II If'" 33 ? 44
6 "".no
G end over ( n 44 4"

7,ource: (
FAO (1985),
), Tale 68
T"ble
** Bead
Read ? aXJd over
'7 employees and
1/Whole
1/ ltiholc country CQV'8Tn.ge only for Jadaica
count!'::l coverage and Sierra,
Ja.rr:e.ica, 2tnd Leone
Sierra Leone
 -- 95 --

ANNEX 77
ANNEX

Selected market-related
Selected market-r el at ed data
da ta for
for F8-SSI
FB-SSI

-- - --
Count q 1/
Country 1/
Item
It em J ,:tnv ~ ic ,=!..
Jamaica Honduras
Hondur:l.s Egypt
EglTIA Bangladesh
J"1;lg1 :tdesh
(1975/80)
( 197!l/ilO) (1979/81)
( 1979/8 1 ) (1981/82)
( 1981/82 ) (1978/80)
( 19 7 [;/80)

A.
A. Sales
S::11 es nrofile
nrofil e by dest inat i o n ( `¡,)
to;)' destination j'; )
7[; -?
? 7?
-- ttoo final COllSUI:1e r
final consumer 76 I';" .'

1c', ?? ? 422
- di st rib utor(s)
- to distributor(s) 19 ~

-- Government
t o Government
to
,
i
G ? ? ?

11 ?? ? 99
- direc
direct export
t export

D
D.. Proportion of total
P;rQ:QQrtion sales
total sales (j:)
(A
"On order"
oruer' basis )13 ? 47
47 ?
- liOn basif;; 58
- On
On credit 10 8
8 18
18 11
11

1/
1/Whole
Hhole country
countr:,{ coverlg e only
coverage only for J c~.m<1icc
for Jamaica
Source:
Source: FAO
Fli0 (1985), Palle 99
( 1985) , 'ro,1-,le

ANNEX 88

Geographical distribution
di s tr i bution of
of sales
sa l es anC
a nd channels
c hannels for
f o r SSI
SS I marketing-data
mar keting-data f.or
for Hait
Haitii

Dest s al es
i nat i on of sales
Destination

Local Markets
Market s lIark ets within Country
Other Markets .

Product
Fino.l
Final Subcont Tact
Subcontract Tr3.(lers
Traders Touristf5
Tourists Export Tot a l
Total
Consumers Trade rs
Traders Sales

Wooden Seul pt u re
Sculpture
" C
'•• >,! 12
12 12
12 14.
1.~ 122
~,
24
74 100
C~rpentry
Carpentry
Product
Productss ,'60
30 "
'', ~-i
5 11 0 11 100
100

Stra :/J, Sis.?l,

Straw, Sisal,
B~ml:lo
Bamboo o 4~
4', '13
13 e 2::'
22 .:'4} 10 100

Source: Haegl'lade et l (177,)

 - 96
96 --

ANNEX
ANNEX 99

aanking of Ei 391 according to enirepreneur perceptions

(where 1 - top)
.--.~

2/
Frollom
Fro!:.'lom
Jr:.r;19,ica
*TcP,Pi, Egypt
kYP, Leone
[ 1978 / 80 ) 11!)C.14( 1
(1981/82) (1974/75)

1. Finance
Fillii.nCe 1

2. Raw materials
Ra1i ma.t ori;:ds 22 2

3. Demandti
De 33 2 33

P:iO (1955), T~hle 11

1935), Table 11
PC /erase only
cove:::·;;tge
. onlyiniYlJainasior.
J o.,mF:;ic2, and
·:O"Ucl Sierra
3ie:;:'TaLeone
Leone

ANNEX
ANNEX 10
10

1fiar as a problon erprises

i:
::£:EttrT8Pl'Co.0-ur
o t st tiriAte
ectir,nte of
0: ".';',,ofofCompetition
Competition

Rural*
RUT'i?l* I Small TTowns*" I Uno;;n'
Urh::m* All
W.11 4J:;l,mcdc2l
How firm's production
How firwts production
fared
f?Tod during last year
,1, "'~ bst Y02T Tioar
!YI'O)(l From
"ro m ::?ron
'2,--,r1 Frof'! From
i?rO;l"l From
Fror:l From
PrOM Fra0
From
SSE's LSE1s
LSE,s i SSJ!.:'s v:n::;'s SSE's LSE's
SSE,s LSIii's SSE's
SSE ti's
LSE's

,I,
Inn1t..
IncT0".f50,d Gl~
64 65 ./
r.:c
55 18 54 42 53
:)3 10
10

Rem<:'.i ne(l unchongea

unchrUlgec'·, 65
85 ,
/
G'i
51 ry
7I 51
61 27 04
64 I7
n,
Dec," " 3"
84 4 I
6?2 20
~o 42 40 75 7ry

(Notes:
(Notes: 1)
1) * Fopula, )71 r.o.ngez
"Population r^ ('()()o):
T): Rural =~ under 2;; Small
Rural Sme.ll towns
tmms = 2-20;
u:::ban ~ 20-100
2) note
N t:'iat the
-- foY' compe~ition an from
from SSE!s
SSE's and
and LSE's
LSE's do
- do not
not add
G.ud
up
up to 100; the dii'ferel1ce is for
. t6r 'not
II no t Known", "no competition"
kno\-;n!l, IIr:,.O competition" and
ano other
other
replies
3) SSE:= So~ll
SSE -nail SOU enterprise5;
scale enterprises; LSE = L8..rge
Large scale
so-oleen:te::-prises
enterprises

SOUTPe: FAD (lat), Table 62

 -- 97
97 --

ANNEX 11
ANNEX 11
So urces of
Sources o f funds
fu nds for
for SSI's
SS I' s in
in selected countr ies (not
sel ected counlries (no t onLy
on l y forest-based
fore st-based ones)
ones)

I e/0
%of total
total funds
funds
!
S i erro?, Leone
Sierra Bangl adesh
Bangladesh Hai t i
Haiti
Source
Source of f unds
of funtls
Init i a l
Initial Expan-
Expan- l ni t i:),1
initial Expan-
Expan- Ini ti ~.l
Initial E)(pan-
Expan-
invest -
invest- sien
sion i nvest -
invest- sien
sion invest -
invest- sian
sion
ment c'1pi tal
capital ment
ment capital ment
ment onpital
capital
11.
• Personal gi f t s
Savings, gifts
Fersonl Savings,
re i nvest ed profits
and reinvested
?nd 75. 5
75.5 88 .5
88.5 73 . 0
73.0 89 . 0
89.0 72 .0
72.0 81. 0
81.0

2. Loans
2. I 6.0
6.0 8.0
8.0 hl 11.0 12.
12.00 l2.!Q
19.0
of which:
of wh i ch:
00.1
.1 1. 2
~
Commercial
Commercial banks 0.
0.99 0 .0
0.0 3 1.2 ., . 4
3.4
Government
Government agencies 00.0
.0 0.
0.00 0. 1
0.1 7. 1
7.1 0. 5
0.5 0.0
.0.0

Moneyl enders 1.2

~
Moneylenders 0 .9
0.9 4.0
4.0 0.9 1.2 6· 5
6.5
Rel ati ves/friends
Relatives/friends 4.2
4.2 00.0
.0 1.8
1.8 1 3. 9
3.9 9.1
9.1 9 .1
9.1

Other loans
l oans 00.0
.0 4. 0
4.0 0. 6
0.6 0. 0
0.0 0. 0
0.0 00.0
.0

:l. Other sources

so urces 18 . 5
18.5 3· 5
3.5 23 . 5
23.5 0.0 16 . 0
16.0 0. 0
0.0

44.. TOTAL FUNDS

FUNDS 100
100 100
100 100 100 I 100 100
_c================== ==== ===:====d===~======= ====~=== ===========
G- ====
GG====~=== ======= ===c=====
Source:
Sol.Irce: Ada pted from
Adapted from FAD (1985), Table 16.
FAO (1985), 16.
 -- 98 -

REFERENCES

J.J.
Boomgard, J.J. small-scale furniture
The economics of small-scale furniture production
production and
and
1983 distribution in
in Thailand.
Thailand. Ph. D.
D. Thesis. Michigan State
Thesis. michigan State
East Lansing.
University, East Lansing~

Child, F.C.
F.C. Employment,
Employment, technology and growth -- The role
role of
of the
the
1976
1976 sector in
intermediate sector in Kenya.
Kenya. University
university of
of Nairobi, Institute
Nairobi, Institute
Development Studies.
of Development Studies. Occasional Paper No.
NO. 19,
19, Nairobi.
Nairobi.

Chuta, E.
E. & Liedholm,
E,Lledholm, C.
C. Rural employment: A
Rural non-farm employment: the
A review of the
1979
1979 state of the art. Michigan State University,
the art. University, Rural
Rural Development
Development
Series No.
No.4,4, East Lansing.
Lansing ..

FAO. Rural non-farm employment and income

Rural income generating
ing activities in
in
1984
1984 developing countries:
countries: The
The contribution of
of wood-processing
wood-processing
activities. Internal
Internal Working Paper No.
No.1, Rome.
1, Rome.

FAO. The of small scale forest-based

The contribution of forest-based processing
1985 rural non-farm employment and income
enterprises to rural income in
in selected
countries. Report
developing countries. Report FO:MISC/85/4,
FO:MISC/8 ,Rome.
Rome.

FAO. Rural non-farm employment and income

Rural income generating
generating activities in
in
1985 developing countries:
countries: The of wood-processing
The contribution of wood-processing
activities. Internal
Internal working NO.2,
Working Paper No. Rome.
2, Rome.

Y. &
Fisseha, Y. o~
6 Davies, C. The
The small
small scale manufacturing enterprises
enterprises in
in
1981
1981 Jamaica: Socio-economic characteristics and
and constraints.
constraints.
Mich an State University,
Michigan University, East
East Lansing.
Lansing.

S. et al,
Haggblade, S. Small
Small manufacturing in
manufacturing and repair enterprises in
1979
1979 Haiti: results. Michigan State
Survey results. State University.
un ity. Rural
Rural
Development Series
ries Working
Working Paper
Paper No.4,
No.4, East
East Lansing.
Lansing.

House, W.J.
W.J. Redistribution, consumer demand and
Redistribution, and employment in
in Kenyan
1981
1981 furniture-making. J.Dev. 17(4), pp.336-356.
J.Dev. Studies 17(4), pp.336 356.

P.J.
Malton, P.J. Income distribution among
among farmers
farmers in
in northern
northern Nigeria:
Nigeria:
1979 Empirical results
results and
and policy
policy implications.
implications. Michigan State
University Rural Economy Paper
University African Rural paper No.
NO. 18, East
East Lansing.
Lansing.

World Bank Employment

Employment and
and development of small
small enterprises -
- sector
Sector
1978 Policy Paper,
paper. IBRD, Washington.
IBRD,
 ~ 99 -~
- 99

BAMBOO-BASED INDUSTRY IN
IN KERALA STATE,
STATE, INDIA
by
by

C.T.S. Nair*
C.T.S. Nair

CONTENTS

Page

1. INTRODUCTION 100

2. BAMBOO REED INDUSTRY:

INDUSTRY: AN OVERVIEW
OVERVIEW 100

3. EMPLOYMENT AND INCOME

INCOME GENERATION 101
101

3.1
3.1 Sector
Traditional Sector 101
101
3.2 Modern Sector
Sector 102
3.3 Traditional Sector Vis-à-Vis
Traditional vis-~~vis Modern Sector 103
103

OFFICIAL SUPPORT PROGRAMMES 104

5. APPROPRIATENESS 105
105

6. KEY SECTOR PROBLEMS 106

7. CONCLUSION
CONCLUSION 108

REFERENCES 109

* Forest~
Forest Economist, Kerala Forest
Economist, Forest Research
Research Institute,
Institute, Peechi,
Peechi, India.
India.
 - 100 -

1. INTRODUCTION

Production of
Production of mats
mats andand baskets
baskets using
using bamboos, especially the
bamboos, especially the
thinner
thinner reed
reed species
species (Ochlandra
(Ochlandra tr,.%ancdrica
travancorica and and O.~ scriptoria),
scriptoria), is is an
an
tant cottage
important cottage industry
industry in in xerala
Kerala State.
State. Weavingwas
Weaving wastraditionally
traditionally
ur :taken by
undertaken by landless
landless aciticultural
agricultural labourers,
labourers, particular"
particularlythosethosebelong-
belong-
ing to
ing to the
the scheduled
scheduled cases
castes andand scneduled
scheduled tribes
tribes as as aa leisure
leisure time/off-
time/off-
season occupation
season occupationand andasaspart
part of
Of their
their feudal
feudal obligation
obligation to to the
the landed
landed
Production was
class. Production
class. wasdirectly
directly linked
linked to to the
the needs
needs of of the
the local
local agri-
agri-
cultural sector.
cultural sector.

Expansionofof trade
Expansion trade favoured
favoured the the growth
growthofof reed
reed industry
industry by by en-
en-
hancing the
hancing the demand
demand forfor products.
products. Duetoto their
Due their low
low cost
cost and
and durability,
durability,
mats began
mats began toLObebeused
usedas as aa dunnage material ininwarehouses.
dunnage material warehouses. Production and
Production and
export of
export of mats
mats to to trading
trading centres
centres like
likeBombay
Bombay isis more than,a
mare than a century
century old
old
(Bourdillon, 1893).
(Bourdillon, 1893). Of the total,guantity
Of the total quantity of of1212million
millionms m2 of
of mats
mats used
used
in India
India per
perannum, 10 million
annum, 10 million ms
m is 2
is produced in Kerala
produced in Kerala (Anon,
(Anon, 1981b).
198Ib).
Large scale production of baskets is closely linked to the trade
Large scale production of baskets is closely linked to the trade in in
fruits, vegetables, betel leaves and fish. Thus, within the traditional
fruits, vegetables, betel leaves and fish. Thus, within the traditional
sector, there are two subsectors, one catering for local requirements and
sector, there are two subsectors/ one catering for local requirements and
the other
the other centred
centred on
on bulk
bulk markets located mostly
markets located mostly in
in other
other atetes.
states.

2.
2 BAMBOO
BAMBOOREED INDUSTRY,
REED INDUSTRY: AN OVERVIEW
AN OVERVIEW

About300
About 300000000persons
personsareair:directly
rirectly or
or indirectly
indirectly dependent
dependent on
on the
the
1):(ditional reed indus,
traditional reed industry (Govt. of Kerala, Kerala, 1983).
1983). Although is
Although weaving
weaving is
a part-t(me ,r upation, IL is an important source of livelihood
primarily a part-time occupation, it is an important source of livelihood
for a sizeable section, particul-rly the landle;
for a sizeable section, particularly the landless -,cultural labourers
icultural labourers
and tribesmen.
and tribesmen. Data on
Data on the
the extent
extent ofofdependence
dependence ' hciseholds on
households on reed
reed
industry are not readily available.
industry are not read ily available. it forms an activity
Nevertheless,
Nevertheless, it forms an act i vi
which provides
which provides the
the maximum employment
maximum employment within
wi thin thethe forestindustries
forest industries sec-
sec-
'.-2attered nature of pction and marketing makes it dif-
toc.1/ The scattered nature of production and market Ing makes it d i f-
tor-l/
ficult to a - -; the contribution f', the traditional sector.
ficult to assess the contribution from the traditional sector. Based on
Based
the input-out ratios and the quantity of reeds removed from forests,
the input-output ratios and the quantity of reeds removed from forests,
the total
the total v.liue
value of
of production
production is
is estimated
estimated at atabout
about Rs.
Rs. 90-100
90-100 million.
million.

Rourohold producton to meet local demand is sp

Household production to meet local demand is spreadi thrc, throughout
( ut
the state.
the state. Hnduction fo-
Production for bulk
bulk markets
markets is,
is,however,
however, cew.
centred
( aro:16 cer-
around 1 r-
tain locali:
tain localities. Easy accessibility
Easy ayc--sibili,»- to raw
raw material
material sourc-
sOurcea:1d
and transport
facilities importut factors t!c)t have led to sucl, concer.:!,
facilities are important factors that have led to such concentration. A
major propor: un of mats for exports outside the state is produ a the
maJor proportion of mats for exports outside the state is produced in the
Angamaly-Kaladyregion
Angamaly-Kalady regionininErnakulam district. Availability
Ernakulamdistrict. Availability of of reed inJAIthe
the
forests of the Periyar river basin and feasibility of water trans )rt have
forests of the Periyar river basin and feasibility of water transport have
been important factors that led to
been important factors that led to the the growth of reed-mat
growth of reed-mat production
production in in
the area.
the area. in Trichur dvArict ar' ,,-dumangad
Talappally in Trichur district and Nedurnangad in in Trivandrum
Trivandrum
district are important centres of
district are important centres of l,asketbasket wee,.
weaving. Production of
Production of dining
dining
table mats is concentrated in Trichur district and is the result of the
table mats is concentrated in Trichur district and is the result of the
spin-off effect of imparting technical
spin-off effect of imparting technical know-how
know-how toto local
local workers
workers by by the
the
first unit
first unitestablished
establishedabout
abouttwo
twodecades
decades ago.
ago.

Suitability of reeds for the manufacture of pulo and paper was

Suitability of reeds for the manufacture of pulp and paper was
recognized nearly
recognized nearly aa century
century ago
ago and
and the
the Punalur
Punalur Paper
Paper Mills ,,.tablished in
Mills established in
1890continues
1890 continuestoto use
use reed
reed as
as the
the most
most important long-fibro material.
important long-fibre :,,aterial. Of

1/ is one of the most important forest-basc

Sawmilling is one of the most important
Sawmtlling forest-based industries in in ustries in
the organized sector.
the organized sector. In 1982
In 1982 there
there were
were 1024
1024 reg(
registered sawmills-

numberof
and the number
and of persons
persons employed was 6980
employed waS 6980 (Nair ,, 1984).
(Nair et aI., 1984).
 -- 101 --

the total
total requirements
requirements of
of 664
664 000
000 tt of fibrous raw material
of fibrous material by the
the three
three
pulp
, p and
and paper
paper units
units in the State, reeds
the State, account for
reeds account for about
about 41
41 percent
percent
(Karunakaran, 1983).
.runakaran, 1983). Especially
Especially inin the
the case
caSe of
of the
the Punalur
Punalur Paper
Paper Mills
Mills
and the
and the public
public sector
sector newsprint
newsprint unit,
unit, dependence
dependence on on reeds
reeds is very high
is very high
(Asari, 1978;
(Asan, 1978, Anon,
Anon, 1981a).
1981a).

3. EMPLOYMENT AND INCOME

INCOME GENERATION
GENERATION

Reed-based production
production represents
represents extreme
extreme situations
situations in
in the
the whole
whole
spectrum ofof technological
technological chc choice
c,e with capital input,
with the low capital input, labour-
labour-
intensive basket and
intensive basket and mat
mat weav:,':
weaving r-epresenting
representing one
one extreme,
extreme, and highly
and the highly
capital-intensive pulp and
capital-intensive pulp and pap-1
paper manufacturing the other.
ufacturing the other. Given a product
mix, flexibility in
mix, flexibility in the
the choice
choice t.techniques is extremely
hiques is extremely limited.
limited. Important
characteristics of product
production,L1 in
in the are discussed
the two sectors are discussed below.
below.

3.1 Traditional Sec

A number ofof institutions,
institutions, viz.
viz. hour.. .;:ds, private entre
households, entrepreneurs,
JrS,
cooperative societies and the Government-owned
cooperative societies GOvernment Bamboo Corporation, are
Bamboo Corporati- ,

involved in
involved in the
the traditional
trad i tional sector.
sector. Avai'a'Ality
Availab i l i ty ofof reeds
reeds in
in the imme-
the imme-
diate vicinity and easy easy -:cess
aCCess to local markets
to local markets enabled
enabled the
the household
producers i r.:ntly. Development
producers to operate independently. Development of of bulk markets in in dis-
dis-
tant places and
tant places and the
the increasing
inc' :asing distance
distance toto reed
reed sources
sources facilitated the
facilitated the
entry
entry of
of entrepreneurs
entrepreneurs who who were
were able to take advantage of of the
the economies ofof
scale in transport of
in transport of rawraw material
material and
and products.
products. Although these
Although these inter-
inter-
mediaries
mediaries play
play aa useful
useful role,
role, most
most often
often they
they tend
tend to to exploit
exploit the less
the less
resourceful household producers. organizations
Organizations like I ike the State Bamboo
Corporation and
Corporation and cooperative
cooperative societies
societies were established
established to to free
free the
the pro-
pro-
ducers the exploitative hold of
ducers from the of intermediaries.
intermediaries.

Employment processing
Employment in [roc, ,ring of
of reeds including the full-time
reeds including full-time equi-
equi-
valent part-time emplod
valent of part-time employment isis estimated about 75
estimated at about 75 000.
000. Almost 90
Almost 90
percent of the production is
the production is undertaken households.
undertaken by households. In cases
In some cases
cooperative societies
societies and
and prii
private entrepreneurs have resorted
te entrepreneurs resorted toto workshed
production.

Salient features
features of processing in
in the
the traditional
traditional sector
sector are:
are,

1. Capital intensity
intensity of production
production is is very low,
low, particularly
particularly in
in
the case of production
the production byby housenolds.
households. A good and aa
good billhook and
sharp knife
knife or
or blade
blade are
are tne
the only tools required.
required. Fixed
capital worker .eldom
capital investment per worker seldom exceeds
exceeds Rs.
Rs. 15.
15. In
In the
case
case of the hmboo
of the Bamboo Corporation
corporation which
which maintains
maintains aa number of
number of
collection depots and warehouses, fixed capital investment
fixed capital
per person
per person is about Rs. 50. 50. In the
the case
case ofof workshed
workshed
production,
production, this isis about
about Rs.
Rs. 85.
85. Production
production of dining table
table
mats requires investment
mats investment onon weaving
weaving looms,
looms, storage space,
space,
dipping tank,
tank, etc.
etc. Even then the
Even then the fixed
fixed capital
capital per
per worker
worker
seldom exceeds Rs. 200.
200.

2. Apart from
from labour
labour and
and reeds,
reeds, production
production of
of mats
mats and
and baskets
baskets
involves the
involves the use
use of nonO other
other inputs.1/
inputs.ll Power and
power and fuel
fuel
consumption is is negligible.
negligible. The skill~or
The skillfor weaving
weaving can
can be
be
easily acquired
acquired and even
even children
children participate
participate in
in the
the produc-
produc-
tion process.

21 Cost
Cost of reeds
reeds and
and wages
wages together
together account
ac£ount for
for 92
92 percent
percent of
of the
the pro-
pro-
duct ion cost
duction cost of
of baskets.
baskets. In the case of table
In the table mats these
these two
two con-
con-
stitute
stitute 7171 percent
percent of thethe production
production cost
cost and
and about
about 15
15 percent
percent re-
re-
to the
lates to the cost
cost ofof nylon
nylon yarn.
yarn.
 -- 102 --

3.
3. historical r,,.1:Jris
For historical reasons the ir.dnstry
industry isis dominated
dominated by by socially
socially
and economically ::ackward
and economically backward sections of of society,
society, particularly
particularly
scheduled castes
scheduled and scheduled
caf.ten aad tribes.
soneduled tribu,,. furthermore, women
Furthermore,
the TujOL
form the major work-force. Weaing
Weaving can
can be
be combined
combined with
with
household ,1-..ares
chores andand is is
easily
easilyacceptable
accetr,ble in
in aa society
society which
which
sees women's
women's domain
domain limited
limited toto the
the nousehold.
household. Being
Being aa low
very few
wage sector, very few men areare attracted
attracted to
to weaving.
weaving.

Indirect
Indirect employment from collection and transport
employment arises from transport of reeds
reeds
and finished products, supervision
finished products, supervisionand andmana..:,ment
management of production and
of production
collection centres,
centres, etc.
etc. About 5 000 persons
persons i':
are estimated toto be
be employed
in the
in the collection ofof reeds.
reeds. Due to
to the
the arduous
arduous n.-:%ure
nature of
of reed
reed cutting,
cutting, it
was an exclusive preserve
was preserve ofof men.
men. Growing unemployment
Growing unemployment andand improved
accessibility have
accessibility have facilitated
facilitated thethe entry
entry ofof women
women into
into this field.
'ield.
Transport of
Transpon, of reeds (carting, rafting, truck transport, loading and
unloading) and supervision
unloadini) and supervision and
and management
management areare mostly
mostly undertaken
undertaken byby men.
men.
The number of
total number
The tot,,J of persons
persons employed
employed in these
these activities
activities are about
about 22 000
000
to 33 000. Income
Income per worker belonging
per worker belonging to to the
the different
different categories is
given in
in Table 1.1.

Table 11

Workers income in traditional reed industry

Category Income/year
(in Rs.)

1.
J. Mat and basket weaver
Mat weaver 820.00

2. Reed loading and

Reed cutters and loading and 33 000.00
workers
unloading workers

3. Supervisory and
and management staff
staff 77 500.00

Source: Estimated from

from the
the balance
balance sheets
sheets available
available
from cooperative societies,
from societies, Bamboo
Bamboo
and local
Corporation and local enquiry.
enquiry.

Generally
l'nerally income earned weavers is
earned by weavers is extremely low in in comparison
comparison
with other categories ofof workers.
workers. Payment
Payment isis on aa piece-rate
piece-rate system
system and
and
wages almost reach the levol
reach the level of
of the opportunity cost cost ofof time.
time. Daily
earnings of
of reed cutters ma:
may b,
be as
as high
high asas Rs.
Rs. 40
40 but,
but, due
due to
to the
the seasonal
seasonal
nature of work,
'e of work, their abnual
annual income is is low. Collection of
Collection of mat-quality
mat-quality
reeds requires extensive travelling
requires extensive travelling and
and the reeds collected have
reeds collected have to
to be
transported
nsported to
to the roadside.
the river or roadside.

Managerial and supervisory

Managerial and supervisory staff
staff are
are mostly
mostly permanent
permanent employees
employees
and, since salary is
and, since is not
not linked
linked to
to production,
production, thir-
their earnings are high.
In the case
In the private sector
case of private sector ventures,
ventures, r116:1 rial and
managerial and supervisory
ervisory
,

functions are performed directly by entrepreneurs

entrepr,nears ttc
themselves,
:es, and
aration of
separation of income between managerial
income between managerial remuneration
remuneration and
and profits
profits isis
di icult.
difficult.

3.2 Modern Sector

In contrast to
In contra.t household sc_Ile
to household scale production
production ofof mats and baskets,
mats and baskets,
the pulp baonr industry is
:ID and paper is highly capital and
big: 17 capital and skill
skill intensive.
Processing
Proc-: sing involves
involi,s complete physical
physical and chemical
chemical transformation and,
transformation and,
conseq-ently,
consequently, energy
energy requirement
requirement is is high.
high. About 20
About 20 percent
percent ofof the
operati ng cost
operating cost is accounted for
is accounted f or by
by power
power and
and fuel
fuel while
wh He wages,
wages, salaries,
sal aries,
 - 103
103 -
-

etc., constitute only about 12 to 15 percent of the cost.

etc., const; tute only about 12 to 15 percent of the cost. Direct
D; rect employ-
employ-
in the pulp and paper units which use reeds as fibrous material at
ment in the pulp and paper units which use reeds as fibrous material at
full capacity utilization may not exceed 10 000 and only a part of this
full capacity util ization may not exceed 10 000 and only a part of this
can
can be
be considered
considered as
as an
an outcome of using
outcome of using reeds.
reeds.

As in the case of the traditional sector, collection of reeds is

As in the case of the traditional sector, collection of reeds is
an important
an important source
source of
of indirect Since reed cutting is not as
indirectemployment.
employment. Since reed cutting is not as
seloctive as in the case of the traditional sector, labour output is
selective as in the case of the traditional sector, labour output is
hi,hcr and, correspondingly, coplop-wnt per
correspond i ngl y, employment of collection
per unit
un; t of call ect i on is low.
Eoployment in reed collecticr ar transport, when the total quantity
in reed collection and transport, when the total quantity
c- red to the
the pulp
pulp and
and paper
paper IFAJLV
i is
is removed, is estimated
removed, is estimated at 20 000
at 20 000
mln-cars.~
man-years

gives th
Table 22 gives
Table in,ome accruing to
the income accruing to workers of different
workers of different
categories in
categories in the
the pulp
pulp ar .-dustry.
and paper industry.

Table 2
Workers' in 'he pulp and paper industry
Categor..
Category Income
(in Rs./year)
I. Reed collection and
Reed collection and transport
transport 33 000.00

2. Factory workers
workers 88 000.00
000.00

3. Managerial andsupervisory
Managerial and supervisory staff
staff 14 000.00
14

Source:
Source: Estimated
Estimated from ba:ance sheets.
from balance sheets.

3.3 Traditional Sector

Traditional SectorVis-4-V:5
Vis-a-VisModern
Modern Sector
Sector

Obviously income.
Obviously income" p, worker is
per worker substantially higher in
is substantially h the modern
in the modern
sector. However,
sector. However, oth... ,meters like capital:labour ratio, raw material
other parameters like capital :labour ratio, raw material
and
and power
power consumption F.' worker
consumption per are also to be considered
..or, :1- are also to be considered inin investment
investment
decisions.
decisions. Table 33 gives ao comparison betweenthe
comparison between the traditional
traditional and
andmodern
modern
sectors.
sectors",

Although earningsper
Although earnings per worker
workerarearesubstantially
substantially high
high in
in the
the pulp
pulp and
and
paper industry,
paper industry, employment potential is
employment potential is very
very low
low and
and requires
requires high
high fixed
fixed
capital investment.
capital investment. Fuel
Fuel and
and raw material consumption
raw material consumption perper worker
workerisis also
also
very high.
very high. Considering
Consideri the problems
ng the problemsinin enhancing
enhancingthethe supply
supply ofof reeds,
reeds, aa
rapid expansion
rapid of reed-based
expansion of reed-based pulp
pulp and paper production
and paper production will
will have signi-
havesigni-
ficant negative redistributional effects.
ficant negative redistributional effects.
 -- 104 -
-

Table 33

Characteristics of reed-based industry

Traditional
Traditional sector Modern sector
sector
Input/output
Input/output ratios Mat Basket
Basket Table mat Pulp and paper
Pulp and paper
weaving weaving production

Fixed capital investment

capital investment 50.00*
50.00* 15.00
15.00 200.00 71
71 000.00
per (in Rs.)
)1 worker (in Rs.)

Power
..?r and
and fuel
fuel consumption
consumption 0.20
0.20 1.50
1.50 18
18 850.00**
year (in
per worker per year (in Rs.)
Rs.)

Consumption
)-51imption of
of reeds per
reeds per 1. 20
1.20 0.80 1.00
1.00 38.00**
worker
wo:)ter per
per year
year (in(in tons)
tons)

Wages and salaries per

',))s and 900.00 720. 00
720.00 800.00 10
10 775.00
worker per
sq.,,,ter peryear
year (in
(in Rs.)

Wages andandsalaries
,c)))):s salaries per
per 750.00 900.00 800.00 284.00
ton reeds (in
ton of reeds (in Rs.)
RS.)

"* ' Based on

B)is'ed accounts of
on the accounts of the
the Kerala
Kerala State
State Bamboo
Bamboo Corporation.
ion. Fixed
capital
,ital mostly
mostly relates
relates to
to warehouses
warehouses for f nished products,
for storage of finished
office buildings,
r. buildings, vehicles,
vehicles, etc.
etc.

*"
** Based on the
Based on the accounts
accounts of
of Punalur
Punalur Paper
Paper Mills for the
Hills for the years
years 1980-81
1980-81
during which
..7),ring thethe
which capacity
capacityutilization
utilization was
was only
only 20
20 percent.

4.
4. OFFICIAL SUPPORT PROGRAMMES
PROGRAMMES

In of their
In view of their contribution
contribution toward
toward rural
rural employment
employment and
and income
income
generation, the
generation, Government policy
the Government policy has
has always
always been
been geared
geared toto support
support the
the
tradi tional sector.
traditional sector. Offici al support programmes
Official programmes can
can be broadly grouped
be broad]
into, (a)
(a) creation ofof institutions
institutions andand providing
providing the
the lcgal
legal and adminis-
ani a:minis-
trative
trative framework
try
for their operation and
framework for
supplying raw
raw material
material at
and (b)
(b) direct
direct supp,Jt
concessional rates
rates from
from ,z)verr
to I- '
support to the indus-' Is-
Government for-
try by supplying at concessional )r- )

ests or by giving grants, loans,

ests loans, etc.
etc.

The Bamboo
Bamboo Corporation
Corporation w..) was )';tablished
established to to free traditional
free the tt.Aitional
workers from the exploitative
frc-r the expl)ritave hold ,)) of intermediaries
»termediaries and and thus
thus toto enhance
enhance
the
the traditional workers' income. Initially
trsOlv6)nal workers' I») )_)11ythe the Corporation
Corporation focused
focused atten-
ttion
i on on m(-reting.
market i ng. Subsequent I y, it
Subsequently, I t )ecame
became necessary to to take
take up collec-
collec-
tion
tion and
and distribution of reeds. reeds. At
At present the the Corporation
Corporation has has the mono-
)..fte mono-
poly for
for reed
TQC,1 collection
collection and all supplies to
and all to consumers
consumerS in in the
the traditional
traditional
sector
sector are channelled through
are channelled through thethe Corporation.
Corporation. As far
As far asas pro,,,,oent
procurement of of
mats isis concerned,
concerned, its its activity
activity is is limited
limited toto the
the Angamaly-Kalady
Angamaly-Kalady region.
region.
About
About 15 000 000 weaver
weaver families
families are are registered
registered with
with the
the Corporation
Corporation which
which
undertakes to
undertakes to supply
supply reeds
reeds to to these
these families.
families. Finished p:od)
Finished products))s are
are
purchased from
purchased from registered
registered weavers
weavers and and the Corporation sells the
the Corporation the mats in
different parts
different parts ofof the country.
the country. The
The Corporation
Corporation has been exempted '70M
has been from
payment
payment of
of the
the minimum
minimum price fixed as
price fixed as per the Kerala Fores:Forest Produce (Fixa--
tion
tion of Price) Act
of Selling Price) Act 1978
1978 and
and curre,J y no no stumpage
stumpage va2c,,
value is levied
from
from the
the Corporation ion for
for reeds
reeds supplied
supplied to traditional
Iraoitional workers.
worker.
 -- 115
105 --

Weavers registered with

Weavers registered with the
the Rarli:ao Corporationcan
Bamboo Corporation canget
get aa loan
loan of
of
up to Rs.
up for procurement
Rs. 100 for of reeds
procurement of reeds under creditt scheme
under a credi scheme operated
operated byby
the Corporation and the State Rank
the Corporation and the State Bank of India. India. AA number
numberofof welfare
welfare
programmes, such as educational schel,,b, house construction grante,
programmes, such as educational scholarships, house construction grants,
accident relief, etc., have also been initiated by the Corporation.
accident relief, etc., have also been initiated by the Corporation.

There arm
There 7,Jair 40
are about 40 cooperari,r %ocieties involved
cooperative societies involved :inin thethe reed
ustry witr
industry horli ru-ner
with ai total number of of auceof
about 5tb,0 000 Aorkers.
workers. The lrg,11
The 1 ftamework
framework
te estafrlirhivnt
for the establishment and .!.nd manager',nt .:-:peratives is
management off cooperatives is prw-ided
provided by by the
the
Kerala
o Coopecar, e Societies
a Cooperative C fieries Act, ,rd the Cooperatii- le,artaient is
Act, )969
1-).",a and the Cooperative nt is
i.:-q_ionsiblefor
responsible for implementation tne :i:.,visions of the nct.
implementation ct of the provisions of the act. ,Imvernment
Government
aiso gives liberal financial suppor: roperatives, especially to those
also gives liberal financial support to. cooperatives, ially to those
wnosemembers
whose members belong
belong to to thescheduled
the scheduledcastes ,.is,es and
and schedue
schedueldtribes
tribes.1/
. .!I

AAmajor
majorpart
part of
of the
the share
share capital
capitalisis
subscribed to to
subscribed byby
Government.
Government.
Other forms
Other forms of
of assistance
assistance include, (i) grant for purchase of (ii)
include, (i) grant for purchase of land, (i i)
building grant and (iii) grant to meet part of the expenditure on pay and
building grant and (iii) grant to meet part of the expenditure on pay and
allowances of managerial
allowances staff during
mana,jerial staff during the first five years of the
the first five years of the
establishment.
establishment.

An apex society ./ fonned

formed under
ie;irr to,,, initiative rf th. Government,
the initiative of the Government,
Kerala Stare unjan irijan
I

DerelopmentFederation,
Kerala State Harijan Girijan Cooperative Development Frd,:ari-n, helps
helps the
the
cooperative societies
cooperative -,,oicties in
in marketing
marketing thr.
the pr,ducts.
products. Some off theton booperatives
cooperatives
producing table
producing P-9b1,,mats
matsmarket
markettheir
their products through the
ucts through the Vi-lela
Kerala State
State Handi-
Handi-
crafts Development
crafts Governmentinvolvement
Development Corporation. Government involvementininthe
the functioning
functioning
of institutions engaged in reed industry is thus quite significant.
of institutions engaged in reed industry is thus quite significant.

5. APPROPRIATENESS

Appriirairreness
App ateness of a 5ie,ri .r activity has to be judged in the
of a sector or activity has to be judged in the
context of
context cd- given ,4JIta,rs and tte ,trectives of devel,p-
:ven socio-economic conditions and the ectives of develop-
ment. In
ment. In the
the Livaditiens
conditions pre tAl'n n in
prevailing u aa t/pita_
typicalcevel,ifing
oping..aountry
country situa-
tion, large section
tion, where a large section of the oc3_latIrm
DI the i,.
t.vlrw the 13^,eeL
population lives below poverty
line, fulfilment of basic ncea-
line, fulfilment of basic needs is 1, aa major F-sed on ce,r, n
major ori1ec.'1%,
objective. Based on certain
criteria
predetermined criteria of
predetermined appropriateness, a quantitative
of appropriateness, quantitative comparison
between the
between the traditional
traditional and
andmod,. sectors is given in Table 4.
modern sectors is given in Table 4.

As evident,
As evident, the
the tradii :onal sector
traditional sector has
has distinct
distinctadvantages
advantages over
over
the modern
the sector in
modern sector in several
several iits, clearly
clearly indicating
indicating its
Sf itsrelevance
relevance in
in
aa typically
typically underdeveloped situ.,1 ionasas prevailing
underdeveloped situation prevailing in
in Kerala.
Kerala.

l/ Mostofof the
Most the cooperatives
cooperatives involved
involvedinin reed
reed industry
industry belong
belongtoto this
this
category.
category.
 -- 106
106 --

Tab] e 44
Table

piateness of reed industry

Criteria
Cd teri" Basket and mat
Hasket mat weaving
weaving Pulp and paper production
i-
on

1. Generation ofof High.

High. A major of the
major part of the Low.
Loe. The
The average
average wages
wages are
needs
basic needs value
value added accrues as
added acctues as h
high and aa larger propor-
propor-
income basic needs
needs inccd.o
income tion
tion goes fulfil non-
goes to fulfil non-
consumption
basic consumption

2. product i on of
Production of A
A major part of
of the
the goods
goods The proportion that
that goes
goes to
needs
basic needs is
is directly
directly or
or indirectly satisfy needs is low
satisfy basic needs low
goods used
used in
in production of
needs goods
basic needs goods

3. Eruployment
Employment High Very low
low

4. Capital/labour Very
Very low
low h
Very high
ratio

5. Raw material
matr-'-r1 low
Very low high
Very high
consumption
per person

6. Skill
Skiil Very
Very low High
requirement

7. Poll ution
Pollution Neg I ig i bl e
Negligible Very high

8. Resource Mature reeds alone are

Mature reeds For pulp and
For and paper manu-
menu-
depletion harvested.
selectively harvested. facturing all reeds
facturing all reeds are
are
Rate of
Rate of resource deple- cut.
cut. Resource depletion
tion is low
tion is is
is high

9. Self-reliance
Self-reliance Promotes
Promotes self-reliance at
self-reliance at Promotes self-reliance at
Promotes self-reliance at
the
the local level
level the national level,
the national level, but
but
this could
this could undermine self-
reliance
reliance at local level
at the local level

10. Mult ipl ier

Multiplier Due
Due to
to dispersed nature
dIrpersed nat re of High. for-
High. Due to the high for-
effect pro uc
production low value
and ion .ve ward and
ward and backward linkages
added generation
rat ion multiplier
r iplicr
effect low
effect very low

Foreign
11. Foreros igible
ible Import substitution
titution effect
exchange
excharge çAite high
is quite
earning
earnio

6. KEY SECTOR PROBLEMS

The traditional
traditional reed
reed industry
industry faces
faces aa number
numbu,' of
of problems
problems largely
from the
arising from
arising changing economic
the changing economic and rocial
social environments
r :,)nments in which it
in which it
operates. of the
Some of the key
key sector
sector pi: ,.=.d below.
problemss are discussed below.

(a) decline in
A decline
A in the
the availa.ility
availability of
of reeds
rcIs is one
is one of
of the
the most
most
important
important problems facing the
problems facing the traditional
traditional sector.
sector. Defores-
tation of reed-bearing areas
areas for alternative uses",
uses,
 - 107 --

especially agriculture,
a-ri,ulfut,,, multi-purpose river valley pro-
jects, settlements
settl ntb and
ond forest plantations
plantatior.b are important
il,pn-tant
factors contributing
factors cont ibutin.j to this.
' Reed is
is primarily found in
Irinatily found in
the
the evergreen
evergre and
ari semi-evergreen forest
f,,'est tracts f
tracg, in
in
particular alo
particular ri r. and
along river stream banks,
and stream banks, and it is
anJ it is tnese
these
areas which
which are
are ssub
ihaa-ted
ected to
to severe deforestation.
deforestation~ No
worthwhile been made
attempt nas been
worthwhile attempt made hitherto
hitherto toto regenerate
reclenerate
reeds artificially.
reeds

Growth of
Growth of the
the pulp
pulp and
and paper
paper industry
industry utilizing
utilizing reeds
reeds isis
another major factor
another factor affecting
affecting thethe raw
raw material
material availabi-
availabi-
lity to thethe traditional
traditional sector.
sector. Annual availability of
Annual availability
reeds from the
reeds from the forests
forests of
of central
central and
and southern
southern Kerala
Kerala has
has
estimated at
been estimated at 300
300 090
000 t, of which
t, of which 274
274 000
09 has
has been
been
allotted to the two pul[ pulp and paper units
and paper units (i-
(Asari,
ri, 1978).
1978).
Fu rthermore, fa
Furthermore, 11 ing ot
fellinq of reeds for
for pulp andand ,- more
is more
intensive
intensive andand this
this affects the availabilit:
aiirt, the availability old
ear old
mature culms suitable for weaving mats. mats.

(b) Availability
nvat:abIlity of of ssubstitute
titete products
prndocts has led led to
to a decline in in
ihn demand
the for commercial
,amard for (-' civ mats.
n=11-_,. Thick sheets
Thick polyethylene sheets
which are cheaper
.01.l are reel mats
cheav! than reed mafs are being used used asas dunnage
dunnage
material
m;tvrial in in warehouses.
warehouses. contraction of
Such aa contraction of market
market is
particularly harmful to the Bamboo Corporation. In
In
response
re ,.:,nnse to this, the
to this, Corporation has
the Corporation has initiated
ini tist.ed product
product
diversification by establishing
div,,aification establishing aa bamboo board factory.
Bamboo
Baf,H'ca board
board is produced adopting the
produced adopting the plywood
plywood technology
technology
using finely
finely woven mats in in the
the place
place of
of wood
wood veneers.
veneers. The
The
product
pioduot could be used for partition walls, ceilings,
furniture,
fu,,,Hure, cupboards, etc. etc.

te the
Despite increasing availability of plastic wares, wr,'C'S,
demand for baskets and other cl!r, household items remains
nuisehold remaius
buoyant.
buovarl. Considering the
Considering the h of the
the vegetable, fr ,It
vegetable, fruit
and
atl fish industries, thethe d..'anJ
demand for baskets is unliKeI,,
baskets is unlike to
decline
ceclirc in
In the future.
the near future.

(c) Shortage
Sh, of working capital is a
a serious problem
confronting
Con' -ing many
many of the units
of the units involved
involved in in traditional
traditional
processlng.
procef'.ifo. Even cooperatives, which
Even cooperatives, which obtain
obtain substantial
substantial
assistance from
assiafon,e from the
the Government,
Government, face
face this
this problem.
problem. Some of
of
the cooperative and
the rrnw.,rative and household
household enterprises compelled to
enterprises are compelled to
seek the help
seek the help of
of traders
traders and
and intermediaries,
intermediaries, thus
thus getting
getting
into
into their exploitative
exploitative hold.
hold.

(d) Enterprises, particularly the cooperatives

cooperatives and the the State
Sfate
Bamboo Corporation,
Corporation, involved
involved in
in the
Ire traditional reed
rvel
industry, face aa number
industry, number ofof institutional problems.
insfifull,nal problems. These
T)rfe
are partly attributable
are part'', at'ributable to 'if- structure
to the ,rt-J.,t,:/eofofthe
the organiza-
organiza-
and par'1/
tion an: partly to
to the
the social
social aud
and palitical
political environment
environment in
in
which the;
they n-,e
have to
to function.
function.

Inefficiency in
Ineff,:,i-,,: in operation
operation is is an
an important
important factor
factor and,
and, even
though sa.;,.-
support is is available from Government, successful
functioning
functionin of cooperatives is
of cooperatives is an
an exception.
exception. AA large
large
number
number of
of the
the cooperatives involved
involved inin reed
reed processing have
have
become defunct
become defunct and lack
lack of committed
committed leadership
leadership isis aa major
major
factor contributing to
to their failure (Nair and
198). The vertical
Muraleedharan, 1983). vertical structure
structure of
of the
the Bamboo
Corporation has
has led
led toto aa polarization
polarization ofof employer-employee
employer-employee
interests
interests and politically motivated
and politically motivated strikes
strikes are
are frequent.
frequent.
 - 108 -

(e)
le) Undoubtedly. the most
Undoubtedly, the important problem for
most important for tho
the traditional
traditional
reed industry arises
reed indu:t,y arises from
from the
the low value a,:Jed
low value added generation.
This limits the
the ability
ability of of enterprises
enterpries to to r,_se
raise sufficient
sufficient
reinvestible
reinvestin_e surplus. Value added
adde,' per worker
worker - and
consequently
con,. wages - - can
can be
be increanv
increased ei ther by
either adopt i ng
by adopting
produ tion techniques
production teliilues and and product
product mixes requiring high
requiring high
energy and
ene, and raw
raw material input or by pr,ducing
material input producing items
items of
of high
high
aesthetic value.
aesthetic value. Choice of
Choice of the first
first alternative
alternative would
would
completel alter the
completely the structure of the the industry
industry and, in in the
the
context declining raw
context of declining raw material
material supply,
supply, itit has serious
has serious
limitations. The second
The second alternative faces
faces the
the problem
problem of
of a
market~
restricted market.
very restricted

Whether the vertical

Whether the vertical integration attempted
attempted by the Bamboo
the Bamboo
Corporation through
Corporation through production
productionofofbamboo
bamboo boards will be
br_ard7, be an
approp-';.te option is
appropriate option is difficult to to sisen nw,
answer now. Bamboo
board production
'::..7nctionisisa acapital-intensive investment and
capital-intersive invo.,,-Ient and the
eb
employment generation
ation effect is low
low.i/ Linking the
the
sect.,r with aa c)rital-i-
traditional sector tal-intens ve ve modern
modern sector
could have negative ck
frod:,-) effects
,
and
.; economic
compulsions may necessitate
compula:ons i-?cessit,te drastic
,5rastic modification
,difioltion of of the
weaving technique.
teChnique. If this haEre
If this happens, many of the the advantages
advantages
of traditional
of traditionalprocessing
processing will
will d:
disappear.

7.
7. CONCLllSION
CONCLuSION
traditional industries.
Reed-based traditional like mat
industries, like mat and
and basket
basket weaving,
weaving.
playa
play crucial role
a crucial roleininthe
therural
rural.,',.nomy
economy of Kerala.
of Kerala. Household scale
Bousehold scale
product i on has been in exi
..o-luction s tenee for
existence :ir a
a very long period
r,r,1,d and the
the
development
Ho ,lopment of of bulk
bulk maC,,,s
markets hashas helped the the growth
growth ofof tho
the sector.
_v:.tor. The
sector has aa number
mr has number ofof desirable atf1.1Les
attributes of of appropriatene;,,
appropriateness. especially
espeCially
in comparison son with
with pulp
pulp and
and raper
paper manufacturing.
manufacturing. The capital:labour
The
ratio,
rati fuel and raw
Hal and rawmaterial
material cr-r.,umption
consumption per per worker,
worker, etc.
etc.,
t are
are extremely
low~
low. Also
!,:no,1 per unit of
per unit raw no,snrial
of raw material consumed, it it generates
generates more value
more value
added
added in the form ':)rm of
of wages
wages than
than the
tne modern
modern sector.

However, the
However, the industry
industry faces
faces aa number of short-term
number of short-term and and long-term
long-term
problems. The
The low
low value
value added
added generated
generated in the ti ditional sector
traditional sector
provides little
provides little scope for for reinvestment
reinvestment and
and bringin'
bringing In in technological
technological
innovation.
innovation. Increasing
Increasing thethe value added isis now being .ttempted
now b-i-, attempted through
highly
highly capital-intensive investment, but
capital-intensive inv-stment, but then 1h',
then such investments.ents drastically
1 drastically
reduce
reduce the
the quantum of of e--looment.
employment. The effort shc,uld
The effort should be directed
..-ected at im-
proving the
the production
production t:.'o
through appropriate technological
technological andand institutional
institutional
innovations",
innovations.

As
As per the project report,
per the report, the
the total
total fixed
fixed capital
capital investment
investment for
for the
the
is Rs.
project is Rs. 5.0
5.0 million and
and it
it will oy about
will employ about 135
135 persons.
persons.
 - 109 --
-

REFERENCES

Anon Report and

Report and accounts
accounts 1980-81.
1980-81. Punalur
Punalur Paper
Paper Mills
Mills Ltd.,
Ltd., Punalur.
Punalur.
1981a

Anon Kerala State

Kerala state Bamboo
Bamboo Corporat
Corporation. Bamboo Board
on. Bamboo Board Pro
Project.
ect.
1981b (Unpublished)
(Unpublished)..
P~K.S.
Asari, P.K.S.
Asar!, Industry oriented
Industry oriented management plan for
for reeds.
reeds. Kerala
Kerala
1978 Department.
Forest Department. report).
(Unpublished report).

Bourdillon, T.F.
T.F~ Report forests of
Report on the forests of Travancore.
Travancore. Government
1983 Press. Trivandrum.
Tr vandrum.

Govt. Kerala.
Govt. of Kerala. 1982~
Economic review 1982. State Planning
Planning Board.
Board.
1983 Trivandrum.

Karunakaran, C~K.
Karunakaran, C.K. Demand
Demand versus
versus supply important raw
supply of important raw materials from
from
1982 forests in
forests in Kerala
Kera1a State.
State. Kera1a Forest Department.
Kerala Forest Department. Trivandrum.
Trivandrum.
(Draft unpubl ished) .
(Draft unpublished).

Nair, C.T.S.
Nair, C.T.S. && Muraleedharan. Rural institutions for
Rural institutions for development of
1983 forestry enterprises:
appropriate forestry enterprises! A case study of the
traditional reed industry
traditional reed industry in
in Kerala
Kerala State,
State, India.
India. Research
Report 18.
18. Kerala Research Institute,
Kerala Forest Research Institute, Peechi.
Peechi.

C.T.S., Mammen Chundamannil

Nair, C.T.S.,
Nair, E. Mohamad.
Chundamannil && E. Mohamad. Intensive
Intensive multiple
1984 use forest
use forest management inin the
the tropics:
tropics: A case study ofof the
the
forests and
evergreen forests and teak
teak plantations
plantations in
in Kerala,
Kerala, India.
India.
Research Report 22~
Report 22. Forest Research
Kerala Forest Research Institute,
Institute, Peechi.
Peechi.
 - III -

O~ CHARCOAL IN
PRODUCTION OF IN SALTA PROVINCE
PROVINCE (ARGENTINA)
(ARGENTINA)

by

Carlos
Carlos saravia
Saravia Toledo

CONTENTS

Page

1.1UTF.ODUCTION
1. INTRODUCTION 113

2. NATIONAL
,b PRODUCTION
PRODUCTION 113
113

3. PRODUCTION STRUCTURES
7,0ODUCTTON STRUCTURES 114

3.1
3.1 Small in Salta
Small Producers in Salta Province
Province 115
3.2 Organized Large-Scale Producers in
Organized Large-Scale in Salta 116

33.2.1
•2 •1 Common
Common characteristics 116
3.2.2
3.2.2 the
Differences of operations between the
two companies
tytlO companies 116
4, CHARCOAL-MAKING OPERATIONS
OPERATIONS 117

4.1 Direct
Direct Operations
Operi^i,ns 117
117
4.2
4.2 Indirect tions
Indirect Owiiotions 118
4.3
4.3 Administrativee ~lanagernent
Administral Management and Control 118
5. PRODUCTION EQUIPMENT 119

6. INFRASTRUCTURE 119

6.1
6.1 Half-Orange Kilns and Water Tanks
Tanks 119
6.2 Roads 119
6.3 Dwell
Dwellings 119
6.4
6.4 Perimeter Wire Fencing
Fencing 120
120
6.5 Sheds
Sheds and Depots 120

7. PERSONNEL REQUIREMENTS
COMPARISON OF PERSONNEL REQUIREMENTS FOR
FOR SMALL
SMALL
LARGE SCALE
AND LARGE SCALE BUSINESS
BUSINESS 120
8• COMPARISON OF
COMPARISON OF INVESTMENT
INVESTMENT FOP
FOR SMALL AND
AND LARGE
LARGE
SCALE
SCALE BUSINESSES 120

9. COMPARATIVE
COMPARATIVE OPERATING COSTS l22
122

10. COMPARISON OF FINAL

FINAL COST
COST 125

11. PROFITABILITY HIO SYSTEMS

PROFITABILITY OF THE TWO 125

11.1 The Iron

The Iron and Steel Market 126
11. 2
11.2 Free Market
The Free Market 127
 -- 112 --

12. DRAWBACKS OF
ADVANTAGES AND DRAWBACKS OF EACH
EACH SYSTEM
SYSTEM 128

12.1 Small Scale Production 128

12.2 Large Scale Production 128

13 . COMPARISON OF SOCIO-ECONOMIC
SOCIa-ECONOMIC EFFECTS:
EFFECTS: THE LARGE
SILVO-PASTORAL SYSTEM
SCALE SILVO-PASTORAL SYSTEM AND
AND THE
THE TRADITIONAL
TRADITIONAL
SYSTEM
SYSTEM 129
14 CONCLUSIONS 130

REFERENCFS
REFERENCES 132
 -- 113 --

1. INTRODUCTION
INTRODOCTION
Argentina has
. has aa long
long experience in charcoal
experience in charcoal production.
production. During
the final quarter
the final quarter of the last
of the last century
century the
the railways
railways built
built lines
lines into
into the
the
semi-arid in order
forests in
semi-acid forests order toto obtain
obtain the
the sleepers
s rs necessary
necessary for
for laying
laying
rails and fuel
rails and fuel for
for energy.
energy.

Until
ntil the first
first wor1)1
world war
..;r- consumption
co u of
1- firewood
firewood and chcharcoal
al
waS mainly for household uses, although
was m,-(n)-,, --;11Jioug firewood was already
already usq
used by the
ne '

steam rrpnan
stun, engines c.f
of the rail%,),).
railways.

up to the first
Up first world
world war
war charcoal
charcoal consumption
consumptio;l was
was about
about
000 tla,
450 000 t/a, which
which rose
rose to about 600 000
about 600 000 t/a
tla during the
the war
war period
period
1970).
(Dorfman. 19701.
(Dorfman,

The
Thn development
development of petroleum-based fuels and electricity
gradually acedd charcoal for
for domestic uses
uses which
which fell
fell to
to an
an average
average of
of
150
150 000 -- 20 u00 tla
',u 000 tía in
in the
the past ten
ten years.
years.

The use, ofof charcoal

charcoal fnr
for the
the productio,
production -f of iron and cast
,ron and cast iron
.on
started in 1945 when vh..-1 the Altos Hornos Zapla
the Altos Zapla r.-0:)t
plant in Juhierro .)
in Juhierro Province
was canst
co.-.) ructed • The present
'.He present consumpt ion of th is plailt
th.i)., ilant,r when operat ing
at full
at full ca capaci • is
,is about t/a.
230 000 t/a.
about 230

2. PRODUCTION
NATIONAL PRODUCTION

In the past
past five years national charcoal
charcoal production has
fluctuated bet,.
betweenn 230
230 000
000 and 370
370 000
000 t/a
t/a (Table 1).
(Table 1).

T-,ble 1

...harcoal Prod,r' (in ons) 1979 -

Province 1979 1980

1980 1981
1981 1982
1'92 1983

Chaco 500
89 500 126 700
126 700 105 200
105 200 500
63 500 63
63 489

Salta 81 100
81 100 78 700
700 800
64 800 49 100
49 100 56
56 958

Santiago del
del Estero
Estero 88 800
800 95
95 100 46 700
46 44 900
900 61
61 521

Other Provinces
Provinces 69 800
69 800 100
67 100 400
66 400 76 700
76 700 77
77 806

TOTAL 329 200

200 368
368 100 100
283 100 200
233 200 259 774
259 774

The above-mentioned
The above-mentione1 three
three provinces
provins account
account for 70-80 percent
for 70-80 percent of
total annual
the total annual charcoal -.) o., while tha.
production.
h,. oal pr-di that ofI thethe other 12, 12,
ih:lu0,3 as
lncluded as "orncr flucz)Jetes betwee~l
Hother provinces t' in Table 1, fluctuates between 20-30
percent.
Fer, nnr. The consurnptio:l ot
reduced.7-nsqmpti,_A
The rPnweJ of .(.1)._,s
Altos 80r:1os Zapla after
Hornos 7apla after 1980
1980 was
was
reflected
rcflrctvd in in dectc-,-,1
decreased c.r._ddction
production inin 1981-1982;
1981-1982; it it was
was observed thatthat this
this
1.1,u),..trl revived in
industry in 1594
1984; aa year in
in which production
production figures
figures for
for charcoal
charcoal
are
are only
only available
available for
foi Salta
Salta province (64(64 630630 tt in 1984). In relation to
In to
national
national production,
production, Salta's charcoal output
Saltas charcoal output increased
increased from
from 3.9
3.9 percent
percent
in 1967
in 1967 to to about 111-25
18-25 percent in recent
percent in rece:1t years.
years.
 - 114
114 --

Because of the characteri~tics cf

the characteristics of tl,
the rtoduct1_,
rroduction ,,tructute,
structu['e, with
wi t h
marked dominance
aa marked dcminance of sma1l producers ,,tn
of small .,i1 outside
who often work outside the
the
regulations in in 20-25 percent
force, 20-25 percent of
of CI
charcoal productio;'1 is
ar-oal prodn2tion is not
reflected i~ the
reflected in the official statistics,
statistics.

3.
3. PRODUCTION STRUCTURES
PRODUCTION STRUCTURES

An analysis
An a~alysis of of the
the number
number ofof producers
producers and the volume
and the volume of
charcoal delivered
charcoal delivered byby each
each of
of them
them to
to Altos
Altos Hornos
HorDos Zapla
Zapla gives
gives quite
quite aa
clear picture of the charcoal productio~ structure for
prodic' c:in structure the three
above-mentioned
above-mentioned provinces
provinces which supply
supply 1095 percent
percent of
of that
that company's
company's
requirements. The volume of the
The the supply varies es during
during the
the year
: year because of
the household
household requirements
requirements which duri~g the
which during old season,
the cold season. from
from April
April to
September,
tember, Increase and decrease during
increase and during the
the summer.
Summer. The supply figures
The figures
at Zapla for the
Zapla for the peak
peak months are,
are:

Cl- ,Ificati of or ,ms t T1.12,11,_ ° me delivered

os f ¿ail, , tiths

Category No. producers

No. producers Charcoal/month Percent Average tt
per producer

- th
300 t/month 280 15 801
15 801 79% 56

300-1 000 t/montr.

000 t/month 2
2 11 600 8% 800
BOO

+
+ 11 000
000 t/month 2 2 6000 l3%
13% 1 300
700

TOTAL 284 20 000

The producers
The producers of of less
less than
than 300 tt include aa cooperative whichwhich
links some 60 small producers
producers who work individually
individually but
but deliver onon behalf
hehalf
of the
of the coo.-rative,
cooperative, and and one producer
producer who
1>1100 during
during six
six month5
months of
of the
the year
delivers
.:,ers about. 11 000 tt of
' charcoal: he purchases this
of charcoal; this from the
the small
small
prOducers and
ar,,:only produces 200-300 tt himself.
only produces

'.1e 3

m of producers
Classification ,u.7.ers by
bu monthly volume
'y volume
delivered tu
to Altos dgrhos
Hornos Zdpla
ZarIa during
during slack
slack months

Category No.
No. Producers Charcoal/month Percent Average tt
per
per producer

- 300 tt 280 7 100 59.16% 25

300-1 000 tt 2
2 I1 900
900 15.84%
15.84% 950

above 11 000 tt 22 33 000

000 25.0 %% 1 500
1

TOTAL 284 000

12 000
 -- 115 --

The "peak
The IIpeak and
and slack"
slack" figures
figures were established for
were established for those
those years
years
when
when Altos
Altos Hornos
Hornos 2apla
Zapla operated
operated at
at full
full capacity
capacity for
for the
the country's
cou~tryfs
normal markets.
normal markets. indicate that
Tables 22 and 33 indicate that 79
79 percent
percent of charcoal
charcoal
supplied to
supplied to Altos Hornos
Hornos Zapla
Zapla is
is delivered
delivered by
by small
small producers
producers during
during the
the
peak months, October
peak October to
to March.
March. From
From April to September they channel
April to channel part
of their production
of their production to
to the
the domestic
domestic consumption
consumption market,
market, decreasing
decreasing their
their
share of
share of deliveries to
to the
the mill to
to 60 percent~
60 percent.

There are
are only
only four
four fairly
fairly large
large scale
scale producers
producers who
who supply
supply
about 21 percent
about 21 percent during
during the
the peak
peak period
period (October-March)
(October-March) ofof Altos
Altos Hornos
Hornos
Zapla's consumption and
Zapla's and 40
40 percent
percent during
during the
the slack
slack period.
period.

3~1
3.1 Small Producers in
Small in Salta
Salta Province
Province

No statistics are
No are available
available on on the
the number
number of
of small
small charcoal
charcoal
producers for the
producers either for the country
country as
as aa whole
whole or
or by
by Province.
province. an
There are an
estimated 80
estimated 80 charcoal
charcoal producers
producers inin Salta,
Salta, of
of whom
whom only
only two
two or
or three
three
produce about 150-200
produce 150-200 t/month
t/month regularly.
regularly. Many small producers make
Many small
charcoal during
charcoal eight months and
during six or eight and then
then stop
stop production
pr"oduction during
during the
the
period
period of low
low demand.
demand.

The typical small

The typical small charcoal-makers
charcoal-makers operate without any capital
capital of
of
their own.
their own. As aa rule
rule they
they depend
depend on
on aa large
large trader
trader who supplies
supplies them
them
with
with food
food while
while they
they make the
the charcoal
charcoal and
and who
who in
in turn
turn receives
receives all
all or
or
part
part of the
the production
production asas payment.
payment. This
This type
type of operation has has the
the
following
following characteristics:

1. family type
It is aa family type of
of activity
activity or
or one
one with
with very
very few
few
workers.
salaried workers.

2. These operators
operators do
do not
not comply
comply with
with the
the legal
legal regulations
regulations in
in
force
force in
in the
the forestry
forestry sector
sector and
and they
they evade
evade payment
payment of
of
and for
forestry taxes and for permits.
permits.

3. It is aa transitional
It is activity~
transitional activity. As the
As the forest
forestry resource is
y resource is
exhausted
exhausted the
the operators
operators move.
move. They
They const tute aa truly
constitute truly
migratory social
migratory social group.
group.

4. When these
When these producers
producers have
have salaried
salaried personnel,
personnel, they
they almost
almost
never fulfil
never fulfil the
the requirements of the social
social security laws
laws on
on
retirement, social services,
retirement, services, etc.
etc.

5. react quickly
They react guickly to
to changes
changes In
in market conditions,
conditions, stopping
stopping
or reducing production whenever
or reducing whenever prices
prices or payment
payment conditions
conditions
deteriorate~
deteriorate.

6. activity of
The activity of these
these charcoal-making
charcoal-making groups,
groups, combined
combined with
with
overgrazing has
has caused the
the disappearance
disappearance of
of about
about 20
20 million
ha
ha of
of forests inin Argentina's
Argentina's semi-arid
semi-arid area turning them
into unproductive wastelands.
into wastelands_

7. Usually
Usually the
the small
small charcoal-makers
charcoal-makers enter in the
enter in the second
second orOr
stage of
third stage of forest
forest exploitation.
exploitation. first exploitation
The first exploitation
stage consists
consists of log
log extraction
extraction for
for sawmills
sawmills and
and posts
posts for
for
fencinq,
fencing, activities carried out by rather large
large scale
businesses which possess sawmills but which are also
migratory.

8. The capital
capital of
of aa small
small charcoal-maker
charcoal-maker consists
consists ofof aa small
small
cart (called
(called "zorra"
"zorra'l locally)
locally) for
for transporting
transporting fuelwood,
fuelwood, one
one
two mules
or two mules for
for draught,
draught, aa power
power saw,
saw, 200-litre
200-1i tre drums
drums for
for
water
water and
and occasionally
occasionally aa tractor
tractor oror 1light
ight truck, several
old.
years old.
 -- 116 --

3.2 Orcani large Scale Producers in Salta

lta

The f -howclearly
urea in Table 2 show clearly that there
that there are only four
four
.-inesses making
businesses n Li cl Arcoal or
charcoal on a scale that that jL-firips
justifies aa buziLe!..
business ty:e
type of
of
of the,c
-

zatic
organization.
On Twou of these firms belong to Falricacicner Milluares
t Fabricaciones Militates
itary manuf
(military
( manufacturers), Zapla and Pttan9 which ara ioc,ted in
C.,urers), Forestal
F,,rp t-I Zapla and Pi.rane which are located iCl
,y and Fstm,sa Irovince rpip,ntively.
Jujuy and Formosa province respectively~ The other
The other two
two businc-5,s.-:, Salta
businesses r Salta
Forestal and
Forestal Camr.os del
and Campos Norte S.A. are located in Salta province,
de] Norte S.A. are located in Salta province. The
first is a s_tatc snter-prise owned by Salta province and the second is a
first is a state enterrrise ownec by Salta province and the second is a
privately owned
privately owned ,-,mpany,
company.

3.2.1
3~2.1 Common teristics
Commc, characteristics
Bot.. businesses
Both I use the same
the same forestry
forestry exploitation
exploitation system
system and
and
have the followi
have the purposes and
following purposes and features
featuresinin
common:
common:

(a) They tend toto establish

es tab I ish permanently settled
settled forestry
forestry
population centres~
population centres.
(b) ThP dpsign
The des of the
n of the exploitation
exploitation plan
plan relating
relating to
to r,
roads
,6 and
to
to thr
the distribution
distribution of
of batteries
batteries of
of kilns
kilns ir
is th same.
the 3me.
Transport is based on utilization cf tradition,
TraL-p,rt is based on utilization of traditional fuelwood
tt.aac,po-t methods.
transport methods.

( c) Both
Both enclose the areas
areas to
to hebe c,cíoited
ex oited under their
under their
plan with barbed wire
management plan with barbed wi re fencing e to restore
the
to restore the
balance of
of the
the ecosystem
ecosystem and
and ensure t regeneraron.
ensure fforest regeneration.

(d) ,Llish their

To establish theicmanagement plan th
management plan first make
they first make aa forest
forest
inventory,
inventory, preparing
preparing mapsmaps onon the
the type
type andand condi'
condition ofn. of
forest communities,
forest tnpciraphy, soils
rnmmunities, topography, soils (from
from the the -. 'faitt
s,arr;[i
standpoint) ç and
and Ni p istiaq infprstrbctures
pre-existing infrastructures :.Jater
(water
su ip, tc.ads,
lies, dwellinq.). They
roads, tracks, dwellings). They alsoalso amakeFce a
ar,:1economic
soc al and p,cnomic sLt p, of
survey of the
thepa,t-,,;1
pastoralgroups
groupsoccupying
occupying
Jrca. In Salta
tne area.
the SaltJ. forestal the b.)r.ground
Por-estal the information
background information
included aa survey
included survey and
and inventory
inventorymade made byby NOS
NOA II II -- Pores
Forestal
tal
(Frith, 1975).
(Frith, 1975).

(e) They establish

They establish an administrative
administrative and a s;7ervisory system
supervisory system
ensuring proper
ensuring proper management
management bothboth of of production.'ion cmemitin
operations s
and administrative
and administrative anti actions. This
T: information .ion pr.
provides
knowlel?eofof the
knowledge the ei,mitlin
execution of of0;ELi.'
operations, forest forest y_eld,,
yields,
kiln
kiln nff,r1,,nv,
efficiencYr the thefuelv.aod:charcc,
fuelwood:charcoal ratio, :lo, progress
progress in
infrastr.vtireP, etc,
infrastructures, etc~

(f)
(f) Forestry research is conducted
forestry research is by both businesses.
conducted by both businesses. The
results
resul ts have been pu1,11,hed,
pub 1 ished, presented
presented at technical
at technical
meetings and cited as agv, forestry models. (Whyte, A. and
meetings and cited as agro-forestry models. (Whyte, A. and
Burton I., bledo 1984-1985;
Saravia Toledo
Burton 1., 1983, Saravia FAO 1983 and
1984-1985; FAO and
1984)..
1984)

Campos del Norte has reseE agreements with the instituto

Campos del Norte has researchn agreements with the Instituto
Forestal Nacional
Forestal Nacional [TFONA
[IFONA (~ational F'- Institute)i, the Instituto de
(NationalForestry Institute)], the Instituto de
Tecnologla Agropecuaria [INTA
Tecnologia (Agri. .'Lral
lINTA (Agricultural and Livestock
Livestock Technology
Institute)), and the Centro de Zoología
Institute)], and the Centro de 20010g1a ApI ieada (Applied
(Applied Zoology
~oology Centre)
Centre)
of the
of Universidad Nacional
the Universidad Nacional of
of C6rdoLlcarries out activities on its
C6rdoba carries out activities on its
lands.
lands.

3.2.2
3.2.2 Differences of operations betv-, the two comp,
1. Salta FForestal
1. Salta 3 as aa s,
has exploits ea rorept
sawmill and exploits forestwhich
-)ci which has
has
s, mmtedtoto previous
previous extractions.
extractionz.
I

nc-
not been subjected Campos del
Campos del
t have a sawmill and the foifst it uses at
Norte does not have a sawmill and the forest it uses at
Norte
present
oresent was
was . lected to heavy extraction of logs and posts
ected to heavy extraction of logs and posts
in the past.
in the past.
 - 117
- 117 --

2.
2. Campos del
del Norte has aa silvo-pastoral
Norte has silva-pastoral management plan,
plan,
applies aa controlled grazing system and establishes
forest-cutting regulations which also ensure appropriate
wildlife shelter,
shelter, whereas
whereas in
in Salta
Salta Forestal
Forestal the
the activity
activity is
is
mainly related
related to
to forestry
forestry activities.
activities.

4. CHARCOAL-MAKING OPERATIONS
Charcoal-making involves
involves several
several operations, some
some of them
them direct
and
and others
others constituting support
support tasks.
tasks.

The direct
direct operations
operations are
are the
the same
same for
for the
the small
small and
and large
large
producer
producer with variation in
with some variation in their
their intensity
intensity or
or form.
form.

44.1 Direct Operations

. IDLrect()p-"E a t ion s

(a) Brush clearing,

clearing 1 track
track making
making and
and limbing.
limbing. These
These jobs
jobs are
are
performed by two men with hatchets
hatchets who cover 10-15
ha/month. Clearing
Clearing and
and opening
opening of tracks
tracks are
are done
done before
before
the power saw
the power saw operator
operator fells
fells the
the trees.
trees. After felling,
After felling,
limbing is done
limbing is with a
done with a hatchet before
before bucking.
bucking.

(b) Felling and log

Felling and log cutting.
cutting. power saw
A power saw operator
operator produces
produces
400 500 tt of
400-500 wood per
of wood per month.
month. He has
He has two
two assistants
assistants who
who
the brush,
clear the brush, open
open up
up tracks
tracks and
and carry
carry out
out limbing.
limbing.

(c) Clear-cutting. After the

the felling
felling and
and bucking
bucking operations
operations
the
the forest is cleared
forest is cleared intensively
intensively using hatchet
using a hatchet to
eliminate the trees which were
the trees not cut with
were not with the
the power
power saw.
saw.
In
In appropriate management of of the
the forest
forest mass,
mass, clear-cutting
clear-cutting
is to ensure
is necessary to ensure good
good forest regeneration. A
forest regeneration. A worker
worker
40-50 t/month
produces 40-50 t/month in
in clear-cutting
clear-cutting operations.
operations.

(d) Fuelwood transport.

Fuelwood transport. The fuelwood is
The fuelwood is transported
transported from
from the
the
felling site
felling site with small mule-drawn
with aa small mule-drawn cart (zorra), which
cart (zorra),
carries aa load
carries load of 11 000
000 to
to 11 200
200 kg
kg of
of fuelwood
fuelwood per trip
trip
and between 8
and makes between 8 and 15 trips
and 15 trips per day
day depending
depending on the
the
distance. normal monthly
The normal monthly output
output of
of aa worker
worker with
with his
his
cart is 200 t/month.
cart is t/month.

(e) Carbonization. This includes loading the

This includes the kilns,
kilns, control of
the carbonization process and unloading the charcoal
produced. This job
This job is
is done
done by
by foremen
foremen of
of the
the battery
battery of
of
kilns with two assistants, producing an average of
100 t/month if
100 t/month if ten
ten kilns
kilns are
are operated.
operated.

(f) Truck or
Truck or trailer
trai ler loads.
loads. Transport of
Transport of the
the charcoal
charcoal to
to
consumption
consumption centres is carried
centres is carried out almost totally by truck.
out almost truck.

A
A small proportion is
is shipped by rail. This requires
regpires
intermediate t.ransport
intermediate transport movement
movement from
from the
the kilns
kilr.s to
to the
the railroad
railroad which
which is
is
also
also done
done by tractor-trailers.
by trucks or by tractor-trailers.

load trucks
To load trucks by
by hand,
hand, teams
teams of six people are
s x people are used
used working
working
about
about 55 to
to 6
6 hours
hours to
to load
load 30
30 t.
t.

Mechanized loading
loading is carried out
is carried out by aa skilled
skilled worker
worker and
and an
an
assistant
assis ant working two hours
working two hours for
for 30
30 t.
to
 - 118 -

4.2 Indirect 0Ter7.°-

( a) Opening , and installation of batteries of kilos
In an
an organized operation roads roads 66 m in in width
width are
are laid
laid out
out
will linkK batteries
which wi)i I batteries of kilos
kilns with
with one
one another
another giving
giving
access to the I', trucks carrying charcoal,
trucks carrying charcoal, andand aa network
network ofof
roads 33 ill
m wide for for animal
animal draught
draught carts.
carts. Each
Bach exploitation
unit,
unit, called
called aa "battery",
"battery", has
has 900900 ha of which 10.7 ha
ha of ha are
ara
cleared for for thethe following
following purposes:
purposes: 0.6 he,
ha, battery
battery ofof
kilos- 3.6
kilns; 3.6 ha, he, 66 m wide
wide roads;
roads; and and 6.5 haha ofof 33 mm wide
wide
roads. If aa worker
If worker does not have
does not have to to buck the
the logs
logs he
ha can
can
clear an average of
clear of 0.5 ha/month.
0.5 ha/month. A company that
that produces
produces
000 t/month
11 000 t/month of charcoal
charcoal withwith ten ten batteries
batteries of of kilns
kilns
should addadd two two batteries
batteries per
per ,-nar
year to to compensate for for tho5e
those
that
that wear
wear out.out.. Four permanent
perrii,:,,,,Jt %orkers are
workers are needed
needed to
maintain aa clearing
clearing rate
rate of
of 21.4
21.4 ha/a.
ha/a.

(b) Kiln and

and water tank
tank construction
construction

A hai
half-orange
or kiln, 66 m
, in diameter,
m in diameter, can constructed in
can be constructed in
three
three days by three workers.

An oparation
An operi (7)n with aa 11 000
with 000 t/month
t/month output
output will
will require
require
construction of
construction of 20
20 kilos
kilns per
per year to fo cover
cover yearly
yearly losses
losses
through depletion under
through depletion under aa five-
five-y(..:, exploitation plan
eicloitation plan for
for
each b5ttery.
battery. This
This means that lud
means .hat working days
80 wctking days per
per year
year
are nc,-,ssary
necessary to 20 furnaces, equivalent to
to build 20 , to the
the work
work
three workers during two
of thive two and one-half months.

Each battery has

Each battery two water
has two water tanks
tanks with
with aa capacity of
capacity of
1. The
3 000 1. The construction of aa water tank
tank can
can be
be completed
completed
by
by two
two workers in
in one
one day.
day.

( c) We te r
Water we 11
well

A battery of 10 ' kilns requires

10 kilns requires a a water supply of 10-1510-15 000
000
l/rnonth depending
nth d., -,ding on on the
the season
season for
for household consumption,
consumption,
watering the e work animals and
,ork animals and use in in furnace
furnace cooling
cooling
operations.
operati, s. AA 11 000 t/month
000 t/month charcoal output operation
operation
requires aa tractor
tractor driver-worker
driver-worker usinq tractor and
using a tractor and tank
tank
trailer for distribution of water to ten batteries.
Perforated wells
Perforated wells are are drilled
drilled to aa depthdepth of 80-120
80 120 mm
depending on on the
the area,
area, to
to produce
produce the
the water
water for
for distri:
distribu-
ttion.
ion. 44 000
000 to to 88 000 1/h
l/h may
may t.
be extracted from the
,fiected from the wells
ddepending
nding on the the diameter of the the ng and the
i the chi%ractd
character-
istics of the groundwater table.
of the table.

The water supply equipment further

The water further includes
includes aa ra-,
raised water tank
tank )

with aa capacity
capacity of 55 000-10
000-10 000
000 1,
1, pumping
pumping equipment and an engine. ,

If the company's
If the company's establishment
establ ishment is
is of
of aa permanent
permanent character the
haracter the
first
first well
well and
and pumping equipment are
are located
located in
in the
the residential
residential area.
area.

4.3
4,3 Administrative Management
Management and
and Control
Control

An output
output. of
of I1 000
000 t/month
t/mo:1th requires
requires aa production manager, an
production manager, an
assistant
assistant,I three administrative persons
persons,1 aa warehouse foreman and two
"we hers!! if
'weighers' if the
the firewood is
is received
received by we ht~
by weight.
 -- 119 --

5.
5. PRODUCTION EQUIPMENT
EQUIPMENT

Small businesses
businesses which
which produce
produce 100
100 tt of charcoal
of charcoal per
per month
mo~th
require
require the equipment:
the following equipment:
22 carts with mules and
and harness
harness
1
1 hand
hand cart
33 fcrks
charcoal forks
33 dr~s of
drums of 200
200 11 capacity each
11 power saw
33 axes
2 shovels

Occasionally
Occas these businesses
ionally these businesses may
may have
have an
an old
old light truck
light truck or
tractor water or
tractor to supply water or goods.
goods.

A larme
A large business
business with anan output
output of
of 11 000 t/month uses
000 t/month uses the
the same
same
equipment,
equipment, but
but instead of aa used
used tractor
tractor or
or light
I truck it
truck it will
will need:
need:

11 pick-up truck
truck in
in good condition
condition
11 80-100 hp tractor
80-100
11 33 000-5 000 1
000-5 000 tank trailer
1 capacity tank trailer
11 t flat
10-12 t flat trailer
trailer without
without hand
hand rails
rails
11 grader or other road
road levelling
levelling equipment
equipment

6.
6. INFRASTRUCTURE

6.1 Kilns and

Half-Orange Kilns and Water
Water Tanks
Tanks

As mentioned under
AS mentioned under 4.2
4.2 (b), the kilns are
the kilns are usually
usually constructed
constructed
with
with aa diameter of 66 m.m. This
This size
size of
of kiln produces an an average
average of
of 10
10 tt of
of
charcoal
charcoal per month. Each
Each kilning
kilning cycle e yields
yields 6.5 to to 7.5
7.5 tt of
of charcoal
in
in 18-20
18-20 days quantity of
days or an average monthly quantity of 10
10 tt per
per kiln.
kiln. The
The kilns
are constructed
are constructed with
with bricks
bricks bonded
bonded with
with mud:
mud; they
they have two doors, one
two doors, one for
for
loading and
loading and the
the other
other for
for upl=adiog.
unloading. In
In addition
addition to to the
the kilns,
kilns, two
two
cylindrical
cylindrical tanks of 33 000 000 11 capacity each are
are constructed
ccnstructed per per battery
battery of of
with bricks
kilns, with br lcks and
a nd cement.
cement. The purpose
The purpose of the tanks is to
the tanks to store
water for
for cooling the
the kilns.
kilns.

6.2
6.2 Roads

are constru+
They are - agonally per
constructed octagonally per operating unit with an
unit with an
additional four side
additional four side roz+-3
roads of 500 m each. The kilometres of
The kilometres roads in
of roads in aa
complex total:

m wide roads
6 m roads = 66 km
3 m
3 roads - 21.5
m wide roads km
21. 5 km

6.3 Dwellings
The
The dwellings constructed byby small
small scale
scale companies
companies are
are temporary
and
and there
there would
would be in turning
be no point in turning them
them into
into permanent
permanent homes
homes because
the population concerned
the population concerned is migratory: once
is miaratory; once the
the resource
resource is exhausted,
is exhausted,
the
the population
population moves
moves again,
again, usually five or six years.
usually every five years.

In large scale companies

large scale companies businesses
busi.nesses whose purpose is
whose purpose is to
to create
cceate
permanent production centr.es,
centres, the quantity of personnel employed
justifies
justifies and
and necessitates
necessitates the creation of
the creation of a
a residential
residential centre
centre for
for 120
120
employees. In aa plant
In plant with a a monthly
monthly output
output capacity
capacity of
of 11 000 tt of
charcoal, the quantity
quantity of houses for workers, administrative and
and
management
management personnel will be about
personnel will about 100
100 units.
units.
 -- 120 --

6.4 rimeter Wire Fencing

Perimeter FencinQ

Companies Norte and

Companies like Campos del Norte and Salta
Salta Forestal
Forestal enclose "7
enclose rtheir
forest exploitation areas
forest exploitation areas with
wi th wire
wire fencing in in order to
to obtain properr,

forest regeneration, and a

forest regeneratinn, a recovering of
of forage
forage productivity
productivity of
of grass
grass and
and
shrubs.

A team
team of three
three skilled
skilled workers
wo,kers can
can erect km of
e,ect 33 km of wire fencing
fencing
per
per morth
morth once a a track
track has been cleared
cleared for
for this
this purpose. Normally
,-mally aa 55 m
m
wide cleared
wide cleared math is opened
Dath is opened up
up for
for the
the wire fencing, inin o--
other words
words half
aa hectare is Cleared
hectare is cleared for
for each kilometre.
kilometre.

6.5 Sheds and Depots

Large scale
Large scale businesses
businesses need
need sheds to store
sheds to store fodder
fodder (maize,
(maize,
alfalfa), for maintenance
alfalfa), for maintenance and
and parking
parking of
of vehicles
vehicles and
and as warehouses
warehouses for
for
storaqe.
storage.

7. COMPARISON OFF PERSONNEL

P REQUIREMENTS FOR
REQUIREMENTS FOR SMALL
SMALL AND
AND LAMPE
LARGE SCALE
SCALE
BUSINESS

For
For aa unit
unit producing
producing 100
100 t/month
t/month in
in the
the traditional
traditional ,-nr-:
manner and
for with an
for one wit:. an output of 11 000
output of 000 t/month
t/rnonth the
the permanent
permanent jobs
jobs ci
created
ma would
would
indicated in
respectively be as indicated in Table
Table 4.
4.

Tablee 44

Comparison of
fornparison of personnel
personnel reauirements
reoC s for small
small and largo
large scale businesses
businesses

Activity 100
100 t/month unit
unit I1 000 t/month unit
000 t/month unit

Brush clearing,
tracks and limbing
tracks limbing 22 24
24
Felling
Fel,, and
-vd bucking 11 12
12
Fuel, d transport
Fuelwood 22 24
24
Carbonization
Carbw,ization 33 30
Truck (manual)
Truc. loading (manual) 11 --
loading (mechanized)
Truck loading (mechanized) --
Clearing roads
roads and
and
installing
installing batteries of of kilns
kilns 0.1
0.1 44
Clear-cutting 11 10
10
Management and administ~ative
Manig.,-ent and administrative
rsonnel
pei,,onnel 66
wood weighing
FIJcl000d weiqhmq 22
Water and
and good;
goods distribution
Constructiol mf
Construction kl
of kilns 0.6
1
1

Road fence maintenance

Road and fer .-ance 22
Driver-mechanic 1

TOTAL 10.1
10.1 118.6

88.• COMPARISON CF
OF INVES
INVESTMENT FOR
FOR SMALL AND LARGE SCALE BUSINESSES
BUSJNESSES

Tables 55 and 66 indicate

indicate the
the investment
investment required
required for
for a
a small
small and
and
large charcoal business
large scale charcoaJ business respectively:
respectively:
 -- 121 --

Table 55

for a
Investment required for a small
small scale
scale business
business
pesos)
(Argentine pesos)

Item unit
Unit No
No.. cost
Per unit cost Total investment

11)) Infrastructure

Kilns each 10 30
30 000
000 300
300 000
000
water tanks
Water tanks each 2
2 55 000
000 10
10 000
000
Clearing ha 5
5 40 000
40 000 200
200 000

22)) Egui~ment
Equipment

Power saws each 11 300

300 000 300 000
000
Carts each 2
2 000
60 000 120 000
000
Mules each 22 40 000
40 000 80 000
000
11 010 000
000

Table 66

Investment
In ves tment requirement for
for a large
large scale
scale business
business

Item unit
Unit No. Per
Per unit cost Total investment
investment

11)) Infrastructure

Kilns each 100

100 30
30 000
000 000 000
33 000 000
Water tanks
tanks "II 20
20 5 000
000 100 000
000
Clearing ha 117
117 40 000
000 44 680 000
680 000
Roads (graded)
Roads (graded) km
km 30
30 100 000 33 000
000 000
000
Wire fencing km 90 250 000
000 000
22 500 000
22
Wells
wells each 1
1 500 000
000 500 000
000
Dwell ings
Dwellings "fl 50 1 500
1 000 75 000 000
75 000 000
Warehours
WarehouZes
300 mm " 11 2 500
500 000
000 22 500 000
500 000
Sheds 300 m2
Sheds m2 "IIIl 1
1 400 000
55 400 000
5 400 000
Raised
Raised tanks
tanks " 1
1 400
400 000
000 400
400 000

117 000
117 080 000

22)) Equipment
EQui12ment

Power saws each 12 300 000

000 33 600 000
000
Carts " 24 60
60 000 11 440 000
440 000
Mules " 24 40
40 000 960 000
960 000
for
Motors for
pumps " 3
3 000
720 000 22 160 000
000
Pumps
Pumps " 3
3 92 000
92 000 276 000
trucks
Light trucks " 1
1 000
5 000 000 55 000
000 000
000
Tractors " 11 99 500
500 000
000 99 500 000
000
Trailers
If
(12 teach)
(12 t each) " 1
1 1/ 160 000
000 000
1 160 000
Tank
Tank trailers " 1
1 920
920 000
000 920 000
000
Power graders
Power " 1
1 45
45 000
000 000
000 45 000
45 000 000

70 016 000
70 000
 -- 122
122 --

Investment costs
Investment costs recorded
recorded in
in February
February 1985
1985 indicate
indicate that:
that:

(a) trad it ional business

A traditional business invests Sa 1 010
invests Sa 010 000
000 to
1 to produce
100 t/month
100 of charcoal
t/month of charcoal of
of which
which only
only $a
$a 510
510 000 are for
000 are for
infrastructure. If we
If we relate
relate investment
investment inin infrastructure
infrastructure
to 900 ha cf
to 900 of aa production unit, a
production unit, a figure
figure of
of $a 566.00
566.00 per
average charcoal
ha is obtained; for the 66 000 tt average charcoal yield,
yield,
wh ich
which the 900 ha would produce in
in five years, the
relationship would
relationship would be $a 85.00
be $a investment in
85.00 investment in infrastructure
infrastructure
for tonnage.
for that charcoal tonnage.
(b) The investment
investment ofof aa large scale business
large scale business in equipment
equipment and
infrastructure amounts to
infrastructure amounts to $a
Sa 187
187 096 000 for an
000 for an area
area of
60 000
60 000 ha,
ha, in
in which
which aa total
total of 6767 production
production units
units of 900
of 900
ha each would be
each would be constructed
constructed in in 35 years. At the final
the final
stage, the
stage, the total
total investments
investments in in these
these production
production units
including cost
including cost of roads and
of roads and cf
of 100
100 dwellings
dwellings willwill be
5a 254 526
Sa 526 000
000 inin infrastructure alone, with
infrastructure alone, with $a 636636 of
charcoal for
charcoal for aa prOjected
projected production
production of 400 000
of 400 000 t during the
t during
total
total 35-year cycle.
cycle. Relating investment in
Relating investment in infrastructure
to the
to the area
area covered,
covered, thethe amount
amount would
would come
come to
to $a4
$a4 242/ha
242/ha
for the
for the total
total 60
60 000
000 ha.
ha.

(c) Compar i ng investment

Comparing inves tment in power saws,
in power saws, mules
mul es and
and carts,
carts, the
investment is
investment is the
the same
same for
for both
both systems,
systems, amounting
amounting toto
$ a 86/t
Sa of charcoal
86/t of charcoal produced.
produced. However, the large scale
the larae scale
business has more
mere equipment
equipment (pumps,
(pumps, light
light trucks,
trucks, tractors,
tractors,
etc.) which for
etc.) 400 tt output
for aa 400 output amounts
amounts tc
to an
an investment
investment of
of
Sa 160/t.
l60/t.

9 •
9. COt1PARATIVB OPERATIl'G COSTS
COMPARATIVE OPERATING COSTS

The costs
costs refer
refer to
to businesses
businesses engaged
engaged exclusively
exclusively in
in charcoal
production,
production, inin other
ether words
words those
those not
not having
having sufficient
sufficient forests
forests to
to extract
extract
logs which
logs which would
would justify
justify the
the installation
installation of aa sawmill.
sawmill. If they were to
If to
possess aa sawmill
sawmill and also to
and also to produce
produce charcoal,
Charcoal, the
the cost
cost would
would decrease
decrease
because amortization
amortization of roads would be distributed over different
different
products.
products.

To calculate the
To calculate the cost,
cost, an
an average yield
yield of
of 11 tt of charcoal for
of charcoal for
every 55 tt of
of fuelwood
fl1elwood can
can be
be taken.
taken. This is the
This ratio applied
the ratio applied by
by the
the
Instituto Borestal
Instituto Forestal Neclonal
Nacional when
when preparing
preparing the
the Statistics Yearbooks.
Yearbooks. The
figure is to taken only
to be taken as an
only as an average
average since
since the fuelwood :charcoal
the fuelwocd:charcoal
ratio varies according
ratio varies according to species, drying time,
Lo species, quality of the
timet quality wood,
the wood,
etc,, and
etc., and as
as aa rule the yields
rule the yields cf
of hardwoods
hardwoods are
are slightly
slightly below
below the
the 1:5
1:5
ratio~
ratio.

Labour for small and

Labour costs for and large
large scale
scale producers
producers would
would be
be about
about
the same.
the same. In however, the
In practice, however, situation is
the situation is different because the
because the
large majority
large majority of small producers
producers operate
operate outside
outside the
the ruling
ruling labour
labour laws
laws
relating to
relating to social
social security,
security, aa factor
factor that
that reduces
reduces direct labour
labour ccsts
costs by
some 56 percent.
some 56
 -- 123
123 --

Table
Table 77

Labouc cost for

Labour for 1 to~ of
1 ton of charcoal.
charcoal. 1985
February 1985
(in
(in Argentine pesos)
pesos)

Operation Price of operation

Price Social
Social charges Total

- clearing,
Brush clearing,
and
tracks and
opening tracks
1 imb i ng (5
limbing t)
( 5 t) 950 580 11 530

- Felli ng and
Felling and
bucking 11 250 700 11 950

- transport
Fuelwood transport
(5 t)
(5 t) 11 500 760 2 260
2

- Carbonization
( per t
(per t charcoal) 11 200 672 11 872

- loading (1
Hand loading t)
( l t) 200 112 312

TOTAL 5 100
100 22 824 924
7 924

Table 88 shows
shows the
the influence
influence of
of amortization
amortization and
and ma ntenance of
maintenance of
infrastructure and equipment on
infrastructure on the
the cost
cost per
per ton
ton of
of charcoal.
charcoal.

For small
For small producers
producers who
who only
only have
have kilns,
kilns tanks
tanks and
I roads the
and roads the
influence of infrastructure amortization and maintenance represents
l50/t of
$a 150/t of charcoal.
charcoal. On
On the
the other
other hand
hand for
for large
large scale
scale producers
producers this
this
item represents $a 672/t of
item of charcoal.
charcoal.

Under the
Under the heading
heading of
of equipment,
eQuipment, the
the influence
influence of
of amortization
amortization
and maintenance
and maintenance represents $a 566/t
represents $a 566/t for
for large
large producers
producers and none for
and none for
small producers.
small producers.

The
The costs
costs for
for administration,
administration, supervision
supervision and
ai1d planning
planning affect
affect
only the large
on/y large scale producer
producer and
and may
may be
be estimated
estimated at
at 15
15 percent
percent over
over and
and
above costs.
above labour costs.
 -- 124 --

Ie 88
Table

nce of e7i'o
Influence ..ation an' nointenar infr,str.sre and
on the c,st per t, char 'ro
(in 11:3fl

Item Amortization Maintenance Total

Total
---~~~~~~~~~~~~~~~~~

I)
1) Infrastructure

Kilns 50
50 50 100
Water tanks
water tanks 5
5 55 10
Roads 15 25
25 40
Wire fencing
fencing 95
95 50 145
wells
W,I1,, 5
5 5
5 10
Dwell ings
Lwellings 200 62
62 262
Warehouses
Kd,,=houses 5
5 10 15
Sheds 15
15 22 37
Raised tanks
Raised tanks 4
4 4
4 8
8

627

2
2 ) Eguipment
F-,lipment
Power (ll
ri-saws (1) - - -
-_-ts (1)
Carts (1) - - -
Mules (1)
tules (1) - - -
Motors '. r pumps
Motor' for ((2)
2) 60 6 66
Pumps ( 21
2) 3
3 33 6
6
Light truck
Ligl.t ti.i_k 83
83 40
40 123
Tractors 80 40
40 120
12 tt trai
12 ler
trailer 10 10
10 20
Tank
Tank trailer 8
8 8
8 16
Power
Power grader 115
115 100 215

566

(I) No influence,
No influence. these belong to
to the
the workers
workers
(2) Influence is
Influence is only 30 percent
percent

Consequently, the difference

Consequently, the differ:ence between
between the
the operating
operating costs
costs of
of aa
typical producer
typical and a
producer and a large
large scale
scale business
business producer
producer amounts
amounts to
to what
what is
is
shown in
in Table
Table 9.
9.

Table 9

Comparative operating
tiing production 01ro e per ton
;,r»;ction costs ton of
of charcoal
charcoal
(February
(Feldrtard 1985; in pesos)
in

Small producer Large scale producer

- Labour 5 100
100 55 100
100
-- Social
Soc Carges
ia 1 charges -- 2 856
-- Amortization
Amort ,on 70 753
-- Maint
Maintenance
: 'ce 80 440
-- Adminiration, etc.
Administration, -- I1 185
-- Supplies 250 250
-- Taxes and
Taxes and rates 200 200

55 700 10 784
10 764
 - 125 --

fact that
The fact that small
small ; have lower production
have lower production costs does
does
not
not mean they earn
mean that they earn more
more -t ;e scale
scale businesses because:
businesses because:

(Ca)
a) They usually
usually deper , on aa middleman who
who keeps the
the larger
larger
share the profit.
share of the

((b)
b) During (April to
five or six months (April
During five to Sep they work at
September) they ' at
full capacity.
capaciLy. During the other months
During mouth:- they
(n e', reduce
production or
production or stop
s it completely
iL completely when
when thee market becomes
;,..rFe', becomes
tight.

10. COMPARISON OF FINAL

FINAL COST
COST

In to determine
In order to determine thethe final
final cost,
cost, the
the influence
influence ofof interest
interest
on the capital invested in
in infrastructures and equipment
ecuipment and the
depreciation of
depreciation of the forest
fr.res( consumed must
capital consumed must be be added
added to the
operating
:rircitIng costs. Interest
Inter,-i is .: calculated at
calculated at an
an annual
annual rate
rate of 10 percent
of 10 percent
at
az constant and f.D.-eat
'^nstant prices and forest deprebiation
depreciation at 10 percent of
at 10 of the
the value ofof
the ,t(arcoal
charcoal ex site.
ex site. i,nse.:uently
Conse ntly thethe final
final cost
cost for
for each
each ofof the
the
:berations would he
operations be as
as indica
indlc-,..01 in Table
i 10.
able 10.

Table 10
10

Comparison of final
final cost
cost per
per ton
ton of
of charcoal,
charcoal, February 1985
(in pesos)
(in pesos)

Item Small
Small producer prOducer
Large producer

Operating cost 700

5 700 10
10 784

Interest 101 11 560

Depreciation 900 900

6 701
6 701 13 244
13

The price
The price of
of charcoal
charcoal delivered
del ivered to to Altos Hornos
Hornos Zapla in
February 1985 was
was $a
Sa 12 ODDlt which,
12 000/t which, minus
minusfrei,_Iht,
fre ht, came
came to
to $a DODlt ex
$a 99 000/t ex
kiln
kiln site. Consequently thethe large
large scale
scale crampon/
company had
had aa loss
loss of $a 1,784/t
$a 1,784/t
on operations
operations and $a 4,244 inin economic
economic terms.
terms.

During December,
During December, January
January and
and February
Fehruary the
the small
small producer
producer sold
sold
his charcoal
his charcoal atat $a 4,OOO/t ex
$a 4,000/t ex kiln
kiln site,
site, which
which means
means that
that he
he also
also lost
lost
$a 22 000/t
about $a
about DOO/t both
hoth on
On operations
operations and
and inin economic
economic terms,
terms, with
with the
the
difference
difference remaining in in the
the hands
hands of
of the
the middleman
middleman who
who delivers
delivers to
to Zapla.
Zapla.
After March
After march the
the free
free market situation wAswas r.versed
reversed and
and the
the small
small producer
producer
received $a
received $a 88 000
000 to $a 9
to $a 9 000/t
DaD/t exex kiln site.
.t. .

The above values

71e -al tes are
are given
given for cash payment
r ,ment terms; if
if payments
del
are de_ayei the financial
tn.. losses can
5 nantlal losses t
can reach ve high levels particularly
high levels particul
in
in aa country whe,-e
where interest
irterest rates
rates are about 20-
20-255 percent per month.

11. nlo SYSTEMS

PROFITABILITY OF THE TWO SYSTEMS

In
In determining
determining thethe profitability
profitabilit of of aa production
production system
system inin
it must
Argentina it must bebe borne in mind
borne in mind that
that the figures
figures are
are valid
valid for
for less
less
than one
than one month
month ifif that,
that, and
and that
that even
even during
during the
the same
same month
month the
the results
results
of a
of a business are
are unpredictable
unpredictable because:
because:
 -- 126
126 -

1. Inflation fluctuates between 15

Inflation fluctuates 15 and
and 20
20 percent per
per month and
and
consequently
consequently the
the prices
prices of
of inputs
inputs and
and labour
labour fluctuate
fluctuate
continuously.

2. The value of
The value the dollar
of the dollar which
which governs
governs prices
prices of
of imported
inputs varies
inputs varies from
from day
day toto day
day and,
and. generally
generally speaking,
speaking.
becomes devaluated at
becomes devaluated at an unforeseeable but
an unforeseeable constant rate.
but constant rate.
Therefore the price of
the price of power saws, tractors,
power saws, etc~ f
tractors t etc., which
depend on
depend on imported fluctuates every
parts, fluctuates
imported spare parts, every week
week or
fortnight.

J • Labour prices
prices are set by the
the state which 'lOrmally
normally
establishes the end
establishes them at the end of
of the
the month,
month, if
if not
not during the
during the
following
following month, this cost
that this
month, which means that cost component is an
compone~t is an
unknown factor during most months.
unknown factor months.

Apart from the

Apart from the preceding
preceding remarks,
remarks, itit must
must be
be borne in mind
borne in mind that
there
there are two markets
are two for charcoal
markets for charcoal each
each with different prices
with different prices and
and forms
forms
payment:
of payment: the iron
the iron and
and steel market (Altos
(Altos Hornos
Hornos Zapla)
Zapla) and
and the
so-called
so-called free market mainly forfor domestic
domestic purposes.
purposes.

11.1
11.1 The Iron and Steel Market

At full capacity this market consumes

capacity this consumes about
about 40-50
40-50 percent
percent of
national and is
national production and is characterized
characterized by:
by:

1• A steady
steady demand
demand throughout
throughout the year except
the year except when
when market
market
conditions oblige it
it to stop operating some smelting
furnaces.
2. It fixes
It fixes prices
prices unilaterally
unilaterally according
according to
to the
the price
price it
it
receives iron and
receives for iron and not
not the
the production
production cost
cost of
of charcoal.
charcoal.

3.
J. It establishes aa charcoal
It establishes charcoal purchase
purchase system
system based
based on
on quality
quality
premiUms and
premiums and discounts taking into
discounts taking account size
into account size grading,
grading I
humid i ty and
humidity and fixed
fixed carbon.
carbon. The analyses
The analyses are
are made byby the
the
purchaser without any
any control byby the prOducer
producer oror an
arbitrator.

4. When there
there is
is aa shortage of charcoal the
the market establishes
establishes
systems for premiums
systems for premiums byby volume
volume and
and filling
filling orders
orders with
with
prices for
better prices for larger
larger volumes.
volumes.

5. It establishes the
It establishes the price
price for
for the
the product
product delivered
delivered atat the
the
steel and
and iron
iron works,
works, paying
paying different
different prices
prices according
according toto
distance from the
distance from the supplier.
supplier. In words, the
In other words, the further
further
the distance
the distance thethe higher
higher the
the price.
price. maintains or
It maintains or
abolishes this
abolishes this system according
according to to variations
variations inin the
the iron
iron
conditions~
or charcoal market conditions.

6. purchaser establishes
The purchaser establishes the payment
the payment terms and fulfils
fulfils
them as
them as he
as long as he can.
can.

This market
market is thethe nearest
nearest toto Salta
Salta province
province and
and most
most ofof its
production goes
production goes to
to that
that province.
province. until the end of
Until the of October
October 1984
1984 it
it
enabled the
enabled the large
large producer
producer toto make aa reasonable
reasonable profit.
profit. Since that
that time
time
the pr i ce
price has fallen conti nuousl y
continuously and in February resul ted
resulted in
in
bankruptcies, mentioned
bankruptcies, mentioned inin Section 10, of
Section 10, of charcoal-producina
charcoal-producinq firms
firms that
that
had
had complied
complied with the the labour
labour laws.
laws.
 -- 127 -
127 -

11 .2
11.2 ket
The Free Market
This market has
This has the
the following
following characteristics:
characteristics:

(a) During five

During five or
or six
six months
mOrlths the demand
the demand doubles
doubles or
or triples
triples
dependirlg
depending on the duration and intensity of
of the
autumn-winter season and
and the
the price
price or
or availability
availability of
of other
other
gas and kerosene-type
gas kerosene-type fuels.
fuels.

(b) The final consumer is the

final consumer the public
public which
which uses
uses charcoal
charcoal for
heating and
heating and cooking purposes,
purposes, except
except for
for aa relatively
relatively small
small
proportion
proportion which is used
which is used in small foundries,
in small foundries, asas activated
carbon, and for
carbon, for other
other uses.
uses.

( c} IIt
t reaches
reaches the
the public
public in
in paperr or
or plastic
plastic bags
bags containing
containing
2-5 and
2-5 and 10 kg of charcoal.
10 kg charcoa is retailed
It in retailed inin stores
stores, I

supermarkets and service stations.

stations.

(d) It passes
passes through
through two
two or three middlemen before reaching
or three 1reachi:1g
the consurner~
final consumer.
the final

( e) Only
Only small
small producers $UDDiV
su 1' this
ttis market. The large
producers cannot
producers partic4ai:. in
cannot partici :n aa market which operates
.aich operates
mostly asas aa black
black market,
market, atat least
Icir- inin tthe producer-to-first
producer-to-first
middlerr.an stage.
middleman stage.

(f) The producer sells

The producer sells the charcoal
charcoal at source, i.e. ex kiln
ex kiln
site price ..
site price.

The market
market price,
price, at least for for the
the producer,
producer, fluctuates with
fluctuates with
demand. In the
In the months
mcnths from
from May
May to
to September
September the
the price
price is
is 50
50 to
to 100
100
percent higher
percent higher atat constant
constant value
value than
than in thethe other months.
months. This
situation may
situation may not
not occur
occUr when
when the iron and
the iron and steel
steel market has
has aa marked
decrease, as
decrease, as it did in
it did in the
the years
years 1980
1980 to 1982 (including
to 1982 (including 1982).
1982).

circumstances of
The circumstances of activities
activities such
such as
as agriculture
aqriculture in
in marginal
marginal
areas also
areas also affect
affect prices.
prices. the price
If the price of farm
farm products is depressed,
products is
part the farm
part of the farm producers
producers will turn
turn to
to charcoal-making,
charcoal-making, causing
causing aa drop
drop
in
in prices
prices due toto oversupply.
oversupply.

The
The price of charcoal on the
the free
free market begins
begins to
to rise
rise in
in March
March
or April
or April and
and starts toto fall
fall in
in September. During the
During months of low
the months low
market prices for
market prices for charcoal
charcoal the
the small
small producer
producer channels
channels his
his production
production toto
Altos ZapIa, iif
Altos Hornos Zapla, f he has a
he has a surplus,
surplus, or
Or delivers
delivers it
i t to
to middlemen who
middlemen who
pay
pay low prices.

The iron
iron and
and st
steel cF. (7.H.'.1
A market (A.H.2.) alsoalso tries
tries toto tu;
buy 11
in excess
during the
during the months
months of
oflow,
lower
. freee demand so asas to cover
cover the shhihag,
the supply shortage
during the
the months
months of0. uMarch toh 0,,,tterh:Es,
September. Another factor
fa-Ar. influenci
,nhluo-c,hg
and supply
prices and supply volumes
voli are the talilZ which
the rains ottiCh can affect 'cc
can affeot the charcoa
,har
production of Easterr
Eastern Chaco.

On the
the basis of all those .ice factors it can be
factors it be said
said that
that the
the it
profit
fit
the small
of the small proO,,,
producer- is reasonable le and
and sometimes even large
large d,iing fi:e
during five
or
Ot:' six months
months of
of -;:a
the year and then:a.1 decreases or becomes
decreases becomes negat,,e
tive during 1

the remaining
the remabir1g months,
months. A large
,-ce share of
share the profits remains
of the rema ns with
with the
the
first
first middleman wh., who often
of', a facilitates production by advancing
facilitates production advancing goods to
the producer.
the charcoal producer.

charcoal has
Briquette charcoal has begun
begun to
to compete
compete on
on this
this market
market in
in recent
recent
years,
years, although it covers
although it covers no more than
than 55 percent
percent of
of the
the market.
market.
 -- 128
128 -
-

}12.
2. ADVANTAGES AND DRAWRACKS
DRAWRACKS OF
OF EACH
EACH SYSTEM
SYSTEM

12.1
12.1 Small Scale Production
The advantages of
The advantaaes of small
small scale production
production are
are due
due to
to low
low capital
capital
investment
investment,t flexibility in
in face of
of changes in thethe market
market and
and compara-
compara-
tively lower production costs (Table
tively lower 9).
(Table 9).

The drawbacks are:

are:

(a) Th is form
This form of production
product ion is an anachronistic
is an a nachron is tic social
soc ia I system
system
typical uboom-or-bustt! economies.
typical of "boom-or-bust" economies.

(b) The small

small scale
scale forestry
forestry activity,
activity, exercised
exercised together
together with
with
destructive pastoralism, causes
destructive past.:.ialism, causes the
the elimination
elimination of forests~
of forests.
More than
than 20
20 emillion ha of semi-arid
lion ha semi-arid forests
forests in in Argentina
Argentina
have
have been
been dest
deni..d andand the
the rest
rest of
of its
its : forests are rapidly
,Gts are rapidly
becoming deg
becoming dear.ni.,.: under
u-der the
the impact of these
tt, activities.

(c) AS all
As aa rule ssmall producers
producers are
are exploited financially
financially by
shrewd tradesmen
shrewd tradesmen or sc-called
or so-called "forestry
'tforestry operators" who
operators~ who
split the profits
split the taking any
without taking any risks.
risks.

(d) In areas subject to

In areas to this forest exploitation system the
exploitation system
population tends to
population tends to decrease
decrease progressively.
progressively. Today the
the
countless abandoned
countless abandoned villages and and railroad
railroad stations
stations are
are
evidence that
that the
the system cf..v leads
system only to desertification
leads to desertification of
the environment
the environment in the semi-arid Chaco. The formerly
The formerly
misnamed "large
misnam,.' forestry t:usinesses"
"large scale forent.. businesses" 7.8rely exploited
exploited
system and
the svi.te, and withdrew as a8 the areas became impoverished
the areas
leaving tehind
behind them
them aa pattern
pattern that
thatonly
onlycc';:
continues
:nues to
to create
misery~
human misery.

(e) In terms
In terms of space the
the cost
cost of
of state
state service
service infrastri
infrastructures
(education, roads.
roads, railroads.
railroads, health) is always insuffi-iris;
cient and ineffective in face of the dispersed and
population pattern
migratory population pattern created
created by
by the
the system.
system.

(f) easy to
It is easy to enter
enter and
and leave
leave thethe system:Lem because it
requires little
requires littleca.tit.11
capital and ddoes not create
not ci, any permanent
-e any permanent
obligation
obligation toto wage-r-Irr,rs.
wage-earners. This apparent -I-t advantage
adi-F.ntage is the
is the
system's greatestdras...ack,
system's greatest drawback, because whenwhen
'.i.J.i.ause thethe pri.e
ice allows
allows aa
good profit
profit margin
margin this activity attracts
this activity attracts aa lace rge mass3 of
investors from other sectors (farmers
(farmr(5,f traders,
t. )ers,
professionals. etc.)
professionals, etc.) leading
leading toto overproduction
overproduction and and c-
creating
ating
problems of
problems of surpluses in in the
the market which,
which. because
because du astic
domestic
demand isis seasonal, is is very vulnerable
vulnerable and consequently
such investors cause prices
such investors prices to
to drop.
drop.

12.2
12.2 .sinesses

large scale
The large scale business
business with
with aa sufficiently
sufficiently large
large forest
forest area
area
which
which allowi
allows long-term permanent
pei .nent activity, aa management planplan ensuring
ensuring
forest regeneration and
forest regener»iron and ar;- priate grazing
appropriate grazing of fodder
fodder resources,
resources, has
has the
the
following advantages:
following advent

(a) It settle permanent

It can settle permanent populatith
population ,entres
centres with
with all the
the
advantages this involves,
advantages this involves: it relo,es
reduces the
the space cost of
cost of
infrastructure
infrastructure and
and makes it efficient~
it more cfricient.

(b) It the future

It ensures the future of
of the
the forest
forest mass,
mass, maintains
maintains aa aood
good
level of fodder production and aa rational
rational wildlife
equilibrium.
 -- 129 -
129 -

(c) The infrastructure

infrastructure of fences I roads
of fences, roads and
and watering
watering points
points
permits the establishment
permita en ishment of multi-purpose agro-forestry
of multi-purpose agro-forestry
systems which can diversify
c and increase
,iversify and earnings~
increase earnings.

Id) it allows
It allows both the
the state and
and private
private enterprise
enterprise to
to plan
pJan for
for
medium and
and long
long terms.
terms.

(e) It can take

It take a--.ntage
advantage of
of the
the benefits
benefits ofof tax
tax redr:
reduction for
reforestation (capital tax) and
Ital tax) and for
for increased
increasedprcr:
production on
low product.lvity
low productivityrui:A.
rurallar-id.
land.

disadvan
The disadvantages of aa large
of large scale
scale enterprise
enterprise are:
are!

1.
I. During the
Dur the months
riv,rtisofoflowlow charcoal
..harcoaldemand
demand it
it cannct
cannot compete
compete
successfully because
succ. . --canse its
i r cost
')st structure is higher than
structure is than that
that
of the
the small scale busInr:.s.
nal. s.alo business.

2.
2, re, cts more
It reacts slowly to
more slowly to unfavourable
unfavourable changes
changes in the
market,
m ."<et, and when it
and when it needs
needs to
to cut
cut down
down its it has
its production it has
s,everance
-ance pay
pay compensation
compensation costs
costs which the small
which the small producer
producer
simply
;y1 does pay.
does not pay.

3.
I. It is responsihle for
is responsible for the
the health
health of
of its
its :ersonnel
personnel andr9 has
has
extra costs for
for transporting patients, I.
,nsporting patients, financing
'ing treatment,
etc., also affect
etc., which also i 1.t costs.

4. fulfils all
It fulfils all t.).(,
the laws in force which provide, rr-ide, for
example,
examp-,., for
for depositing
depositing 1818 per
percent
Pr,t added
added value tax (IVA)
(IVA) on
sales.
sales. The scale producer
small scale
The small proc), workir3
working cutsie,
outside the
the law
law
receives
rec.i-i,,sthis
this 18
18 percent but does
percent bur_ not 0,,posit
does not deposit it.
it. If to
If
added the
this is added difference in
the difference in undeposited
undepolted budgetary
budgetary
the small
assets, the small producer
producer obtains
obtains 44
44 percent
percent more
mors ofof the
the
value (at
(at given sales prices)
given equal sales prices) than the large scale
the large scale
business. The gravest problem
The gravest problem isis that
that 4444 percent
percent of of the
the
extra illegal
extra illegal profit
profit usually
usually remains
remains inin the hands of
the hands of the
middlemen
middlemen and notnot with
with the
the producer.
producer.

13. COMPARISON OF SOCIO-ECONOMIC

SOCIO-ECONOMIC EFFECTS:
EFFECTS: THE LARGF
LARGE SCALE SILVO-
SILVO-
PASTORAL SYSTEM AND THE TRADITIONAL SYSTEM
SYSTEM

Based on
Based the experience
on the experience ofof the
the past
past ten
ten years in in Salta province
province
which ha-
which has two 1
twc large scale production units,
scale production uni ts, one focusing on forestry
rre focusing
(Salta Forestal), the other
(Salta F,:te,(31), other operating aa silvo-pastoral
sil,. -,-astoral system
.1,stem (Campo
(Campo del
Norte), valid comparisons can be
Norte), ra.io be established
established eith
with the
the trnditional
traditional system.
system.
Roth these large
Both these large scale
scale businesses
businesses are
are located in the the -rni-arid
semi-arid Chaco,
Chaco,
which has
which has 511
511 mm average
average annual
annual rainfall,
rainfall, which
which varies
varies between
between 228228 rom in
mm in
the driest
the driest year
year and
and 852
852 mm inin the
the wettest,
wettest, with
with years
years of 60 60 percent
percent
beJow-averaae
below-a,,=rige rainfall (Bianchi, 1981,
1981, p.105).
p.I05). Absolute
Absolute maximum
5.8 o C and
0
temperatures
tempera, Jr.PS reach 4747°CC and absolute
absolute minimums
minimums 5.8°C and the season of
the season of
frosts isla from
irom May to September.
May to September. During Che
During the warmest
warmest. month
month the
the average
average
o
temperature is
temperature is 27.6°C
27.6 C and
and in the coldest month 14°C
the coldest 14°C (De
(De 1"ina, ~.,
Fina, et al.,
1960).
1960).

The results
results of the
the traditional
traditional system
system have
have been
been analyzed
analyzed inin
different studies showing
different studies showing clearly
clearly that
that it
it leads
leads to
to total
total impoverishment
impoverishment
of the
of the forest,
forest, which
which is
is disappearing
disappearing as
as such,
such, and
and of
of the
the natural
natural fodder
fodder
resources (Saravia Toledo, 1984).
resources (Saravia 1984).

After onlyonly 20-30

20-30 years
yearsofoftr.-,ditio!--1
traditional forestry
forestry and pastoral
and pastoral
the population abanc.'
activity, the abandoned' the
the area because the resources
. - resources were
were
exhausted t iillustrating
exhausted, l l ustrat.ing aa typical "boom-bust " economy.
economy_
11
 130 -
- 130

Concerning pastoral
Concerning ral activity,
activity, Saravia
Saravia Toledo (1985) analyzed
Toledo (1985) analyzed the
process
process of
of occupation of 60
occupation of 60 000
000 ha
ha with
with aa traditional
traditional system,
system, where in 30
where in 30
years the
years the livestock population decreased
livestock population decreased from
from 15
15 000
000 to
to 300
300 unitS,
units,
forcing the inhabitants
forcing the inhabitants to
to seek
seek temporary
temporary employment
employment outside
outside the
the area
area to
cover their minimum subsistence needs
cover their needs or
or else
else to
to emigrate
emigrate outright.
outright*

Comparing the large

Comparing the large scale
scale business
business with the traditional
with the traditional forestry
forestry
and
and pastoral
pastoral exploitation
exploitation system in aa typical
system in typical area of 60
area of 60 000
000 ha, after 40
ha, after 40
years
years of
of exploitation the socio-economlc
exploitation the socio-economic results
results would
would be
be as indicated in
as indicated
11.
Table 11.

11
Table 11

Cornpari_son large scale

Comparison of large scale and
and small
small scale
scale businesses
businesses
US$)
(in US$)

Large business
Large scale business Small business

No. permanent jobs

Forestry
Forestry activity 120 -II
-1/
Livestock activity 30
30 20~1
202/

Annual gross income

F'orestry
Forestry 400 000
400 000
Livestock
Livestock 400 000
000 15 000

1/ During 10 to 15
10 to 15 years,
years, while
while the
the forest
forest lasted,
lasted, it
it created
forestry jobs.
forestry jobs.

~I
2/ temporarily outside the
Employed temporarily the area
area for
for several
several months.
months.

14.
14. CONCLUSIONS

Until
Until now
now the
the semi-arid
semi-arid forests
forests in the Argentine Chaco
the Argentine Chaco region
region
have suffered the impact
impact of the traditional forest and pastoral
exploitation system,
exploitation which can
em, which can be defined
defined asas aa "non-management!! system.
"non-management" system.
The
The consequences areare frightful
frightful from
from any
any point
pOint ofof view,
view, he
be it
it socio-
socio-
economic or
or biological. Abandoned villages and
Abandoned villages and railroads,
railroads, biological
desertification, human misery and chronic social instability are the the
consequences
consequences of this process
of this process which has
has destroyed
destroyed more
mOre than
than 20
20 million
million haha
of forest turning them
of forest them into
into unproductive
unproductive brush.
brush,

experiences in
The experiences in Salta
Salta province
province indicate
indicate that
that the
the process
process of
of
destruction
destruction can
can be
be reversed
reversed and
and that
that an
an appropriate
appropriate balance
balance of
of the
the
ecosystem
ecosystem can
can be
be maintained in a
maintained in a stable silvo-pastoral
silva-pastoral production
production system,
tern,
provided that experimentally-tested management norms
provided that norms can
can be
be applied.
appli

far these
How far these experiences
experiences could
could be extended in
be extended in aa country
afflicted
afflicted by
by one of the
the world's highest
highest inflation
inflation rates
rates which
which affects
affects the
the
is aa challenge
whole production mechanism is challenge that
that cannot
cannot be
be met
met easily.
easily.
 -- 131
131 --

Argentina 'reno tc have fun. ov.r.tal tools

Argentina seems to have two fundamental tools to .anize
to or"ganize
,
tt.Flottation
itation of
of the
the IA its ser reolo,, halt t?e
t,..EC, t,.e.p in its semi-arid) region, halt the processes
resources
ot It-t,tiuction
truction and
and bri. stabili-: to an ,:e3 which
bring social stability to an area which until now .gw has
hpe-, one
been roe of
of population
population expulsion. These These tools
tog1, are.
are:

1. State
State centerprises
.ir,rrises which
which are
are the
the natural
natural market
market for
for the
the
leading of the
products of
leading forestry products the semi-arid
semi-arid forest, i.e.
forest, Le.
railroad slp.pers
railroad sleepersand
and charcoal
charcoal for
forAltos
AltosHornos
Hornos 2apla,
2 a. All
All
Argentina's railroads are state-owned and Altos Hornos
Argentina's railroads are state-owned and Altos Hornos
Zapla belongs
Zapla to Fabricaciones
belongs to Fabricaciones Militares
Militares which
which is also a is also a
state-owned
state-owned company.
company.

2. Thesemi-arid
The sem arid Chaco provincpshave
Chaco provinces havelarge
largeforest
forest reserves
reserves in
in
their r
their publAc
ie lands.
lands. Ftoboi-ily 80
Probably percent of the national
8.1 percent of the natio:>al
for .t for slety.tt,
forest reserve for sleepers andi 60 r0 percent
percent of its reserve
of its reserve
for charcoal
fOr la, can be
can in tte 'tate forests.
foun.1. in the state forests.
be found

.ictors would o
These two factors t' that gradual coordination
that gradual coordination
between the state market and the proaucers could lead to
,

between the state market and the veers could lead to a rational rational
exploitation
exploitation of state
resources under state regulation
resources regulation and :hp( rvision,
supervision,
allowing
allowing aa sound
sound and
and permanent socio-economicevolution
perma:1e:1t socio-economic evolutionofof the
tne semi-arid
semi-arid
region.
region. In this
In this scheme
scheme charcoal
charcoal production
production would
would play
playaa fund.imental
fundamental role
role
because is an
it is
because it an activity
activitythat
thatcan
cangenerate
generatea sizeable labour
a sizeable labourdemand
demand and
and
it constitutes a n-cessary management tool in semi-arid forests, since it
it constitutes a necessary management tool in semi-arid forests, since it
permits oraaol'ati-n and improvement of the forests if exploitation
permits organization aCId improvement of the forests if itation is
is
practised ac-c,,lrii to ecological e'a,.ards.
practised according to ecological standards.

In Aruntine
In Argentina the the known petroleum reserves ryes are
are sufficient
suffirirnt for for ten
ten
years accordt-io
years according to t, pessimistic estimates and 20 years no( ..,t,ting to
years according to the
the
optimistic PzPp,
optimistic ones. ratural gas
Natural r.
gas could cover the
cover the presPit
present d-ma.-d
demand for 100
years but, thc petroleum
petroleum is high,t rpaand for this
. i

years but, if It the etth, usted, a higher

is exhausted, demand for this
foreseen and,
product can be foreseen
product thetercre, the
and, therefore, the reserve
reserve vi,u1
would last last for
for a
shorter time.
shorter time. All
All this
this means
means that
that it is of
il is of fundamental importance for
fundamental impOrtance for
recuperate, preserve
Argentina to recuperate,
Argentina preserve and improve its its semi-arid
semi arid forests,
forests,
whichare
which are producers
producersofof fuelsfuels that
that constitute
constitutea arenewable
renewable natural
natural resource
resource
of incalculable
of incalculable value
value forfor the
the future.
future.

The establishment
The establishment of of policies
policies whichwhich cancan offer
offer aa reasonable
reasonable
framework of staz.1tity and profitability
of stability prcfitability for large scale
for large scale charcoal
charcoal
businesses and
businesses and a -dual technolog
a gradual tectnol,i,calieal evolution
evolution of of thethe small
small producer
producer
group would
group would be -:-1-st step
be a first .5-i" tii
step titoward attainment of
the attainment of obj that can
1.ves that
objectives can
rationalize thu
rationalize the ssystem.

the final
In the final analysis
analysis the the problem
problem is is not
not toto chi
choose between
, between twotwo
options leading
options leading to to the
the same,
same,oror aa similar,
similar, goal.
goal. The The dUdilemmaa consists
consists ofof
whethertoto maintain
maintain the the present
present production structure with with all
r

whether production structure its

all its
negative
negative consequences,
consequences, Or or to
to introduce
introduce aa social
socialand andtechnological
technologicalchange change
in harmony
in with the
harmony with the development stage which
development stage humanityisis experiencing
which humanity experiencing at
at
present.
present.
 -- 132 --

REFERENCES

Bianchi, A.R.
A,.R. Las en el
Las precipitaciones en el Noroeste
Noroeste Argentino.
Argentino.
1981 I NT!,
INTA Salta.

De
De Fina, A. et
Fina, A. et l. Difusion geografica de cultivos
Difusión geográfica cultivos indices
indices en
en las
las
1960
1960 provine as dedeSalta
provir.-::,: Salta yy Jujuy
Jujuy yy sus
sus causas. Instituto
Instituto de
de Suelos y
Agrotecnica
Agroté,-,loa INTA.
15TA. Publicacion No.
Publicación NO. 67
67 Buenos Aires.

Dorfman, A.
A. Historia 1a industria
Historia de la industria argentina.
argentina. Ed.
Ed. Solar/Hachette --
1970 Buenos Aires

FAO. Simple technologies

technologies for
for charcoal-making.
charcoal-making. FAO. Rome.
1983

FAD.
FAO. Sistemas Agroforestales
Sis Agrc stales en America Latina yy El
El Caribe.
Caribe. Ofieina
Oficina
1984 Regde la
Regional de 1a FAO. Chile.
Chile.

A.
Frith, A. Plan de manejo 1975-80,
1975-80, Lotes
Lotes íi,.cales
Fiscales 35-36.
35-36. Documento
1975 NO. 12 NOA
No. 12 NDA II
II Forestal -- Salta.
lEONA.
IFONA. de estadísticas
Anuario de estadisticas forestal.
forestal. Forestal Nacional
Instituto Forestal Nacional
1982
1982 Buenos Aires.

Sarav ia Toledo,
Saravia Carlos.
Tcled, Cailos. Manejo
N. rejo silvo-pastoril
silvo-pastoril en
en el
el Chaco Nor-
1984 occidental Argentino.
oc.,,lental Argentino. III Reunión
III Reuni6n de Intercambio
rntercambio Tecnológico
Tecno16gieo en
en
Zonas
7nnr,n Aridas y
y Semiaridas. C.A.D.r.A. Buenos Aires,
:.idas. C.A.D.I.A. Aires.

Saravia Toledo, Carlos.

Carlos. Tierra ptiblica
La Tierra pablica en
en el
el desarrollo de
de las
las
1985 regiones aridas yy semiAridas.
regiones áridas semiaridas. I-La
I-La experiencia del Chaco
Occidental Argentino. IV Reunión
Reuni6n de Tecno16gico en
de Intercambio Tecnológico en
Zonas Aridas
lonas Áridas yy Semiaridas. C.A.D.LA. Buenos Aires.
Semiáridas. C.A.D.I.A. Aires. (in
(in press).
press).

Whyte, A. &
Whyte, A. & Burton, I.
I. The of the
The human ecology pf the dry
dry Chaco,
Chaco, in
in the
the
1983 Argentina. Toronto. Canada.
province of Salta, Argentina.
 -- 133 -
-

LIBERIA: THE INSTITUTIONAL FRAMEWORK

THE LEGAL AND INSTITUTIONAL FRAMEWORK
FOR
FOR CITIZEN IN FOREST
CITIZEN PARTICIPATION IN FOREST INDUSTRIES
INDUSTRIES

by

F~ Kranwe Sio*
F. Sio*

CONTENTS

Page

1• INTRODUCTION 134

2• ANALYSIS
ANALYSIS OF THE SITUATION 135

2.1 Background 135

135

2.1.1 Forestry in Liberia's economy

Forestry in economy 135
2.1.
2.1.22 Forest ru,oir,e;
resources 135
2.1.
2.1.33 Logging, forest industries
Logging, torolt industries and the
the
timber. trade
timber trede 136

2.2 Ownersh
Ownership and Current
Aspects and Current Levels
Levels of
of
Citizen Participation 136

2.3 Selected Sector Problems

Problems 137
2.3.1 Infrastructural problems
Infrastructural 138
136
2.3.2 Concession and
and other fees
fees 138
136

2.4 The Legal and Institutional

The Existing Legal Institutional Framework
Framework 139

2.4.1 An cr.
An open economy
r, 139
139
2.4.2 The legal basis for
The Irgal for participation
participation 140
2.4.3 The
The institutional basis of participation 141
3. REMARKS
CONCLUDING REMARKS 142

REFERENCES 143

• Col of Agriculture
n:::!1,..nr and and
of ,.griculture Forestry, University
Forestry, UniversityofofLiberia,
Liberia, Monrovia,
Monrovia,
Liber
 -- 134
134 --

1. INTRODUCTION

The greater liarticipation

participation of of citizens
citizens in in the
the wood-processing
wood-processing
industry is natgra: ~development
is aa natural 'developmentfrom FromLiberia
LiberasI S interest
interest inin seeing
seeing that
that aa
great proportion of of 'cm.fits
benefits from
from forest
forest exp:.itation
exploitation remain
remain in
in the
the coun-
coun-
try..
try. For aa long time, harvesting , proce,,r,g
, processing and and troi!,
trade in forest. pro-
in forest
ducts were almost
ducts were a Imos t exclusively
exclus i ve1y inin forei,-1
fore 19n hands.
hands. In
I n addition,
add it ion, the
the indus-
indus-
try!s emphasis was
try's on export
waS on export ofof quell,
quality logs
lco, of species, resulting
of primary species, resulting
in
in large
large volumes
volumes of of secondary wood going to : tq waste.

Be i ng aware
Being awa re that
tha t local
local o'ocessing
process lng would
would help
help reduce
reduce was,u
was te and
and
increase
increase thethe value
value of the forest products
of the -.ducts while generating employment
while also generating
opportunities
opportunities and and increasing aggregate profits to
ate profits to the
the national
national vi,nomy,
economy,
Liberia
liber'.1 introduced
introduceda anew newtimber
timberprocessing
processingpolicy
policythat
thatbecame
becameeffective
eieetive inin
1973. It stipulated in
It stipulated in concession agreements
agreements that
that local
local woo::
wood processing
per company
1 increase annually
any should increase annually inin increments
increments ofof 20 percent starting
20 perc:.c: starting
from 1973 so
fl, - so that
that by
by 1977
1977 all
all loos
logs harvested
harvestedwould
wouldbebeprocess..'d
processed locally.
Aft.er
Arter the lat.t.er year
1-o latter year there
there woulo
would bee no more exportation
no more exportation of of logs.
logs. How-
ever, by
' y 1980 Liberia
1980 Liberia exported
exported 6464 percent of her
..arcent of her log production.
log production. The
policy was
was therefore
therefore never
neverfully
fully.:,i.Lemented.
implemented.

In their
In their analysis
analysis of causes
causes for
for this
this failure,
failure, Gillis,
Gillis, Mescher
Mescher and
(1983) list
Peprah (1983) list the
the fo:lowing
following as
as major
major factors:
factors:

(aJ Logging companies benefit more

coananies benefit more from
from exports
exports of logs
logs than
from processed
:::ed timber.
timber.

(b) want to
not want
The companies do not to make
make additional investments
additional investments
that
that will its.
will not yield quick profits.

(0) The desire

desire by
by concession
concession holders
holders to
to maintain
maintain the
the supply
supply of
of
logs
logs to parent companies or
or business
business partners
partners abroad.
abroad.

(d) companies do
Logging companies do not
not regard
regard wood
wood processing
processing as their
primary activity in
in Liberia.
Liberia.

(e) The primary

The primary aim
aim of
of companies
companies isis to
to export
export high
high duality
quality
species as
as logs
logs to
to their
their processing
processing plants
plants or
or marketing
marketing
outlets in
outlets in Europe,
Europe, which isis the
the largest market for
largest market for Liberian
timber.

Regarding
Regarding thethe host
host country
country itself,
itself, the
the failure
failure toto implement thethe
above policy may
above policy may have
have been
been due toto lack
lack of
of adeouate
adeauate staff
staff toto enforce the
'orce the
(

policy, a
policy, a strong
strong desire toto obtain foreign
foreign exchange to to back
back nat
national budget
and
and weakness
weakness in in bargaining
bargaining with
with the
the predominantly
predominantly foreign
fore n concession
concession
companies
companies because
because of the lacklack of experience
experience in 1r,coi,g
logging and timber
industries.
processing industries. The forest resources,
The forest resources, therefore,
therefore, c-ntinued
continued to to be
'creamed off"
·creamed off' and
and other
other benefits
benefits including
including local
local empl:.yment
employment remained
small. In short,
small. In short, the
the forest
forest industry
industry sector
sector as
as aa whole inappropriate
whole was inappropriate
relative to the
relative to the country's needs.
needs.

A major
major step
step to
to increase
Increase local
local participation
participation in
in the
the hope
hope of
of
thereby
thereby expanding
expanding local
local benefits from
from the
the sector
sector was
was taken
taken in
in 1976
1976 with
the
the amendment
amende,.t of
of rules
rules governing agreements to
governing concession aniePments to require atat least
least
25
25 percent
percent loeal
local shareholding
shareholding in every concossic:,.
in every concession. This
This was in addition
was in addition
to the di'.cree
to the decree requiring
reauiring increased
increased local processing.
local prccessirc.
 135
- 135 -

22.• ANALYSIS OF
ANALYSIS OF THF
THE SITUATION
SITUATIO"

2.1 round
.~EI<.9.rrou
R. nd
2.1.1
2.1 .1 forestry in Liberia's economy

Forestry and forest

Forestry industrial enterprises contribute substan-
forest industrial enterprises contribute substan-
tially to the national ec
tially to the national economy. , An initial target of twelve million
y. An initial target of twelve million
dollars for taxes
set for
dollars set to t.
taxes to he generated forestry was often increased
,nerated by forestry was often increased
until 1980-81.
until 1980-81. Because of
Because Ign log demand
of high this target
demand this target was
was frequently
frequently
1979/80 by
exceeded; in 1979/80 by near], three million dollars. Forestry was then
nearly three million dollars. Forestry was then
the third largest earner of foreign gxchange, after iron ore and rubber.
the third largest earner of foreign exchange, after iron ore and rubber.

It is
It still playing
is still t6 -,ndous role
playing a tremendous role inin generating
generating essential
essential
revenue for
revenue for the
theGovernment. The depression in
Government. The , , in the
the timber
timber trade
tradesinc,-.
since
1981-82 and
1981-82 and the
the general
neral econo
economic ems have
e problems have decreased
decreased the
the revenu,
revenue
contribution
contribution of of forestry
ores trytoto
only
onlyUS$US$ 9.57
9.57 million
millioninin 1981-82
1981-82 and
and to
US$6.87
US$ 6.87 million
million inin1982- 13. The
1982-83. The r( tion resulted
reduction
' resulted mainly
mainly frcm
from ti,
the
adjustment of the
adjustment of the i ' ' fees, the
themajor
majorcomponent
component 6t
of
the forest
the forest revenue.
revenue~

In spite of
In spite of thedecline, Gillis et al. (1983) cal
I' decline, Gillis et al. (1983) J ,hat in
calculated that in
1980 the forest sector, in terms of value added, contribuc
1980 the forest sector, in terms of value added, contributed o.1 5.1 percent
percent
of GDP, 7.6 percent of total taxes and 14 percent of total ...).:.orts. It is
of GDP, 7.6 percent of total taxes and 14 percent of total exports. It is
generally believed that with wise manalement, Liberia's foists can sus-
generally believed that with wise management, Liberia's forests can sus-
tain even higher levels of economit rinzribution in future.
tain even higher levels of economic contribution in future~ Bpwever,
However, in
in
1976 the forest sector employed lesf.. ihn one percent of the total labour
1976 the forest sector employed less than one percent of the total labour
force the country.
force in the country. This low
This low prop,,rtion reflection of the low
proportion isis a reflection of the low
degree of
degree of processing
processing within
withinthe country
the which
country leads
which to mínimum
leads to minimumemployment.
employment.

2.1.2 Forest
Fores t resources
resources

Liberia
Liberia comprises total land
comprises aa total land area
area of
of 9.84
9.84 million
million ha.ha. Out of
out of
this, 5.71
this, 5.71 million
million t,hagior
approximately
approximately 58 58 percent -.:timated to
percent is estimated to be
be hiah
high
forest land.
forest land. forest area
With this forest area Liberia ,;iried as
Liberia was classified as one
one of
of the
the
tal forest
forest area,
.

forest-rich coun
forest-rich countries in West
es in '-t rica. Out
West Africa. Out Ot
of TE
the total area,
1.68 million
1.68 million ha
ha ar, Forc,l Reserves.
are National forest Approximately 3.9
Reserves. Approxit 3.9 million
million haha
are
are classified
classified as as productiv,
productiVe fgrest
forestand andare
areunder to, ' management,
under forest management.
These are
These are rough
roughestimates
estimates andand there
there isis an
an urgent
urgent need Aate the
need to update the data
data
on forest size
on forest size and
and quality.
quality. The updated information
The updated information will
will ...noble
enable Liberia
Liberia
to plan
to plan better
betterand
andimprove
improve the
themanagement
management and andutilization
utilization of its forest
of its forest
resources.
resourceSD
The land
The land tenure
tenure traditions
traditions and and Folicies
policiesofofLiberia
Liberiahave havesomesome
bearing
bearing on on prospects
forest re,crvog,
forest
prospectsfor
reserves, the
for citizen
citizen participailon.
the Government
Government owns
participation.
ownsmo.7I ot the
most of
In
In
the lan
land
af-
addition to the
to
from
the state
state
from limited
limited
areas
areas of freehold and leasehold
cf freehold .n.;ehold propert,
property (including agr icul culture/rubber
ture/rubber
estates,
estates, etc'
etc.); never.. ess state
); nevertheless stateland
landIsisoften
oftenundo: tacto loose
under de facto
. loose andand
unregiot.roci
unregistered tradition::,
traditional control.
control. The forest
The forest rc,ources
resources growing
growing on on such
such
land are freely accessible
are freely acceible toto local inhabitants for
local inhabitant, for all
all non-commercial
hAl*,-ting (fuelwood,etc.)
harvesting (fuelwood, etc.)asas well
well asas for
for cle,g.n:
clearing forfor subsistence
SUbsistence agri-agri-
cniti.,-e.
culture ~ This
This "ownership' pattern isis not
tlownershipl! pattern not conducive
conducive to to efforts
efforts at at wise
wise
manag:mentofofthe
management the resource
resource or or its
itscommerc4o1 exploitation. Thus
commercial exploitation. Thus thethe land
land
tenure system
tenure system in in Liberia
Liberia isisa aconstraint
constraint %rich
whichprevents
preventslocal communities
local communities
fromestablishing
from establishing and and maintaining
maintainingforest forr,,t estates
estat, forforcommercial
commercial use. use.
Forest
Forest asas aa source
source of of revenue
revenue could
could be
be used
used to
to d, rural communit
develop rural communities os
if it
if it was
was owned
owned and
and operated
operated by by themselves.
themselves. such communities
Where such communities are are
reohnically and
technically and ffinancially
inanciall y unable
unable toto operate forests, they
tr, se forests,
opera te these they co':
could
themtoto concessionaires
lease them concessionaires directly
directly like
like the
thero7ional
nationalgovernment
government does.do(.
 •
- 136
- 136 --

The Forestry
The Fores Development Authority
Development Authority could
could assist
a -t with the maraoemert
with the management and
facilitate entering or
facilitate enrering or ccnri
concluding and sic--
id-n7 and ac*ements wirt
signing agreements with concession
con,e,sion
companies.
companies In this
In this case
case the
the :Gru,flts dericq fro-
benefits derived from rne
the opera,lipo w:uld go
operation would go
to communities.
to the commLrities. As zne
the friir,
fruits of their efforts are
their efforft,
-)f. a:e visible, the (ram-
visible, the com-
munities wuJiC
munities would be
be encouragec
encouraged tc to show
show more
more interest
interest in in reforestation
programmes.
programmes *

In the
the case
case ofof forest
forest reserves
reserves and
and other
other public
public Lands
lands close
close to
to
human settlements which have been let let as
as timber
timber concessions,
concessions, the
the tradition
tradition
is
is to transfer all
to transfer revenues therefrom
all revenues therefrom to the central
to the central government
government and
and none
none
to local
to local people
people who therefore
therefore seesee little
little of thethe financial
financial benefits
benefits to
to be
be
reaped from
reaped from forest-based
forest-based operations.
operations. There
There is provision for
is also no provision for ss g-
nificant influence
influ.-n'e by local reople
by local le on
on whether
whether and
and drier
under what
what condition,-
conditions
concessions
concessi:nr operate:
ot,t'xrre: their rna n role
their rain role is
is toto provide
provide labour.
labour. They may
They
additionally
additionallY q.lingain from clinics, etc.,
from schools, clinics, etc., which
which government may may
require aa concessionaire
,-..zr,c,.s-Ipnaire totoconstruct~
construct.

2.1. 3
2.1.3 Logging, forest industries and the timber trade

There are
are not many industrial
not many industrial activities in in the
the forest-tased
forest-based
sector
sector of the Liberian economy.
Liberian economy. Beyond the logging stage,
the logging stage, few timbertirb,::
processing plants such
processing plants such as sawmills, plywood and
as sawmills, veneeer mills,
and veneeer mills, or or fur-
ior-
niture factories
niture factories have
have beenbeen established.
established. Pulp and paper are
Pulp and are not 7' -
not produced
in the
in the country.
country. Lack
Tack of of adequate
adequate knowledge and skillssk s in
in timber
timber business
coupled wi th inaccessibil i ty of the forest resozt,..,.,
coupled with .uented Liber
resourceS prevented LI: ar.ia
from undertaking productive
from undert,flr,o rtniJctive commercial
commercial activities in ,: the1 forestry
1,restry se,sector1,,
until
until recertly.
recently. The
'Lne, heterogeneous
heterogeneous nature
nature of of the
the forests (over 200
:,.)rests (over 200
ies), the
species), small size
the _wall size of of the
the Liberian
Liberian market,
market, funding problems, and
fun(Ing problems, and
absence of an
nce of an appropr(ate
appropriate and and attrative
attractive timber
timber utilization
utilization policy
pol icy con-
COn-
tributed to
tributed to the
the drIly.
delay. Serious efforts in
Serious efforts in this
this regard
regard were
were only
only started
started
in the latter parf
in the part of the the sixties.
sixties, Ihe
The present
present industrial
industrial activities
activities
consist of
consist logging, sawmilling
of logging, and production
sawrnilling'3 and production of of 3veneer
3veneer
plus plywood
plus plywood
Production in 1980 wps 745 000 m m of logs 1475 000
logs 3(475 000 mm exported),
exported), 53 53 000
000 mm333
sawnwood (37
sawnwood (37 000
000 mm exported), 77 600 m3 veneer and
m veneer and plywood (3 (3 000
000 m3
m
exported).

2.2 Own e-! -s and Current Levels of Citizen Participation

Logging
Logg I andI processing
processing activities
activities areare dominated
dominated by by private
private sector
ope rat ions wor
ittons working
Ing under aa sys tern of concessions
system Goncess ions granted
g ranted byby Government
Governrnen t
through its
Luiough its empowered
empowered agency,
agency, the
the Forestry
Forestry Development
Development Agency
Agency (FDA).
(FDA).
Gillis
Gillis et al. a1. (1983)
(1983) estimated that 92
estimated that 92 percent
percent ofof such
such concessions
concessions were
were
granted
gi ,nted toto foreign
foreign companies
companies (compared
(compared to to 70
70 percent
percent in in Cameroon and 36
Cameroon and 36
percent
pczcent in in Gabon).
Gabon). As of
As of 1980,
1980, they
they report seven foreign
report seven foreign firms
firms are
are ope-
ope-
rating in in Liberian forestry. The
Liberian forestry. The total
total accumulated
accumulated foreign
foreign investment
investment inin
the
the sector stood at
sector stood at US$
US$ 124.87 million compared
compared to to only
only US$
US$ 22.03
22.03 million
million
local
local investment, whic which represents
:epresents only 15 15 percent
percent ofof the
the total,
total.

A survey in December 1980 1980 showed that of

showed that of the 20 large
the 20 large mills
mills which
which
accounted for
accounted for 90
90 percent
petco,., of installed capacity,
of Liberia's installed capacity, 80 percent
percent (16
(16
by number)
by were mainlv
number) were mainly foreign
foreign owned
owned and
and these alone accounted
these alone accounted for 85
for 85
percent the country's
percent of the country's total
total sawmilling
sawmilling capacity.
capacity. Only 10 10 percent were
wholly Liberian owned
wholly owned and
and another
another 55 percent
percent were
were Liberian
Liberian dominated.
dominated.
These levels
These 1 evel s of local par t 1C ipa t ion were
local participation were aa cons iderable improvement
considerable improvement onon
1976 when 91
1976 91 percent
percent of
of total
total installed
installed capacity
capacity related
related to
to 'oreign-owned
foreign-owned
sawmills.

If
If other wood industries
industries are
are added sawmilling, the.otile
added totosawmillin,:, profile of
of
ownership for
for 1980 was,
was, according toto Gillis
Gillis et al.al. (1983), as shown
(19B3), oc. below:
fqwn below:
 -- 137 -
-

% Local Ownership Range Enterprises

Enterprises

Number %
75
75 to 100
100 2 g-
50 to 74
50 33 13
13
25
25 to 49 14
14 58
55
0 to 24
0 to 55 21
Total 24
24 100
100

The logging
The logging activities
activi ties and
and the
the timber trade both
timber trade lack separate
both lack separate
data on
on current
current participation
participation levels.
levels. It is known
It is known however,
however, that
that as of
of
1976, 76
76 concessions
concessions have
have been grint,d . A World
been granted World Bank/FAO
Bank/FAO mission
mission in
in
1977
1977 remarked then that
remarked then that many these ,ctivities
many of thtit activities were
were linked
linked to
to overseas'
overseas'
ene uses of logs, that they tended to
end to concentrate
concentrate onon removal of of high
value species
value species and
and that
that the
the future
future availability
availability ofof these
these species
species was
was
endangered. They
They also
also noted
noted th-i
that there
there was inufficient
insufficient involvement
involvement of
of
nationals inin sector
sector management
management and furthermore that in industry, "the
9d furthermc-e "the
influx of strong foreign
influx of investors
foreign in,- 's has made itr difficult for the
I

small Liberian entrepreneur to

small Liberian to remain
- -in in
in a competitive
1 t r e position."
i

A significant shift
shift was 211 occurring then (which continues
tr-r- 14.nich continues
now) whereby eby small
small operators
operators - mainly
M9 cl, berians -- areste subcontracting
stbccrtracting to to
-i.gn log
larger foreign buyers and ctoiets't-
log buyers processors in in order
r1cr to to tar
tap ihe
the latters'
letters'
markets.
mat.e7a Tnese
These small
small operators othnrilie tird
operators otherwise find it .t difficult
iirti:a_t toto provide
provide
,ititts_e processing
suitable processing facilities,
facilitie, as ai requiredrci,iircd law, if they wish
if they wish to
to
engage
er-71,-tt in log
in log exports.
exports4 For
For new
new inn
and inr\prrIrnnrs
j nexperie companies
77,rbp-inle'sthat
thatare
are not
well establ
yct wel: ished in the
established timber trade
the ttmtc: trgdc the simplest procedure
tnc cimplcsl procedure isis to
sell agents and
sell through agents and brokers.
brokers.

There is
There is also
also aa number
number of of middlemen
middlemen andand brokers
brokers who
who purchase
purchase
logs
orr- and sud other
other timber
timber products
products within
'o'ithin the
the country
country on on behalf
behalf of
of foreign
foreign
ent isesB
i-nt.tprises. Again other companies l
companies, which are experienced and
cst,blished,
est ishee, can
can sell
sell timber
timber also
also on on contract
contract basis.
basis. The advantage
The advantage of
of
selling through these agents
through these agents is considerable, particularly
rticularly for
for newly
newly
established companies
established companies or or local timber
timber firms
firms without
w thout experience
experience andand
established commercial credit.
established commercial credit. However,
However, the the small
small firms
firms have
have to
to forego
forego
some
soc.e advantaqes
advantages thatthat they would have
they would have if if they
they were
were able
able to
to reach
reach markets
markets
directly.
d,iectly. ATLANTA (1978)
ATLANTA (1978) discusses
discusses thesethese various
vadous options
options ofof marketing
marketing
r,-,rp,nures.
pc,s'ures. It suffices here
It suffices here simply
simply to to indicate
indicate that
that these
these agents
agents are
are
capable
. slab. iof creating confidence
of creating confidence between
between shippers
shippers and
and buyers,
buyers, which
which local
local
firms
t ribadly need in
badly need in order toto penetrate
penetrate the the timbcr
timber trade.
trade.

Another problem
Another probl em which
wh i eh faces
faces local
local fores
F t enterprises
0- enterpri ses is
is the i r
their
weakness inin grading
rading and
and ability
abil itytotodeter::: the quality
ne th
determine quali of
of timber
timber
intended sole.
intenied to be sold. Here expatriate firms hive
Here again expatriate have the
the advantage
advantage of
; of
ence over
e>priience a firms~
domestic firms.

2.
2.3) ed Sector
.:tor Problems
Problems

In ariition to problems of
In addition of market
market access annrioncd
mentioned earlier,
earlier.
nationals face
naticnalt other barriers in
fin, other in forest
forest industdes.
indii.trins. In all
in all cases the
problem may tvi_,
probleT ma: idr both
exist for both foreign
foreign and
and local
local operators
op-r,ttic but
let the
the burden
t,Pdn ísis
more instilort
insupportable for 117 the
the latter
latter due toto their
their firarcial,
financial, techntiil
technical and
and
institutional weakness.
..,--,J)ess. The areas are
The problem areas are the
the following:
following'

(a) Inadequacy
Ic.,deouacy of i nf rastructure
infrastructure in
in concession areas
(especially roads and
and power
power supply).
supply).

(b)
(b) Proliferation
Proliferation and level of fees
and level fees and
and sundry taxes
taxes payable
payable by
by
concessionaires~
concessionaires.
 -- 118
138 --

2.3.1 ctural problems

The ccnlition
condition of
of roads plays
plays a crucial
crucial role
role in
in logging
logging
operations.. In concession
Tn areas, the
concession areas, the construction
construction of
of roads in the
is the
resn jiiity of of
responsibility thetheconcessionaires.
concessionaires. The Government
The Government of of Liberiais
Liberia is only
only
for trunk and other major public roads to connect those
responSlble for trunk and other major public roads to connect those
ucted by
constructed by the
the timber
timber enterprises,
enterprises. This
This reauirement
requirement hashas necessarily
necessarily
that only organiations with substantial
meant that only organizations ·"ith substantial financial financial resources
reSOurces oror
access to loans can p,.;tIcipate to a significant degree.
access to Joans can participate to a significant degree~ For most
Por most
citizens, even
citizens, if they
even if they grnaD into cooperatives
group into cooperatives, f their capability
their capability toto raise
raise
funds Eor
funds for costly
costlyroad
road networks
networks is
isoften
oftenananinsurmountable
insurmountable problem.
problem.

The small
The small operators
operators are
are also
also increasingly
increasingly at at aa disadvantage
disadvantage as as
forests close
forests close to to ports
ports are
are worked
worked out ex-Aoitation
out and exploi tation moves further
moves further
inland into
inland into inaccessible
inaccessible locations; cost cof new
frja cost
locations; the roads is
new roads is then
then even
even
higher and
higher and toto this
thi s must be added
must be added er haul charces to
charges to ports
ports as
as
well.
well~ Power supplies are
power supplies are anoth,;.,
another problem; in Liberia, mains
en in Liberia, mains
ten
electricity
electricity is unavailable in the
is unavailable the fore=ted
forested r=o:ons
regions aJj
and concessionaires
concessionaires
(who are required
(who are required to to invest in proce
invest in processing facilities if they if want to
they want to
export) mustinstall
export) must install their
theirown
own costly
costly di
diesel or steam power ; J .r plants.
plants. ThisThis
can pus~
can pushtotal
total investment costs beyond
investment costs beyondthe te reach of most
reach of most citizens.
citizens.
2.3.2
2.3.2 Co-- :on and other fees
fees

Liberia i..7.?oses a
Liberia imposes a wide
wide range of charges
range of charges onon forestry
forestry and
and forest
forest
industry enterpr:s.=,
industry enterprises,some some a5
as fixed
fixedamounts,
amounts, others
others pro-rated
rated onon volume
volume
and variable acc,.
and variable :1.ri to
according to value
value of
of species.
species. Thefol
The fo(ln.ing
owing is
is aa list of list of
the
the various
various feci-,
fees,c.,irges
charges and
andtaxes which
taxes whichmay
maybe
becharg d L.epending
charged depending on on the
the
type of
of forest-related
forest related Gperation:
operation:

(al
(a) Licence fees on
Licence on concessions;
concessions;
(b) Landrental
Land rental or
or annual
annual ground rental;
ground rental,
(c)
(c) Volumebased
Volume based chargesonontimber
timber harvested;
harvested,

(i) Refor(ztation fees;

Reforestation fees;
(i i ) Indust aization incentive
Industrialization incentive fees
fees (formerly
(formerly
stu
stumpage fees);
fees);

(d) Sev=cin,e fees,

Severance aes;
le)
(e) Expmt ,harges;
Export charges;
(f) Cotp-ration income
Corporation income tax;
tax;
(g) Tree marking
Tree marking fees;
(h) Forest products
Forest products fees
fees (sawnwood, plywood,etc.);
(sawnwood, plywood, etc.);
(i) Fines (penalties).
Fines (penalties).
Theyare
They are fixed
fixed rates
rates and are defined
and are defined by
by schedules in the
schedules in the forest
forest
regulations promulgated
regulations promulgated byby the
the Forestry
Forestry Development Authority in
Development Authority in keeping
Ing
with
with Liberia's
Liberia'sRevenue
Revenue and
and Finance
Finance Law.
Law.. The only exception is the
The only exception is the
industrialization incentive
industrialization incentive fee which is
fee which is adjusted
adjusted according
according to to market
market
conditions.
condi t ions.

Just as for
Just as for infrastructural
infrastructural costs,
costs, the
the level
level of
of suchn charges
charges is
is
not
not an
an issue but the
issue but the impartiality
impartiali with
withwhich
which they
they are
are 1,'vied
levied on all
on all
concessionaires
concessionaires has hasimplications
implicationsforforcitizen
citizen participation.
participation.
Thus, establishing logging
Thus, establishing logging and
and wood-processing industries is
wood-processing industries is not
not
easy task
an easy task for
for the
the average
ave Liberian.
Liberian. There are also
There are also constraints
constraints which
which
overcome should he succeed in
must be overcome in establishing
establishing anan industry.
industry. While
\-,hile
iign firms
foreign
. fi rmspossess
possess managerial
managerIal andand technical
technical skills
ski lIsand
andadequate
adequate
worKing
working experience
experience in the timber
in the timber business,
business, Liberians do
Liberians do not
not have
have such
such
 139
-- 139 -

qualities.
qualities. Furthermore, they do
Furthermore, they not have the
do not the advantage
advantage of of easily
easily
obtaining loans
obtaini for investment in
loans for in th( ir 're sector.
the forestry sector. On the
On the other
other
hand,
hand, t the expatriate
ernatriate companies have
companies have acces,
access to t, fr,,ancialinstitutions
financial institutions that
that
offer them
offer iedit facilities. Acquisition
(0!!, credit facilities. Acquisition of !, capital
capital isis consequently
consequently a
consids,!!oly greater
considerably greater constraint
constraint toto Liberians than to expatriate or
Libt...:.ans than to expatriate Or
foreign t!firms.
foreign rms.
Inn granting
r,inting concessions,
concessions, the
the Forestryti., .:.ev,:_pment Authority
Development Authority
offers the same
offers Z..1M9 conditionsofof contract
conditions ltn htt,-rian and foreign
contract to both Liberian and foreign
ccronari
companies.
. Ji_tiu2lun is is
No distinction made
madebetween
between the
the LWQ ieo,ic. Consequently,
two groups. COnSeqUently,
se rAr
the st r always
'J1W3 survives+ In this
::try_tes. In this case,
case, the
the !.atti_lte
riate isis very
very often
often
at ai ir advan-a.ieinir bargaining.
advantage bargaining.

The Liberians
The Liberians who
who are
are in ti',
in the timber business hardly hardly penetrate
penetrate
the dominant European market directly, os
the dominant European market directly, because they do not
!, , do not know
know the
the
marketing channels
marketing channels well, that are
well, that are often
often a, ,he ,llspc
at the di A of the foreign
of the foreign
firms. On
firms. the other
On the other hand, the local
hand, the local market
market is not (-p,ble
is not capable ofofabsorbing
absorbing
the Jogs
the logs which
which are
are exported.
exported. Even it were
Even iiff it were possible
possible to to sell logs on
sell logs on
market, the
local market,
the local the prices
prices for
forthem
them would
would bebe very
very low in in comparison
comparison
with those
with those on
on the
the export
export market.
market.

2.4 The Existing Legal and Institutional Framework

2.4.11
2.4. An open economy
Theoverall
The overll environment
environment for for industry
industt, aand commerco
commerce isis governed
g,verned by
by
',tare approach
a laissez-faire to managing
rch to managing the country's ecruhmo,
economy. This
This has
has
beer, cil cre I
been con in thehe Peoples'
Peoples' Redempt cil Gc-etr.-,ct policy
Redemption Council Government policy
stacemer: (.rtlivesfor
statement giving directives for the
the currerit
current g-
development -t p,In.
an:

" The Gover:nment

G: the People's
of the people's Redemption Council
Counci 1
nent to
confirms its commitment to the
the free
free eenterprise system
ystem of
t,irntit
economic pursuit .•.."
~lf

"... .s will continue an open invest'

••.. Government will continue an open investment , licy,
icy,
encouraT: ng
encouragi in both local foreign pri
local and foreign private
vate invr,fornt.
investment.
Public investment, will
Public will be
be used
used largely
largely as
as an insz!rh,i,orit
an instrument
to stimulat, rrivate investment.
to stimulate private investment. Priority will
Priority will be
accorded ti'
accorded to productive investments which
productive investments which have
have a high
domestic resdut,e
domestic utilization particularly in
impact, particularly
resource utilization impact, in
terms of
terms of futthettng
furthering the
theemployment
employment of of Liberians.
Liberians. There
will be
will be no
no nationalization
nationalization ofof private
privatebusiness
business interests
interests
in
in Liberia."
Liberia~1'II

lib-ria prr, ides generous

Accordingly, Liberia provides
Accordingly, generous incentives
incentives to inv-,J,-,rs
to investors
as can
as be clearly
can be clearly observod
observed fron, the Investment
from the Incentive Grip
Investment Incentive Code rpprr,v-d or on
21 March
21 March 1966
1966 and
and published ;rril 19667
publin,lvd 15 April
i 1966; and
and from the Act
from the Act Amending
,lpnrlini rhat
that
Code approved
Code on 66 March
approved on 1u73and
March 1973 andpublished
published 28
28 February
February1975.
1°7. The,e
These }kV
are
further elaborated
further elaborated under
under "The
"The National
National Investment (om-listou Act oft
InVestment Commission
1976", approved
1976", approved onon 66 September
September 1979.
1979. In general
In general terms,
terms, the
the ,9,.t5
Acts provi2e de
for
for:

(al
(a) an open
an openinvitation
invitation to
to foreign
foreign investment
investment generally;
generally;

lb)
(b) guarantee of non-nationalization
guarantee of non-nationalizationand
and non-sequestration;
non-sequestration;

lc)
(c) the absence
the of restriction
absence of restriction on the remittance
on the of profits,
r-emittance of profits,
dividends and
dividends andrepatriation
repatriation of
of capital;
capital;

(el/
(d) attractive tax
attractive taxand
and other
other investment
investment incentives;
incentives:
 - 140 -

{e)
(e) tariff
tariff protection
protection for
for infant
infant industries;
industries;

(f)
(f) an
an opportunity for expansion
opportunity for of trade
expansion of trade uelaiions
relations with
with other
other
countries
countries in
in Africa
Africa using Liberia asas aa base,
uSing Liberia han, since
since Liberia
Liberia
is
is aa member
member of the Economic
of the Economic Community
Community ofcf West
West African
African
States (ECOWAS)
States and the
(BCQWAS) and River Union.
tha Mano River Union.

There is
There an additional ctive feature of the Liberian
is an additional attractive feature of the Liberian
ir e4t,,ent_ policy.
investment policy. IItt is the fact
is the fact that the-de Liberian
Liberian curten'',
curr fully
is fully
is
cr..-werlisle and there
convertible there are no
are e- ange control
no exchange restr....t.,ps.
control restrict ons. This
f,,,.."...tatea multinational investments
facilitates multinational investmentsand
raidinternational
international transactions.
transa:tions.
Provided in
Provided in the
the Amended Investment Code
Amended Investment Codeofof 1973
1973and andpubl
published in
ished in
1975 are
1975 are certain
certain reductions
reductionsoror exemption,
exemptionsfromfromcustoms
cllstoms duty
dutyandandincome
income
tax and
tax and other
other benefits
benefits which
which the
the Governm
Governmentnt offers
offers toto new a, expanding
new and :axpanding
business enterprises
business enterprises for forthe purpose
the purposeofofh.moting
promoting thethe
economid
economicw:owth
growth and
and
devel ,rment of in case of
of Liberia.
LI ber i a. In case of approved imports of
-ay.,: imports of mach
r- ,a and
i nery and
egu)pw nt to be used in establishing t r: 'ad invest,nt
equipment to be used In establishing the approved investment project, an ct, an
ex-mptign from
exemption fromimport
importdutyduty up
up to
to 90
90 perc
percent of cdtiable vvalue ofT such
0 the dutiable
imp,Li, sermissible. Such
imports is permissible. St,h ,xemption
exemption is granted for period of five
jr' aa [D,- five
ye,r, Jr!
years and may be
I be extended for lo addition,
t ir an additional two years. ars. The . isans of
isions of
the ...r..e6,..1,nt
investment code code apply
apoly equally
ogbally to t
to citizens
e foreign inns except
andd foreign
lonens which
for ele~ents
for whichcan
canon."... irderest foreisrl
only interest foreigners.

2.4.2
2.4.2 The legal
The legal buci participation
basis for participation
I

The overall policy

overaJl pci 7.), framework, under which the specific
the specific
legislation Lib=ri.in participation
permits Liberian
legislation permits epl ,itation
forestry exploitation
participation in forestry
enterprises, is Governmen:.'s desire to see bett,r spread of dr'el,pnental
enterprises, is Government's desire to see better spread of developmental
beric
benefits.. The Peoples
The Peoples' Redemption h..s d,c1
Council has
Felem[1....,, Council declared tta_ for their
¡red that -
poli
policy" d...
•.• A basic tenet
A basic -e to assure
tenet wl
will be to assure that tta,.. benefits
benefits fuo, ez,n,m-c
from economic
.elopment will Ir
growth and development be enjoyed by aa large and increasin,
er=syed by increaSing uumrer
number
of Liberians~1f

the forestry sector arrangements to achieve this have been

In the forestry sector arrangements to achieve this have been
made with regard
regard concessions by the issuance
to concessions appropriate
issuance of appropriate
Thus, although
regulations. Thus,
regulations. although in
in concluding
concluding timber
timber concession
concession agreements
agreements
Liberia (through
the Government of Liberia
the treats
(through FDA) treats both citizenscitizens and
expatriates alike and there are no differential treatments meted nut
expatriates alike and there differential treatments meted out to to
nationals,
nationals, nv exception
ti i the st_ipulation
]a i in foreign .. .nritz, tual
agreements erguir erg that twent.p-fi e (21 5 f -cuenca sJld
sionaires t, rese fci neticral,. igner :(,i, prc 1, On
citizens'
zens Fitchase unCer 7:Tre í,
,cncesEicn Anre,neit is ehuie.; as
follows: -
follows:

(a) Commencing
Commencing with th,. first issue of voting shares
the first issue of any voting shares and
and
continuing with repe.:t to all subseluent issues of shares,
continuing with to all subsequent issues of shares,
the
the Concessionait,,
Concessionaire,.11all
shall offer
offer a aminimum
minimum of 15 percent
of 15 percent of
of
each issue shares tn a cooperative or cooperatives in the
each issue shares to a cooperative or cooperatives in the
County of the
County of the conc, .sionaires operations
concessionaires operations and minimum of
and a minimum
10 percent shall he offered to other Liberian citizens.
10 percent shall be offered to other Liberian citizens.

lb)
(b) Should all or
'aio,ld all or part
(uot. c' such
of such shares so so offered r,ma-In
offered remai
disi,,,scribed or
unsubscribed or ore's''
unpaid for for at ond of
trio end
at the of six (6) nonths,
six (6) months,
th2n
then the
the concessipnati,
concessionaire shall shall depoit
depositsaidsaidunsubscritcd
unsubscribed Or
unpaid for
unpaid for share;
shares4ttnwiththetheNational Investment
National Investment Commission
Commission
whoshall
·"ho shall hold
hold them
theminin escrow
escrowfor for aa further
further period
period ofof two
two
years and six
(2) years six (6) (61 during which period a
months during
cooperative in
cooperative in the
the Concessionaire's
Concessionaire's County
County ofof operation
operation or or
other
other Liberian
Liberian citizens
citizens may may purchase
purchase said
said shares
shares from
from the
the
percentages reserved
percentages reserved forfor them as detailed
them as detailed in in paragraph
paragraph (a)(a)
 - 141
- 141 --

above. After said

After said period
period of
of aa total
total ofof three
three years,
years, any
any
shares that
that remain
remain unsubscribed
unsubscribed or or unpaid
unpaid for
for shall
shall be
be
returned
returned to the concessionaire who shall shall then
then offer
offer them
them to
to
existing
existing Liberian
Liberian shareholders,
shareholders, said
said offer
offer to
to remain
remain open
open
for
for aa further
further period
period of
of six
six (6)
(6) months.
months. After
After expiry
expiry of
of
this last period of six (6) months any remaining
unsubscribed or
Or unpaid for shares shall revert to
concessionaire
concessionaire whowho may
may dispose
dispose of of them
them as
as he
he sees
sees fit
fit in
accordance with
accordance with the Association Law.Law~

(c) Should aa cooperative

cooperative or or cooperatives
cooperatives inin the
the County
County of
of the
the
concessionaire's
concessionaire's operations
operations or Liberian citizens
or other Liberian citizens who
who
wish to
wish to take
take upup the
the reserved
reserved shares
shares be
be unable
unable to
to make
make full
full
payment,
payment, then
then said
said cooperative
cooperative or or cooperatives
cooperatives oror citizen
citizen
shall make aa down
shall down payment
payment of of aa minimum
minimum ofof ten
ten percent
percent
(10 %) of
(10 %) of the
the value
value ofof said
said shares
shares and
and the
the concessionaire
concessionaire
shall
shall finance
finance the the remaining
remaining ninety
ninety percent
percent (90 %) by
payable on
dividends payable on said
said shares.
shares.

It would be hard
It would hard toto find
find more elaborate
eJaborate oror generous
generous arrangements
arrangements
for
fot- ensuring that citizens
ensuring that citizens do participate;
do participate; except
except for the very
for the largest
very largest
share
share offerings, the 10
offerings, the 10 percent
percent requirement
requirement would
would on
on the
the surface
surface at
at least
least
appear
appear to bebe within
within reach.
reach. It is not
not clear,
clear, however,
however, if if this
this law
law is
responsible for
responsible for most
most ofof the
the recent
recent increase
increase in local
local participation
participation in in
sawmilling. Secondly,
sawmilling. Secondly, it is not
it is not known
known yet what
what degree
degree of of importance
importance can
can
be
be attached
attached to
to participation
participation in in terms
terms ofof shareholding
shareholding onlyonly as
as opposed
opposed to
to
substantial control.
more substantial control. It
It isis also
also unclear if the benefits accruing
unclear if accruing to
to
the country
the country have
have improved
improved with
with this
this provision.
provision.

2.4.3 The institutional basis

The institutional basis of
of participation

The legal
legal provisions
provisions presented
presented earlier
earlier cancan be
be said
said toto indicate
indicate
the potential
the potential or or scope
scope of
of what
what can
can bebe done;
done; whether it it isis actually
actually
achieved
achieved largely
largely depends
depends on
on institutional
institutional arrangements.
arrangements. The available
The available
information suggests
information that the
suggests that the sectors' official organization
sectors' prime official organization is is the
the
semi-autonomous Forestry
Forestry Development
Development Authority
Authority (FDA).
(FDA). It is
It is a
a government
body charged
body charged with promoting sector
sector development and and has
has activities
activities ranging
ranging
from conservation, management, plantation, licensing/concessions,
policing
policing forest
forest activities
activities and
and the
the trade
trade aspects,
aspects, etc.
etc. It isis aa heavy
heavy
burden and
burden and evidence suggests
suggests the
the FDA
FDA is
is not
not coping
coping fully.
fully.

with
With specific regard to its role in assisting citizen
part cipation, the
participation, the FDA
FDA is
is not
not known
known toto bebe specially
specially required
required toto promote
promote
such
such development
development and does notnot appear
appear to to have
have aa special
speciaJ section
section oror set
set of
of
programmes
programmes directed
directed specifically at aspiring citizen-entrepreneurs 'or or
their organizations.
their organizations. Furthermore,
Furthermore, bothboth thethe terms
terms ofof reference
reference forfor the
the
as aa corporate
FDA as
FDA corporate body
body and
and the
the Forestry
Forestry Act Act generally
generally do not not seem
seem toto
give
give the
the agency
agency discretion
discretion inin interpreting
interpreting the the "open
"open door"
door" policy.
policy~ In
other words,
words, itit does
does not
not seem thatthat thethe FDA
FDA can
can inin its
its own
own right
right dodo
anything
anything but
but treat
treat weak
weak aspiring
aspiring citizens
citizens in in exactly
exactly thethe same
same way
way asas it
it
does powerful
does powerful transnational
transnational corporations
corporations when drawing
drawing up up concession
concession
terms, applying
terms, applying incentives,
incentives, or
or setting
setting the
the conditions
conditions for
for licensing.
licensing.

On their
On their part,
part, the
the citizens
citizens seem .ill prepared
seem ill prepared toto do
do more
more than
than
just
just buy
buy shares
shares in
in concessions.
concessions. They
They do not
not have
have the
the skills
skills to
to fully
fully
understand
understand what else they
what else they could
could do
do and
and they
they very
very often
often cannot
cannot contribute
contribute
effectively
effectively toto enterprise
enterprise success.
success. law does
The law does not
not seem
seem to
to require
require the
the
FDA or
FDA or any
any other
other agency
agency tc
tc set
set aside
aside any funds
funds or
or other
other inputs
inputs for
for
strengthening the local
strengthening the local peoples'
peoples' skills
skills and
and capabilities
capabilities through
through train-
train-
i ng, through
ing, cred i t facilities,
through credit fac i 1 i ties, through
through cooperative
coopera t i ve resource
resource creation/
crea t i on/
 -- 142 -
-

nrocessing/marketing.
processing/marketing. At the same
ti time, it
it is
is well known that
that
~ultinational firms always
multinational firms always invu,.-
invest heavily
neavily in
in their
their own
own skills development
development
in all
and in aspects and
all other aspects and thus
thus the
the disparity
disparity in capabilities between
in capabilities between
the two groups tends
the tends to
to grow,
grow.

multiplicity of
The multiplicity of reaulations
regulations and
and esi,iciallly
especiallly of levies, fees
of levies, fees
and taxes
rmyms related
related to
to harvesting, processing, anm
harvesting, processing, and trading
trading in
in wood could be
be
another important
important area
area of
of problems in the
problems in the sensc
sense that
that such
such a situation is
a situation is
more burdensome to small and
..,-d..nsome to and new
new operators
operators than
than to large established
large established
corporations.
corp :ations.

limited degree
The limited degree of
of private
privatelandownerst.ip
landownership is is the
the last
last ofof the
major factors with
major factors bearing on
with aa bearing on participation.
participation. ,v,ffs plausible
It seems
It plausible toto
that if
suggest that if citizens
citizens owned their land
owned their land and
and the
the forests
fois'7.isonon it
it or
or had
other strong title
other strong title to
to the
the resource,
resource. they
they might
might find
find enterprise
enterprise start-up
start-up
far
tar eas ier than
easier than now when they
now when they have
have to
to satisfy
satisfy so
so many
many preconditions
preconditions onon
Government concessions.
concessions~

3. CONCLUDING
CONCLDDING REMARKS
PFM/f.KS

on the basis
On I-he limited available
basis of limited available information,
information, this
this paper
paper has
has
at Liberia's
looked at f ' attempts
att- to increase
s to icr, citizen participation in in forest
forest
industry d,
industry development wi'' aa view
nt with view to
to increasing
,
reising thethe benefits retained
retained in
in
the country.
the country. The emphaf,,s
emphasis si,,
seems toto have
have been on making legal al provisions
provisions
for such partic ipation.
participat un. There 'f
is 1little
i ttle evidence of signif icant
significant
institutional and
institutional and other arrangements
arrangements to to convert
convert thethe legal
legal potential
potential into
into
feasible and
feasible and beneficial
beneficial reality.
real ity. Nevertheless,
Nevertheless, the the past few years have
past few have
seen some measurable
measur,,ble progress toward 'at at least part ownership of
individual enterprises;
individual enterr,i,vs; clearly
clea '
more can
more can bebe achieved
achieved and
and the
the benefits
benefits
from such participation
from participation can can it.,rlf
itself probably be enhanced. At this stage,
At this stage,
it seems desirable
it seems desirable only to to s summarize
'Imarize some
some of of the
the main issues raised
main issues raised in
in
the analysis,
the analysis.

It is
It assumed that
is assumed that increased
increased citizen
citizen participation
partiCipation isis aa valid
and would
goal and would lead
lead to
to improving
improving the
the sector's
sector's contribution
contribution to
to Liberia's
Liberia's
development. TheThe issues
issues appear
appear to
to be:
be:

I.. An
An overriding consideration relates
relates to to Liberia's
Liberia's commitment
an open
to an open economy
economy andand specifically
specifically to to interpretation
interpretation of of
this ohilosophy by
this Philosophy by the
the FDA
FDA toto mean
mean identical
identical treatment
treatment of of
citizen and
and foreign
foreign firms,
firms. The issue does
The issue does not
not seem
seem toto be
be
whether or not the
whetnef the philosophy is is correct, but whether
whether itit is
is
reasonable to to treat
treat as as equals
equals fwotwo parties
parties which
which very
very
clearly
clea .y differ in
in skills plus experience, access to
finacial resources, marketr,
financial markets, technology
rr-hralogy and influence
irflf, a
generally.
aenerally. The danger woulo
The danger would appear to to bebe that
that citizens
citiz.'.-3
being in
being in the
the weaker
weaker position
position maymay never
,,,vfir be
be able toachi,,,,.e
able to achieve
and through
any prominence and through nono faul
fault ofot their
heir own.

2. The second
second issue
issue derives
derives from
from the
the first
first and
and is
is about
whether adequate provision has
ha- :i made
been made to create
institutions
institutions or or toto empower/enable
empower/enable exfexisting institutions to
'ring institutions to
help citizens
c:- ,zens benefit from the legal provisions for
partie
particf, tiOD.
in. This does
does not
not se(-
seem to be the case
be the case and
and ur,ler
under
these cl,
c rcumstances
.:-,st,,nces two
two main developments
main dev,- .
',en's could
could take
take place:
the first
first is is parti. 'parion could
that apparent participation could occur
occur on
on
paper aras r,iorded
recorded shareholdiuls,
shareholdings, etc.,
etc., but
but real
real influence
influence
would
would re-
remain elusive
elusive asas would tube the
the expected
expected increase
increase inin
national benefits.
1
fits. The
The second isis that
that even "paper partici-
even "paper partici-
pation" would
r sid fail to fully occur and the the country's
aspirations would thus thus be
be openly
openly frustrated,
frustrated.
 - 143
- 143 --

Many
Many more arguments
ar: Ls could be raised
raised and some tentative
recommendations
recommendat ions gi,,n,
given, but:L.t it
it ceit
seemS best
best to first observe
te first observe developments
developments
for
for some more time.
time. The counttv
count ha, clea~]y adopted a
has clearly a commendable
commendable policy
pol icy
but
but it
it may well
well have is up
hav tto follow 1.n1,,- up with institutional arrangements to
with institutional
t
ensure that its u,
its achi eved.
objectives are -,,hioved.

REfERENCES
REFERENCES

ATLANTA
ATLANTA Feasibility study on the
feasibility the logging
logging and
and timber
timber and processing
ocessing
1978 training centre.
centre. Bomi HilJs
Bomi rndustrie und Unter
Hills Industrie Unternehmensberatung
n -eratung
GmbH.
GmbH. Hamburg.

fAO/IBRD
FAO/IBRD Draft report
Draft report of the Liberia forestry
the Liberia forestry project.
project. Rome.
1977

M., Mescher,
Gillis, M., Mescher, M. & Peprah, I.
M.~ & I. Fore n investment in
Foreign in the
the
1983
1983 forest-based in Africa.
forest-based sector in Africa. (Draft for
(Draft prepared for
fAO, Rome).
FAO, Rome).

forestry Development
Forestry Development Authc.
Authority. 1982,
1982, 1983
1983 Annual Reports.
Annual Reports. Monrovia.
1982: Forestry Regulations.
Forestry 1.,;.:],ations.
 -- 145 --

FOREST INDUSTRY IN
fOREST IN ITALY
ITALY
CONSTRAINTS, POLICY ISSUES
CONSTRAINTS, SOLUTIONS AND POLICY ISSUES

by

F. Pstina
f. P~stina

CONTENTS

Page

1. INTRODUCTI ON
INTRODUCTION 146

2. fOREST
FOREST RESOURCES 146

2.1 Historical
Historical Background 146
2.2 Forests
Distribution of Forests 146
2.3 Sources
Sources of Wood Supply 147

3. Of THE FOREST
STRUCTURE OF fOREST INDUSTRY
INDUSTRY 147

4• Of FOREST
CONSTRAINTS TO THE DEVELOPMENT OF fOREST INDUSTRIES
INDUSTRIES 149

5. INSTITUTIONAL FRAMEWORK
fRAMEWORK 149

6. THE NEED FOP

FOR A
A COORDINATION CENTRE
CENTRE 150

7. THE "PERMANENT CONFERENCE

THE CONfERENCE OF THE ITALIAN
ITALIAN WOOD SYSTEM"
SYSTEM" 150

8• INTEGRATED OPERATIONS 150

9. TYPE OF
Of ASSOCIATIONS 152

9.1 Forest Owners

Consortia or Cooperatives of Forest Owners 152
152
9.2 and Repair
Service and Repair Facilities, Technical Assistance
Assistance 152
152
9.3 Specialized Services
Services 152
152
9.4 Workshops and Warehouses
Workshops and 152
152
9.5 Manufacturers' Associations
Manufacturers' Associations 153
153
9.6 Trade
Trade Associations 153

10. RESEARCH 153

153

11. MARKETING
MARKETING AND PRODUCT PROMOTION 154

12. TRAINING AND CONTINUOUS EDUCATION

EDUCATION 154
154

13. CONCLUSION 155

REfERENCES
REFERENCES 156

* International
International Consultant in
in Forest Industries,
Industries, Rome,
Rome, Italy.
Italy.
 - 146
146 -

1. INTRODUCTION

It
I t has hee:;
h. that after
a.d that
said after. the
the iron
ironage
age and the age of arti-
and the age of art i-
ficial
ficial materia..,
materials, ilization
civilizatio:1 is now entering
is now entering a unewu
"new" wood
wood age,
age. This
This
statement may, however,, only
may, howevo, only be
be partially
partiallytruetruebecause
becausethetheage
ageofofwood
wood has
has
never
never really
reallyvanish('
vanished. Fromthe
1. From the early
early beginnings
innings wood has contributed
wood has cmn'ributed toto
the
the progress
progress andandcivilization
civilization ofofmankind.
mankind. Woodhas
Wood has always
alea he, the com-
been the Com-
panion of
panion of man t,s daily activities.
in his daily activities.
rna:! in is part-veda.
This is
This par-tieul for
7rue for
true
Italy
It where
where wood
wood h-,,rributed in r. xi,i to the c.-Jiele
has contributed in many r,riods of
to the different periods of
Italian civili7v-iv
civilization.. has plater
It has played ao e in the ce,,clorr,,n,
in the developme:1t and im- im-
pro ere t of
provement of ti,e o" life en] In suoh areas as do.str,Jcton, ship
the way of lifc and in such areas as construction, ship
art, etc.
building, art, etc.

In our
In our time
time aa red iscovery and
rediscovery and aa new appreciationof
new appreciation of the
the value
value of
of
this material
this material isis evidenced
evidenced in in which
in aa world in which other
other materials
materials are
are even
even
more scarce,
more

At present the Italian forest 'ndustry sector is facing many

At prese~t the Italian forest industry sector is faclng many
protlems, of
problems, of which
which the
the most
most serious
seri00s one is aa shortage
one is shortage in
in th ri ctio. of
the production of
domesticroundwood
domestic roundwood which
which is cnunth,actd
is counteracted by :considerable
rvsiderable imports of ind indus-
trial r roundwood.
trial 1-0, nod. The The negative
n.iia.ive influence on thethe !valance
bala"ce ofof trade
'ra«.ai,.e..3
caused by
by
tnere :npv..-tss and the imports
these of dvvi-H-.1,hel
Impc.rt., of forest FroiLo,v,
semi-finished forest products, mainly
mainly
pair ;, aw'viod,t is,
pulp and sawnwood e\fltts of finished products',
offset by exports of fin:i shed products·,
is f however, offset
inil. fiiniture, ,iub,_-_,red by the ,ery dynamic Italian wood-
3ind fur!1iture, TIanufactured by the very dynamic Italia" wood-
including
proied,nq iuoustry.
processing industry.

2. RESOURCES
FOREST RESOURCES

2.1 .'.orical Background

Historical Background

Ald.,nd the
Around the year
year 1500
1500 sore
some 15 million ha,
.15 million ha, representing
representing 50 50 percent
pervet
tt,, total area
of the
of area which
which nnw or.,:ses Italy,
now comprises Italy, was i, coveredby
covered by forests.
fortzv, Ey By
the year 1925 the the forest ari had
forest area reduced to
been redu-hq
n,r.i been to about 5.5 mill,dn
about 5.5 million ha.
ha.
In ad,ut fui centuries the
In about four centuries the fr.r-.n
fcrest area area had, therefore, been
had, therefore. been reduced
reduced by
by
almost 60 peicent. This This drastic
cll.:stir_ reduction
reductionwas wascaused
caused by by irrationalutili-
irrational utili-
forest fires,
zation, forest
zation, fires,overgrazing,
overgrazing! foreignforeignoccupation,
occupation, war-time
war-time require-
require-
mentsand
ments andother
otherfactors
factorsaccelerating
acceleratingthe thedestruction
destructionofof thethe forest.
forest.
2.2
2.2 Distribution of Forests
Cut of
Out of a total
total arca
area of over
,417vver 30
30 million
milli ha,. Italy is
hi,. Italy is covered by
morethan
more than6 6m!million
Ilion haha of f, ,e,ts, which
of forests, which represent some:,.de 20
20 pe nt the
roe,,,- of
percent the
total area
total area of
of the
the country.
ccuntry. o6
Of '`,id forest are
this forest area, only
only 43 43 percent
percent p, ,ddv
provide
roundwood
round wood forfor industry.
industry. TheInc Lemai,ing
remaining 57 57 perc,
percent is i5 composed
composed of ot doppl(e
coppice
from which
from which wood
wood is is obtained
obtained for fuel, as as fuelw:01
fuelwood dnd
and forfor the
the orocuctv_:,
production
of charcoal.
of charcoal, Eighty
E hty percent
percent ofdl thethe total forr,i area
total forest area isis covered
covered with
with
indigenous hardwood
indigenous hardwood species
species and 20 percent
.-:nd 20 percent with
witi coniferous
coniferous species.
species.
Distribution of
Distribution of the
the natura]
natural forest
forest isisuneven:
uneven:

62
62 percent
percent of
of the ta are
forests are located
locatedon
onmountains
mountains
33 percent
33 percent are
are on sides
hillsides
,
5
5 perch:.t
percent are
are on
on tnd
flat land

The geographical distribution::on isis ree% the issues

relevant ,to the affectiro
issues affect
the wood-p,-,dd.,0
the wood-processing _idustry.
industry. The orographic of a large part .f
orographic locatio;]
lo.rr -ri of a large part 0
the nati,-,
the t. :e,d s.recludes
national1 forest ,xploitation.
precludes an easy exploitation, The forest
The forest distribu-
distritui-
tion figures also imply that the ritural forests in Italy serve a purpose
tion figures also imply that the natural forests in Italy serve a purpose
whichisis basically
which basically !'protective".
'protective".
It interesting to
is interesting
I t is to note
note hhat
thatapproximately
approximately 6262 percent
percent ofof the
the
forest land is
forest privately owndd,
is privately owned, 32i. perceClt by municipalities
pnrcent by municIpalities and
and other
other
nat ional and/or
national and/or regional
reg io"al public
publ ic authori ties, and and only percent by
only 66 percent by the
the
Foresta owned
State. Forests
State. owned byby the
the publ, ,,,,A0r are
public sector are distributed
distributedbetween
between several
several
 -- 147 -
-

bodies, i:'lcludi:1g mU:'Iicipali ties,

including municipalities, t·egio:lal
regional for-est
forest compa:iies,
companies, :latio:lal
national
utility companies,
utility companies, the the national
:lational oiloil agency,
agency, the
the national
;)ational forest
forest central
central
authority, and
authority, and other
other Government
Gover:1ment organizations.
organizations. This fragmented oW:lership
This fragmented ownership
has made a
has a rational
ratio:1al management
management of of the
the forests
forests rather
rather difficult,
difficult, resulting
resulti:1g
in the
in the production of roundwood low low in
in quantity
quantity and
and poor
poor inin quality.
quality.

2.3
2.3 Sources
Sources of Wood
wood Supply

of the
Most of the roundwood
roundwood produced
produced in
in Italy
Italy comes
comes from
from the
the northern
northern
regions. :1atural coniferous
The natural coniferous forests
forests are
are located
located inin the
the alpine
alpine regions
regions
which
which provide
provide 66
66 percent
percent of the domestic
of the domestic supplies
supplies of industrial roundwood.
of industrial roundwood.
Plantation wood, particularly
Plantation wood, particularly poplar,
poplar, has
has always
always played
played anan important
important part
part
as raw material
as raw material for
for forest
forest industries
industries in
in Italy.
Italy. In the past,
In the past, 60-70
60-70 per-
per-
cent
cent of the industrial
of the industrial roundwood
roundwood extracted
extracted fromfrom plantations
plantations hashas been
been
poplar. Other plantation
plantatio:l grown
grown species
species are
are Pinus
Pinus strobus,
strobus, Pinus
Pinus radiata
radiata
and spp.
and Eucalyptus spp.

Between 1947
Between 1947 and
and 1979,
1979, 62
62 percent
percent of the
the domestic supply of
domestic supply of
roundwood for
roundwood for industrial
industrial use
use came
came from
from natural
:1atural forests
forests and
and 38
38 percent from
percent from
plantations. In the same
In the same period,
period, 35
35 percent
percent ofof fuelwood
fuelwood came
came from
from
plantations.

3. STRUCTURE OF THE
THE FOREST INDUSTRY

The Italian forest

The Italian forest industry
industry sector
sector isis composed
composed mainly small
mainly of small
scale
scale mills although large
mills although large operations
operations also
also exist.
exist. The primary advantage
The primary
in the
in the wood products industry
wood products industry in
in the
the northern
northern part
part of
of Italy
Italy is
is the
the exist-
exist-
ence of wood
ence wood resources
resources composed
composed ofof coniferous
coniferous species.
species. Most
Most of
of the small
producers inin the northern regions
the northern reg ions use
use the
the local
local natural
natural forests.
forests. There
are,
are, however,
however, also
also many larger firms
many larger firms which base their
their wood
wood products
products indus-
indus-
tryon imports of roundwood logs.
try on imports logs.

Technological changes
Technological changes in the wood-processing
in the wood-processing industry
industry in in Italy
have been aimed
have been aimed at
at reducing
reducing production
production costs
costs and
and improving
improving the
the quality
quality of
of
the finished products.
the finished products. Increases
Increases in in yield,
yield, savings
savings in
in energy
energy and
and reduc-
reduc-
tions inin labour requirements have
labour requirements have been
been sought
sought so as to
so as to offset
offset increasing
increasing
prices
prices ofof raw
raw lnaterials,
materials, energy and the
energy and the cost
cost of labour.
of labour. Mechanization
Mechanization and
automation have substantially reduced
automation have reduced the
the labour
labour requirements
requirements per
per unit
unit of
of
output. A level
level of technology
technology has beenbeen selected
selected not
not only
only appropriate
appropriate to
to
local raw material
local raw resources and
material resources and infrastructure,
infrastructure, butbut also
also toto the
the type
type and
and
scale
scale of
of production.
Labour intensive
intensive technology
technology often remains the
often remains the most
most appropriate
appropriate
cho ice, especially for
choice, for smaller
smaller mills
mills producing
producing products
products for
for the local
the local
market. The majority of
The majority of these
these mills operate very
mills operate very efficiently
efficiently and
and the
the
quali ty of
quality of the products is
is excellent.

sawmilling was aa labour

Originally sawmilling labour intensive
intensive industry
industry with
with rela-
rela-
tively
tively low requirements
requirements i!1 capital and
in capital and energy.
energy. Si!1ce
Since then the trend
then the trend inin
all developed countries
all developed countries has
has been
been to
to substitute
substitute capital
capital forfor labour.
labour. At
At
present the composition
present the composition of the
the industry
industry varies
varies from
from small
small units
units with
with low
low
technology
technology to
to completely
completely automated large units.
automated large units.

Man/ hour requirements

Man/hour requireme!1ts per
per cubic
cubic metre
metre of output may
of output may vary
vary from
from
less than 55 to
less than to more than 50.
more than 50. It has to
It has to be
be pointed
pointed out,
out, however,
however, that
that
productivity, profitability,
productivity, profitability, recovery
recovery and
and quality
quality have
have been
been improved
improved more
more
easily and
easily and at
at lower
lower Cost
cost by
by better
better management,
ma!1ageme!1t, training,
training, improved
improved skills
skills
and maintenance,
and tha!1 by better machines.
maintenance, than
 -- 148 --

Technologicaldevelopment.s
Technological des,icnments forfor:erate
temperate ¿orce
zone softwood inclu(je
include
integrated
integrated mul ti-band saws,
multi-band saws, chippers and thinner
opers and
', .:.ner cutting
cutting blades. Other
advanced 'rchhology
advanced technology includes
includes sensors
sensors to toz,id
aid inin sorting,
sorting, location
location and
opt.imal
optimal positioning
po<i'lic.ningofoffeedstock
feedstockand
and programmable
programmable controllers
controllers and micro-
and micro-
computers.
computetb. An important improvement
Au Important improvement in
in the
the field
field of
of managerial
manaderial technology
is
is computer-assisted
computer-assisted optimization of production
production steering
steering and
and scheduling.
scheduling.

These advanced
These advanced technologies,
technolog ies, al'hough
al though currently
currently concentrated
concentrated in
in
the big mills,
the big mills, arc
are influencing through their
influencing - thrnigh their impact on the relative
impact on
competitive
competitive positions -- the
the development
development of wood-processing indus-
tt smaller wood-processing indus-
tries as well.
tries as well.

Many sawmills
Many sawmills add
add value
value by
by further
further processing
processing of
of the products
the products
through drying, preservation, planing,
planing! grading and, in
in some cases,
stress-grading.

Sawmill iog genera

Sawmilling tes large
generates large amounts
amounts of
of wood
wood t,tidues
res idues (bar1
(bark, slabs,
olabs,
edgings, shorts,
edgings, shorts, offcuts,
offcuts, chips,
chips, sawdust),
sawdust.), which
whichrepresent
representappro.,
approximately
:tely
40-50
40-50 percent
peicent of thethe roundwood.
roundwood. these residues
utilization of these
Economic utilizaticn r.:=es isis
aa necc,si.y
necessi and their
and their value actually
actually rises
rises with
with the
the increasing
increas prices
prices for
for
raw
raw materia and energy. Wood
material and Wood residues areare mainly used
used as rawraw material in
material in
the
the production
production of particle board,
of particle board, fibreboard
fibreboard and
and pulp
pulp and
and paper;
paper; they
they are
are
also utilized
also utilized for the the generation
generation ofof energy
energy consumed
consumed by by wood-processing
wood-processing
industries.

The cos
The raw material
cost of raw material constitutes
constitutes aa large
large proportion
proportion of thethe
total
total production costs. The =' of sawnwood,
sawnwood, altlictoh
although fluctuating
fluctuating with
general
general business
business conditions,
,»n:itions, I=mained fairly stat1P.
remained fairly stable. Sa"'1Uills
Sawmills have
reacted to the incrEising co=os
'be increasing costs of raw material,
of raw material, labour
labour and energy by
and energy
increasing production
n!o1uct,ion efficiency
efficieJ,.,,through
throughimproved
improvedrecovery
recovery and
and production
productiun
speed, and ngs in
and savings in energy and labour.
labour.

The quality
The quality ofof sawnwood
sawnwood depends
depends essentially
essential on
on the
the raw
raw material
material
fes such
properties such as strength, durability, appearance,
strength, d,rability, rance, defect frequency
frequency,f
etc., and
etc., and on the
the manufacturing
manufacturing tcchnology
technOlogy (dimensional
(d nsional accuracy,
accuracy, surface
surface
quality, grading, defects
defects elimina'-ion,
elimination, etc.).
etc.). Over 50 o 7ce:co of
nver 50 of sawnwood
sawn,uud
is
is used
used directly in building and
directly in and construction.
construction. Higher
HigheL qualityrty sawnY/ood
sawnwr.= is¿s
used
used for
fr.: secondary
secondary processing furniture, joinery and
processing (quality furniture, engineered
and engilo, ad
timber
timber structures). Sawnwood
Sawnwood isis aa bulk
bulk Commodity
commodity and
,nd the otirket
market is sen-
sitive to
1m overall
overall economic trends and
economic trends and especially toto the
the level
level of
of building
building
activities.
;es.

majority of
The majority of the
thesecondary
secondarywet.
wood-processing
si 'processing industries
industries is
is based
upon
upon imported
imported raw
raw materials
materials and
and is located
1,, att aa distance from
from rati,nal
national
forest rescuroes.
forest resources. Some units
units are
are integiut,
integrated with primary
primary wood-prmoe:<,ing
'tlood-processing
plants; ,tur independe-'
plants; other independent industries
industries -hhe
have been
been established
established within
within tb,
the bome
same
region as the
the latter.
latter. Sawnwood dominates
,,,,nwood dc. =s as
as raw material for
for those
those secon-
secon-
dary
oo'n industries ;hturing pc,.
industr4es manufacturing productsts destined
destined for
for the
the construction
construction
industry. Wood-based
1-ba,oc.:panels,
panels,mostly
moso,y particle
particle board,
board, are
are used in in the
the
manufacture
ihoture of furniture.
oi o_roiture.

The level of technology

technology extends
extends from
from manual work
work with
with hand-tools
hand-tools
in
in small
small workshops to
to largee scale
scale industries
industries using
using automated
automatedmach':ort-
mach for
streamlined production.
streamlined production. using modern
Enterprises using modern technology
t.echnology and
and ...aa-
mecha-
nical
nical equipment are dominating in
equipment are in terms
terms of
of value
value of
of output.
output.

The ircreAsed
The increased local
local demand
demand for
for fore,t-J.i
forest-based
sd products
products has
has been
been one
one
reason
reasnn for theti., secondary wood-7tocessing
expansion of the secondary wood-processing industries.
Economies of
of scale in this
Itale in this sector
sector are
arc not
not such
such as
as to
to make
make the
the small
small com-
com-
pany so-,fIcient.
inefficient. This implies
This implies that
that factories
factories start
start onon aa small
small scale
scale and
and
gradually expand
gradn,.O.y expand operations
operations as
as markets, and skilled
markets, capital and skilled labour
labour become
become
 -- 149
149 --

available. To
available. industry is
.-he industry
that the not characterized
is not characterized byby pronoun,,
pronounced 1

economies of scale not mean

not that there
mean that there are
are no
no advantages in operat;
advantages in operating
ad\antages are
large plants, but these advantages
large are not
not great
great enough to shut
enough to shut the
the small
producer out of
out
pianproducer c' the ,ket.
he market.

4. CONSTRAINTS TO
CONSTRAINTS TO THE
THE DEVELOPMENT OF FOREST
DEVELOPMENT OF fOREST INDUSTRIES
INDlJSTRIES

Historically
Historical the
the production
production of of roundwood in in Italy
Italyhas has not
notbeen
been
t- hop
1018 to keep up with the
able the internal
internaldemand.
demand. until the
Until theperiod
period ending
ending with
with
the second worldw,ild war. deficit was
war, the deficit was=,pproNimately pet,e,,t of
approximately 20 percent of theLne
total domestic r o remets.
1cmellh requirements. In recent
In recent years, local production ion has gra-
he,cme even
dually become LO more .,aficient
more def icient in sJpg1Liqo
in supply ftc rapidly increasing
ing the
d!mand. In
In 1982,
1982, zhethe total product
production ionofof roundwood
roundwoo.1 wasrag .A-rw12
about ,illion
12 million
w`t rundv,-,rd equivalent
m of roundwood
wood eguivalent j
egu::a1,-e: and
These IT:Torts
These
and imports
imports reached
imports were
reached 30.85 million
were necessary gee' the tct'l
of
necessary to meet the total demand off
i,hni-
,t round-
40.50 touiilent-3
40.50 million
million imf, of of roundwood Ex[hszel in percentages, the
equivalent. Expressed
roundwood equivalent.
demand
demand inin 1982
1982 was
wasmet met for
for 25
25 percent
percent by bydomest.,"
domestic FicOl L7:9 ion 191 -(t
and for 11 11
percent by internal recovery,
b} internal recovery. i.e.i.e. aa total
total of
of 3o
36 percent and 'jo r-Faln
11 I the remaininghg
ol percent
64 pqr;:kric by imports.
by imports. This contrasts
This contrasts Lathe,
rather drastically with the tho 20
perr,rt ,leficit
percent deficit mentioned
mentionedabove above forfor 1945.
1945.

It
It highlights
highlightsthetheshortfall in domestic
shortfall in domesticroundwc
roundwoodd ion and
votion and
the ever
the ever increasing
increasing dependence
dependence onon imports
importe to
to cover
cover the
the co 's require-
country's require-
,

ments for
ments for wood-based products.
wood-based products.

The main
The mainproblem
problemofofthe
the wood-processing
wood-processing industryofcfItaly,
industry Italy, which
which
employs hundredsof
employs hundreds of thousands
thousands ofof workers
workers in in the
the various
various sectors
sectors ofof the
the
primary and
primary and secondary
secondaryindustries,
industries, centres
centres around
around substantial imports of
substantial imports of
raw materials.
raw materials. TheThe livelihood
livelihood ofofsosomany
many people
people in the the wood-processing
wood-processing
industry depends
industry depends Onon these
these raw
rawmaterials
materials that
that the
the production
production of ofdomestic
domestic
raw materials
raw materials must
must be
be encouraged
encouraged so so as
as to
to guarantee
guarantee en an adequate
adequate supply
supply of
of
domestic raw
domestic raw materials.
materials.
In
In addition,
addition, thethe plywood,
plywood, blockboard,
blockboard, particle
icle board
board and fibre-
and fibre-
board industry
board industry have
have some constraints which
some constraints which are
are related
related totothe development
the development
of infrastructure
of infrastructureandandskilled
skilled manpower.
manpower.

5. INSTITUTIONAL FRAMEWORK
INSTITUTIONAL FRAME ..l0RK

The forest
The forest policy
policy in Italy is
in Italy is aimed at at decentralization
decentralization and and the
the
organizationofof its
organization its operationei
operational aot. 't re is
activities enralized in
is decentralized the coun-
in the coun-
try's twenty
try's twenty regions.
regions. Coordinatic,n
Coordination 1, is de ted torl rhe
the General
General Direction
Direction
of Forestry
of Forestry ofof the
the Ministry of ricuT ture 15d Foisrry, which
and Forestry, which is
isrespon-
respon-
sible for the forest
sible for the forest pol icy of of ent-e 09Ltr. The
entire country. forest pol
The forest policy
icy is
is
based
based on the relationsh
on the relationship 7 between rl
betsF=en utilizationz,1t,r ofr resources,
resources, production,
production f
and conservation
and conservation of ',.,ircvmerr. It has
of the environment.
: n1.7 been icsigned to
1)cor designed to reduce
reduce the
the
commercialdeficit
commercial deficit ofofroundwoul,
round wood , to t en_ure
ensure an on active
,,et,ve defence
defenceofof the
the soil
soil
ard to
and te increase the income
increase the income ofofthe the local
Ic-1 ation.

Cheaim
The aimofof the
the regiona: is to
.ies is
regional authorities to keep
keep the
the value
value added
added of
of
the forest
the forest inside
inside their
their region.
region. '-orit),.:; are
Priorities aregiven
given to
tointegrated
integrated pro-
pro-
jects where
jects locally produced
where locally produced raw mote,,a1.,are
raw materials are utilized
utilized inin mills
mills located
located
in the
in the same region.
same region~

Forest utilization
Forest utilization cont'-'--= re^o,=te duties
contracts regulate dhties and rights of
and rights of timber
timber
harvesting compenses.
harvesting companies. Th,f, are di fferent
There -nt types ofof contracts,
contracts,depending
depending
forest property
on forest
On property and sL,p, ik
and scope of the operation, and ano they
they include
include forest
forest
managementcontracts
management contracts and
and timheh
timber ha: esting cowracts.
harvesting contracts. Usually the
Usually the fores-
fores-
try enterprise has the right
try enterprise has the right to u. rtake loqping
to undertake logging inin aa determined
determined area area
without
wi thout the
the responsibility
respons ibil i ty for
forforest management,
forest management, alalthough
though thethes silvicul-
11 v icul-
tural cutting
tural regime is
cuttingregime is usually
usually laid
laiddown
down and
and the
the quantity
guantity or or area
area to to be
be
harvestedannually
harvested annuallyororperiodically
periodically isis specified.
specified. In
In some cases, the
some cases, the only
only
 -- 150 --

form
form of forest disposal is
of forest is under
under short
short oror medium
medium term
term hharvesting
-v, ting contracts
leave considerable
which leave considerable freedom
freedom toto the
the grantee
grantee with
with r,
regard toto harvesting
techniques,
techniques, road construction methods and and utilization
utilization standards.
standards. In
In other
other
cases, the
cases, the grantee will,
will, however,
however, have
have toto plan
plan and
and control
control the
the harvesting
harvesting
more intensively;
intensively; the
the annual exploitable volumevolume isis fixed,
fixed, the
the cutting
cutting area
delimited and
delimited and the
the trees
trees to be removed
to be marked by
removed marked by the
the forest service; the
forest service; the
logged
logged area will bebe inspected
inspected and
and wasteful
wasteful logging
logging methods
methods penalized.
penalized. In
fact, the operations of
the operations the grantee
of the grantee aceare under
undec close
close supervision
supervision by by the
the
forest service.
forest service.

6.
6 THE NEED FOR A COORDINATION CENTRE
CENTRE

It isis felt that,

that, if if the forest policy
the forest icy aimed
aimed at decentralization
decentralization
is to
is to bebe more
more effective,
effective, integration
integration between
tween wood production
production and and the
the
industry has
forest industry has toto be
be strengthened
strengthened couland to
to be supported by by the
the regional
regional
forest derarrments.
forest depalCtments. Forest property in
Forest property in Italy is is held
held byby the
the public
public and
private
private sector in
;:-.e...%or in aa ratio
ratio ofof approximately
approximately twotwo toto three, which shows
three, which shows the
importance cf
importan:- of the private sector
the private sector in forestry.
forest'cy. Forest industry and
Forest industry com-
and com-
merce
merce are are in the the hands
hands of of thethe private ctor and
private sector
, services ~ such
and services, such as
as re-
re-
search
search and development, traini training of of personnel,
persom. , are public. These branches
have
have in in the
the past
past been
been left
leftpi..practically
:ically without any coordination,
ut any coordination, neither
among
among themselves nor nor between
between tthe private and
e orivate and public
public sectors.
sectors. Roth
Both sectors
have realized the
have realized growing ne,
the growing needI for aa comprehensive
comprehensive approach
approach to the many
to the
problems
problems common to to the
the different
different branches
branches and
and for
for aa common
common policy.
policy.

In 1983 the
In the private
private sectors
sectors ofof all
all branches
branches ofcf the
the forestry
forestry
sector formally
sector formally invited
invited thethe public
public organizations
organizations opera"i
operating g any
any wood-
wood-
relat,,d act.'ies to
related activities to establish
establish jointly
jointly a avolur;.,,y
voluntary organ
organization for the
rion for the
coordination of the Italian
cc'-rdination . so-called "wood
Italian so-called "'wood syr,!,7".
system" nWood sstem"
8 system tJ in
this context
thic aontext means all branches
,,ears all branches of forestry, forest industryih,..,stry and cor-
cor-
related activities
related activities managed
managed byby the
the private
private and
and public sectors.
p0Aic sectors.

7. THE "PERMANENT
"PERMANENT CONFERENCE OF
OF THE
THE ITALIAN
ITALIAN WOOD
WOOD SYSTEM"
SYSTEM"

The
The principal aim of
principal aim of the Permanent Conference of the the Italian
Italian Wood
System
F-,tem is to promote
is to promote a a national policy
policy forfor the
the entire "wood
"wood system".
system".
Membership
7'....,,orshipassures the the
assures presence
precnncein in
the Conference
the Conferenceofofthe
the interests
interests of
of both
both
the private
t;.e and public
private and publicse,-h,,rs.
sectors. tangible result
A tangible result of the
the activity
activity of the
the
Permanent
P.'rmanent Conference
Conference hash6s,been
been the
the coordination
coordination between the different
between the
branches in in both
both sectors.
sector. This ,-,ordina'inn
coordination has has been
been so successful that
so successful that
it
it is
is no
no exaggeration to to say that, through
through the
the Permanent Italy
Permanent Conference, Italy
has an organization
has an organization which
which represents
repr--,:s the the ,ntire
entire "wood
uwood system"
system" and
and which
which is
is
able to
able to speak with one voicevoice as
as valid
valid counterpart
counterpart toto the
the national
national Govern-
Govern-
ment
ment and
and also
also to international organizations
to international organizations such as the
suches the European
European Economic
Economic
Community.

It also
It also institutionalized
institutionalized a a relationship
relationship between producers and
between producers and
consumers of
consumers of wood
wood at
at the national level,
the national level, which in the
the long
long run should
run should
optimize Italian "wood
optimize the Italian system!'~
·wood system".

8. INTEGRATED OPERATIONS

Bethel (1983) notes

Bethel (1983) notes that:
that:

"The structure of the forest

fore,t utilization system
includes four principal components,
c,mp rents, namely: the
forest, the harvesting operation,
harvesting oporalicn , the manufcturinq
operation and the
the marketing process."
process."
 -- 151 --

An
An forest utilization
integrated forest utilizationsystem
system includes all
all of these
components.
components~

It muy
It may be
be under
under stalls
singlecorporate
corporateownership
ownership and n Aertent, Which
id management, which
is the
the case
case when the firm
when the firm k-ns
owns the land, grows
the land, grows thE tr t rvests the
the trees, harvests the
forests, manufactures
for-ests manufactures the
1 ti - products and markets
r /aurae' and markets them, or r,1 .t muy
it may involve
involve
multiple ownership
multiple ownershipandand menu t
management, a, with
with each
each phase f3'1 ng under
phase falling nder different
different
ownershl.
ownership. The Government
The Government rem- may awn
own the land, grow
.-he. land, growthe tU tren'
trees and and Gubse-
subse-
guently sell
quently them. A
sell them. A lcnnIrn
logging nnnrreotr.r
contractor might
might buy
buy tse
the frohh,
trees, lhj haem
log them and
and
convert
COFVE them into roundwood carrircrenhs
ao round/v/1,rd components for ter sale
sale to
toQr,e
ODe Cr M,C, manufac-
or more
ar, w/ach
turing firms,
turing whichthen
thenmanafaa,vre
manufacture thethewood-based
wood-based produot-
products end and sell
sell them
them
to
to the
the ler.
consumer~
e, The manufacturing
The manufactur company
company may
may be
be a ver,
very simple
simple one,
one,
consis Ell) of
consisting 4,F aa single
single sawmill
salo.'Il\ill only.
only. On the other
On the other hand,
hand, the
the manufacturing
manufacturing
roliht comprise
compare, might
company several highly
compr ise several highly integrated
integrated mills
millswhich,
which, inincombina-
combina-
tion, util,_e
tion, utilizemostmost of
of the
the biomass
biomass of of the
the forest.
forest. In any
In any case,
case, the
the four
four
forest, harvesting,
components - the forest., harvesting,manufacturing
manufacturing and
and marketing
marketing - are
commontoto bot.h
COrnmon both systems.
Integrated
In rated processing
processing is the le key factorfactor in in achirviro hetter
achieving ai better
utilization of available
utilization availableresources,
reSOurces. Integration can
Integration can bebe urdcrtaken
undertaken step-
step-
wise,
wise r byby successively
success i vely adding
add i ng new
rn ucts which either make
wh ieh either Ls, of
make use of, or
or I

contribute
contribute te to the
the production
production of of a./ready ly existing
existing units.
units. lam.a-zari,n of
Utilization of
woodwaste
wood wasteand/or
ard'r residues
residues as raw rr/ material or or asas an energy s_nt,e
an encrA source are
are
crucial
crucial in irtegration prone,
ir the integration process. ar, in
However, Italy thas
in Italy thisFrneess
process has
has
not beer
not been a 1a in-plaa, i
scale, in-plant jr
tion of industria]
of industrialccmrm-,ns,, but but
it has
it has rarJ1,r1
resul ranm fromcombiniaa
combining relativelyn small and functiona
11 and functionally indepen-
indepen-
dent units,
dent units, whvr,ver
wherever possible.
possible.

A stepwise
A stepwiseintegration
integrationonona arelatively
rrAatively small
smallscale
scaleisis practically
practically
always possibleand
always possible andisis stimulated
stimulated by by local
local and central authorities
and central authorities throughthrough
financial, fiscal
incentives -- financial,
incentives fiscal and and social
social -- to to facilitate
facilitateincreasedincreased
integration of
integration of small
small scale
scale production units. An
production units. An application
application of of this
this
concept is the formation
is the formation of of cooperatives
cooperatives formed
.formed by by individuals
individual' en-jar/el
engaged in
operations which fell
logging operations fell and transport logs to to the the croretati%s
cooperative's
storage centre.
storage cenU-". The Thewoodwoodisisthenthensold
soldbybythethe cooperative
cooperativetoto sawmills.
s,wmill,. In
some cases
some cases - and these are
and these are becoming
becoming more
more and and more
more numerous
numerous ane :=m,
the same
sawmills which
sawmills whichbuy buythe thewood
wood jointhe
join th./cooperative
coope/ltrveofof the the lcu,ets
loggers who 5u[1_1"
supply
the raw
the raw material.
material. -he industryfs
The :-: alcter,
industry's rural character, at pints, is
le/,s/. in parts,
at least r _s
very well
very well suited
suited to /a. the
ahe overall
overall e- e - eevelopment
economic development of of aa given
c./en rea,,,m
region.

S./meregionaI
Some regHualauthorities
/uthorities have -ryadeveloped
developedprocedures
procedure2 forinintegrat-
for rat-
ing tree
iog growing by...je
tree nrcolna the public secteer with
public sector with manufacturing
manufacturing and and marketing
rna ting
carried out
carried out byt/ the
the private
private sector.
sector.

The Italian experience

The Italian experience showsshowsthat thatvertical
vertical integration
integration of of small
small
individual processing
individual processing units units or or plants
plants isiseconomically
economically desirable
desirable in in terms
terms
of
of increasing
increasing the the utilization
utilizationofofthe thewood
wood raw raw material,
materiaL diversifying
diversifying the the
product range
product rangeand andfurthering
furtheringthe thedistribution
distribution of of labour.
labour. Such Such integration
integration
has been,
has been,and andstill
still is,
is,thethemain
mainfocus
focusforforregional
regional development.
development.

Small scale
Small scale integrated
inteaiated unitsunits such
such as as the
the ores
ones operating
operating mainly 7e inin
northern Italy
northern Italy migtt
might also be suitable
al'-. be suitable irindiffaceam
differentsocio-en a
socio-economic &Or--
sur-
roundings and
roundings and couId
could be he promoted
cruoted inindevelbhind
develop /ountrses
countriesthrougethroughtechtmm:1
technical
and
and economic
economic assistaboe .././r.aames,once
assistance programmes, once
thetheir suita/tility in
suitability in aa aufferint
different
environment
environment has
has been
been uveaaated.
evaluated~

The deve}
The development
opment ofofanother
anothertype
typeofof i integration
ration relates
relates totothe
theNew
New
Forestry Enterprise.
Forestry Enterprise. It
It was felt that felt forestry enterprises,
that the forestry enterprises, which
which
traditionally had
traditionally been engaged
had heen engaged only logging operations,
only in logging operations, should
should also
also
involved in those
become involved
become operations which
those operations follow logging,
which follow logging, ii.e.
,e. manufac-
manufac-
turing and
turing and marketing.
marketing. This
This resulted
resulted ininthe
theestablishment
estabIishment ofofNew
New Forestry
Forestry
Enterprises, which are owned
Enterpr ises, which owned byby local
local regional
regional authorites.
authod tes. The publ
The public
ic
forest enterprises
forest constitute operational
enterprises constitute units in
organizational units
operational and organizational
 -- 152
152 -

which
which thethe participa:Jts
participants are tic orcanizations
are pll!:)lic 0 izatio.'1s activo
active iniil the
the tiomotion
proJriotio;) of
of
all forest and
all forest a~d forest,/
forestry actactivities, including
ilcludi~g manufa c mg,m
ma~ufacturi:Jgf iketing and
rnarketi:Jg and
prctiction. This
environmental protectio:i.
e:lv:ironmental is promotional tends no
activ.!-: ten,,s
prolTlotioilal act:ivity to develop
develop
industrial
i:1dustrial or commercial
compr opkrations together
operatioi1s together with
wi th praivate investors and
private investors and
assures an
assures an obtimra, .1.iition of
optimillfi utilization of the
the standing
starJdi:1g fcrei,ts.
forests. This development
This development
has also
has also been
been iinstrumental
i ntal inin keeping peopleioin the
keeping people the forest
forest area-
areas byby giving
givi~g
enc iiment in
pnrmanent employment
them perma:1e:-:t in forest activities, which is
forest activities f is r:%ticularlv
icularly
1.,nrra
important for for thee. znomv of
t.he ecoilomy of those
those areas
areas which
which are
are usually
usually mrt:;inal
margi;1al froM
from
an
a~ err
economic:c poi:'
pOintt of view.
!

99. TYPE
TYPE OF
OF ASiOCIATONS
ASSOCIATIONS

specific areas, in the overall performance and in

Improvements in specific areas, in the overall performance and in
the development of f(cr ryrelate ..:prations are obtained by eneaging
the development of forestry-related operations are obtai"ed by engagi~g
the services of specialists in the
the services of specialists in the field of forestri, manufactur4rd and
....:,d of forestry, manufacturing and
This ira
marketing. This may i be
le done without any
done without a)y problems
problemsbybrthe
'se largec 'ons
larger operatio~s
which can easily ,tify
which Can easily justify their their emp:oyment.
employment. Howrvrr, when sma,.ale
However, when small scale
producers
producers require
require tr.! services of specialists, it may have to be db,c-
the services of ialists, it may have to be done by- a
specialist serving
s ialist serving se"Jeral small firms.
f,,iferal small irms. This is
is accomplished
aceomnlished thrc
through
different
di ferent arrangements or associations.
arra~gements or associatio~s.

9.1
9.1 Consortia or
Consortia or Cooperatives
Cooperatives of
ofForest
ForestOwners
Owners

These are units --noted and

These are units (promoted a"d assisted
ass is ted by
by public-owned
publ ie-owned regional
reg ional
forest companies)
forest companies) manaiin rests which
ma:1agi:1g forests whichwould
would otherwise
otherwiseremain
remaiilunmanaged
unmanaged
due tv the small size of
due to the small size of the pecc.ers'
members' proper`y
property or Or other
other disadvantages
disadvan such
such
the high degree of sencicence of the (wners, all factors which impede
as the high degree of Senescence of the owners, all factors wh impede
,he utilization of from these cooperatives or
rtsource. Roundwood from these cooperat i ves or
the ut i l i zat ion of the resource.
consortia 1 is usually supplied to local small firms or to commercial
,-PS0,1 ! is usually supplied to local small firms or to commercial
sawmills.
SiDAT-

9.2
9.2 Service and Repair Facilities, Technical ASsistance
These are provided
These are as aa kind
provided as of indirect
kind of indirect subsidy
subsidy to
to small
small scale
scale
producers
producers by public decentrfliced auttorities. The service and repair
by publ ic dece nt ral i zed au thor it ies • The serv ice and repa i r
facilities, viich operate as ..!eratrav,s or as independent firms, supply
facilities, which operate as cooperatives or as independent firms, supply
common facilit 'as for t,a re,
common facilities for the repair and a .%vicinctofoftools
servicing tools and machineryto
and machinery te aa
number of sn.ii firme,
nwnber of small firms. ve small firms do
Generally these small firms do Clot fp ' employ
employ en-
e!l-
gineers, mecl
gineers, iif or oth, s aiJ they receive tr,nnicei assist-
mechanics or other specialists and they receive technical assist-
ance
ance from thc service
from the service and
and repair facilities~ ities.
9.3
9.3 Soecialized Services
§p."cialized Services

For reasons
For reasons of of economies
economies ofof scale it has
scale it has proved
proved advantageous
advantageous in i~
some cases to
some cases to establish
establish comisen specialized facilities
COmmon specialized facilities for
forwood
wood drying
drying and
and
preservar'-''
preservation, or or to
to provide
provide other
otherspecialized
ializedequipment
equipment such
such as
as veneering
veneering
and edgebonding
arld edge 'oiding for
for particle
particle board
boa for
for the
the use
use of
offirms
firms which
which are
are too
too
small
small toto o,n
ow:!and
andtotoeconomically
economicallyoperate
operatesuch
suchequipment.
equipment. These services
These services
are
are also
also !ipvided
provided as as aa kind of indirect
kind of indirect subsidy
subsidy byby public authorities.
public authorities.

9.4
9.4 Workshops and
~Iorkshopsand Warehoueo
Warehouses

As mechanization
As mechanization of logging
I .t. ing increases,
increases, so so does
does the
the need
need for
for
workshops
workshops andand skilled tecf:!.! s te
skilled technicians to maintain
maintain andand repair
repair the
theequipment.
equipment.
The same applies,
The same applies, inin aa different
differe~t way,
way, toto the
the sawmills,
sawmills, veneer mills, etc.
veneer mills, eft.
few fortunate
A few
A fortunate loggers
loggers maymay °pirate areas well
operate in areas well covered
covered by ccamer,
commercial
repair
repair service
service facilities,
facilities, butbutmost
mostloggers
loggersmust
mustsupply
supply their
the r own.
own. lie
The
moreisolated
more isolated the
the operation,
operation,the the greater
greater the
the need
needforfor self-sufficiency
self-sufficirriy in in
maintenance fac!lit . In
maintenance facilities~ In efeis
areass'iere
wherecommunications
communications andand trans;-,,r-
transport are
are
loggers may
poor, loggers may find it advantageous
-d it
' advent r-ous to
. to provide facilities evr-
provide facilities for
even for
meor overhauls
major overhauls in theirleir own
own work, Similar considerations
,ps. Similar
workshops. considerations -imply
apply toto
w.e..)uses
warehouses and
and to
to socking
stocking spare
spare p. ts, fuel
parts, fuel and
and lubricants.
lubricants.
 - 153
- 153 --

Sometimes lcome
Sometimes ism con
l09Qers form s' s'res totooperate
cooperatives operatesuch
suchworkshops
workshops and
a~d
warehouses.
warehouses.

9.5
9~5 Manufa-'
Ma~ufacturers' ia*
Associatio 0s

These associations usually

These ass-ci:s1 usually incorporate
. i~corporate the large
large as well as
firms as well as ,

the
the small.
small. An
An important ....le of
importa~t role of these associations is
these associat- is to
to set ...nd maintain
a~d maintain
quality sbandards for :no-notion and products ivce latter in coniudttion
quality standards for production and oroducts (the latter in conjunction
with trooi associatic,:). Actiher area of actvity iowerns thP
with trade associations). Another area of activity concerns the environ-
ment,.,-though the risk of e
ment. nronmental pollution
Although the risk of environmental pollution asomciated
associated witn
withmenha-
mecha-
nical ,processino industries
nical wood-processing
. :ndustriisisand
andwith
withthe
the use
use of
of ,ettain
certainwood
wood ptethicts
products
is low in
is in comparison
comparison with industrial sectors, the ap.oici.iion
many industrial sectors f the assocL3tio:l is
with many is
aa3,ye in areas such as the promotion of fuller utilization
active in areas such as the promotion of fuller utilization of wood wood waste
waste
residues, which will diminish the actual enviromental ar.: waste (Hs-
- residues f which will diminish the actual enviromental and waste dis-
and
, problems.
E'llowing 3'4: steep price increase of oil in 1973, much research
Following the steep price increase of oil in 1973, much research
and development
and devel.iomentwork workhast=sbeen
beencarried
carried out
out ini~ order
ordertoto
improve
improvethe economy
the economy
of wood-prosessing
of In Italy, as in most industrialized coun-
industries. In Italy, as in most industrialized coun-
wood-processing industries.
tries, this
tries, work
this workhas been
has beenfocused
focusedono~energy
energysaving
savingthrough
throughthe
thedevelopment
development
of technolcs-
of technology and3nd machinery
machinrry consuming
consuminglessless energy,
energy~

9.6

Trm,de aassociations
Trade further th, n-,reste of their members by
ciins further the interests of their members by
assisting s*tt duct standards, prisioating legislative norms
ass isting in setting product standards, promoting legislative norms for for
refanal
regional and naticnai preparing banking agreements or
-snments, preparing
national governments, or by
engaging in resecch
i::1 research ents aimed at
projects solving problems
at solving problems ot
of common
iniocest.
interest.

While the
While the exchange
-echange of of technical
technical aand marketing
marketing information
information tends
tends
to
to benefit
benefit the
thesu, firms, the
7,, r firms,
smaller the larger
larger firmso benefit
benefit from
from the
the increased
increased
political base
political base thaL
that the
theorganization
organization can
can dtaa,
draw on in seeking
on in seeking solutions
solutions to
to
problems common
problems common to tothe
theindustry
industry as
as aa whole.
whole.

Trade associations are

Trade associations are often
often involved
involved inintraining of of
trair:ing management
management
and workers.
and workers.

10.
10. RESEARCH

The wood-processing
The wood-processing industry
industry has relnt 31y low
has a relatively low technology
technology in
in
comparisonwith
comparison with many
manynew,
new,fast
fast developing
developing industries.
indratrI The total research
The total research
input, either by the public or privaie sectnr, ,ois
input, either by the public or private sector, has re: ained very
remained very law.
low. The
industry utilizes national rewwible re,
i~dustry utilizes national renewable resources
, es, is relatively nhour
is relatively labour
j

intensive, and self-supporting 15 energy: iSs.a factors make the ini,itry

intensive, and self-supporting in energy; these factors make the industry
an important unit within the national econc,y and, therefore, an increas-
an important unit wi thin the national economy and, therefore t an increas-
ing share of public funds should be destine for research in the following
ing share of public funds should be destined for research in the following
areas:
areas:

- Forest
Forest management
management and 1 plant,: t
plantation tech:-dques, mcl
technig. , including
I the
the
.'es, re.; i. il to pests
1

production of gulf,.
production of quicker growing trees, I:esistant r 3 and
disease.
disease.

Industrial uses ot larger proportion of the total wood

Industrial uses of a larger proportion of the total wood
volume per hectare of forest.
volume per hectare of forest. This
This should
should include
include research
research
in processing technologies, utiliv,ion of forest waste and
1:1 proceSSing technologies, utilization of forest waste and
wood residues from
wood residues from industrial
industrial operations as
as raw
raw material
material and
a~d
as fuel for the generation of ern iov.
as fuel for the generation of energy.

Developmentofof specific
Development specific technol. :es for
technologies for the
the drying,
drying, preser-
preser-
vation
vation and processing of
and processing of the
the various
various species.
species.
 -- 154
154 --

Appropriate machineryand
rcHIte machinery andespecially
especially en
on cutting
cutting tools
tools for
for the
the
variouss species.

Wood
WO, H in construction.
in

Structural desiqns for

Structural designe for the
the use
use of
of wood
wood in construction~
in construction.

Finger jointing and

Finger jointing and other jointing
jointing and
and assembly
assembly methods.

retardants.
Fire retardants.

environmental impact
The envir,-,mental impact of
of the
the wood industry and
wood industry and research
r on
h on
technologies
technolo and
and mitigation
mit tion measures toto control
control the harmful
-rmful
environmental
environn -tal effects
effects associated
associated with harvesting and
with harvesting and proces-
sing of wood.

11. MARKETING AND

MARKETING AND PRODUCT PROMOTION
PODUCT PROMOTION
To maintain its position
maintain its in the
position in the market,
market, there
there is
is aa need for the
need Eor the
Italian
Italleo wood
id industry
industi" toto be titive in
be co,ptitive in price
j_tice and
and quality,
quality, as
as well
well as
techeically inuo
technologically utive to
innovative stal ccm,c0'.ition
ro ',r,stal competition fromfrom substitutes,
substitutes, to
intensiy promotional
intensify promotional effort.
efforts. to transport and
improve transport
tp impro,., distribution
and distribution
channels
channels, and
and to
l to standardize
standardize and
and organize
organize market
market information.
infomation.
Preferences
Preferences forfor and
and against
agaInst wood
wood are
are dependent
c nt on
on sociological
and psycholog
and ps-hological
ical factors.
factors. The promotion of
The promotion of woou
wood rfoducts
products in Italy has
in Italy has
tried to foster aa mOre favourable
:. roster image of
favourable image of wood.
wood. V .5 entailed
This entailed above all
to demonstrate
to cstrate the the suitability
Itability of
of wood in applications hitherto
wood in hitherto untried
untried or
or
little
littl, used in par:
used in particular
.colar lines
lines of
of products.

The Italian wood industry

Italian wood exports utility
industry <xports utility furniture and other
finished products.
finished wood products. The development of
The develipment of this
this ,,':;ort
export market
market has
has been
important not
important not only
only because
because itit earned
earned much needed foreign
mch needed :,Algn exchange.
exch,..1-, but
but it
also en.)bled
enabled the Italian wood
the If-Ili-in wood industry
industry to
to expand
expard output. Jr. However,
Ho,,r-ei, market-
market-
ing. t,,(ther
ing, together wizn
with design and technology. have
and technology, have been
been the
the factor:
factors i.etermin-
determin-
osess. It is
ing success. obvious that
.. ;..tvious thatininthe
thefurniture
furniture sector
sector skilled
skilled des rs
designers
are able to
are able provide -,Jt
to prosiO, not only fashionable but
only fashionable but also
also ergonomically
ergonomically correct
designs.

can be made easier

Marketing can easier if
if product
product and
and quality
quality standards
standards are
are
and innovations
maintained and
maintained are made
innovations are made in
in des;nn
design and
and presentation of the
presentation of
products.
manufactured products.

In all promotional activities,

activities, whether directed at
ner directed at the domestic
the d-oe,t ic
or the export
or the exporr market, there there is
is great
great sy.p.
scope fort- work by
by trade
trade and
and mar,Jt=c-
manufac-
turers' associations.
iations. The
The marketing fuucti_c.
function isis aa difficult
difficult one particu-
larly for the small
small en'e,prises
enterprises which
which must
must e,amine
examine all
all possible
possible channels
channels
for marketing their
for marketir,j their pree.ucts.
products. are usu-.1..y
Exports are usually effected
,ffected through
through export
consortia, wh_ch
consortia, which recome economic incentivE,
receive ecorirni incentives and Government aid.
-overnment aid. These
These
expor
exportt consort, fDrmed by export
consort ia a re formed export firms,
firms. organized
organ i zed as
as trad i ng com-
trading com-
panies provide
panies and pro, -.7., essential export
f,isential e,port market services~
marketing services.

12. TRAINING Af.

TRAINING AND CONTINUOUS EDUCATION
-,TINUOUS EDUCATION
Mechanical wood-processing
. 1-processing industries are
industries relatively labour
intensive industries; ctsviously,
intensive industries; obviouslY1 modern tend to
factories tend
modern factories to be less labour
be less labour
intensive than older mills.
1Jer mills. Within the primary wood industries them-
primary wood
selves,
selves, there
thg_r,.. IS aa great
great variation in in labour
labour requirements.
requirements. Sawn wood
Sawnwood
manufacturing requ_res,
manufacturing requires, asas aa rule,
rule, most labour per
most labour per cubic metre ofof output,
the ply',--470
plywood industry
indust-y requires less, less; the particle board and fibreboard
particle board
industries
industri...: have
rave the : 6.;,,t manpower requirements
the lowest requirements per
per unit
unit of
of output
output in
in the
the
mechanical wood
mechanl.al wood indu,,r,
industry.
 -- 155 -
-

Skilled /abour
labour in in the
the wood
wood and
and wood-processing
wood-processing industry industry areare
mainly graduates
mainly graduates fromfrom thethe Italian
Italian equivalent
equivalent of of trade
trade and and vocational
vocational
schools. are often trained
They are trained more as as craftsmen than than asas skilled
skilled machine
machine
operators and,
operators and, therefore, need need extensive
extensive in-plant
in-plant training
training in in order
order to
to
upgrade
upgrade their
their skills
skills to to the
the level
level required
required inin industry.
industry. The schools
The schools are
are
independent from the
independent. from t.he industry,
indust.ry, because
because they
t.hey are
are operated
operat.ed by by the
t.he Govern-
Govern-
but some
ment.! but.
ment, some ofof them
t.hem have
have connections
con:tections with
wi th thethe trade's and manufac-
t.rade I sand manufac-
t.urers' associat.ions as
turers' associations as far
far asas preparation
preparation of of the
t.he curriculum
curriculum is is concerned.
concerned.
At
At. present,
present, however,
however, there
there is is aa tendency
t.endency for
for the
t.he regional
reg ional authorities
author i ties to
t.o
be active in
be in training for for the
the industry,
industry, and it it. is
is very
very likely
likely that
that inin some
some
of the
of the northern
northern regions
regions of of Italy
Italy one
one or more
more schools
schools willwill be be established
established
to t.rain
t.o train skilled
skilled manpower for for the
t.he wood industry~
wood industry.

Continuous
Cont.inuous education
education is is aa must
must today
today inin the
the wood
wood industry
indust.ry and
and
here
here again
again the
the associations
associat.ions are
are active,
active, promoting
promot.ing yearly
yearly courses
courses atat the
t.he
University of
University of Turin for
for the
the managerial
managerial level
level of
of the
the wood
wood industry.
industry. Stu-
dents
dents are
are sent
sent mostly
mostly byby the
the industries
industries and
and the
the majority
majority ofof the
the teachers
teachers
are experts
are experts from
from the
the industry,
industry, such
such as
as managers,
managers, men from
from the
t.he production
production
line, from marketing
line, market.ing and
and from
from the
t.he engineering field~
engineering field.

13.
13. CONCLOSION
CONCLUSION

As has
has been
been illustrated,
illust.rat.ed, the
t.he private
private and
and public
public sectors
sect.ors involved
involved
indirectly in
directly or indirectly in forestry
forestry and
and forest-based
forest-based operations
operations areare jointly
jointly
undert.aking efforts at.
undertaking efforts at reinforcing and improving the the structure
st.ruct.ure of the
the
entire forestry and forestry-related sector
forestry-related sector, aimed at
aimed1 at aa more rational
more rational
management of the forest
forest which will not not only meet
meet biological
biological andand silvicul-
silvicul-
tural demands,
tural demands, but
but. also
also social
social and economic requirements.
requirement.s.
 -- 156 -
-

REFERENCES
REFEBENCES

Bethel, J.S.
Bethel, J.5. Processes of optimizing and
Processes and diversifying the materials
diversifying the materials
1983
1983 output from
from aa forest.
forest. Proceedings, International Forestry
Proceedings, Fares
Seminar, Selangor.
Selangor+

Conferenza Permanente per

per i
i Congressi del Legno.
Legno. Linee programmatiche
1983
1983 di sviluppo del
di una politica di sviluppo del "sistema
"sistema del
del legno".
leg:1o". (Unpublished
report)
report)..

Cremonese, F.
F. II Progetto Montagna della Regione
Il Regione Veneto.
Veneto. Cellulosa e
1984 Carta, 4.
4.

Froncillo, A.
A. Risorse,
Risorse, disponibilita
disponibilitä di
di prodotti forestali ee prob1ema-
prodotti forestali problema-
1984
199-4 tiche tecnico-commerciali
tiche tecnico-commerciali dell'approvvigionamento
dell'approvvigionamento del
del legno.
1egno.
Documenti FEDECOMLEGNO.
FEDECOMLEGNO.

Moruzzi, P.
P. Considerazioni conclusive ee programmatiche. 1°
I° Congresso
1981 "II legno
Nazionale "Il leg no nelle
nelle attivitä
attivita economiche
economiche del
del paese".
paese".

Pastina, F.
F. Utilizzazioni industriali ee chimiche
Utilizzazioni industriali chimiche del
del materiale
materiale legnoso
1982 dei boschi cedui.
cedui. Rassegna Chimica,
Chimica, 3.
3.

Pastina, F.
Festina, F. Una
Una strategia forestale
forestale per
per lo
10 sviluppo.
sviluppo. Cellulosa ee
1984
1984 Carta, 4.
4.

Prevosto, M.
M. 11 utilizzazioni del
Il problema delle utilizzazioni del legno.
legno. Cellulosa ee
1984 Carta, 2.
2.

Torsani, S.
S" una nuova
Una nuova politica
politica per
per le
Is foreste.
foreste. Ed.
Marsilio Ed.
1984
1994

UNIDO.
UNIDO. First
First world-wide
world-wide study of the wood
of the and wood-processing
wood and wood-processing
1983
1983 industries.
industries. Sectorial Studies Series
Series No.
No.2. IS.398.
2. IS.398.

UNIDO. wood resources and

Wood resources and their
their use
use as raw material~ Sectorial Studies
raw material.
1983
1983 Series No.3.
Series No. IS.399.
3. 15.399.

Vinciguerra, G.
G. Assestamento ed associazionismo7 l'impresa forestale
associazionismo~ l'impresa forestale e
1983 l'impresa di
di trasformazione
trasformazione boschiva.
boschiva. ASSOBOSCHI.
 -- 157
157 --

FOR APPROPRIATE
IMPROVING LEGISLATION FOR APPROPRIATE FOREST
FOREST INDUSTRIES
INDUSTRIES

by

the
the Secretariat
Secretariat

CONTENTS

Page.

L INTRODUCTION 158

2. SPECIFIC ISSUES CONCERNING LEGISLATION FOR

FOP
APPROPRIATE FOREST INDUSTRIES 158

2.1
2.1 Availability of Land
Availability of Landen.'
and pe;.-or,e,
Resources 158
2.2 Customary Laws and R
and U,aqe Plohh: ts 160
2.3 Timber Harvesting
Harvesting a.D5
and Otore5s1.-1.1
Processing 16]
161
2.4 Credit 162
2.5 Timber
Timber utilization
Utilization Agreements 163
2.6 Cooperatives and Other
Cooperatives and Otai Local
1 1 Organizations
rganizations 165
2.7 Fees and Taxes
Fees and 166
2.8 Forest Administration
Forest Administration 167

3. SUGGESTIONS FOR IMPROVED

IMPROVED LEGISLATION
LEGISLATION 167
 -- 158 --
158

1. INTRODUCTION

tions which
tions which implement
i.e. statutory
Legislation, i.e.
Legislation, statutory laws
ther, is
implement them,
laws and
in based on
and the
the administra''
on national
administrative regula-
national policies
pol ides y" f.;.11eot
which reflect
lila-
the social, pl ir aspirations of
a A economic aspirations
the social 1 political and of each
each indivi0,,a,
individual countLy~
Legislatior c;rnl
Legislation ,isnes tCtherdl,,1
establishes rulesand
andguidelines
guidelinesunder
underwhich is to
which society is to
function in lc:)tiance with tls, policies.
function in accordance with these policies~

Any forestry
Any forestry enterpri
enterprise or iindustry
5e or is, therefore,
ndust ry is, therefore, subject
subject to
to a a
wide variety of
wide variety legislation dealing
of legislation dealing with
withsuch
such subjects
subjects as
as incorporatiOn,
incorporation,
taxation, fiscal accountability,
investment, fiscal
taxation, investment t accountability, worker safety,
health and safety,
worker health
environmentalprotection,
environmental protection, trade,
trade, marketing,
marketing, contrac:3
contracts and so forth.
and so forth.
However, forfor the
the purfer-e
purpose of of this
this paper. deals with
paper, which deals with what
what are
are
riled apprr
called . e forest inlistries, it
appropri ate forest industries, it is is as
assumed that oneone of the pri-
of the pr i-
mar
mary cricriter.-
teriafor assessing
for assessing:nc appropriateness
the appropriateness of an rn enterprise
r enterprise is thethe
aibutic which
contribution which it it will
willmake
make totorural
ruraldevelopmen
development.. That is
That is to
to say,
say, any
any
,-1LerpriseIsisappropriate
enterprise aor,, yriateonly onlyifif itit helps
helps toto improve thelot
Improve the lot of
of the
the rural
rural
by returnihq
.ple by
people returning benefits
benefits totothemthemthat thatoutweigh
outweigh costs.
costs.Appropriateness
Appropriateness
also implies
also implies acreotance
acceptance by by and
and involvement
involvement of the rural
of the If
rural people.
people. If the
industry is
industry is not not_ vire
one inin which
which th local people are willing or able to
the local people are willing or able to
participate,
participate, it it may
may well
well bebe inapb- ,riate as
inappropriate as aa vehicle for building
vehicle for building local
local
self-reliance and
self-reliance sustainableincome
and sustainable ir;, generation~
For that
For that reason, ail] not te di
rea,ton, the discussion which follows will not be direct- .
ed to
to the
the more gereta, type
more general type of
of laYt
laws nentioned
mentioned aLc-e,
above, vhich
which affect
affect almost
a
iness en
business en'_et,_ris, but will
ise, but will focus onon those
those forestry
fc,fc?try enterprises
enterprises that
'hat
Lei primarily on
re y primariJy Dn iDcal
ocal human
human andandnatural
natural resources
resourr.asfortor their
their opero: ion.~
operation
It is here
It is here that H. H:,A,ements
that improvements areare n,cdcd
needed in in legislation in
legislation in order
order to
toremove
remove
constraints to
constraints rur.-:! forestry
to rural forestry do.olopmnnt
development andand provide
provide greater
greater support
support toto
appropriate forest.
appropriate forest. industries.
industries.

2.
2. SPECIFIC
SPECIE- uf
ISSUES CONCERN'',
CONCERNING aJON FOR
LEGISLATION FOR
APPROI1,, ' 'EST
APPROPRIATE FORESTINDUS'1'
INDUSTRIES

There arr
There iss:
number of issues
are a- number have aa specific
ch have
which Hie bearing
bearing on
on
legislation for
legislation forthose
those appropriate
appropriate forest industries which
, rely primarily
ch rely primarily
on
on local
local human and natural
human and natural resour
resources., ey relate
They relate to
1to the
the production
production as
as
well as
well as the
the processing
processing ofof raw
raw materials
materials and
and the
the marketing
marketing ofof semi-finished
semi-finished
and finished products.
and finished products. These issues include.
These issues ii
land
land tenure
tenure and
and land pilityt
land aavailability,
customary laws and
customary and usa,)
usage irights, 'rs;
timber harvesting
timber harvesting and
and p:
processing,
credit;
credit;
cooperatives and
cooperatives other lo(-:1
and other local institutions; institutions;
public
public admistration
admistration of
of foi...L
forestlands
landsand
andresources.
resources.

a number of these topics are primarily the subject of

While a number of these topics are primarily the subject of
While
forest laws,
forest laws, other
other laws
laws also
also come into play,
come into ay, including
including those
those dealing
dealing with
wit:,
land, agriculture
land, agriculture and
and finance.
finance.

2.1
2.1 Availability
Availabili of Land and Resoui
Since one
Since oneofof the
the goals
goals ofof appropriate e forest
forest indr r ,ies for
industries for rural
rural
development isis to
to involve
involve local
local people tire entire
people in the entire pr
process
c to the
l to the extent
extent
it follows
possible, it that participatio,
follows that participation of the the local
local lee inin the
: the pro-
pro-
duc-Aonofot raw
duction raw materials
materials is is aa component of appropriate
component of appropriate industries.
t industries.

Th is, in
This, in turn,
turn,requires
requiresthat people
that peoplehave
haveaccess
access to
tothe themeans
means of
of
(land, tools,
production (land, tools, seeds or or seedlings) that tthey are
seedlings) and that are assured
assured
that
that the
the benefits
benefits of
of their
theirwork
work will
willaccrue
accruetotothem.
them.
 -- 159 --

The fiest question to

first question as:,z(~;,i, therefore,
to be asked, whether existing
therefore , is whetht"r Axistin9
legislation pcovides
le9islacion provides access
acces.':i for
fl)C rural
rural people
people to to the ~anJ needed
ti18 land en growl
need!-;!J for (Jr-ow-
ing
ing or
or gathering
gathering the
the caw mater-ial needed
raw material needed foe their particular
for their pacticular purposes.
purposes.
In ]eneral,
In this will
general, this will be wood-fibre, biJt could
WO,_)IJ-fioce, bit <:»lJld also incl11._~~ other
.,ls() include 1)t.;H~C products
pr.',)rj'lcts
such as nuts,
such as nuts, fruits,
fruits, reeds,
reeds, and
and so
so forth.
forth.

Land tenure
Land tenure and
and land
land ownership
owner_-sh.ip vary
vary from
from country
country to to country.
country. The
power to
~lti(nate power
ultimate to control land ownership
c.)ntrIJl lamd and use
ownersl,ip amd use lies
lies with
wit)l each
eacll sovereign
sl)vereign
national aovernment
national government andand isis usually
usually established
establ ished by by the
the Constitution
Constitution or or an
an
equivalent document.
document. In some
In some countries,
countries, allall lands
lands areace deemed
deemed toto be
\)2 state
state
property. In
In other
other countries,
countries, communal
communal andand private
privatt-:: ownerships
ownerships arear-e also
also
cecognized in various
recognized in various ways.
ways.

Closely related
related toto land
land ownership
owner-ship is the question
is the question ofof land
land use.
use.
Whoever has ownership
owner-ship usually
usually has
has the
the power
power to
to determine
determine land
land use
use and
and can
can
transfer
transfer that
that power
power to
to someone
someone else
else through
through sale
sale of
of the
the usage
usage right,
right, lease
lease
of the
of the land,
land, or some other
or some other tenurial
tenurial arrangement.
arrangement.

From aa legal
legal viewpoint,
viewpoint, a a wide variety of
wide variety of tenurial
tenurial arramgements
ar-r-angements
are
are possible, depending on the land policies of a
possible, depending a particular
particular- country.
COUrltr-y.
where all
wher-e all land is owned
land is owned by by the
the government,
government! various
var-ious forms
for-ms of
of leasing
leasing or or
assignment
assignment of of long-term
long-term usage
usage rights
rights can
can provide
pr-ovide aa framework
framework forfor rur-al
rural
people
people toto grow
grow forests
forests andand manage
manage forest
forest areas.
areas. A number
number ofof countries
countr-ies
provide
pr-ovide for
for- the
the specific
specific demarcation
demarcation ofof land
land for
for- community
community forests,
forests, with
with
ownership retained
land ownership retained by by the government, but use and
the government, and management
management are are
taken care
taken care ofof by and
and for
for- the
the local
local community.
community.

In Nigeria,
In Nigeria, where
where forestry
forestry is is aa state
state rather
rather than
than aa federal
matter, Native
matter, Native Authority
Authority and
and Local
Local Government
Government Council
COllnc.il forests
forests may
may be
be
consti tuted to be
constituted be managed by
by or
or for
for the
the community.
communi ty.

In
In Tanzania, the law
Tanzania, the law provides
provides for
for the
the creation
creation of
of local
local authority
authority
forests in
for-ests much the
in much manner~
the same manner.

In Nepal,
In ~epal, Government
Gover-nment lands
lands can
can he
be turned
tur-ned over
over toto local
local villages
villages
enabling tllem to create forests
enabling them forests that
that are
ar-e entirely
antir-ely under
under the
the control
contr-ol of the
the
vi llage.
village. The Nepalese
The Nepalese law
law also allows
allows villages
villages to take
take over
over portions
portions of
of
deg raded reserved
degraded reserved forests and to
forests and to manage
manage them
them onon a
a profit-sharing
profit-sharing basis
basis
with the
the Government.
Government~

There are
There are also cases
cases of
of government
government lands
lands being
being made available to
made available to
local communIties
local communities or
or- private groups
gr-oups for
for- reforestation
r-eforestation and mdnalJement~
and management.

In the
In the Ivory
Ivory Coast,
Coast r state
state lands
lands can
can be
be set
set aside
aside for
for reforesta-
reforesta-
tion
tion by
by private and
and local
local groups,
groups, subject
subject to
to rules
rules and
and regulations.
regulations.

In Thailand,
In Thailand, the
the Forest
Forest Law
Law provides
provides that
that degraded
degr-aded areas
areas of
of
reserved
reserved forests
forests can
can he
be leased
leased to
to private
private concerns
concerns for refore~3tation and
for reforestation and
forest management.
forest

A growing number
number of
of countries
countr-ies provide
pr-ovide for
for- the
the production
production of
of
non-timber
non-timber crops
crops by local people in conjunction conjunction with
with government
government tree-
growing programmes.
growing programmes. In Indonesia,
In Indonesia, local local people
people are
are allowed
allowed to to grow
gr-ow food
food
crops
crops during
ducing the
the early
early years ,)f teak
Y8l:'lCS of teak and
and pine
pine plantations
plantat.ion:-; to
L) grow
grow fodder
fodder
grasses within
grasses within some
some of
of the plantations, to
the plantations, to grow medicinal
medicinal herbs
herbs within
within
{)lljer teak plantations,
older teak plantations, and
dnd to tv produce
l)roduce honey
h')ney from
from forest
forest lands.
lands.

When communal
When communal lands
lands are
are involved
involved -- those
those owned
owned either
either byby aa vil-
vil-
lage or
lage or through
through membership
membership inin ad clan
clan or
or family
family - use
use and management
Inanagement can
can
often
often be
be carried
carried out
out by
by local
local people
people assisted
assisted or
or supervised
supervised by
by the
the fores-
for-es-
agency.
try agency.
 163 -
-- 160

However,
1l0wevet:", tI: itr i ir- ,aupens that,
t:)at, while
whi1e ownership of
S;)!rtt?t.i,tll?-; lldppcnS communal
of c0mmunal ',)wne(~>hi!..l
lands
lands remains in-- the actual control and
unchanged,
r~rndins and l11anage1nent
managementofof the
the land is
land is
vested
\les by Jaw
ted by in the
law in the gove
r; rnme nt. In Ghana,
In Gha na, for example
exampl e all
all communal
communa I lands
are under
are the p,-
under the of lLo
autllority 0f the Pres.:dent, whoholds
President, who holdsthe
thelands
lands~nintrust
trust for
for
the communiti,,
the communities. t, mana,
But
, and administration
managementt and administratioh of of the
the land is under
land is undec
Government o.)ntrol.
G0V8 rt)tF\ent CJnt r-ol •

In oteL
In othet: countries, varying degreeP
countt:ies, varying degrees of of government ':*--..ntrol are
government control
imposedononnative
imposed native owned
ownedlands,
lands,based
basedononthe
thetheory
tt-ory that
that the
the1Pn,.:-,ners
landowners are are
capable of providing adequate manager.:.,it
not capable management andand administration
admini-tration or in
or in
order to
order to protect rho landowners
protect the landownecs From land -, - Hators.
[nlln land latora. For example, in
example,. in
Fiji, landownerscannot
Fiji, native landowners cannot sell thc,
non-nit. es, and
sell their ,and to non-natives, al]
and al}
land leases
land to non-natives,
IBases to non-natives, including ti
including those for
fvr roundwood extraction, must
coundwood extraction, must
be approved
be by the
roved by the Native
Native Lands Trust 2o9r1.
Lands Trust Board. In Papua
In NewGuinea,
Papua New Guinea,similar
similar
restrictions
restr ctions aro
are applied
applied reg 'ding the
regarding the alienation
alienationofofland
landand
and timber
timber
rights by
rights by native
native owners to non-n,t,:e3
owners to non-natives. However,these
However, theserestrictions
restrictions would
would
not seem
not seem to keep the the native Frommanaging
native landowners from managing theirlands
their lands to
to sup-
sup-
port
h'ort local
local for-s%v
forestry enterpr -.H. Papua
enterprises. Papua New
New Guinea fact, experi-
is, in fact,
Guinea is, experi-
menting with forest
menting with forestcevelopment
development programmes which require
progeammes which r-qui.se that
that 75
75 percent
percent
of
of equity
equity isisheld by by
held Government
Government and/or
andloe local
locallan:owne%,.
landownecs. In Fiji, the Fiji, the
Fiji
semi-autonomous Fiji Pine Commission is
semi-autori- industry on
developing a pine if'hiu8try
is developing
lands leas
lands native owners
,.p from native
leased who, it is
ownecs who, is hoped, it
hoped. will
willeventually
eventuallybecome
become
the ultimate
the ult.,aatv shareholders
vnaoholdersofoí thethe corporation
corporationitself.
itself.
use countries
In those count/tes where
whereprivate
private land
land is
is involved,
involved,leases
leasesbetween
between
private
private parties
parties are
are pv,,sible, and t~e
possible, and the formation
'p-m ,tion of
of cooperatives
cooperatives of
of small
small
private forest
forestowner;
owners can be aa conside,:ole
can be aid to
considerable aid to forest
forest product ion, to
production, to
which the government should contribuz
contribute' by providing assistance
dssistance and
supervision.
supervision",

The role of
The role of legislation
legislation inin this context is to
this context to provide
provide the
the legal
legal
frameworkfoe
framework for whatever systemofof land
whatever system land tenure
tenure would be most
would be most appropciate
appropriate for
for
giving rural
giving ruralpeople
peopleand
and communities access to
communities access to land
land on
on which
which to
to grow
grow tree
tree
crops,
crops, either
either as
as forest
foreststands
standsororunder
undervarious
variousagro-forestry
agro-forestrysystems.
systems.

Thepoint
The point to
to be stressed isis that,
be stressed if rural
that, if rural pegple are to
people are to parti-
parti-
cipate
cipate in the resource
in the resource production
production component
component ofof rural-based
cural-bised forest
forest indus-
indus-
tries, they
tries, theymust
must have
have access to land
access to land anda
and a form
form of
of tenuie
tenuresecure
secure enough to
enough to
be able to
be able to count
count on
on receiving
receiving benefits
benefits from
from the
the work
work they
they ar>
are doing.
doing.

Laws which
Laws which unduly
unduly restrictaccess
restrict access
to to forest
forest Ici'-r
land forrwal commu-
rural commu-
nities
nities and
and populations will be
populations will be a
a great
great constraint
constraint to
to tse ,.-reloment of
the development of aa
truly appropriate
truly appropriate forest
forest industry.
industry.

Therefore,
Therefore, land
land and land tenure
and land tenure laws are one
laws are one of
of the
the first
firstcompo-
compo-
nents
nents of
of legislation thatthat
legislation mustmust
be reviewed and,and;
be ceviewed where necessary,
whece necessary,amended
dluended
so as to
so as to support
support the
the development
development ofo'rural
rural forestry
forestry enterprises.
enterprises.

2.2 Customary Laws an.d

Cus t oma ry Laws and Usaae
usage Rl
l:iohts
ghts

In many
In many countries,
countries, ir.: 7...ous native
indigenous native rural
rural populations
populations ex,-. se
exercise
various
various usage
usage eights on forest
rights On lards by
for-est lands by virtue
virtue of
ofcustom
custom and
and trad,t;on.
tradition.
These customaryrules
These customary rulesmay
maybebewritten,
written, but
but in
inmany
many cases
Cases they
they are
ace nnot.. In
a
a nr. of countries,
r of
numbel countries I th,
these unwritten systems
unwritten of land-use
systems 0f rig
land-use rights exist 4ist
It
r

side L.,' side with

by side with more
moce recent
recent statutory
statutory laws.
laws. in often
It is thecase
often the c , that
that
the co.
the toma
customary laws are
laws are known
kn, , and
and exercised
execcised by
t-)1., rural people,
tire rur-al
the people, while
while the
the
stet; :ory laws
statutory I ate neith.
,s are neither known
known nor understood or
nor understot)d or observed.
observed.. For this
For- this
reason, aa rural-based
ceason l r,oal-based for,
forestry
j ,,lfpcise must
entecprise must take
takeaccount
account of
of the
thecustom-
custom-
ary laws as
ary laws as well
well as of of tne itory ones,
the statutory ones, since
since the
the ov-,rative
operative rules
rules of
of
local society
the local societymay be tho:
may be custom rather
those of custom rather than those of
than t- ot statute.
statute.
This is to say
is not to say that drestry enterprise
that the forestry enterprise shoCd
should pe statutory
nore statutory
 - 161
- 161 --

law and
<111'1 follow
la .... ,.)nly the
:')\ :0'" only ~l!8 customary
CllSt,,)!fl;;l"'Y rules, biL
cu1es, bdl. 1' practical point
5v a L)t:'c3CtiC.1,l
r~'l)ln pOlilt off
of
view
view itit does
does mean that, to
mean that, to the
theextent
extentpossible,
possible,thethecustomary
customaryways
ways must
must bebe
accommodated, at
a~~cornmodate{j, least in
at least in thethe initial
initial stages,
stages, since since it may be
it may be the
the
customary
customary rules rules with
with which
which the the local
local people
people are
are familiar
familiarandandwhich
which they
they
will
will use
use to
to guide their activities.
guide their activities.
Mostforest
Most forest statutes
statutes recognize
recognize customary
custoJOary uusage rights and usually right, and usually
provide for their protection when forest develo- inr-,r
provlde for their protection when forest developlnent is contemplated , as
long
long as 1: not significanly in'erfere with tiT
as they do not significantly interfere with timber 11&:- e,tinj opera-
c harvesting opera-
tions. I,pical custoilry ilja :igtts would
tions. Typical customary irr
rights would include the rights of vil- il c 1 ,nrs' of vil-
lagers f, gatner fuelwoc,i, t)d:e-,
lagers to gather fuelwood, f ilding mateiiai
r, building
L. materials for home use, and a f,i h.mo use, and a
variety of non-wood
vac18ty non-wood fH't)tlucts
Lau such as is nuts
nuts ot or- feu its
1 i for non-commercial
fvr non-commer-cia]
hunt and fish, co ,jrr2, animals,
animals, and to clear land
and for
for sub-
i

uses, to
uses, to hunt to graze and to clear] sub-
sistence
sist~nce agriculture.
agcicultuce.

In and
In and ofof themselves,
themselves, these these customary rights can
customary rights can form
form the
the basis
basis
variety of
for a variety
for of appropriate
appropriate forestry
focestry enterprises,
enterprises, without
wi thout any any need
need for
foe
specific
specific additional
additional legislation.
legislation.

What may
What may be required, however,
be required, however, is a change changeinin existing
existing legis-
legis-
lation to
lation to identify
identify the thecustomary
customary rightseights more specifically, Le.
more specifically, i.e. identify
identify
who
who is in entitled
entitled to to exercise
exercise thernthem andand toto what
what extent.
extent. If thece
If these rights
rights are
are
to
to form
ft)J:1U Hi,
the basis for: rural enterprise
for aa rural enteC'pC'ise (such
(such asas the
the gath,ciag
gathecing and and pro-
pro-
cessing for f ale uf
sale of fruits
fruitsor ornuts
nutsfromfrom forest
forest trees),
trees),limit:,
limits wc11
will have
have toto
bo
be p"acod
p'aced on the size of
,he size of operationi
operation by the appropriate la
ti,I. appropriate foii,latory
locall regulatory
authoilly based on
authority _n the
the capabilito,
capabili of
of the
the foreat
forest area
area to to,cuatnir, ri:reased
sustain increased
ha, ',at iit. Over-use
harvesting. r,,-'r-ese must
must be jiar,,r,' a(,gi,aL
be guarded inst if the ,rirc,-,rls
if the enterprise is to Lo be
sJs,airoolo. Also, laws
sustainable. thatrestrict
laws that corm:, '90 e.rciseexercise of of -urtimart
cust()mary ricnts
rights to to
loi-Loometc,aluses
only non-commercial uses '",i]]
will hiYo
have to to oe
be amerided
a",ended totoallowallowharvesting
naivct,au for for
commer:iil p_trp,ses.
commercial purposes.

The forest
The forest laws
laws may also need
may also need toto bebe strengthened
strengthened to to provide
provide
greater
greater protection
pcotection forforthe
theexercise
execciseofof customary
customary rights
eightswhere
where these
theseform
focm
basis Eor a rural
basis for rural forestry
forestry enterprise.
enter-pris8. In other
In other words,
words, there
th8r8 must
must bebe a
a
formofoflegal
form legal protection
protectionfor for these
these rights,
rights, soso that
that aa timber
timber concession
concession or or
resettlement scheme cannot
population resettlement
a population arbitrarily, which
cannot be imposed arbitrarily,
eliminate the
would eliminate
would the exercise
exercise of the caai!,ac!
of the customary :ights,
rights, leaving
leaving the rural
the rural
people withoutaa legal
people without legal right
right toto claim
claimcr,mv '.,jon ororsome
compensation some other
otherform
Eorm of
of
relief.
relief.

As with other
As with other forms of land
forms of land tenure
tenure and
and use,
use, customary
customary rights
r must
in law to provide the security
secured in law to provide the securi
be secured rural people
rural people need i 1-e,t
need to invest ti
their time and resources in an enterprise based on the exercise uf auch
their time and resources in an enterprise on the exercise of such
rights.
rights.

tLe overall
In the
r" 0:erall picture
picture of
of tropical forestry development,
tropical forestry development, these
these
small local fc.re',tii
small local forestry enterprises
enterprises may seen insignificant,
may seem insignificant, but
but in
in the
the rural
rural
development -oule't they
development context they may
may make
make the
the difference
difference between
between poverty
poverty andand
prosperity
prosJsrlty for
for the
the local
local people.
people.

Therefore,
Therefore, the protection,
protection, identification and regulation
identification regulation of
customaryusage
customary usagerights
rights should
should be
be addressed
addressed byle9islation
legislation in
in thoso
those crareas
where small rUeal
where small rural forestry
forestryenterprises
enterprisesbased on on
based non-timber commodiC
non-timber commodities alCe
appropriate.
appeopciate~

2.3 Timber Harvesting and

Timber Harvesting and Processing
Processing

Pural
Rural ha,e Irolitionally
e have traditionallybee,beeneaulcw,ed
oyed in
in timber
timber harvest-
harvest
ing activities,
ing activitie--:, but rl pac ly as
Iii primarily as hilCed
hired labour
ll'our rather
ii her than
than as
ias Jogging
logging
contractors or
contractors c,er processors.
or timber
1- proce-,rs. The Thegoal
goalofof forestry
foro-try for
for rural
rural develop-
develop-
ment isis to
ment to tire opportunities
ve the ,pportonities forfor cur,' -'vple to
rura' people to buy
buy and
and operate
their own
their 1..)gin... and
own logging 4,1 .JwmAll equipmentand
sawmill equipment audtoto have
have access
access toto timber
t mber
stands within
stands within whicl
which toto operare.
operate.
 -- 162
162 --

This implies two issues

This implies issues which 1sed to
WhiCh need to be
b8 addressed
addcessed by law or
by law or
cegulati\)n:
regulation:

in the
assistance in the purchase
purchase of
of equipment
equipment through
through credit
ccedit
programmes;
p ::-og r: ammeS ';

the availability of permits

Loe permits and
and licences,
licences, and
and of
of timber
timber
stands suitable for
for small
small scale harvesting
harvesting activities.
activities.

Ennicaltural and
Agricultural industrial crecit
and industrial credit laws
laws need
need to
to be
be reviewed and
reviewed and
actions ttaken to maKe crndit
o make credit available
available to
to small
small local
local logging
IOll'lln,] operators
operators
meet the qualifications
who meet logging permit
for aa logging
,,oalificatlesb for permit or
or licence, but who
licence, but who lack
necessary operating
rerating capital.
ci. rtt.

logging equipment
flaving the logging
Having equipment isis not
not enouji.
enough. The
The local
local logger
logger
muI aso
must also have
have aCcess to su_ti0,1.
suitable stands
stands ofcf timber, marKetable
incluliing marketable
timber, including
species. Opportunities
Opp,r:s. even exist
ces may efen exist f::
fOl: small log.E.E,n
loggers to to relog
relog area
areas
inft ha:e been
that have been harvested
harvested in
in a larger
1,tgec operation on if
if aa market for the
:En hot for the resi-
resi-
dual wood
dual wood exists,
exists, such
such as
as for
for charcoal,
charcoal, fuelwood
fuelwood or or local
local building
building
lU8.ter:ials.
m,terials.

Most countries
MOE: ountries have
have within their forestry
within their forestry legislation
legislation provisions
provisions
for the
for the issr-
issuance- -Eof short-term logging
logging permits
pec;1\its for
for relatively
relatively n-n11
small arras
areas
which would meet the
which would he needs
needs of the local
of the local timber operators
operatocs enand
n these
tto are
usually dssi']ned
usually C___. , for for covering local
local needs
needs for
for building
building materials
materials¡,:f
processed
at mi 11 s.
I oca I mil;
at local .

2.4
2.4 Cred it
Credit

without access to
without ircess to credits,
credits, few
few forestry
forestry enterpri:
enterprises
es will
will ever
ever be
launched by
launohed by thob.
those at
at the 1,-ver
lower end the rural
of the
end of rural income scale.
income scale. Without
credit
fitdit for the purchase of equipment,
the ;fichase fipment, supplies
E gs, the
and materials,
lies and the rural
rural
entcepreneur will r-L
eotiepreneur wil not be
be ,o:
dble to C0nv~rt
cony- the raw materials at
CaW mat, disposal
at his disposal
into
into aa product for the
product for the mareer.
market.

The
The small logger will
small logger will need
need saws,
saws, axes,
axes, draught
draught al ,:5 and machi-
animals ~achi­
tor
nefY,and
andwill
willhave
havetotofind
find a a way
way of
of transporting
transporting his loe; to the
his logs the point of
of
(>rocessing.
nro.fdbing. The small pro:Escor
The small processor will
will need
need sawmilling
sawmilling en,
eqUipment
:
oE to
to convert
the logs into
rh- into lumber,
lumber. The
........ herecs of food product
Lerers of r
pco<Jucts fr,)ill the will
nc forest will
need some
need some means of
of trans-ot,oEion,
transportation, profe processing and st
sing and storing their products.
products~
The maker of
The maker of handicrafts
hanicraEdf will will need
need to
to buy aome
some mate.
materialsE and find a way of
and find of
bringing the
bringing the raw
raw Ea
materialsadd to to the
the point
point of
of manuf
manufacture,
a,' , and finished
and the finished
product to
to market.

the scale
As the scale of
of the
the operation
operation grows,
grows, so
so will
will the need
the need for
for
tal and
capital and the need
need for
for credit.
credit.

Credit,
Credit, by its ve
its very nature, is
nature, is least
least available to to the
the Ie
e who
need it most.
need it most. l.enders requ re security
Lenders require secuci ty for
for their
thei r- loans,
loans, as
as weI
w as some
assurance that the money
that the money lent
lent will
will eventually
eventually be be repaid
repaid with least aa
with at adast
nomi"al interest.
nominal The landless
The rural people seldom
landless rural seldom have
have any
u assets on
ossets on
which
which to base a line of cEedit.
a line credit.

experiencen w:th
Past experiences with vario
various government credit programmes
sovernment credit pcogrammes for
small farmers
fa show mi:-
show mixed cesults~
esults. SOffie programmes
pcogrammes report
ceport low
low rates
rates of
of
repayment Eid
rep:o and failure
failure ol
of »rogrammes
programmes 1.to survive. report that
Others report that small
small
Earmers
farmo: can
can be more
mOce rei:ed
relied upon
upon when
when itit comes
comes to
to paying
paying back
baCK loans
loans than
than
large farmers.
large ormers.
 - 163
163 -

The small borrowe~

The small borrowermay maybebe more
more rel. tle with
reliable with regard to paying
rd to pay!ng hishis
debts
debts because
bt~c<"tuse be
he knows tbat, anless
kno'Ns that, ,jnles~ ;re
he J!)~;.s r .tere will
t11?Ce
, w II be n!)no further
further.
loans. The
loans. Thelarger
larger farmer, on the
Earmer, on the other
otlt!r hand,, mdY 'ay feel
feel that
that the
the lending
lending
institution will
institution ,,,illwant
want totokeep
keep him
him as
as aa cl
client it and
dnd may
'OBY be
be more
more patient
tient in
collecting outstanding
collecting outstanding debts,debts, asas there is in thethe prospect
prospect of of continuing
cont nuing to to
makeloans
rna',e loanst,,)to the
the larger
lae']€t: producers.
producers*

The biggest
The biggest complaint
complaint against
against rural
rural local local programmes
programmes hashas been
been
that they tend
that they tend to to be
be dominated
dominated by the hetter-off
by the iJetter-ofE people.
people. Those
Those whowho al
al-
ready have
ready have collateral
collateral are able able toto capture
capture mostmost of the available
of the available funds,
funds,
since lenders
since lenders do do not like totolend
not like money to
lendmoney to those
those without
without assets,
assets, which
could be
could beclaimed
claimedifif thethe debtor defaults.
debtor defaults.

It is
It is unreasonable
unreasonable to
to expect
expect that
thatthe commercial
the commercialbanks
bankslend
lendmoney
mon
to small
small speculative forestry enterprises
speculative forestry enterprises with assets and
with no assets and no track
t
record of
record of production
production or
or income
income generation.
generation. This is aa job
This is job for
for the
thegovern-
govern-
ment.
ment. Small
Sma] 1 farmer
far.lller loan
loan programmes needtoto be
prOfJrammes need be estabJ
established
i shed which
whi ch provide
pr:ovide
loans to
loans to the
the small
small businessman
businessman wiwith low interest
th low interest rates,
rates,reasonable
reasonable grace
grace
pericia and
pecio,js and low
low collateral
collateralrequirements.
requirements.

2.5 Timber Ut
Timber Utilization
i ~i."ationAgreements
Agreements

Manydeveloping
Many developing countries
countries still rely
still rely heavily
heavily on
On the
the use
use of
of timber
timber
utilisation contracts
utili2ation contractsand
andconcessions
concessions in thethe developmeot
developme~t of their forest
theic Eorest
resources.
r-esources.
In
In the
the early
eadystages
stagesofof
forest development,
forest development,many
many countries
countcies found
found
themselves lacking in
themselves lacking in the
the capital
capital and
and technical
technicalexpertise
expertiseneeded
needed to
to deve-
deve-
their forest
lop their forest resources. To foster
To foster such
suchdevelopment, they found
development, they it
found it
necessarytoto grant
necessary grant timber
timber concessions
concessions to to foreign
foreign investors,
investors, often
oftenononterms
terms
that
that failed
failed to
tocapture
capture the
thefull value
full of the
value resources
of the committed.
resources committed, Many
developingcountries
developing countriesstill
still rely
rely heavily
heavily onon the
the use of timber
use of utilization
timber utilization
contracts and
contracts concessionsfor-
and concessions for forest
forest development,
development, andandarearelikely
likely to
to do
do so
so
in
in the
the future.
Euture~ However,most
Howeve!:", mostcountries
countries are
are modernizing
modernizing their
theie concession
c0ncessjon
agreements,regulations
agreements. regulations and
and procedures considerably in
procedures considerably in order
order rotomake
make them
them
effective instruments
effective instrumentsofofsocial andand
social economic
economicdevelopment.
development.

un important
~n important element
element in
in most
most timber
timber utilization
utilizationprogrammes
programmes today
today
is
is aa
range
rang~ of of provisions
provisionsdesigned designed totopromotepromote domestic
domestic processing,
processing, as as
opposedtotothe theexport
exportofof logs,
logs, and and to to provide
provide support
support for for the
the growth
growth ofof
rural forestry enterprises.
rhrdt forestry enterprises. These goals
These goals are are addressed
addressed in in aa number
number of
ways:: certain countries
certain countries have have imposed
imposed total total bans
bans onon log
log exports,
exports, others
others
laso commenced
have commenced to to reduce
reduce theirlog
their log exports
exports progressively,
progressively, aimed aimed atat aa
complete
compi ete ban hanwitwithin
h j n a afew
fewyears,
years,and ands still
ti 11 others
others havehave set
set aa percentage
percentage of of
ld;s that
logs that can be be exported,
exported, withwith thethe remainder
remainder to to be
be processed locally.
processed locally.

provisions acsooplish
These provisions accomplish two two goals,
goals, they
they help
help retain
retain more
more of
of
the value added from 'rom procesaihj
processing wa-minwithin the the country,
country,and and they
theyencourage
encourage thethe
pseir or
development
e ot uomestic
domestic forestforsqt inoaatries.
industries.

A number off countries

A -taf-'?- alsd
also encoura;e
encouragedomestic
domestic processing
processing -- not not by
by
banrIhp
banni sw,exports,
log eNytt-, bat but byby taxing exportsex:trl- at al- aa high rate -- in
high rate In order
order to
to
ma.w
make dottaaf1 srodwaatni more
omestic processing mdteattractive.
afrraat,ae. This This method
method does does notnot only
only
obtain the ite 'asame t,so_L
e' result as the -n ban on exports but !_,Qtalso
also has
has thethe advantage
advantage of
rP ,nut4tot) tfle
r- a ,q revenue
raising the oter...
extent. that ,t logs are6te e%,rted.
exported.

Thohc
These provisions
r) r, ate '1;
are 'i'
obviously related
related to to the
thedevelopment
development of of
e'' r, enferp_
rmira' fforestry
rural ente -e- in
ises fiat they help
ir that n?lp tO ensure'that
to ensure 'that logs
logs will
will be
be
_a.alla
available le fort,r 1-11
localfp-.aarorest Indssfaleo,
industries, ',t-ara, for
Ghana, for example,
example, still still permits
permits
?
a 11aeral
liberal o,,-ort
export of if riellwdod loia aith
round wood logs with the w.ception
exception of of two
two species
species which
which
at?
are ft.-
the 'r "i.,1-1'1-ed
most utilized b, by the ",,l'31 industry.
the local 1:,131r, The total ban
The total ban onon the
the export
export
ot
of t'ese
these rwo two species ensures a supply to the tne Jomestic
domestic processOrS.
processors.
 - 164
- 164 --

Banning e,ovr is
hanri, exports is not
not enovvh
enough to to er,iure
e~su~e d a Supply
supply of ef 10e5
logs for t0C
harvesting
h,':lrvesting hy 1;).:::a1
1 pr,)c!;':::-;s:qt] I)y local
c-'; 0r prove, 10cal mills.
'OllIs. The 4: rtlSt,)
T'h;:">? i(til.<?t', also
be stipulations Li]
be stipulations iting harvestatd-
Eor al ocating harvestable timber mber for
for these
these pu,i:
purposes.

MOSC C.),j:ll:,-les
Most Cad :iw make specific provisions in their t:
~0w rnake specific pc,)visions in tl1eir timber
concession laws
concession laws or for small timber sales, which are des
or :regulations for small timber sales, which are des ned :ed
ta AdC'COfOloodate
to -imme,Idte 1OC,1
local ns m
r'lBeds. Evenluore
E'ler; morei:nportantlYI
inportantly, dd number of countries
nl.l'nb~r of countries
are . viding fleyibilit their timber utilization
are providing flexibility in their UmbeL utilization laws, that a
laws, so that
vari of cantra possitCie in arder to suit a given situation.
variety. oE contractss is possible in order to suit a give~ situation~
ShorLsierm permits
Short-teLm permits for arc,:s, that do not reguirf
for Es.,all facili-
small areas, that do not require processing facili-
ties, are the most a riate
ties, dce tile IOOSt appr,)pciate type I)C Or`licence
licence for
for the
the smullvr
smaller- operators.
operators ..
A5 the size of the ese,e.rjon inc.ce,.se, longer term contta,ss for larger
As the size of the operation increases, longer term contracts for larger
areas come into pi ss end, at A certain level, processing facilities may be
areas come into play and, at a certain level, processing facilities may be
required as
required as aa ere for granting
condition fo~ granting aa larger
larger concession.
concession.

lity is essential if timber utilization system is

Suc1 flexibility is essential if a timber utilization system is
Such f

to be developed that responds to the needs of timesmall

to be developed that responds to the needs of the smalllocal
local operators.
operators.
Ideally, the
Ideally, the rural-based fe,,stry enterprise
rural-based forestry enterprise will will be be one
one com-
com-
ponent ofof an
ponent an overall
overall national strategy r)r
national strategy (or forest
forestdevelopment,
development, basedbased onon
reliable
. forest resourCeS
forest inventorter, comprehensive forest
resources inventorIes, industry
Forest industry
devels,. t planning,
development planning, and long-range land-use planning
long-range land-use planning that that will help
will help
dete,m,ne how
determine land can
how land can be
be adjusted
adjusted over
over time
time to
tomeet
meet changing
changing needs.
needs.

The moreefficient
The more efficient utilization
utilizatio- v6 of lesser
lesserknown
known tree
tree 7 iris is
ies is an
an
atea of
area of interest
intecest ta tomost
Jnost tropical
Lcss-, counrc::., and
ca~ntries, and an
an atea
area whicS
whi nas
has poten-
poten-
tial for
tial for benefitting
benefitting the the grw
growth of cf local
local forest
forest industries. l.vecies which
industries. Species which
might not
might not be
be suitable
suitable for could form
for export could form 7.'2
the '-:3is
basis ofofCAW materials for
raw materials for
the domestic market,
time domestic where the
market, where the need forfor speciss
species ofof high
hi value
value and
and high
high
processingquality
processing quality isis not
not as
as great
great as in tire
as in -.p,rt trade.
the export t

number of countries are enzs,- iling . eter utilization of

A number of countcies are encouraging greater utilization of
these so-called secondary species thre,in
these so-called secondary species through a va -y of fiscal
v8t:"iety fiscal measures
measures
such as .V.,rging
such as lower fees
charging lower fees for
for these
these 4,-evies
species and
and providing
providing other
ather incen-
Incen-
tives fo, %leir use.
tives for their use.

Like
Li ke all formsofof resource
all forms resourcedisposal,
disposal, the
the granting
granting of of forest
forest
uhili-ntioriis"facts
lJtili'ldti')1l c,)nU'''actson
onpublic
public land
land is
is subject
subject to
to law.
law. In ·:Jeneral,
In general, itit is
the
t~e Forestry lejislation ofofa a-..,:ntry
forestry legislation countrywhich
which governs utilization contract4.
governs utilization contracts.
The forest act lays down chal F.:!,es of contracts may be granted and r-ts
The forest act lays down what types of contracts may be granted and sets
ovt the v: :iples governing
out the principles
. ,c,;:ing and
governing logging and forest
forest management in the
management in :e er
the granted
rorest regulatle,,s wi'ich normally supplement the acs
a' -as. The forest regulations, which normally supplement the acts, may
areas.
cei.lare detail 1, s 11, administrative,
the legal,
ce<Julate in detai I the financial
technical and financial
administrati ve, technical
requiiecients for the vari,...
requirelnents for the various types
t1 'u of forese contracts.
of forest ~ontracts.

Forest utilization
Forest utilization contracts
contracts also
also exist
existwithin
withinthe
thegeneral
general frame
frame-
work of the
work of the national legal system
national legal system and
and will thus be
wi 11 thus be subject
subject to
to numii),
nwuerous
other acts
other and regulations
acts and regulations such 1-1J laws,
such as land laws, investment and con-
laws, and
investment laws, c,i-
tract and
tract and arbitration
arbitration laws.
laws. In addi,
In the Constitution
addition, the Constitution of
of the
the country
country
may containprovisions
lTIay contain provisionsrelating
relating to
to lar,:
land use.
use. in
In many countries, customary
many countries, customary
rights
~ights of
of local
local populations
populations are
are aleo
alsoimportant
iloportant considerations,
considerations, asas has
has been
been
mentioned.
mentioned.

Effective
Effective forest
forest contract
contract legislation
legislation has se eral
s€vecal Main
main
ceqUiCementS:
requi t"€rnents:

I.
1. Legislation related
Legislation related to
ta forest mtracts must
Eorest contracts must bebe part of a
rt of
compreheslve
comprehensive forest legislis
forest legislAtion that
tl18t cedi..stic
is ce~l stic and
aligned to
illlgned r) the
the needs
needs of
of the unity,
the communi
i i ty. Flae-Jr to be
Factors be con-
con-
:ude the
sidered include
sidered the extent,
extent, legal
legal status
status and
dnd future
: uses of
uses oE
the
the loir. arC,il
forest area;availability
availabill of ofmanpower,
manpower, te.: skills
technical skills
 165 --
- 165

and capital;
and the existiflj t-pe
capital; the type or
of land
land tenure;
tenure; thethe extent
extent toto
customary rr L:JiltS t1(8u practised;
wh i ell cust0mar.y
wdlich prdctised; the
t'10 pressure
presstJce for
for
agricultural la land; 'ng structure
d; and the of the
structure of the evisting
existing forest
forest
industries. Such
Such legiilation
legislation should ala,
also !)e based onon those
the)se
laws
laws of aa social
social andln! economic
economic nature
nature el
which1, mil
may somehow
somehow
affect the
atfect the forestiv
forestry ,nct
sector.
r.
2. Legislation should allow
islatlon should allow for
for a variety
variety of
of types
types of timber
uf timber
ut 1 ization contracts
utilization c,)ntracts: to
to meet
meet varying
varying needs
needs and
and conditions;
conditions;
short-term contracts
contracts forfor small
small areas to
to support
support local
local needs,
needs,
medium-term contracts
contracts forfor larger
larger areas
areas and
and larger
larger processing
processing
facilities,
facilities, and long-term contracts
and long-term contracts where
where large
large areas
aceas and
and
.Jperations are
integrated operations are involved.
involved.

3. important to
It is important to distinguish
distinguish between
between those
those legal
legal provi
provi-
sions related
slons related to
to forest
fore5t contracts
contracts which
which should
should be^n aa part of of
the Forest
Forest Act
Act itself,
itself, andand those
those which
which should
should be be inin the
the
regulations. I
It often wise
t is often wise toto limit
limit the ActA t to
I-0 major
factors, with
factcis, with details
details tu to be
be se:
set out
out in
in re,slid
regulations, prima-
. prima
rily because regulations
rily !ecause regulations are are eesier change than law!,
easier to chau-' laws and
viin greater
provide areater flexib
flexibility to
i .o allow
allow the novernmunt
government to tj
to changing need, si ial and
neeos, both social
, and econndic.
economic.

2.6 Cooperatives and Other Lot ,1 ions

Itions

The purpose
The purpose of
of aa cooperative
cooperative is
is to bring together
to bring together the
the resources
resources
oE
of aa number
number of individuals
indivl(judls or
or communities
communities inin order
order to
to form
form aa single,
single,
Iaeger
larger and
and more
more powerful
powerful production orOr marketing unit.
unit.

in general,
Cooperatives, in general, have three functions:
have three functions:

They provide an institutional structure which enables

individual
individual small
small pro,juc8cs
producers to organize land use
organize land use and to solve
and to solve
problems asas aa group
group that
that might be
be beyond
beyond the
the ability
ability of
of
individual
individual landowners to to handle.
handle.

They de an
They provide an opportunity
opportunity to bring
bring many
many small units to-
small units to-
gether and
and turr
turn them
them into
into larger
larger and
and more
more efficient
efficient produc-
produc-
tion and/or mari.eting
tion and/or marketing units.

They provide
They provide an
an opportunity
opportuni ty for
for more
mOre effective
eEfective delivery
del i very of
of
technical, financial and
technical, financial inputs than
and production inputs than could
could be the
be the
case if
if many individuals
individuals had
had to
to be
be served.
served.

Cooperatives may be
be constituted
constituted either
either under
under statutory
statutory authority
authority
with mandatory
with mandatory membership,
membership, statutory
statutory authority
authority with
with voluntary
voluntary membership,
membership,
or under
und"r customary
customary land
land laws
laws which
which recognize tradition of
recognize aa tradition of cooperation
cooperation
among communal
among communal landowners.
1 andowners ~

Agricultural cooperatives
Agricultural cooperatives areare quite
quite common
t)MMON in most countries;
in most countries;
forestry cooperatives are
i.i-:try cooperative, are Inss
less so. But as
But "d'i0Ji
as various settlement and land
settlement and land
reform programmes resift
rn' tm aragrammes resul t in fragmented
'ragmented forest
Eoresi ownership, forestry pro-
owilerchip, forestry pro-
duct ion e:operatives
duction cooperatives will in in
in importance. And
And as appropriate
dioropriate forestry
ettnipiisas
ent begin to
ises begin to come ,cto
. nto being,
being, the cooperati~es will
the cooperatives will take
take on
on even
even
noie impartance
mot'S .nportance as
as aa protitidic:
pr,)cessing and in,strument ~
macketing insi,
and marketing

Forestry cooperatives
Forestry cooperatives may
may be
be organized
organized undid
under aa variety of of legis-
legis-
forms, including
lative forms, includi business
business and
and corporate
corporate lent- latlon, agricultural
legislation, agdcultural
legislation and specific
legislation and sped f c forestry
forestry legislation.
legislation. ruestion as
Thes question as to which
type of
type legislative framework
of legislative framework is the most
is the "Dpr'J[Jriate inin
mO$t appropria,o has to be decided
to be decided
wi thin the
within the general legal system
general legal system of
of each
each country.
country. Al though some
?i1ti!.ugh some forestry
forestry
 - 166
166 --

coop,
'C'J"J!,,,,(,)~t\l(~,; nave
11<1'11:; ics
!)B'2n ,ajz,
,,)r'JJ.q;l~;d ;JIJ,lec ascicelJaral co.Jeefative leEic
anJec 7'\'JrtC1:lr,J-di <»,)p~:;::;\tiv~; legis
!.lL ,,)0, thea ;)h)sl s.. 3n:1];,):1 dJJi)':,)::l.~::l
,»:11 .54)2)1 is drovide a separate cR, 'ical
t) ~)t-\)viGe d sepd':d~0 Jurid i cal base
an, oltural cooperative
Jstry legislation. Agr1c~Jltu(,-jl c<),)per-ative 1 1-slation
!

within the
\.vithin the C.foces.t:-::-y leqisldtiun. isldti0n can
often
,Jften be looked upon
be loci, upon as as aa model
codei in in drafting
dnaft no similar
similar forestry
fDrestry laws.
aws~

Most -E
Most modern c .se,ative
of the Inudern rative ac.oniements
arrange10ents in in forestry
f.):~st(y are
are based
based
voluntary membership.
on v01untary membership. srincs
Vat: ous cateroci-E
cate<jorie.g of
,)( cooperativas
cooperat iV8S require
require aa
varying legre e ,)e
varyin:.] deqr:I2t-.?- of firmal
(dondl an6 d()!J Jut 711 ')('Jdnization.
juridical occac cation.
The rules rules for for establishi.
establishing utiliz on cooperative
, a utilization cooperative may may be
be
fairly
f21iLly simple,
~-3implei while _ .iperat
production c00pecativB
whilt-.?- a pr0duction ir.J in
engaged ir) processing
pc()cessing or
or
marketing may
Inarketing need to
may need to be
be much moreelaborate.
much moce elaborate.
Amongthe
Among thepaints
points to
to be
be considered
considered when
wilen reviewing formal arrange-
~eviewing fo~mal arrange-
ments for forestry
ments for Eorestry cooperatives
cooperatives are
are the
tIle following:
following:
sane, status (non-profit, corporate,
name, ;;;tatu8 (non-profit, co~p0rate( semi-public),
semi-public), place
place of
of
registration;
registration;

purpose
pu and objectives
and objectives may
maybebegiven
given inin considerable detailI
c()nslde~able detai
or
oc inn more
mace general
!Jene!:ct 1 terms;
terms i

membership: voluntary
membership: voluntary ot' or obligatory;
obligatory, eligibility; registra-
eligibility; registra-
tion; limits
tion; limits in
in size,
size,conditions
conditions forfoe leaving;
leaving;

rights and
rights and obligations
obligationsofof
mJEobers;
members:

statutory bodies
statutory bodies of the cooperatives: the Jscc.catives:
general
IJeoerdl "Ay,
assembly,
executive
execut i ve committee,
commi ttee f superv:. a:y committee;
supervisory commi t tee;

adoption and
adoption and modiEication
modificationot
of statutes;
statutes
dissolution and
dissolution liquidation.
and liquidation.

eratives that
Forestry cooperatives
Forestry thatengage
engage inin actual business cperciipns
actual business operations
require
r:~quir:e a more
d,moe€! fors structure which
torm,,1 structure which isis usually
usuallydetermined
deirminedbybytheth-generalj-ira]
iness and
business and fiscal legislat ion of
fiscal legislation of thr
the countrc.
country. 1,,,:ues to
Issues to be
be ccnIsicjered
considered
are financial
arB tinancial participation
pactiCl)dtion of Inernbar·s
me, -i,, tl)Clnatiol1
!)f forme c 1 capital, access
of capita] accesE to
t to
I,-"!xternal financing, capacite
0-ernal financing, ty of owning
7,n land, appointment of
g land, managers,
of managers,
emcloyment ofpersonnel,
employ:nent ()cpersonnel,financial
financialliability
liability ofof members
members and andofficers,
officers, etc.
etc.
Manycountries
Many countrieshave
havespecialized
c,:.Jializedagencies
agenciesand andspecific
specific legislation
legislation
dealing with
dealing with the
the subject
subject of (c. sseratives. Although
cooperatives. Although most are concerned
m<)st are concerned
primarily with
primarily est agrioultical
agricultu"alprojuction
productionand andmarketing,
marketin'J, the the opportunity
opportunity to to
adapt the
adapt ,ice an,
tI,e service and lej,elatiou
legisldtiolltotocooperatives
coope(dtiv~s Cor f0r rural
cucal forestry
fo~estry
enterpriser should
enterprises 7Jcl ricn onerlooked.
not be overlooked.

2.7
2.7 Fees an1
Local enterprises
Local ente J .rises will
will be
be subject
subject to to a anumber
number of fees and
oE fe€$ and laxen
taxes
which relate directly E harvesting and
which eel ate directly to tile harvesting clnd pr..-Jec.ing
processing ofof timber
timl)er or
oc other
0ther
forest products.
forest products. cese will
Usun.7, these
Usually will be
be found
found within thethe forestry
forestry laws
laws and
and
regulation,.
regulations.

In most
most countries, nxercise of customary rights to forest
countries, the exercise of customary rights to forest
domes tic use
tirodu.: fors ,jGmestic
produce use by people usually carries no fee, for the
by rural people usually carries no Fee, Evr the
simPlc reason
simple r, ..son that enforcing such, aa regulation
that enforci,c; regulation would cost far
would cost far more than it
more than it
bri..j listo
w()uld brinr,J into tse st.i,I and
the tcedsury dnd because
becdll;5e revenue
cevenue agents
a'Jents nave
have enough
enough to
to
-JapIng crack
do keeping track of
of coEccrc concessions and
cvmmeccial concessions andactivities.
activities.
When che exeri.:.! of usije rights expands into commercial produc-
When the eXBccise of usage rights expands into commercial produc-
tion, regulations, includi
tion, regulations, includj tres of
fees of various
sr various kinds,
kinds, areace likely
likely toto be
be
applied,
applied, especially
especially when
Wiler) the
tile O[\:!sl: land
L3.n:J in
in question
question isisgovernment
:],)vernment land.
land.
 - 167
- 167 --

2.8
2.8 F0:::-est AGrnlll:I.-;r_Cdtion
Forest AdminAtration
The manner
The manner inin which
which the
the public
public forestry
for.estry administration
administration is is orga-
orga-
nized and
nized arld functions
functi()ns can
can have
have aa significant i1npdct on
significant impact on rural forestry enter-
rueal forestry enter-
prises, particularly in those countries where all forest land is
government-owned
90V8Cnin(:;nt-owned and
and where
where activities
a.ctivlties such
such as trans~).)ct off
<3.8 transport ,)( forest
r:,)c..-ost products
pt>.)ducts
and regulation of
and regulation of forest
forest industries
industries are
are vested
vested in in the
the forestry agency_
Eorestey agency.

The c10ser government decision-makinu

closer government decision-making can be delegated
ca:1 be ;j(~18i)ated to the
local
local scene,
scene, the
the better it will
better it will generally be fortor the
the local
local forestry
forestry enter-
enter-
prise. Poe
For drl 0peratoc to be forced
an operator f,)rced to
to make
make frequent
frequent long
long and
and expensive
expensive
trips to aa central
tr ps to headquarters can
central administrative headquarters can bebe aa heavy
heavy burden.
burden.

Foc
F'-.)c tilis reason,
thi.s red.son, if rural
rucal development
develoI)lnent forestry
forest("y is
is to succeed,
to succeed,
,]ovecnment services need
government services need to
to be strengthened
stcengthened atat the
the field
fieJd level,
leveJ, both
both to
provide
provide necessary
necessary regulatory
cegulatory controls
contcols and
and to
to provide
pcovide those
those technical
technical
secvices that might be
services that be desirable.
desirable.

Almost without
AJmc)st without exception,
exception, thethe countries
countries of the the developing
developing world
world
suffer from
suffer lack of
froln aa lack of strong
strong forestry
forestry field
field services.
ser.-vices. This fact
fact has
has aa
historical background.
historical background. Until
Ulltil only recently,
recently, most
most national
national forest
forest services
secvices
weee concerned
were concecned primarily withwith administering
adlninisteriny thetile government
government forest
focest reserves
ceserves
and
and dealing
dealing either
either with
with log-exporting
l,)g-exporting operations
operations or or with
with large
lacge companies
companies
that
that had
had their ownown management
;nandgeln8nt and t>~c;lnicdl expertise.
and technical .e)(~)!::rtise. The need
The need to
to regu-
regu-
late and assist rural-based
rural-based forestry
forestry enterprises
enterprises simplysimply was
was not
not called
called
for.

Most
Most countries
countries that
that are
ace pursuing
pursuing a a policy
pol icy of
of rural
rural development
development
ace in he
are in the process
peocess of
of reviewing
ceviewing their
their administrative
administratlve organizat
ocganizdtion in order
on in order
to provide
to provide stronger
stronger services
services at
at field
field level.
level.. This isis true
true for
for forestry
forestcy as
as
well.

Many countries
Many countri>8s are are decentralizing
decentcalizing their their government
government services
secvices in
,) to move
i:O
cd~ ('
orlar rrtOv"'::! authority,
-'Ut}'l')Ctty, and decision-making
dnd deci:;ion.-rn.-:1kin') authority,
dUt 1l')r:"lty, closer
el,)sec to the
rural
('lj ('.-:11
dcedS.
areas. This should be useful in the
This should the process
process of of promoting
pcomoting rural
forest industries.
focest industeies.

3. SUGGESTIONS FOR IMPROVED LEGISLATION

SUGGESTIONS

As has
As has been
been pointed
pointed out,
out, ruralrural forestry
forestry enterprises
enterprises are ace subject
subject
to a
to a variety
vaciety of legislation,
legi.slation, beyond
beyond that thdt_ of
of the
the forestry ..,~ctoc.
forestry sector. This
interdependence between
intecdependence between forestry
forestry law law andand other
other economic
economic development
development and and
natueal cesouece legislation
natural resource ler..Jislation is
is growing
l..Jrowinl..J both
:)oth ill
in sc.::upe COITIDlexity.
scope and complexity. It
It
is
is therefore important that
therefore important that any
any effort
eff,)ct b) to develop
develop appropriate
appropriate forestry
forestry
enterprises fJl~
entecpcl,se':l be accompanied
acco:npdnieo by by aa review
review of of this Inte::-r-elat Lon~hip of
this interrelationship of the
the
laws and
laws and coordination
coordination of of the
tIle development,
development, agricultural,
agricultural , forestry
forestr-y andand
land-use laws.
laws.

evoJ ution of rural forestry

Successful evolution forestry enterprises
enterpr-ises also also meansmeans
thdt
that an .-:1n increasing
in<:('l~dsln9 number
rlljlobe.c of
of people
pe')D11~ willwill be i),::! required
r":;qtJlr>~'l to
tt) know
kno . . . and
a..n:j under-
under-
stand the
stand the laws
Jaws with
with which
which they
they must must comply.
comply. For
For thisthis reason
reason it it is im-
portant to to develop
develop legislation
legISlation that is i'~ cornpcehensive, 1'1811
comprehensive, well stcuctured
structured,l
easy
Basy to to understand
under-stand and and available
available to to thethe public
plJblic in in aa consolidated
consoli,jated and and
understandable
.J n rj e cst and a b 1 e form,
foe In, dand 1 .s 0 translated
n d i.is,S .-3.also t r- a n s 1 a. ted 1into n t ,) local
1 ,) cal dialects
d l rl 1 e c t s iiff
necessacy.
necessary.

Legislation must
Legislation must also be be practical
practical and
and capable
capable of of being
being complied
complied
wjth '1nd admini
with amd ad1ninisb.:;red.
tered. A f::nf,)rcei?ble laws
f<-.;w enforceable
i\ few laws will
wi 11 accomplish
a.ce')lopl ish more
,Tl0ce than
than a
a
flood
flood of
of regulations
re<Julations andand rules that that maymay be
be ignored
ignored either
e.l ther because
because they
they
cannot be
cannot he complied
c{)rnplied with
w.ith or because they they cannot
cannot he
be enforced.
enfor-ced.
 -- 168 --

laws themselves
The laws themselves should
should in
in general
general bebe limited
limited toto major
major policy
provisions and
provisions and constraints,
constraints, and details be
and details be left
left to implementing requla-
implementing regula-
t.ions~
tions. Regulations
Regulations Can be chanced
can be changed to
to meet new
new conditions,
conditions, whereas
whereas laws
are usually much more
are more difficult
difficult to
to amend.
amend. Keeping the law
Keeping the law to
to the
the basics
provides the necessary
necessary flexibility.
flexibility.

Finally, the laws

Finally, the laws must
must be
be continually
continually under
under review
review in
in order
order to
to
ensure that
ensure that they
they are
are working
working as
as intended,
intended, and
and continuous
continuous efforts
efforts must be
must he
made to strengthen
made to strengthen their
their administration
administration through
through continuing
continuing programmes
programmes of
training, and enforcement.
training, education and enforcement.
 -- 169 --

TECHNOLOGY AND
AND PEOPLE
PEOPLE AT
AT
PAPER INDUSTRIES
PAPER INDUSTRIES CORPORATION OF THE
THF PHILIPPINES
PHILIPPINES

by

P cornell*
P.M. Picornell*

CONTENTS

Page

1.
1, INTRODUCTION ]70
170

2. PAPER INDUSTRIES
THE HISTORY OF THE PAPER INDUSTRIES CORPORATION
CORPORATION
OF PHILIPPINES
OF THE PHILJPPINES ]7]
171

3• THE BISLIG FORESTS

FORESTS 173

4.
4, PROCESSING
WOOD PROCESSING 174

5. PEOPLE
PEOPLE AT PICOP 175

6.
6, CONCLUSION 176

APPENDIX 11 Annual capacities of the

Annual the production
production
units at Picop;
at Picop; 1984 177

APPENDIX 22 The Bislig

The Bisl Forests
g Forests 178

APPENDIX 3 Flow of
of wood
wood at Picop 179

*
* Senior
Senior Vice-President, Industries Corporation
Vice-President, Paper Industries Corporation of
of the
the Philippines
Philippines
Manila, Philippines.
Manila, Philippines.
 -- 170 -
-

1.
I. D1TRODUCTION
INTRODUCTION
In
In the
the early fifties when
early fifties PICOP first
when PICOR first came into
into the
the picture, the
the
supply tropical hardwoods
supply of tropical lwoods in the Philippines was
the Philippines believed to
was believed to be
inexhaustible.
inexhaustible. Logging
Loc was being carded
was being
. carried out with little thought of
with little
conservation,
conservation, and the conversion
and the conversion frcm
from extracted
extracted logs
logs into
into wood
wood products
products
very low.
was very low~

Only high qual,ty

only high quality Jogs
logs were
were brought
brought outout of the forest and
the forest
( and of
these, the
the tops,
tops, branches and the
brancI,e and buttresses were
the buttresses were lett
left behind
behind to rot.
to rot.
After selective lonnii
After selective logging, such forests were
suoh forests were left Ul'Ol,cded, an
le! t unguarded, easy prey
an easy
for the land hung,y
hungry settlers cleared thousands
'ilecs who cleared thc upon thousands
upon thousands of
hectares of these
these for
for agriculture.
agriculture.

Almost
Almost 50 percent of
50 percent of the
the wood
wood that waS Lied
used for for the
the manufacture
of semi-finished and
of semi-finished and finished products ended
finished products er up as
up as wood
wood residues.
residues. In
fact,
fact, some of this
this created aa disposal probd,-.
problem. Only high quality plywood plywood
and lumber were
and lumber were exported, and there
expor.', and there was
was aa v.very
'y limited
limited local
local market
market for
the
the lower
lower quality which naturally
quality products whi,h naturally develop from such operations.
operations.
Most
Most sawmills semi-permanent structures
sa,-Ills were semi-peim,nent structures to to bebe dismantled
dismantled andand moved
moved
when the
when "- ,-eas
areas operated
operated in rinran short
short ofof adequate logs.logs. Plywood
Plywo,.: m; 11 s
-llls
were mOre permanent
were im .
structures, usually
permanent structu(es, usually located
located inin the
the larger
largerci.cities
:, oror
towns, and supplied with logs
logs purchased
purchased from
from various
various sources.
sources.

At
At that time, the idea
that time, idea ofof producing
produci pulp and
pulp and paper
paper from
from tropical
tropical
wood was just
wood that~ in
just that. an idea
idea in
in the
the minds
minds o. aa few visionar,
visionaries.
-. In
In fact,
people actually
many people actually believed
believed that
that it could
coul., not
not be
be done ron a co,
commercial
,
(al
scale. This,
This, however,
ho, did not
did
, not worry
worry the
the large pulp at
.7 and paper CO6, lies;
er companies;
after all,
all, they
they h(lo
had enough
enoc-h softwoods
softwoods inin temp
temperate countries
countri to supp.,
to supply the
needs of
needs of the
the world for many years
years toto come.
come.

This
This was the picture
was the picture when
when Paper
Paper Industries
Industries Corporation of of the
Philippines (PICOP) came into
Philippines (PICOP) into the
the picture. Initial
Initial research
research done
done irin tte
the
Philippines and
Philippines and artild
abroad by S99 Miguel
by San Miguel Brc,ery,
Brewery, Inc. (now (now San Miguel -1
Corporation) indicated that
Corpor6tion) indicatrc thatpc,por
paper could
could be be pr:p-
produced
- on
on aa large scale from
tro^ical
tropl cal hardwoods,
hardwoods, and and hon
San Miguel
Miguel needed
need(id paper compl emen t i.ts
..er to complem,:nt ts
operation;
oper on; paper
paper to to make
make c.)rrugatcd
corrugated cartons fct for packing
packing beerbeer and soft
m,d soft
drir.nittles
drink bottles andand for
for the
the production
production of of other
other containers.
containers. Two c()mpanies
were created for
were created for *J.:
thiso 7urpose,
purpose, Bislig
1. slig Bay Bay Lumber Co., Inc.,
Lumber Co., Inc., and
lni Bislig
Industries, Inc.
In.:. Tropical hardwood forests
'cal hard, forests were the the only
only sour(ie
SOurCe ofof wood
WOOd
in the Philippines
Philippine available in.1 sufficient volumes to sustain aa
large
large scale
scale pulp andand paper
paper industry.
industry. These
These two companies were
two companies later to
were later
merge into what
merge into what isis now
now Paper
Paper Industries
Industries Corporation
Corporation of of the
the Philippines.
Philippines.
More on this
this later.
later. The site chosen for for th,
the nroject
project was
was atat Bislig
Bislig inin the
the
province
province ofof Sur igao del
Surigao del Sur,
Sur, on
on thethe easternn coastcoast cf of the
the island
island ofof
Mindanao in
in the Philippines.

The entry of
The of PICOR
PICOP into
into the
the picture presented
presented two
two new
new factors
factors to
to
the
the Philippine forest industry.
industry.

1. represented aa very large

IItt large investment
investment in forest industry
that require aa permanent
that would require permanent supply
supply of
of wood.
wood.

2. It would call
It such more
call for aa much more efficient
efficient use
use of
of forest
forest
resources
resources asas the
the plan
plan was
was to
to use
use forest
forest residues
residues and
and the
the
from lumber
waste from lumber and
and plywood
plywood manufacturing
manufacturing operations
operations for
for
the manufacture of
the of pulp
pulp and
and paper.
paper.

If
If successful, it could
successful, it could bring about
about aa new
new era
era in
in the
the utilization
utilization
of tropical
of tropical forest
forest resources.
resources.
 -- 171 --

The first problem

The first problem to
to be
be solved
solved was
was toto make
make sure
sure of
of aa permanent
supply ofof wood for such
wnod for such aa project.
roject. about that
At about
At that time,
time, Filipino
Filipino
foresters
foresters were
were making their
their first
f rst studies
studies on
on the
the natural
natural regeneration
regeneration ofof
tropical forests in
tropical forests in the
the Philippines.
Philippines. 8i51ig
Bislig became
became aa laboratory
laboratory for
for the
the
use of
use of selective logging
logging to to perpetuate
pe tuate tropical
tropical forestry,
forestry, and
and very
very
valuable
valuable information was obtained
obtained fromrom observations
observations made
made over
over thirty-four
thirty-four
years.

However, itit became apparent that, while natural regeneration

became apparent
through
through selective logging
logging did veryve well in
well in some
some areas,
areas, itit did
did not
not do
do well
well
in others,
in others, and
and something else wouldwou to be
have to be done
done to
to ensure
ensure an
an adequate
adequate
wood supply
wood supply for the project.
the project. The solution
The solution was
was to strike an
to strike an adequate
adequate
balance between
balance between natural
natural regeneration
regeneration by selective logging
logging in areas
areas where
where
this was
this was suitable
suitable and
and to supplement
supplement the wood supply by clear-cutting
by clear-cutting
areas
areas where natural regeneration
where natural regeneration was not d,ing
was not doing well
well and
and converting
converting these
these
into industrial tree
into industrial tree plantations.
plantations. This, or ourse, was
of course, was easier said than
easier said
done. There
There were
were some
some successful
successful plintltions
plantations andand some
some very
very costly
costly
failures. There were insectinsect infestations
infe:f-ation4 and natural calamities.
calamities.
the overall
However, the overall analysis
analysis showed wel that thethe idea
idea was
was sound
sound and
and
workable.

An offshoot of
An of the
the idea
idea o,
of tree 11,,
antations
,:.rt-;t1,7swaswasthe
the idea
idea of
j,'Ling supplemental
getting sup,?lemental timber
timber from
from industr
IndJsria.. irwe plantations to
al tree to be
be
established by farmers in
zy farmers in private
privatelani-
landso surrounding the PICOP
sr r u rl u uro.. PICOP operations.
operations.
While t.i_s
While zan had
this plan had its difficulties, it did
its difficult'_e,, lid come
,me outout toto be
be very
very
successful, and itit did
did establish
establish a avery
veryl'riu,rtmr,t
ant area
area of
of cooperation
cooperation andand
par,:rershlp popolatIon onu
nership between the local population and rhe
the industrial complex.
is ls
:his .er, good
is aa very good example
example ofof the interacAion
interaction ofof people
people and
and technology.
technology.

PICOP stand
Where does PICOP stand today?
today? IItt is an industrial complex
is an complex based
based
on aa perpetual
perpetual supply of wood from natural tropical forest and
plantations,
plantations, and surrounded by
and surrounded by individually-owned
individually-owned tree
tree plantations
plantations that
that
the tree
make the tree farmers
farmers partners
partners inin the
the enterprise,
enterprise, aa very
very good
good example
example of
of
joint people and
efforts of people
joint efforts and technology.
technology. RICOH has
PICOP has had
had and still has
serious problems,
serious problems, financial
financial and
and technical.
technical. However, solutions to these
However, solutions
problems are being
problems are being worked
worked out
out to
ta make
make this
this ent
entvcir.L
ise aa prime
prime example
example of
of
the
the cooperation
cooperation of and technology in
of people and in the !:.rest
orest industry.
industry.

2. THE HISTORY OF THE PAPER INDUSTRIeS

INDUSTRIES CORPORATION OF
OF THE
PHILIPPINES
The establishment of paper
Paper Industries Corporation of the
Philippines
Philippines started
started with
with beer and the vision
beer and vision ofof one
one man,
man, An,res
Andres Soriano,
Soriano,
aa far-sighted
far-sighted industrialist
industrialist and president of San
and president San Migiel
Miguel Fr,wery
Brewery (now
(now san
San
Miguel
Miguel Corporation).
Cor ation). 8eer needed
Beer needed bottles,
bottles,whi,,1,
which werP
were alre being
manufa,tir,d
manufactu in
in ,V,
the Philippines,
phi lippi nes, bottles needed c.-,,rugD7o1 cartons,
bottles needed c3rtmic, andand
carton: needed
cartons reAL,d paper.
pipr. Don Don Adres, as as he
he was
was affecL.10..?1,,
affectionatel called
.1:le1 by by his
associates, had been looking
h=1 te-n looking intointo the
the possibilit,
possibility of mil< ng paper from
paper from
raw materials
raw mater,als hatuve
native to tz, the
the Philippines
Philippines sincesince 1934.
19.'4. Tni- work was
This was
interrupted by the second s,crc worldworld war.
war. InIn the
the late
late fcrLie,
forties it il became
evident that any
evident tlat an, large
.'irrescale
sca'e pulp
pulp and
and paper industry, to
paper industry, established
L- be e;t1blished
in the Ph-IlLrin-.3
in the Philippines with
4ith thetne object
object ofof manufacturing
manufacturioo aa low-priced
i6.e-rriord product
pioduct
such as -)ntlinrr board,
as container bard, wouldwould only
only bebe able
able toto :bain
abain sutfici,nt
sufficient raw raw
material if it 1: was
was to
to useuse tropical
tropical hardwood
hardwood found
found in in abundance
abundance in in the
country. first two
The r1r-,t two problems
problems to to be were:
be solved were:

1.
1. prove that
To prove that adequate
adequate paper
paper products
products could
could be
be made
made on
on aa
commercial scale
scale from the tropical hardwoods in the
Philippines.
 - 172
- 172 --

2.
2. To find a forested area large enough
pi' to support
support1 aa
commercial
commercial size pulp and
size pulp and paper mill
mill ucing
ng low-priced
papers.
papers.

A
A technical team
technical team was organized
organized to to study
study the
,;,e feasibility of
feasibility of
making paper
making paper out
out of
of these
these rDe
raw materials
materials and
and extensivc
extensive studies
studies were
were made
made
in ihn, this
laboratories abroad,
in well-known laboratoric being
this beingsurr:om?rtcd
supplemented by by work
work done
done
in the
tn, Philippines ir 'r iry established
Philippines inr aa laboratory
1 'n established for for rl la purpose. A
this A
search was
was also
also initiated
initiatel for
'.ria suitable
titable forested
forested area for this project.
area for project.
After an
Af,,, an extensive
extensive sear,h,
search, the Bis11g
BI6lig area
area onon the eastern coast
the eastern coast of
of the
the
island
island of Mindanao was
of mindanao was chosen.
chosen. This was
This was the
the first
first interaction
interaction between
between
and technology
people and technology in
in PICOP.
PICOP.

Thus,
Thus, 8islig Bay Lumber
Bislig Bay Lumber Company, Inc. was
Company, Inc. was established
established in
in 1950
1950 to
engage in
engage in the
the development
development of
of the
the forest
forest in
in this
this area
area where
where aa forest
forest
applied for.
concession was applied for. A camp was
waS built
built and the
and the first
first road
road leading
to the logging
to the logging areas
areas was
was constructed;
constructed; logging
logging operations -tarted
operations started shortly
shortly
after. A portable
portable sawmill
sawmill waswas installed at
installed at the same
the same Lime,
time, and
and aa more
one was
permanent one was built
built in
in 1953.
1953.

In
In the
the meantime,
meantime, as the ,Iperimental
as th, experimental work on the the use use ofof the
the wood
wood
at Bislig
at Bislig showed
showed promise,
promise, th,
the decision to eiital.;1ish
d-,1- on tc, establish aa pclt
pulp and paper ¡'aper mill
mill
was made.
wa. In line with Don Andres'
line witt icy to get the
:o get ;:ne ceFf available
best avlieble
know-how,
1-n'w-hrw, International
International Paper
Parer Company, the lar,est
Copa'', the largestpul'.
pulp and
.1,),1 paper company
pater c,mrany
in the
ir tte world, invitei to rartiirate
world, was invited icipate in thisthis venture,
venture, and and Bislig
Bi81;g
Industries,
1'1,011-r:ties, Inc. was organized inn 1952
was organized to implement
1952 to the pulp
implement the pulp and
and paper
paper
project.
pio],ot. Bis1ig
Bislig Industries, Inc. changed its
Inc. changed its name
name to
to Paper
Paper Industries
Industries
Corporation of the
C,rporation the Philippines
Philippines inin 1963.
1963.

B181ig Industries
Bislig Industries applied
applied for
for aa timber
timber concession
concession just
just north
north of
of
the Bislig
the B15lig Bay Bay Lumber
Lumber Company
Company (orwe,,,ion,
concession, the
the first
first timber
timber and
and pulpwood
pulpwood
concession granted
concession granted in in the
the Philippines.
Philippines. In view
In view of
of the
the encouraging
encouraging
resul ts obtained
results obtained in laboratory and
in laboratory lot plant
and pilot plant work,
work, arrangements
arrangements were
were
made to
made to send
send 11 000 tt of of the
the wood
wood available
available atat Bislig EA, to
Bislig Bay the United
to th,
where it
States where it was processed into
was processed into newsprint
newsprint andand contai
container L,arJ
board in
to two
mills of
mills of the International
International PaperPaper Company
Company ln
in 1'57.
1957. TheThe paper so jr' uced
was sent
was sent to to endend users
users inin the
the Unir_ei
united Siave,
States and the the Phi Tpr re' who used
Philippines
it
it under
ur',"or actual
cc ' ," commerci al cond it ions to eo ft,ue
prove once
once a:1':
and for all that
tha t
Philippine leal hardwoods could te
hardwoods cJi.lo be i,e1
used 'sir
for this purr
purpose.

Unfortunately, there
inforrkriately, there were
were delays
delay inih implementing the project
implementing the project due
prevailing economic
to prevailinu economic conditions,
conditions, and it was
ini it was only
only in
in 1962
1962 that
that the
the
go-ahead was given
signal was
go-ahead irignal gi ven for
for the
the estatlishment
estab1 ishment of
of the
the pulp
pulp and
and paperr
mill. In the meantime,
In the meantime, in line with the
in line the idea
idea of
of establishing
establishing aa fully
ly
integrated
integrated forest industry, Bislig
forest industry, Bislig Bay Lumber
Lumber Company,
Company, Inc.,
Inc., in
in the
the late
late
fifties
fifties built
built aa veneer plant andand dry
dry kilns
kilns and
and aa lumber
lumber finishing
finishing mill.
mill.
This was
This followed by
was followed by aa plywood
plywood mill
mill which
which w,
was established in
in 1966.
1966.

It
It took
took another sixsix years
years tto work out the financing
out the financing for
for the
the
to negotiate
project, to negotiate its
its special
special requ'.7,
requirementss with the Government
with the Government and to
to
design the
the mill.
mill. Construction
Construction work on the
work on the mill
mill proper
proper started
started in 1969
in 1969
and the mill
and mill was started up
up inin late 1971.
1971.

In 1969,
1,6', PICOP
liCc'r'acquired
acquiredBisli
BisligBay
Bay Lumber
Lumber Co.,
Co., Inc.
Inc. as its
as its
wholly-owned subsidiary.
wh:;1:yoer:,1 1970 it became a
In 1970
In a public
public corporation,
corporation,
offering its shares to
offeri the general
t, the general public
public and
and in 1972 and Bislig
1972 PICOP and Bislig
Bay
bay L;or Company were merged with the former as the surviving
Lumber
corporation~
corporation.

A second
second plywood mill was started
plywood mill started up
up in and in
in 1976 and in 1977 PICOP
PICOP
acguired Rustan
acquired Rustan Pulp and
and Paper
Paper Mills,
Mills, Inc.,
Inc., with
with aa mill
mill atat Iligan,
Iligan, Lana°
Lanao
del Sur,
del Sur, on
On the
the northern coast of
of the
the island
island of
of Mindanao.
Mindanao.
 -- 173 --

The first
The first decade
decade of operations has
of operations has not been an an easy one.
easy one.
Ouality problems
Quality problems hadhad to
to be
be worked
worked out,
out, and
and the
the energy
energy crises
crises ofof the
the
seventies affected costs
seventies affected costs severely.
severely. Measures had
Measures had to be
be taken
taken toto make
make the
the
mill
mill less dependent on
less dependent on imported
imported oil
oil by
by constructing
constructing a new
new high-pressure
high-pressure
wood burning boiler.
wood boiler. The recession
The recession andand the financial
financial crises in in the
the
Philip?ines
Philippines inin the
the eighties
eighties also
also affected
affected the
the company
company with
with high
highir.
interest;t
costs and decreased
costs and decreased markets,
markets, forcing
forcing the
the closure
closure of
of the
the container
container nboard
rd
line
line at Iligan mill.
at the Iligan

However, these
However, these rroblems
problems are
are being
being worked
worked out.
out. The mill
The mill now
and coni,iner
produces newsprint and container board
board which
which meet
meet international
international standards
standards
and
and its plywood and lumber
lur:,ei products are known for their quality
throughout world.
throughout the world. Thus. PICOP faces the
PICOP faces the future
future with
with confidence,
confidence, aa
confidence
confidence built
built on its po,ple
on its people and its
its technology.
technology.

Appendix 1 indicates
1 the capacities of
the capacities of PICOP's manufacturing
PICOP's manufacturing
units at
units at the
the end
end of
of 1984.
1984.

3.
3. THE FORESTS
THE BISLIG FORESTS
PICOP most of
PICO? obtains most of its rawraw materials from the
materials from the fcforests around
Bislig Bay on the eastern
Bislig May eastern coast
coast of
of the
the island
island of
of Mindanao.
Mindanao. These
1 _se consist
of
of 182 ha of
592 ha
182 692 of national
national fo -ts operated
forests operated by the company
by the company held
held as
as
concessions from
concessions from the
the Philippine
Philippine Government include some
Nernment which include some 46
45 000
000 ha
ha
converted
converted into tree plantations. This This isis supplemented by
by wood
wood from
from about
about
20 000 ha of of privately
privately owned
owned land
land converted
converted into
into industrial
industrial treetree
plantations around the concession.
concession. Appendix 22 shows thethe location of
these their major subdivisions.
these forests and their subdivisions.

The forests operated

The forests operated byby the
the company
company are
are managed on aa sustained,
managed on sustained,
expanding
expanding yield basis, combining
yield basis, combining for
for the first time in the
first time Philippines
the Philippines
two
two di
different si 1 vi cuI tural systems,
fferent silvicultural systems. selective
select i ve logging and plantation
logging and plantation
forestry.

Selective
Sel4 logging is
*,D 10S.ir'c i5 aimed at perpetuating
perpetuating the theoriginal
orinal rain
rain
forest in the
forest in the areas best suited
as be,.,
, r.ited for
for this,
this, and
and consists of oronly harvesting
narvesting
mature tree6
mature 160 em
trees (60 cm brea6L
breast height
height and
and above)
above) leaving the healthy
leaving tLe young
Aly young
trees to matute
mature and
and act
act as
as seed
seed trees
trees for
forthe
thenext
nextcycle,
cycle,usui,,,,y
usually in
in from
25
25 to 35 years. Foreu;t
to 25 Forest protection
protection beccmes
becomes ofof prime
prime importance
importance under
under this
system
system asas maturing
maturi ng forests
forests have
have to be be protected
protected during
during the
the long
long years
years
while
while regenerating.

As
As not all
all areas
areas are adequate for
are adequate for natural
natural regeneration, those
regeneration, those
which
which are
are not
not are
are converted
converted into
into industrial
industrial tree
tree plantations.
plantations. The
original
original forest
forest cover is clear-cut
cover is and the
clear-cut and the land
land planted with
with fast
fast growing
growing
species which grow
species grow to
to pulpwood
pulpwood size
size ininsisix to einUt
x ,:,_ yero, and
eight years, and to
to sawn
sawn
timber
timber size
size inin twelve
twelve toto fifteen
fifteen years.
years. Plantation forestry
Plantat;on forutry is is aa prime
example
example ofof the
the combination
combination of of people
peop] e and
and technology. People are needed
People needed
in clear-cutting
cle.!,-cutting while
while technology is is used inin matching species
species to to soil
soil
conditions
conlit.'07; and planning the plantation. People are essential
^p0ple in
maintaiPHJ
maintaining the young ?lantations
plantations until these can take
take care of
themsel ve", as pr.:,r
theT.1,'37,,, proper maintenance
maintenance isis esse:._ial
essential to the successful
to the successful growth
growth
of the trees.
tt-, Technology
:. '`nology isis also
also very
veryimp,,,ytant
important in in protecting
protecting the the
plan'Aons against
?lantations ,.ainst pests and diseases while ?eople people are used in
monitoring growth till till time
time ofof har%est.
harvest.

and people
Technology and 0150 come
people also come ininwhen planning
when the harve'''ng
planning the harvesting
of the
the timbec
timber in selective
selective logging.
l..y,:dng. The selection and
The selection and deployment
de?loyment of
machinery and
machinery and equipment
equipment to do this, the pl',nnu
planning of actual ,ettin
of the actnal setti
the logistic
the logistic support
sup?ort required
required to sustain
susta1 such
su u operations ,AS are
a, pr me
examples of modern technology.
examples of technology.
 -- l74
174 --

Road building and

Road building and maintenance
maintenance areare: essential
essential activities
activities inin the
Bislig forests.
Bislig forests. As of 1984,
As of 1964, PICOP had aa road network
PICOP h,d etwork ofof 22 100 km of
100 km
roads
roads designed
designed toto carry
carry 50
50 tt loads
loads t..."
underr all
al] wc Fher conditions
weather conditns to to t,Hf.g
bring
the from the
the wood from the forests
forests to
to the
ther71.h..
mills. --lingofofthe
The planning
The -H road system
is done
is computerized me-:
done by modern computerized methods while tthe building
ouildin of roads to
ci the ro:Bb- .

exacting specifications requires

exacting specifications requires highly skilled manpower
manpowel operating the
cperating the
most
most modern road building
build machinery.

In addition
In addition to to logs
logs supplied
supplied from from forests
forests operated
operated byby the
the
company, PICOP
company, PICOP obtains
obtains anan important
important portion
portion of of its
its wood
wood supply
supply through
through
its cooperative agro-forestry
its cooperativo agro-forestry prograr
programmeHe with landowners in the
with landowners the vicinity
of Its
o, its forests.
foreE-. Under
under this
this programme,
progr-, , the the company
company helps
helps small
small farmers
farmers
and
ard private landowners to improve their living
private _,ndowners by supplementing
living by supplementing their
crops with
,r_,F.F the growing
with inc growing ofof trees
tree- in Lae
in the rarginal
marginal parts
parts of their
their farms.
farms.
The company
The company provides
provides free technical acvice, advice, sells
sells seedlings
seedlings at cost,
at cost,
payable
payable at at harvest time
time and
and guarantees
- tees aa market
market for
for the
the wood
wood produced
produced in
sizes.
proper sizes. There are farmers operating aa total
are 55 300 farmers total of 20
20 000
000 ha
under
under this programme.

All these activities are

these activities supported by aa very
are supported very strong
strong Forestry
Forestry
Division engaged
Division engage' in surveying, cruising
in surveying, cruis-g andand planning
planning the
the harvesting
harvesting
operations. ItIt also
E.', comple'k Forest
includes aa complete Forest Research Department
Department
engaged in all
engaged in all pho
phases of silvicultural
silvicultural w:
work.

As look at
As we look at the
t Bislig forests
sislig fc: today, we
ts today, we have
have to remember that
what we
what we now
now see
see isIs the
the product
p years of
of ye
'
development work
of de,., work in
in all
all phases
forestry.
of forestry. We have
We our sh
have had our ,re o>f
share of costly
cosrly failures
failures asas well
well as
resounding successes.
resounding successes. _ is
It is only
only through
through the the proper
proper combination
combination ofof
people and
people and technology that we
technology that we have
have arrived
arrived at
at where
where we are
are today.
today.
Important
Important problems
problems still
still remain to be solved,
remain to solved, but
but we
we are
are confident
confident that
that
these
these will
will be
be worked in due course.
worked out in course.

4.
4. WOOD PROCESSING

The idea
idea of
of wood
wood processing
prog,, 1g at PICOR
.
PICOP isis toto obtain thethe..maximum
maximum
utilization
utilizat ion of the Bislig
of the Bislig fore,:tc
forests In in the economical w.y.
the most economical way. As the
As the
wood
wood arrives at the the mill
mill sito,
site, itiL is
is taken toto aa central area ,-,ere
Rntral arRa where it is
it is
sorted and
sorted and sent
sent to
to the
the approctiate
appropriate pro:essing
processing unit. ; Experienced
Expel. H graders
inspect
inspect the
the logs
logs and
and decide
decilE where these are to be
.here thEge ,E. used. There
ThIE are,
at,?, of
of
course, certain
course, certain logslogs which,
which t tecause
because of of their
their characteristics,
characteristics aret are sent
sent
directly toto the
the unit
unit which
which is
is to
to process
process them.
them. This
This isis particularly truetrue
of pulpwood
pulpwood logs coming from from tree
tree plantations
plantations which
which are are used
used as
as pulpwood.
pulpwood.

Very high quality

Very high quality logs
logs are
are still
still exportri
exported asas such
stic., because the
because the
net obtained for
net value obta-ned for these
these in
in the
the export
export uiarke
market iso better
better than the netnet
value of proceEscl
value processed materials that
that may bebe obtained
obtained fron
from these.
these. While the
Aile the
Government discourages log
Philippine Govcrnment log exports,
exports, itit recognizes
recognizes thisthis reality
reality
and
and allows limited export
allows aa limited export of logslogs by
by companies
companies who
who have
have extensive
processing operations.
operations.

Veneer
Veneer blocks
blocks developing from 'le
developing from the wood
wood being
bei brought in
brought in are
are fent
to the
1 two
two plywood
plywood mills
mills -
- with
with aa cc,lb_ned
combined capac ty of
capacity of 150 000 mm of
150 000
plywood
plyr 'd per year -- where
per year they are
where they are monnfactured
manufactured into
into plywood
plywood which
which is
is
exported allover
exc the world.
all over the world. PICOP PLY, PICOP's
PICOP PLf, PICOP' s trade
trade name,
name, is is well
known
known for
for quality and reliability.
cuality and

Logs cannot be
Logs which cannot be processed,
processed into into plywood
plywood are
are sent to the
sent to the
sawmill which has
sawmill has aa capacity
capacity of 50 000
of 50 m3 /a.
000 m'/a. the lumber
Some of the lumber is
is air
air
dried and sold
dried and sold rough
rough while
while some
some of
of ib
it> is
is dried
dried in
in dry
dry kilns,
kilns, after
after which
which
in sold
it is sold rough or or finished.,
finished"3 Kiln-dried lumber is
Kiln-dried lumber is also converted into
also converted into
blockboard
blockboard (capacity
icapacity 10 10 000
000 m la) which
m'/a) which in in turn
tUrn is
is sold
sold as
as such
such or
or used
used
as cores in
as in the
the plywood
plywOOd mills.
mills.
 - 175
- 175 --

Waste from from the

the plywood
plywood mills
mills and
and sawmill
sawmill isis either
either used
used asas
pulpwood or as
pulpwood as fuelwood
fuelwood to to generate steam andand electricity
electricity required
required to to run
run
the processing facilities. PICOP has two large and three small
wood-fired boilers
wood-fired boilers (2x114
(2x114 t/h
t / h boilers
boilers and
and 3 small
small boilers
boilers with
with aa capacity
capacity
totalling 30
totalling t / h) and
30 t/h) and anan electric
electric power
power plant
plant with
with aa total
total capacity of of
61 MW. Very recently,
61 MW. recently, it it has also been connected
con nected to the
the Mindanao grid of
Mindanao grid of
the National
the National Power
Power Corporation
Corporation which
which obtains
obtains its
its energy
energy from
fr o m hydro-
hydr o -
electric sources.
sources.

Pulpwood is is sent to the the pulp

pulp and
a nd paper
paper mill
mill where
where it is
converted int o either
converted into either chemical
chemical oror mechanical
mechani ca l pulp.
pulp. The chemical
chemical pulp
pulp isis
used inin the
the manufacture
manufacture of of container
container board
board (capacity
(capacity 6868 000
000 t/a
t /a at
at
Bislig) while
Bislig) while chemical
c hemical pulp
pulp isis also
also mixed
mixed with mechanical
mechanical pulp
pulp inin the
manufacture newsprint (86 000 t/a
manufacture of newsprint t/a at
at Bisliq).
Bislig). The container board
The container board
mill at Tligan
mill at Iligan is is presently
presently shut
shut down
down due
due to
to anan insufficient
insufficient market
market and
and
plans are made to
plans to transfer
transfer its
its machinery
machinery toto Bislig
Bislig and
and thus
thus have
have all
all the
the
manufacturing facilities
facilities atat one
one site.
site.

All o f these
All of these processing facilities
facili ties use
use the
the latest
latest technology and
and
are operated by
by highly
highly trained
trained Filipino
Filipino technicians
technicians and
and workers.
workers.

PICOP is is now in the

now in the process
process ofof increasing
increa sing its
its container
container board
board
capacity at Bislig to 78 000 t/a t / a and it
itss newsprint capacity to
118 000 t/a
118 000 t / a by
by improving
improving its
its present
present facilities.
facilities. A major expansion
expansion is
is
f or the
planned for the early
early nineties.
nineties.

Appendix 33 shows the distribution

shows the distribution of
of wood
wood from
fr o m its
its various
var i ous
sources to the
sources to the different processing
processing centres.
ce ntres.

Because
Because of its isolated
of its isolated location,
lo cation , PICOP
PICOP operates
operates extensive
extensive
maintenance
maintenan ce and
and machine
machine shops
shops to
to make
make sure
sure that its machinery
that its machinery and
and
equipment are maintained
equipment are in top
maintained in top operating
operat ing condition.
condition. It also operates
It operat es
its own
its own port
p ort facilities
facilities capable
capable of
of handling
handling ocean-going
ocean-going ships
ships which
whi c h take
take
the
the company 's products
company's products directly to
to overseas
overseas and
and domestic
domestic markets.
markets.

5. PE OPLE AT PICOP
PEOPLE
At the end
At the end ofof 1984,
1984, PICOP
PICOP had
had 88 500 directly employed.
500 persons directly employed.
Another I1 500 employed by
500 were employed by contractors
cont ract ors working
working onon tree
tree plantations,
plantations,
1 000
1 wo rking for
000 working for other
other contractors
contractors in in other
other wood
wood operations,
operations, and and some
some
300 working for
300 working for hauling
hauling contractors.
contractors. At an
At an average
average ofof four
four dependents
dependents
per worker,
per worker, itit can
can bebe conservatively
conservatively estimated
estimated that
that there
there are at at least
least
67
67 000
000 people directly dependent on on the
the PICOP
PICOP operations.
operations. Thi s does not
This not
in c lude people involved
include in vo lved in the shipping and and distribution
distribution of o f finished
products
products nornor people engaged
engaged inin the
the further
further processing
pr ocess ing of
o f these.
these.

As an
As an organization
organization deeply
deeply involved
involved in in technology,
technology, PICOP
PI COP isis
committed the improvement of the
committed to the t he skills
skills of its
its employees
employees to to be able to to
achieve the proper
achieve the proper balance technology. While aware
balance between people and technology. aware ofof
the
the important
important function
function ofof creating
c r eat ing employment
employment in a a developing
developing country,
country,
the company
the company does
does not
not believe
believe in in emp loying large
employing quantities oof
large quantities f very
very low
l ow
grade
grade labour,
labour, but
but rather in upgrading its
in upgrading its labour
labour force
force and
and paying
paying it it
better wages.
better wages. Fortunately
Fortunately, the
Ithe company's
company's operations
operations are located in
are located in an
an
area
area where there is
where there is no
no surplus
surplus of of labour
labour and
and it
it does
does not
not create
create aa social
social
problem
problem by
by being
being choosy in picking out the
choosy in the people itit employs.
employ s.
 -- 176 -
-

Prospective empl
Prospective employees are carefully
carefully selected
selected using
using aa series
series of
tests, and there are
and there are self-improvement
sel progre=,s at al
improvement programmes allI levels of tire
levels of the
operation. These include on-the-job and ,.::Is-soom
include on-the-job class-room programmes. All1 ;

personnel are
personnel are periodically evaluated.
evaluated. are effected
Promotions are _fected from
,

within
within whenever possible.
Being in an
Being in an isolated
isolated location,
location, PICOP has
has to
to provide quite aa
number
number of
of services which would
services which would not
not usually
usually be provided
provided in
in more
more populated
areas.
PICOP
PICOP maintains
maintains aa very
very well-equipped
well-equipped hospital
hospital which can handle
which can handle
most medical,
most medical, surgical
surgical and
and dental
dental cases
cases encountered
encountered atat Bislig.
Bi.slig. Medical
Medical
and dental
and servi ces are
dental services are rendered free 70
rendered free to employees.
emp] oyees. Employees' fam
Employees i.l i es
families
get
get free
free consultation
consultation services
services and
and pa'.' nominal charges
pay nominal charges for
for hospitaliza-
hospitaliza-
tion
tion and
and medicines. While the
While the Co.:.,::;v's
Company's medical
medical facilities
facilities- are not
are not
usually available
usually available toto outsiders,
outsiders, these
th,s.- are
are always there for
always there emergency
for emergency
cases ~
cases.

While the
the Company
Company cdoes not.)toperate
operate any
any schools
schools directly,
directly, i t
it
heavily subsii'srs
heavily subsidizes two
two scr,
schools which provide
provide gua1i1-(
quality education
education through
through
le ,.1s. It is important
school levels.
high school ,,portant toto keep f=11)es with
keep families with growing
growing
children togelner and
children together and thus
thm provide
:;sovide aa healthy family life
life for
for the
personnel of the
personnel of the Company.
Company.

The Company only provides

provides housing for executives and key key
operating personnel.
operating personnel. IItt has subsidized two
has subsidized two projects
projects where
where supervisory
supervisory
personnel have been
personnel have been able
able toto own
OWn their
their own
own houses,
houses, and
and it
it helps
helps its
its
labourers
.1 in building
rs in building their own houses
their own houses by aa programme
programme of selling
se]) log them
them
Ir.-
lumber and at subsidized
and plywood at subsidized prices.
prices.

Within the
within the limits
limits of
of its capability, the
its capability, the Company
Company assists
assists the
the
community
community inIn developing
developing programmes for the
programmes for the benefit of all.
all. These
These include
ci vi c and agd
civic cuI tural cooperati
agricultural ve programmes.
cooperative proo,,m.mcs, the most important of of
the agro-forestry
which, the agro-forestryprogramare,
programme. has
hasa9rc,i,:y
already been mentioned.
mentioned.

When PICO?
PICOP (then
(then called
called Bislig
Bislig Bay
Bay Lumber
Lumber Company,
Company, Inc.)
Inc.) moved
moved
into Bislig in 1950, the Loen
into Bislig town was small fishing
was aa small fishing village
village with
with aa
population
populat ion of 1. ;1 one
of less than one thousand
thousand persons.
persons. Today, Bisl ig is aa
Today, Bislig
thriving community o,
thriving community of some 75000
me 75 persons with
000 persons with its
its own
own banks,
banks. hotels,
hotels,
market and shopping
market and shopping centres.
r; -tres. This is the best
is the best example of what
example of what can
can be
combining people
done by combining people and
and technology
technology in
in aa developing
developing country.
country.

6.
6. CONCL[JSION
CONCLUSION

In looking
In looking at at PICOP
PICOP today,
today. it
it must
must bebe stress-1
stressed that
that itit has
evolved into what
evolvod into what it
it is
is now over aa period
now over period ofof thirty
thirty y-'-n.
years. And
And even
today,
today, the
the Company
Company isis still
still in financial
financial difficulty due Lo to she
the recession
recession
of the
'' early eighties
early e'lties andand the economic problems the the Philippines
Philippines areare going
going
through. How,I.,r,
. However, thethe PICOP
PICCP story
-1toryshows
shows what
what can
can be
be done
done with
with the
the proper
proper
application
2',A..,,c;,tionofofpeople
r,_eopleandandtechnology.
te,inology.
 - 177 -
- -

APPENDIX 11

O~ THE
ANNUAL CAPACITIES OF THE PRODUCTION
PRODUCTION UNITS
UNITS AT
AT PICOP
PICOP
1984

Newsprint line, Bislig

line, Rislig 86
86 000
000 metric tons
Container board, Bi sli 9
board, Bislig 68
69 000 mettic
metric tons
tons
Contai ner board,
Container Iligan
board, Iligan 30
30 000
000 metric tons
Abaca pulp,
Abaca II igan
pulp, Iligan 33 000
000 metric tons
tons

Plywood plant No.

No. 11,, Bislig 50
SO 000
000 cubic metres
Plywood plant No.
Plywood plant 2, Bislig
No. 2, 100
100 000
000 cubic metres
Lumber, Bislig
Lumber, Bislig 50
50 000
000 cubic metres
Blockboard,
Blackboard, Bislig 10
10 000
000 cubic metres
 - 178
178 --

APPENDIX
APPENDIX 2

THE BISLIG FORESTS

THE FORESTS

BAY

LOCATION Pal P

0
MII'I
M I r.1OANAO
Ott 7.1 A 0
Scal
Scale 10 000
e I1- 10 000 000
000

PROVI NCE

CATeeL BAY

LOCATION
LOCATION MAP
MAP
OF
PAPER INDUSTR[ES CORPORATION
PAPER INDUSTRIES CORPORATION
OF
OE THE PHiLiPPINES
THE PHILIPPINES
Tim be r Licence
Under Timber Licence Agreement
Agreement
No.
No. 4.3 47
43 and 47

~O====~'~;o~'~O====~
c!
5 10
" ~;o~20km
15 20
, km

Forest Concessions
COncessions
T.L.A. No . 4~ j.:-., .... ,<.j
T.L.A. No.43
T.L.A.
T.L. No . 4?
A. No. 47 U!I!!Ifllllllili
• Compos lelo
Riye a Creeks
rs a
Rivers Creeks <

Concession
Co ncesso3n
BOund a ry
Boundory
 -

1
395000 m' H90002 mj 1
~ 3660nn
,000 m~~
m3

1. 1599000 73'
9960M m3 WAD 693000 m,
LflYlAND YVPP.

~~debarking
d!?barking gradino
gradinq and scali.!']
i)nd scalinG 3 hydraulic debarker
debd,ke.
~~¢ ,imt,n
scalinG buck ina
1589 DO m3
1589000 m bgcking
.. -

m3
492000 m3 Cir 769000 m3 326000 m3
sautimber
sawtimber 315
31% 485
48% 21%
pulpwood
t'
0
.,'"
434000 m 0
330060 m3 ."
~)
.383,,0 m3 V 000 m3 e:21BloO;;;J
!L.:3 15
0 ~

l0m3 sales ~
veneer
venef'r blocks aN 1.log" 125tP30
. - 125000 trims residues
'forest rp.sidul!s ~
barKS
'--
S;H.fT1 Ll
".
J saw LBM
N
"'
'"
0
620000 m3 0
,-----<53000 m3
5300b m ~ m'
veneer '"
:t ~~enee, precsion and .4A"'; "*" .~
chiparvestor hogging fecilities
hoqqinq facIlities
@3§dJ' / 7 .. >
local
Loca, saLes bands.
1DOnor, ,;3 /""
I~...J. ,.
~~ hot
hot ores ~'~
2ionoo
210000 .3
m.3 ',f.." '"
expert
export ",., '"'"
~-:;..~~}S;'~...
~
d J1?z:~J,:;:·,.i '::'..(?'";,."r' db ""
IX
rt'iJin chioper power
power plant w
,,,,,,, .3 fin i, 3
pi.,
log pLant
ply.mod ~ .6000 600C -- [umber
lumber sates
sates
~ ~OOO m3
-,l
. bl6~kboard
kboard
 - 181 --

THE KFSEDAR
KESE'DAR PROJECT IN
IN KELANTAN, MALAYSIA:
MALAYSIA:
A STUDY 01" THE !O,710-ECCNOMIC
STUDY OF- SOCIO-ECONOMIC DYNAMICS
DYNAMICS
IN A NEW LAND DEVELOPMENT SCHEME
IN
by

Alexa webster

CONTENTS

Page

1.
1. INTRODUCTION 182

2.
2, CONDITIONS AT THE DESIGN OF THE KESEDAR PROJECT
CONDITIONS PROJECT 182

2.1 General
Gen, -DI 182
2.2
2.2 Ecological
Ecolooical Milieu 183
183
2.3
2.3 The Socia-Economic
The Socio-Economic Milieu
Mil ieu 184
184
2.4 Economic Dualism 188
168

33.• THE KESEDAR

THE KES5DAR PROJECT 190

3.1
3.1 Proi-
Projectr Design and
and Implementation
Implementation 190
190
3.2
3.2 Evaluation the Project
Eve" . --on of the Project 191
191
3.3 Analysis
Anal.- is of
of the
the Kesedar Project
Kesedar Project 192
3.4 Accomplishments of
Major :-:complishments of the
the Kesedar
Kesedar Project
to Date
to 198
3.5 Implications for
Implications for Future Projects in Kelantan 199

REEERENCES
REFERENCES 200
 -- 182 --

1. INTRODUCTION
Since
Since 1956ilff) the :'llaysian
Malaysian:',,vernma'lt
Government has been1 involved
invol-c:- in land
in land
development
develi Ant schemes
sche,e, as aA componert
component of aa c_tional
national an to
ri develop the
to dv,elop
resource
resou,, base of of the
[he country
c while simultaneously stimulating
w: Anulatimj regional
development.
devel ,--nt. Such sschemes - c and their adjunct development
devel ,pment ofof institutions
and infrastructure to
and infrastructure to service them became even more integral integral toto national
national
development activities with
devel,ment activities with the introduction of the
ccion of the New
New Economic
8conomic Policy
Policy
(NEP) inin the Second Malaysia Plan
the Second Plan (SMP, 1971-1975).
1971-1975). In
In addition to to
resource and
spurring resource and regional
regional development, land land development
development schemes were
anticipated
anticipated toto contribute
contributeto to the eradication
t::a, :!ication of
of poverty
poverty and
and restructuring
of society in
of society in its
its social
social andand eco
economic
:c :c functions
functions asas stipulated
stipulated inin the NEP
NEP
strategy. Implicit in
C-Hclicit rategy was
in such aa strategy was income
income distribution
distribution and and
alleviation of regional
.::ional disparities.

In
In response
response to
to such
such strategies, the Kesedar pr
strategies, the project (Pembangunan
Pembangunan
Kawasan Kelantan Selatan)
Kawasan KelLAtan Selatan) was designed with
was designed with implemerL.:
implementation
.A starting in
starting in
1978.
1978. The
The project denoted a a commitment
commitment and
and determination
determination on
on the
the part
part of
of
the
the Government to
to directf:,
directly address
address many
many of
of the
the problems
problems of the rural
of the rural poor
in
in Kelantan. In
In essence, the mandate of the
essence, the the Kesedar
Kesedar project
project was:
was:

(i) to fully develop

to fully develop tha
the southern
southern region
region of
of the
the state
state into
into an
economically viable p-oductive
economically viable productive area area and
and to ensure aa more
to ensure
equi table
equitable distribution
distribut',-. of
of the benefits of economic
economic
development to the Kelantanese
to the ):.7:lar.:.anese people in accordance with
in accordance wi th
the
the goals of the
the NEP;
NEP;

( i i) to provide employment opportunities especially to the

Bumiputras (l i terally "sons
(literally the soil"
"sons of the soil" and used by
and used the
by the
Government to identify the
to identify the Malay
Malay ethnic
ethnic group of
of the
Malaysian population);

(iii) to encourage
encou! Bumiputra participation in the development
Bumiputra participation
process b:
by creating
ceating an
an environment
environment conducive to to their
their entry
entry
the cormercial
into the commercial sector of thethe economy
economy (for(for example,
example, in
in
order to
tu encourage Bumi putra
Bumiputra Ilogging
ogg i ng concerns, the
Goqr.;:t would award logging concession licences to
Gcvernment
Bumips companies);
Bumiputra companies); and
and

(iv) concomi tant to (i

concomitant i i) , training programmes and financial
(iii),
institutions
institutions would
would be developed to
be developed encourage and
to encourage and enable
enable
Bumiputra
Bumiputra participation in such ventures.
in such ventures~

is not
It is not the
the intent
intent of
of the author to either question or
. ) or
:

evaluate the
evaluate the underlying
underlying decirion-making
decision-making pro,
processess nor the objectives of
of
the Kesedar project.
the Kesedar r problems ha
However, problems have surfaced in the
the Kesedar
Remedar
project which have resulted
re,::(ted
'
in itit falling somewhat
somewh,t short of its
and hence
objectives and the goals of the
-ce the
Y the NEP.
NEP. These shortcomings seem seem to
to be
be
in p-rt,
attributable, in part, to
to incomplete
incomplete problem
problem analysis
analysis byby underestimating
underestimating
the impact of prevailing
the impact prevailing socio-economic
socio-economic conditions
conditions on
on the
the implementation
implementation
of the activities of
the activities the project.
of the project. The
The paper
paper aims
aims atat examining
examining those
those
conditions and
conditions and at
at analyzing
analyzing their
their impact
impact on on the
the project
project in its
in achieving its
goals.

2. CONDITIONS AT THE DESIGN OF THE KESEDAR

KESEDAR PROJECT

2.1
2.1

Examination
Examination of of any facet of
any facet of the
the economic
economic system
system in
in Malaysia
Malaysia inin
the
the past
past reveals anan inequitable
inequitable distribution
distribution of
of financial
financial and
and political
political
power. Therefore, the Second
Therefore, the Second Malaysia Plan
Plan called
called for
for an
an increase
increase to
to 32
32
 - 183 --

percent
percent by
by 1975
1975 for
f o r Bumiputra
Bumiputra participation
participation in
in the
the modern
mod e rn economic
economic
sector, indicating how
sector, how small
small Malay
Malay participation was in
participation was in the
the economy
economy given
given
that they
that they constitute the
the largest
largest ethnic
ethnic group in
in the
the country.
country.

The
The New
New Economic
Economic Policy
Policy isis aa strategy
strategy designed
designed to
to restructure
restructure
and social
economic and social imbalances
imbalances in
in the
the Malaysian
Malaysian society.
society. Its
Its objectives
are:

(i) to reduce
to reduce and
and eventually
eventually eradicate
eradicate poverty
poverty by
by raising
raising
income levels
income levels and
and increasing
increasing employment
employment opportunities
opportunities for
for
all
all Malaysians, irrespective of
Malaysians, irrespective of race;
race; and
and

(ii) to accelerate
to accelerate the
the process
process of
of restructuring
restructuring society
society to
to
correct
correct racial economic imbalances in the
racial economic the context
context of an
economy, leading
expanding economy, leading toward
toward the
the creation
creation of
of aa dynamic
dynamic
and just
and just society.
society. (SMP, p. 1.)
(SMP, 1971-1975, p. 1.)

The Federal
Federal Government, in conjunction with the state
governments, has sought
governments, has sought ways
ways to
to implement
implement NEP
NEP objectives
objectives byby encouraging
encouraging
Bumiputra participation
participation in economic development through integrated
regional strategies.
regional development strategies. Rural Malays,
Rural Malays, identified
identified asas the
the group
group
experiencing the
experiencing the most
most regional
regional and
and ethnic
ethnic imbalances,
imbalances, became
became aa priority
priority
target group
target group for
for such
such strategies.
strategies. Land
Land development
devillopment schemes
schemes as as aa
component of regional
component of regional development plans
plans became
became aa panacea
panacea for
for the
the manifold
manifold
problems of the
problems of the rural
rural poor
poor inin Malaysia.
Malaysia. Landlessness, underemployment,
Landlessness, underemployment,
unemployment, farm holdings
unemployment, unproductive farm holdings and
and subsistence
subsistence agriculture
agriculture were
were
to
to be
be eradicated
eradicated by projects suchsuch as
as Kesedar.
Kesedar.

The
The NEP demonstrated an an understanding
understanding of of the
the underlying
underlying problems
problems
of development
of development in
in Malaysia
Malaysia - - a
a diseguitable
disequitable development
development process marked
marked byby
social, economic
social, economic and
and ethnic
ethnic imbalances.
imbalances. The economic and
The economic and social
social goals
goals
expressed were aimed
expressed aimed at
at attaining
attaining sound
sound and
and stable
stable growth
growth toto correct
correct the
the
imbalances. Moreover,
Moreover, it it was
was designed
designed within
within the
the context
context of
of anan expanding
expanding
economy whereby the
economy whereby the underprivileged
underprivileged would would be
be allocated
allocated aa larger
larger slice
slice of
of
the !'economic pie".
the "economic pie". Not all all Malaysians,
Malaysians, however,
however, perceived
perceived thatthat "pie"
"pie" to
to
be
be expanding
expanding and
and became
became anxious
anxious that
that their
their share
share would
would diminish.
diminish. The
restructuring policies promulgated
restructuring policies promulgated by by NEP
NEP inadvertently
inadvertently contributed
contributed to to aa
polarization of
polarization ethnic identities
of ethnic identities determined
determined to to protect
protect their
their shares
shares of
that "economic pie".
that "economic pie". In
In such an atmosphere,
such an atmosphere, serious
serious reactions
reactions and and beha-
beha-
vioural responses
vioural responses developed
developed which
which could
could be
be expected
expected to
to affect
affect the
the
implementation of projects
implementation projects like
like Kesedar.
Kesedar. These will
These will be discussed in
in the
the
of the
analysis of the project.
project.

2.2 Ecological Milieu

Ecological

The state
The state ofof Kelantan,
Kelantan, located
located if
the north-eastern
the north-eastern region
region ofof
the country, covers
the country, covers an area of
an area of 14
14 750
750 km
krn (l.S
(1.5 million
million hal of which 75
ha) of 75
percent isis occupied by by forests.
forests. The
The topography is is dominated by by mountains
mountains
in the
in southern and
the southern and western areas, which has
western areas, has contributed in in the
the past
past to a a
geographical isolation
geographical isolation from
from the
the rest
rest of
of the
the peninsula.
peninsula. In the
In the northern
northern
part
part of
of the
the state
state is
is the
the only
only flat
flat area
area constituting
constituting 20 20 percent
percent of of the
the
total land
total land area
area -- itit isis intensely
intensely cultivated.
cultivated. Rubber
Rubber accounts
accounts for for
approximately
approximately 45 percent of
45 percent of the
the total
total cultivated
cultivated area;
area; padi
padi (rice), 33
percent; mixed horticulture,
percent; 18 percent; and palm oil,
18 44 percent
(Economic Survey,
(Economic Kelantan, 1979,
Survey, Kelantan, 1979, p.p. 1).
1).

Kelantan has one

Kelantan has one of
of the
the largest
largest concentrations
concentrations ofof Bumiputras
Bumiputras inin
the
the country
country -- 93
93 percent
percent (or
(or 673
673 012)
012) -- of total state population
of the total population ofof
686 286
686 286 (ibid,
(ibid, p.
p. 1).
1). The vast majority 9f the population
~f the population (over
(over 500
500 000)
000)
resides as padi
resides as padi farmers
farmers on the
the 11 550
550 km
km alluvial plain created
alluvial created byby the
the
 -- 184
184 --

Kelantan River. At
Kelantan At least
least half
halfofofthe households
the households ininKelantan
Kelantan earned
esrned less
less
than MS
M$ 150/monthl/
ISO!month1! in 1976: indications are that
1976; indications that 76 percent of
percent of
rclan-tan live
householes in Kelantan
households live inin poverty
poverty compared
compared toto a
a national
national average of
average of
49 percent (ilid, p. 2).
49 percent (ibid, p. 2).

The Kesedar region, located

region, located in southern Kelantan, had a
in southern
population of
population of 61 780 in in 1970,
1970, of of which
which 69.62 percent or
89.6 percent
2
or 54 141 were
54 141 were
Bumipuras. The
Bumipusras. The man-land
man-landratioratio was was9:1 9:1 per
per km
kmas as compared
compared to to aa 58.8:1
58.8:1
per km
km in the northern part of the state.
in the northern part of the state. As of
AS of 198,
1978, the
the population
population
had increased
had increased aa mete one percent
mere one percent to to 6767 469.
489. Thearea
The areawas
wasstill
still heavily
heavily
forested with
forested with only
only 5353 916
916 ha undercultivation
ha under 'ly rubber (61)
cultivation -- primarily rubber (8111
(Lembaga
(Lembaga Kemajuan -antan Selatz-
Kemajuan Kelantan Selatan, 1984, 1984, p.p. 20).
20). ec iTment has
Development hasbeon
been
hindered' in the p-,
hindered pasti by
by geoorar,
geographical constraints - aa mout.tainous
'al constraints mountainous and ,nd
heavily ,forested
heavily ,forested terrain.
t'-:rain. As aa result,'k' It, the area has had little
the area has had little infra- 1.1,1ra--
structural
struct~ral devel,,dment.
development. ''l
This sence
absence of
of readily accessible
readily an, ,ible
infrastructure impeded
infrastructure impeded opportunities
opportunities and and access to to market
market and service:wice
'

the population
for the
areas for population of thE reg
of the region
ion and
and reinforced
reinforced the the ser
sense of of a
remole and
remote and isolated
isolated hinterland.
hinterland. Atditionally, this
Additionally, this sense
sense of
of i,-91ation
isolation
de'orted spontaneous
deterred spontaneous settlement.
settlement. Ile majority
The majorityofofKelantanese
Kelantanese preferred
preferred
t, remain either
to remain proximity to
either in proximity 5, Tc,iceand
to service andmarket
marketareas
areasandandfamilial
familial
tie.
ties in the north-east of the state or to travel out of state to where
in the north-east of the state or to travel out of state to where
omploymentopportunities
employment opportunitieswereweregreater
geeaterand andmore
morelucrative
lucrativeand
andancillary
ancillary
services available.
services available.
Given
Gi Yen such
such constra,rds
constrai nts totodevelopment in s...
development in rn Kelantan
southern Kelantan and
and
the
the poverty
poverty in the state,
in the state, Vollntan
Kelantanwas
was an
an ideal
ideal enxizmment in which
environment in which to
to
operationalize the
operationalize the NEP stiot,gies.
NEP strategies.

2.3 The Socio-Economic

The Socio-Economic Milieu
Milieu
It has
It has been
been understood
understood thatthat thetheKelantanesa .ys personify all
Kelantanese Malays personify all
associated with
that is associated
that with being
being Malay
Malay in in Malaysia.
Malaysia. They y are
are seen
seen as as a
closely knit
closely knit andand proudprQud people
people who whocontinue
continuetotopursue pursuetheir-heirtraditional
traditiorA
culture in rural milieu.
culture in a rural milieu. They embody,
They however,, a
embody, howev,, a dilemma,
dilemma, cahoht
caught
retain traditional value
between the need to reta i n trad i t ional val ue sys terns and the E.' t u neri
need lo to
participate
participate in in thethe growth
growth andand development
development ofoftheir tc ccuttry. They
country. '-oy areare
cogn7.---
cogn i zant ofof their
their socio-cultural
socio-cul tural beliefs
bel iefshaving
hav ing remained intact intact because
-cause
f,- -arginality to to
of their marginality
of thethe
modern
modern Malaysian
Malaysian economy.
economy. Nowe,,:,, the
However, the
diseguitab1. distribution
increasing diseouitable di::,nhution of incomesand
of incomes andstandards
standardsofot living
living
b,1 ti-mselves and
between themselves ilans, as a whole,
and Malaysians, whole, has has not
not gone
gone unnoticed.
unnoticed.
htnene, like
The Kelantanese, like oth
other -laysians,
Malaysians, want want toto participate
participateand and share
share in in
the
the gidv- '1 and
growth curring in their country.
and prosperit
prosperity occurring in their country. To balance
To balance
ctic -1.0n
partici ion in the development :cicess
the devel process whilewhile simultaneously
simultaneously preserving
preserving
their c'Jtural heritage has
their cultural heritage has t- ie their become their dilemma ji....-Tma - the the Kelantanese
Kelantanese
dilemma. Kelantan's
Kelantan's settlf,-ats
settlements re
are pz:1,..:ily rural
primarily rural withwith the
agricultural sector
agricultural sector providing the largest
providing largest source of of employment.
Practically all
Practically all farming farming is is on
on aa smallholder
smallholder basis basis at subsistence
at the SUbsistence
level, marked
level, marked by by low
low yields
yields and
and 1::wr levels of
low levels of technology.
technology. It
It should
should be be
noted that most
noted that most farming
farming isis done
done in in conjunction
;-Dnjunctionwith with other
other activities
activities suchsuch
(fruit
as tobacco, dUBun (fruit and vegetable v---table gardens), coconut or
gardens), coconut or non-farm
occupations.
occupations~ Such
, diversity i- :t:dicative ofofsubsistence
diversity is indicative subsistenceeconomics
economics where
where
the
the rationale
rationale of of 'begging
"hedging one's prevails (i.e., little latitude for
one's bets· prevails (i.e., little latitude for
incomefailure
income failure within
within their
theirpower).
power).

The extended
The extendedfamily
family is
is the
the nucleus
nucleus of
ofthe Velantanese
the Kelantanesehousehold
household
- extended in the
extended in the sense of the
sense of the nuclear
nuclear fami
family and si,ndryrelatives
and sundry relatives freely
freely
movinginin and
mOiling andout
out as
as the
the occasion dictates.
occasion dictates. r,r the
After the family,
family, the
the

l! 1976 rate
1976 rete of
of exchange:
exchange: US$
USS I1 = MS
M$ 2.20
 -- 185 --

kampong is central
structure is
(village) structure
kampong (village) central to the individual.
to the individual. The kampong
The kampong
social structure provides a milieu
a for mutual support, security,
guidance, social and identification.
interaction and
social interaction common that
It is cornmon that aa
person, upon
person, upon introduction,
introduction, identifies
identifies him/herself
him / herself in
in terms
terms ofof their
their
kampong.

Kelantanese (used
The Kelantanese (used here
here asas synonymous
synonymous with
with Malay)
Malay) society
society isis
noted for having
noted for having anan inordinate
inordinate number
number ofof female
female headed
headed households.
households. This
is due,
is due, inin part,
part, to to social
social practices associated
associated as as being
being distinctly
distinctly
Kelantanese. Polygamous marriages
polygamous marriages and and anan excessively
excessively high
high divorce
divorce rate
rate
(between
(between 1948 1957, 71
and 1957,
1948 and 71 percent
percent of marriages
marriages in in the
the state
state ended
ended in
divorce) force many females
divorce) force females to to take
take sole responsibility
responsibility for for the
the financial
financial
well-being of
well-being their families.
of their families. The result is
The result is that
that the
the female
female has
has become
become
an active
an active participant
participant in economic activities
in economic activities (albeit
(albeit activities in the
informal sector).
sector). It is
It is generally accepted that that female
female headed
headed households
households
large component
constitute aa large component of of any
any target
target group identified as being
group identified
poor. Since in in Kelantan
Kelantan they
they comprise
comprise an an unusually
unusually large
large component
component ofof
the rural
the rural poor,
poor, it it would
would be be assumed
assumed they they would
would bebe recipients
recipients in in any
any
programme aiding
programme aiding thethe poor.
poor. Moreover,
Moreover, givengiven that
that the
the land
land development
development
schemes
schemes areare anticipated
anticipated to to alleviate
alleviate a a great
great many
many ofof the
the problems
problems
associated
associated withwith thethe rural poor, it
rural poor, it would
would follow
follow that
that female
female headed
headed
households would
households would participate
participate in them.
in them. This
This may be unlikely
may be unl ikely toto occur,
occur,
however, as
however, as a a result
result of of aa stringent
stringent adherence
adherence to to a division
division of of labour
labour
code in Kelantan.
code in Kelantan.

In Kelantan, farm
In Kelantan, farm activities
activities are
are distinctly
distinctly demarcated
demarcated by sex.
by sex.
In padi farming
farming women
women have
have the
the tasks
tasks of
of caring
caring for
for nurseries,
nurseries, trans-
planting, weeding',
planting, weeding, winnowing
winnowing and
and threshing prepare the
threshing while men prepare the land
land and
and
harvest the
harvest the crop.
crop. Delineation
Delineation of tasks is
of tasks is equally
equally prevalent
prevalent in
in rubber
rubber
and oil cultivation.
and palm oil cultivation. To perform tasks
To tasks of
of the
the opposite
opposite sex
sex results
results
in
in aa severe loss of face
severe loss face in
in the
the kampong.
kampong.

Such division of
Such division of labour
labour codes
codes have
have important
important implications
implications forfor
land development
land development schemes.
schemes. Female
Female headed
headed households
households wouldwould find
find it
exceedingly difficult to perform the tasks associated with land
development and
development and the
the subsequent
subsequent farm
farm activities.
activities. Moreover, it should be
it should be
noted that
noted that inin the
the initial
initial stages of the the Kesedar
Kesedar project
project only
only the
the males ofof
aa household
household were permitted
permitted on on the
the project
project to to prepare
prepare thethe individual
individual
landholdings.
landholdings. This decision
This decision was
was necessitated
necessitated due due to
to inadequate
inadequate housing
housing
and infrastructural
and infrastructural facilities
facilities inin the
the early
early stage
stage ofof the
the project.
project. Given
such considerations, few,
such few, if if any,
any, female
female headed
headed households
households would
would be
be
willing to
willing to risk
risk participation
participation in in the landland development scheme.
scheme. Without
access to the opportunities
to the opportunities of the the schemes,
schemes, female
female heads
heads ofof households
households
would maintain
would maintain their
their status
status quo
quo in the the traditional
traditional activities
activities of the the
informal sector
informal sector wherewhere divisions
divlsions of of labour
labour would
would not
not preclude
preclude their
their
participation. Furthermore, their activities would continue in
established
established "no
Ii no risk"
risk areas of
l'
of the densely populated
populated north-east
north-east region.
region.

In view of
In above, a considerable component
of the above, component of
of the
the rural
rural poor
poor
of the
the state (i.e.,
(i.e., the
the target
target group of
of the
th e project)
project) would
would be
be eliminated
eliminated
from participation
from participation in
in the
the project and
and the
the Government
Government would
would have
have to
to
develop alternative
develop alternative programmes
programmes toto aid
aid this
this group
group (unless
(unless aa way to
to
accommodate them was
accommodate them was to
to be
be found
found in
in the
the project
project as
as it
it developed).
developed).

The division of labour

The labour practices
practices also also creates
creates problematical
problematical
ssituations for the
i tua t ions for the males
ma les who
who participate
part ic i pa te in
in the scheme.
the scheme. As has
As has been
been
stated
stated previously,
previously, Kesedar
Kesedar was
was set up on aa model
set up model whereby
whereby inin the
the initial
initial
stage
stage of land development only the
of land the males
males of of aa household
household (excluding
(excluding school
school
aged
aged boys)
boys) would be permitted to
would be to work the the land.
land. Although the the male inputs
inputs
are greater
are than those
greater than those of
of the
the females
females for for rubber
rubber and
and palm
palm oil
oil production
production
in Kelantan,
in Kelantan, thethe secondary
secondary activity - - the
the home
home garden
garden -- is
is cultivated by by
 - 186
- 186 --

womenand
the women andtheir children. The
their children. The income
income fromfrom the
the produce
produce ofofhome
home
(jens is
gardens is important
important for
forsupplementing
supplementing the the family
family income.
income. For the
For the adult
adult
males ofof the
the household
household to to perform
perform such tasks, however,
such tasks, however, would constitute aa
would constitute
Jc.-s of fac,s
loss face in their villages.
jr their vill es. Given the time involved
Involved in
in
operationalizirg aa home
operationalizing garden, iif the
home garden, the males
males were not to
were not to develop them, it
develop them, it
would ITIFFI
would mean prolonging the the time
time before
before the
the family
family would benefit from
would benefit from itsits
yields on
yields erCII,. 'amily
once the3 entire family was
was settled
settled on on the
thenew
new landholding.
landholding. Here
is dilemma - they cannot
the di].
is the cannot do do it yet, they cannot, not do it
it - yet, they cannot, not do it: Such
dilemmas
dilemmas maymay see-
seem somewl,-,t ,,xaggerated In
somewhat exaggerated importance to
in importance outsider.
to the outsider.
However,ititshould
However, shcS'I be
to remel,reied
remembered that that incomes
incomes inin the
the early
early years
years ofof such
such
ptojects are n,;,igible ,%:ept for Government supports -
projects are negligible except for Government supports - increased increased
financial burdkns only add to an already stressful environment for the
financial burdens only add to an already stressful environment for the
newsettler.
new settler.
For the
For the PIHontanese,
Kelantanese, as as for
for the
the majority
majority of of Malaysians, land is
Malaysians. land is
security.
security~ The sr.,'utity, however, is in owning the land, not in the
The securitYt however, is in owning the land, not in the
working
work it.
ing of i t ~ lo
In Kelantan
Kelan tan land
land ownership
ownersh is an
is an ,--,tremely sensitive
ext remely sens it i ve
,oventy-five percent
issue. Seventy-five
issue. percent of land in the =tat, Is still forested
of the land in the state is still forested
and protected
and protected under
under the
the Malay
Malay P,
Reservations Enact,goL.
Enactment. This means
This that
means that
the authority of the state g, --snment and cannot be
the land is under the authority of the state government and cannot be
released totonon-Malays.
released non-Malays. Even though these
Even though these lands in trust and
lands areare Leid
held in trust and
their re:
their ase controlled
release controlled in their their favour.
favour, the
the majority
majority of of Kelantanese
Kelantanese
c,onot ah''
cannot to huy
affordI to them. Those
buy them. Malayswho
Those Malays whohave
havethe thefinancial
financial resources
resources
nar, rally purchase agricultural land already developed.
quite naturally purchase agricultural land already developed. The
o<ices demanded
premium prices demanded for developed fertile north-
for the land in the developed fertile north-
eastern plain
eastern plain is is financially the majority of
financially prohibitive
prohibitive to to the majority of farmers.farmers.
Henceaa small,
Hence small, well
well connected
connected Malay elite own
Malay elite own thethe "prime" ll
uprirne agricultural
agricultural
land which
land which they, in in all
all likelihood,
likelihood,dodonot notwork
work themselves.
themselves.

Some 96 percent of the farmers in Kelantan lease land on a

Some 96 percent of the farmers in Kelantan lease land on a
crop-sharing basis and experience full
experience the difficulties
the full range of difficulties
associated with
associated with such
suchconditions
conditions(i.e.
(i.e. insecurity
insecurity of of tenure,
tenure,fragmented
fragmented oror
small farm
farm size, of capital and/or collateral, lack of access
size, lack of capital and/or collateral, lack of access to
financial institutions,
financial institutions, low technology inputs, productivity, poor
inputs, low productivity,
quality yields and debts to non-institutional bodies).
quality yields and debts to non-institutional bodies). It would
It would appear
appear
that crop-sharing
that from two
stems from
crop-sharing st.ems two economic realities in
economic realities in Kelantan:
Kelantan, (i)
(i)
absentee landlords
absentee landlords who ownthe
who own the land
land but want to work it, but are
but do
do no;
not want to work it, but are
lease to the landless on a cl.csharing basis; and (ii)
willing to lease to the landless on a crop-sharing basis, and (ii)
willing
small ,,ole farmers who have for various , .:ons mortgaged the,:i
small scale farmers who have for various reasons mortgaged their land,
defaultel or
defaulted on plym-nts
payments and were forced
and were forcedtoto sell.
sell. rt (ii)
It isiscommon
common inin (ii) that
the new
the ownerleases
new owner 1,-aes over
over the
the land
land totothe
theformer
formerawneJ
owner co on a crop-shar:ng
crop-sharing
arrangement.
arrangement. 7.tere is
There to discuss
is no need to discuss the the ensuing
ensuing sentims.nts
sentiments
ass.'s,ciated
associated withwith such It is sufficient to sly t
events. It is sufficient to say that it
such events. it isis not
not only
only
the family who suffers personal loss but the
the family who suffers a personal loss but the kampong no as
as aa whole.
whole.
tAthoughsuch
Although suchactions
actions are lelal on the part
are perfect:..
perfectly legal on the part of the new new owner,
many./ of thethe villagers regard the- new owners (although
villagers regard ,
(aHlough themselves
,eiant-aneseI with
Kelantanese) with contempt
contempt and as usurpers of the rights of the
and distrust as usurpers of the r
- hts of the
true "Bumiputras",
true nBumiputrasn~

I,nd was the past and still continues

Land was in the past and still continues to be a valued
commodity
cemmod i ty among the the Malays. Unt,1 ery recently
Unt i l very there were few
recently there
occupationol alternatives totofarming
occupational alternatives _!:,t all but the small elite centrci
farming for all but the small elite centred
arou.-c:
around Ih: Sultancy.
the Sultaney. With
\~ith uni,,,Fal
universal education reality,
education a reality, new
the rural youth. Alternatives which a!,.pld
emerged for the rural youth. Alternatives which amplified
alternatives emerged
aspit t
aspirations and expectations
and expectations far in excess
far in excess of
ofwhat
whatthe Government
the Government would
seemtoto be
seem Le able
aale LO deliver. With
to deliver-. close onrr-lation
With aa close correlationbetween
between edw
education
qualifications
qualifications and and the t,ce of
the type of workwor y^nng were/are willing
pa.- _e were/are
young people to
willing to
accept, farming
accept, farming became
became una:cc,rtable.
unacceptable. Their eda,,ti(,n
education prepar-:
prepared them
them to
anticipate
anticipate growth
growth and
and develorm.nt
development in in o,Jotry and it was tir right
country and it was their right
to have access and to share in it with their qual,l'cations.
to have access and to share in it commensurate with their qualifications.
 -- 187
187 -

One of the basic

of the basic assumptions
assumptions of land development
of land development schemes
schemes hashas
been that
been that subsistence
subsistence farmers farmers and
and rural
rural poor
poor want
want to remain
remain farmers
farmers andand
that, by improving
that, improving conditions
condition,., and production, rural
n-,d production, rural poverty
poverty would be
placed in in check.
check. For certiir,
For certaincomponents
compc)nents of of the rural rural poor,
poor, that
that
assumption
assumption has hasbeen
beenand andcontinues
continuestoto bebe valid
valid and
and has
has been borne out
been borne out inin
various land
various land development
development schemesschemes in in Malaysia.
Malaysia. However, for
However, for the
the educated
educated
rural youth
rural youth such solution is not
such a solution not soso easily
easi ly accepted.
accepted. Granted that,
Granted that,
ultimately, financial
ultimately, financial circumstances
circumstances will will force
force changes
changes ininattitude,
attitude, their
their
aspirati,ns and
aspirations and expectations
expectations will will not disappear ••• th-':
notdisappear ...
they co
do not
not want
want to to
far,,,ers .•. they want
be farmers want something
somethingwith with more
more status
status ar'i returns.
and greater returns.
Resistan v to
Resistance to farm,ng
farming has has been
been so
so intense
intense ininsome
some young
young Velantanese
Kelantanese thatthat
'hey have
they in lied
ha.,e, impl iedthat
that land development
land developmentschemesschemes areare a ployploy toto keep
keep thethe
Aputras in
Bumiputras :;' the rural
f-Lg - areas
areas and
and marginal
marginal to tu the real growth of
real growth of the
h:-'tlar such
antry. Whether
country. hntimentsare
such sentiments arevalid
validoror notnot isis irrelevant
irrelevant if if they
they
are sincergly
sincerely felt tlt and
andc,dressed
expressed as as aa certain
certain kindkind ofof reality.
reality.
Historically many
Historically many ruralrural youth
youth have have migrated
migrated out out of of Kelantan
Kelantan to to
the
the industrial
industrial areasareas of ofthe thesouth
southwhere
where wageswages and andfacilities
facilities w,at, more in
were more
dine with their
line with their aspirations.
aspirations. However,with
However, with thethe closure
closure of of 5,niaporean
Singaporean
factories to
factories to Malaysians
Malaysians and labour surplus
and a labour surplusfor for the
the fa2tories
factories of of
Malaysia,such
Malaysia, suchoptions
optionsare arenot notsosoreadily
readily available
available for for the
the vastvast major:ty
majority
of Kelantanese
of Kelantanese rural rural youth
youth of of today.
today. Undeniably,alternatives
undeniably, alternatives are are '3,,tt.
needed
but, more
but, importantly, they
more importantly, they must
must be be alternatives
alternatives acceptable
acceptable to to the
the rural
youth as
youth asbeing
beinginin line line with
with their
their aspirations
aspirations and and expectatior-.
expectations.

Timeaspirations,
The aspirations,expectations
exp^ctationsand andattitudes
attitudes of of tod'
today's youthyouth inin
Kelantan have
Kelantan haveserious
serious impl implicatio,..
i cations for ::.or 1land
and development
development sch schemes. s. Fi First
rst
foremost is
and foremost concern that
is concern that fewer
' ,wer youths
youths would would be inter(_ggad in
be interested in
participating
participatingininthe the schemes.
schemes. Given Gi'.'onthat that the
the youth
youth constitute
con,lgtute one one ofof the
the
state's
state's most
most valuable resources! if
valuable resources, if aa substantial
substantial numper number choosechoose not not to
parLi,irate,
participate,how would that
how would that affect
affect the longer longer term stra sttatf jes les of of the
Moreover, what
schenes: Moreover,
schemes? what alternatives
alternatives would would be be av mle to
available to them
1 - andand how
how
would thethe Government
Government integrate integratethem theminto into the
the overall
ov, gall stratc
strategies 3S of the
of
NE!P?
NEP? Secondly, if if they
they werewere to to participate
participateand andgiven
giventime the nardships
hardships
confronting them
confronting themasassettlers,settlers, how would their
how would their at attitude ide (a (a sense
sense of of
disenfranchisement) affect
disenfranchisement) affect the successfulsuccessful implementation
impleiier,L,' - and ultimate
. ultimate
objectives
objectives of of thethe project?
project? Thirdl,
Thirdly, resistance ano/or
, resistance and/or refusal refusal to to
participate in
participate in such
such schemes may airect the family's
may affect family's decision to
participate in
participate in them.
them. In land
In land develupment
development schemes schemes manpower
manpower is is a
a resource
resource
heavily dooc,Hdent
heavily dependent upon upon operationalizingofof individual
operationallzing individual landholdings.
landholdings. If
If
the young
the youngare ai, unwilling
unwilling to to work
work withwith thethe family,
fc,rrlv. the the family
family would would suffer
suffer
aa substantial
sgostant.al reductL,n
reduction in in their
their output
output ca ,lities atataacrucial
capabilities crucial period.
peLiod.
Und,,-such
Under suchcircumstances,
circumstances, would would the family be w,lling
the family willing to to take
take the the risk
risk of
of
rese lement?
resettlement? issu, r.ich
An issue resettlement would
such as cesettlement would be consensus
be a consensus
dec
decision~
s on. Even if if eco,.ic
economic considerations
considerationsand and realities
realities determine
determine
participation, compromises
participation, compromises would would be bemademade to to accommodate
accommodate the tt, narmony
harmony of of
the
the family.
family. That is is thette Kelantanese
Kelantanese way. way. How would such
How su,', compromises
,ompromises
affect the
affect family's ability
the family's ability to to cope with with and and perform
perform thethe LdSKS
tasks on un their
their
new land?
new land?
Kelantan is is noted for for having a large proportion of its
large proportion its
p^nulation migrating
population migrating out
out of
of state
statefor employment.
for employment. Be it
Be it tottlKedah
Kedah to
to help
help
with seasonal
with activities orat:to to
seasonal activities ,:gala Lumpur,
Kuala Lumpur,Penang
Penang or or Johore
Johore Baru,
Baru,
1,.,lantanese(p.drnarily
Kelantanese (primarr: males
males in Their their productive
productiveycars,
years)seek seekemployment
employment
supplementtheir
to, supplement ir.ily
their family incomes. --i.
Between 1957 and
Between 1957 ani 1979,
1979, some
some 55
55 700
700
,ritanese sought employment
Kelantanese mg:.loyment on aa permanent elsewhere in
permanent basis elsewhere in the
LIntry.
country. Op'
Optimally, er^nzmic ..uvelopmentwould
economic development wouldcurb
curbthisthis flow
flow and
and
attilcL thos,r.
attract have left,
those who have left. back.
back. To attract
(To attiacL KAantanese
Kelantanese back to the
back to the
stale has
state has been personal objective
been a personal
, objective of of the
theMCP;11 Pesar (state
Mentei Besar (state miniSter)
minister)
uf Felintan
of Kelantan who wishes to
who wishes ti maintain dish. iotly Kelantanese
maintain the distinctly Kelantanese way of
way of
life.)
life.)
 - 188 -

Emigrativn ffts
Emigration has beeni aa particular];
particularly problematic
prvblematic issue issue forfor Kelan-
Kelan-
tanese. The incomes
incomes deriv,
deri ved frvffi
from such
; such emplvyment.
emrl,vment have have often
often prvvided
provided the t.he
needed cash
cash for the toa.sc needs
the basic needs vf of the
the family.
family. At
At the
the same
Same time,
time,
I'vwever, migration
however, migrativn deprivi,.
deprives family
family of of one
one of
of their
their most
most highly productive
resources. The remain<ler
remainder of of the family -- wife,
the family wife, children
children and,and, perhaps,
perhaps,
ol,jer parents - do
older do the
the farming
farming tasks.
tasks. It
It is
is possible
possible that these families
that these families
would be hesitant
would hesitant to to participate
participate in in land
land development schemes.schemes. Firstly,
they ma:
they may he
be reluctant
reluctant to take take the risk in
the risk in foregoing supplementary
foregoing the supplementary
income thEt,'
income they dependon onwith
depend withthe
thehead
headofuf household
household having
having to to work
work the
the new
land.
land. Secondly, reluctance to
'ndly, if there is aa reluctance to forego
forego thethe supplementary
sc-lementary
income,
incom9, the
,;;e family
fz,milywouldwouldbebe inin a a situation
situation similar
similar to to the
the female
fem. headed
households
house-i ds in thatthat they
they would
would notnot have
have anan adult
adul t male
male to pr,.p..re
prepare thei t:'
holding. (It
(it is assumed that that the rigours
rigouts of land
land clearing and
pretion at this
preparation at thisstage would
stage wouldbe beexceedingly
exceedinglydifficult
difficult for Ear ,ales
males over
over
50
50 years of of age and thereby
age and thereby exclude
exclude the the woman's
woman's father
father or or father-in-law
father-in-law
from these tasks.)
from doing these tasks.) Given considerations, it
such cbrsiderations,
Given such may i.e
it may be possible
that these
ti esefamilies
familieswouldwouldretain
retaintheir tus__CJ.,!~ in
their eirusjluo in aa perceived
:,,eiveH no-cisk
situation rather than
than take the unities
opprrunitie-s offered
offer,i by a new
landhol ding.
landholding.

An
An attitude of of dismissal
dismissal could
could easily be be taken
taken toward tco5i who
toward those
not want
do not want toto or
or cannot
cannot participate
participate in in the
the programmes
programmes such
such as
as F.-edar.
Kesedar.
There are always others
are always others willing
willing to participate.
to participate. However, reasons
reaE.,,n:. why
certain components of
certain components of aa slated
slated target
target group
group refuse
refuse toto participa:o
participate in in aa
project have
project have considerable
considerable bearing
bearing upon
upon measuring
measuring the
the ultimate
ultimate success
success of of
that project.
that ect. Considering
Considering the the extent
extent ofof rural
cural poverty
poverty inin Kelan,An,
Kelantan, the the
fact that
Cact that certain
certain ;r groups
..ps dos notnOt participate
partic'pate may may point
point toto intrinsic
intrinsic
weaknesses
webknesses in in the
the pro_ect
project dt.ign
design or or to
to prohlcm,
pcoblems in th; society
in the society which the the
project has not takentakkn into
Int consideration
_onsideration when
wh,p analyzing problems of
anal ;ing the problems of
the very group they
t', very t tted to
-ney are targetted
.. to help.
help. The Ing discussion has
ling has
at tempted
n'tempted to illustrate the mr-asures
-ne measures the Kelantanese
Ke. :;tanese have taken
themselves to
themselves to maintain
maintainti-v,,r spb,11 structure
their social structuce andand cope
cope with thethe problems
problems
of thelc poverty.
of their poverty. They have tiLer
They taken actions
actions in in response
response toto conditions
conditions and
and
circumstances
circumstances overover which
which they
they have
have little
little control
control but but must,
must, nonetheless,
nonetheless,
exist in. Recognition and
Recognition and analysis
analysis of the the measures
measures taken
taken byby the
the target
target
group
group toto cope
cope with
with their
their daily
daily needs
needs should
should be be central
central toto the ect
the project
designers problem
problem analysis.
analysis. Far too
Far too many programmes
programmes anywhere
anywhere inn the
world presuppose an
world an understanding
understanding of of the
the socio-economic
socio-economic environment
environment
wi thout proper
without prvper analysis.
analysis. As aa consequence,
consequence, analysis
analysis i, is often
often done
done in
in
terms of
terms the project
of the (i.e. analysis
project (i.e. analysis is is preconceived
preconceived ta to Eit the ect).
the project).

Given thethe success

success of of land
land development
development s schemes in malay,:la,
' Malaysia,
attracting participants
attracting articipants per per sese has
has not been heen a problem. Rowevec,
attracting t
attracting the right partiCIPants
right particip-,inT (i.e. thethe group targetted
target ted to benefit
to benefit
from the
from the project)
project) is is another matter.
anotht matter. cOr example, if
For example, iE the
tl'e rural poor
;,-it- at
subsistence
subsistence level
level are the ta,get
are the target group
group ofof a a project
project and and it it is apparent
-; :Arent
that the
that the family
family and
and kampong
kampoog (which
(which areare central
central to to their
their way way of
of life) was
percei ved to
perceived to be threatened or altered by
or alterdd by thethe project:,
project, how would those
how would Hr,',a
sentiments
sentiments affect
affect thethe degree
degree and SL.-c,S of
and success their participation
of their participation in in that
prject?
pr €let? If the risks when
the risks weighed are
wholt weigh,,j ata tooto,) nr.,it
great and and they E,,r,,q0
they forego
participation,
participation, who, then, sill
who, then, would actually
actually benefit
benefit f.,omfrom the the project? Would Kfould
the project achieve
the project achieve whatwhati,s.
was originally intendP12
intended? If
if risks
risks andand impacts
impacts
are identified
identified inin the
the pre-design stage,stage, then
then pe'pe '3 the
the project would be
project would
able to
to circumvent suchsuch problems
problems and
and reach
reach thethe s,t;
statedd beneficiaries.

2.4
2.4 Dualism
Economic Dualism

Analysis of
Analysis of any
any problem
problem inin developing
developing regions illustrates the
regions illustrates the
between the social and economic milieux.
interdependence between Certain
economic situations
economic situations determine aspects
aspects of the social
of the social milieu and
and vice
vice
versa ~
versa. In Kelantan
In Kelantan responses
r-esponses to
to events
events in the social
in t.he social and
and economic
economic
 - 199
- 189 --

milieux appeac
mi11eu~ appear accentuated
accentuated by
by 0verri,iing
overridir- 'ns between
C0ncerns between "havo
H~avd and
and have
have
not" issues
issues translated
translated into
intuethnic
ethnicconcerns
concerns and
and emerging as aa form
emerging as Et)rrn of
economic dualism.
economic dualism.
As
As has
has been
been stated ilier, 93 percent of the state population
stated earlier, 93 percent of the state population
is Malay
is while Chinese
Malay while Chinese and a[ Indians constitute percent.
Indians cc)nstitute 7 percent. Due to to
historical factors, the
historical factors, the m= !ty of malay
majority Malay Kelantanese participate in
Kelantanese participate
traditional agriculture.
traditional agriculture. same hist-rical
the same historical reasons,
!'or ht.- reasons, thethe Chinese
Chinese
are involved almost
are involved almost monopolistically
' facets of the trade and
-.ally 15 1.1 facets of the trade and
in all
industrial sectors.
industrial sectors. Their children -1 receive on-the-job training
rsgoti h.. on-the-job training from
ft:"vm
their families and relativ
their families and relatives in acquiring skills
.,dguirimg the -erate within
'or skills to t operate within
those sectors.
th0se sectors. Under - oditions an: given the
Under suc,
such condi ti0ns and given the absence ethnic
a--7'nte of ethnic
interaction, the trade and industrial sectc
interaction, the trade and industrial sectors become cl.;;ed spheres,
become cll)sed spheies, open
open
only to those with ties
vnly tv thvse with ties te) to them.
them. ccular system allows little
Such aa circular system allows little
Such
ornortunity or latitude for the Kelantar--.e to have access to these
appvrtunity or latitude fvr the Kelantanese to have access tv these
s,ctors.
sectors. Moreover, theysimply
Mvceover, they simplylacklack the
the heouired skills totocompete
required skills c<)mpete and
and
in them.
...::orate in
vperate them. An impvrtant
An important pvint
point to here is that, although
tv t,.e.;.ider
cvnsider here is that, although
-versal education exists, it is of ilsisical rather than vocational
universa1 education exists, it is of a classical rather than vocational
-rare and does not prepare its students `oi
nature and does not prepare its students Evr the 1:9,real
real ski''-
skillsrequired
requiredEOT foc
the growth
the and development
growth and developmentofof thethe econvmy
economywithin
withinthe thestate.
stat' .
I is precisely this sort
Itt is precisely this sort vf economic and
of economic soc.
and social 7alarization
polarizativn
that the NEP wants to rectify by "elimination of the aht ..oat.pr. of race
that the NEP wants to rectify by "elimination of the association v, race
with economic activity." To redress the economic iooalances,
with economic activity." To redress the economic imbalances, the the
Governmenthas
Government hascreated
created programmes
programmes (such (suchasas Kesedar)
Kesedar) which .-1.1 eventually
which will eventually
tarn the balance scales toward an equilibrium.
turn the balance scales toward an equilibrium. Not all Malaysians
Not all Malaysians view
view
the as an
the prvgrammes as an attempt to bolpi,E, economic disp,arities.
Al 1.,,,11.7 to balance econvmic disparities. The
Chines,, who as
Chinese, -.5 aa group that -no- arP not fav.ored te the g.lie
t....l that t
group feel are not favoured by the policies
deliberrt, atreogt t,
-

and prrrramm.u,
and interpret the
programmes, intecpret acti-rg as
tr., activns i a deliberate attempt to weaken
or des,r wnat they ha.e achieved. ht must be emphilized tha7
vr destroy/ what they have achieved. rt must be emphasized that the
validit. ,ndror veracity of such opinions
validity and/or veracity of such opinions is not ;he _v-ern here,
is nvt the conCern here, but
)...L
rather the reality which results from beliefs and
cather the real ity which rcsul ts from such bel iefs and the the subsequent
subsequent
responses to them.
respvnses to them. is with the methods and extent of the
Concern is wi th the methods and extent of the
Cancern
measures the gr-oup
measures the groupinitiate
initiate ininresponse
responsetotothose
thoseprogr,rames.
pLogranunes~

The phenomenon
The phenvmenon of ,F the tri'1" illustrates
"Ali Baba"
the "Ali illustrAF, such ,nch methods
methvds and
and
resp-4-ser
responses. The Ma1,7:
The )vernwon, 91, rct legisla,
Malaysian Government has set I egi 51 ati on
. .o whereby
whereby gre hcc
any new
entrrpii.e
enterprise in Mal a must haveC gercent Bumiputra
51 percent - ownership.
Adherefee tv
Adherence to the le,:
the legislativo restltel
lation has resulted in entrepreneurial
r t nerrial Chinese
seeking out
seeking vut equally
equally oAtrepreneurial
entrepreneut:ial Malays
Malays who will, un
who will, on paper,
paper, maihtaii,
maintain
control
contevl of
vf the
the magic
magic 51 For their signature, the dumiputia, are
51 percent.
percent. !'or their signature, the Bumiputras are
paid a "directors' fee" and are expected to stay out of the way,
paid a "directors' fee" and are expected tv stay out of the way. rh,,, do
dv
not learn nor are they aware of the mechanisms of "their" business; nor
not learn nOr are they aware of the mechanisms of ~theic" business; nor
can tthey have
can have access
access to
to such
such information.
information~

Ostensibly ti' iegislation was desinnp

Ostensibly the legislat icon was designed fvr all the right F)r all the
Jht
It was de-. ,r-'d to steo
reasons, It was designed tv stem the flow gh
reasvos. ;,ncril2 cvntrvl Ervm
vf eCvnvmic
Malays while providibi un-the-job traii, enatlihg ttem
Malays while prvviding on-the-job training, enabling r.. ,o,'n
them to eventually
operate the business-i themselves.
oper-ate the bus i nasses themsel ves. er, overl
However,
FL u ovecl.rohin.: certa,an 'social
ooki ng certai al
realities - that the rimase would not readily wl, Jme ;Ialays into
realities - that the Chinese would not readiJy welcome Malays into their ;oir
business world and that the Malays in turn would prefer not to
business wvrld and that the Malays in turn would prefer nvt to wvrk with
the Chinese - plus the lack of economic reality in the assumption that a
the Chinese - plus the lack of econvmic reality in the assumption that a
group would willingly relinquish control of their domain, the legislators
grvup would willingly relinquish cvntrol vf their domain, the legislatvrs
severely limited
severely limited the
the scope
scope and
and impact of aa sound
impact vf sound policy.
pvlicy.

The n"Ali
The Al i Baba"
Saba" phenomenon
phenvmenvo points
nts out
vut e-'
another akness
weakness enlemi in
economic dualismparticular
econvmic dualism particulartoto this
this region ... a shortage
region •.• ;rtage of
of_ PLminatras
with
with exgertise
expertise or training to
ur training to function
function success in the rell-ts of
ilh'y in
successfully
busines,.
business. Ultimately
Ultimately thethe Malays
Malays will
will acquire
acquire the
t1 skills. However, in
skills. in
the intetim,
the interim, self-fulfilling
self-fulfillingprophecies
prvphecies of failure and/or
vf failure "'di Baba's"
and/or "Ali Daha's"
might possibly
might pu.5ibly undermine their participation
undermine their participativnin in
economic
economicdevel ;pment and
development and
thus the
thus :oals of
the gva15 vf the
theSEP.
NEP.
 - 190 --

3.
3. THE KESEDAR PROJECT
THE PRO,JEeT

3.1
3.1 Project
Project Desi~n-2_nd
Design and Implementation
The Kesedar
Kesedar project
project evolved
evol ved as
as a
a part
part of an
an overall
vverall integrated
integrated
regional development
regional development plan
plan for the state ui Kelantan in
of Kelantan in line with the
line with
guals vi the
goals and strategies of the NEP.
NEP. In
In opening new land
opening up new land in
in the
the southern
regivn
region of Kelantan, the
of Kelantan, the project was to:to:
( i) provi de
provide empl oyme n t
employment opportunities particularly for
Bumiputras,;
Bumiputras;

(ii) improve the social

improve the social and
and economic
eCvnumic status
status of
of the kampong
the kampong
people;
(iii) enSure
ensure aa mure
more equitable
equitable division
division of the benefits
ot the benefits from
from
deve10pmentt
economic development;

(iv) help improve

improve the
the man:land
man:land ratio
ratio in
in the
the north
north by resettling
resettling
underemployed farmers
underemployed farmers and
and provide
provide agricultural
agricultural land
land to
to
casual farm
Bumiputra landless and casual farm labourers;
labourers,

(v) promote the

the region
region as aa growth
growth centre;
centre;
(vi) encourage Bumiputra participation in
encourage Bumiputra in all
all facets
facets of
of the
the
pr ect by
project by providing
providing the
the necessary
necessary training
training programmes
programmes and
and
appropriate
appropriate financial institutions, and
financial institutions; and

(vii) encourage Bumiputca

Bumiputra participation
participation in
in the
the development
process
process by creating an
an environment conducive
conducive to
to their
their entry
entry
into the trade and industrial
into the industrial sectors.
sectors.
The executing
executing agency - Lembaga Kemajuan Kelantan Selatan Selatan
(Develvpment
(Development Board of Southern
Board of Svuthern Kelantan)
Kelantan) -- waswas to
to be
be funded
funded by by the
the
Federal
Federal Government. The release of
The release of land
land for
for the
the project
project was
was to to be
be
determined by the
determined by the state Department
Department ot of Forestry
Forestry inin conjunction
conjunction with
wi th the
the
state development planners.
planners. In
In the initial phase,
the initial phase, 6 000 ha ha of
of land
land were
were
to be allocated
to be allocated under
under a budget
budget ofof MR$ 000 000.
MRS 23 000 000. During this phase
During this phase
(which
(which coincided
coincided with the latter
with the latter part
part of
of the
the Third
Third Malaysia
Malaysia Plan)
Plan) it it was
estimated that
that 1350
1350 people
people would
would be
be settled
settled within
within the
the project
prvject area.
area.
To integrate
integrate Kesedar
Kesedar with
with the
the regional
reglunal development
development plan
plan of
of the
state,
state, five
five activities (in
(in addition to
to the
the organizational
organizativnal framework)
framework) were
were
designed:
(i) development of new
new agricultural
agdcul tural lands;
lands;
( i i) town development;
town development;
(iii) traditional
traditional kampong development;

(iv) infcastructural develvpment;

infrastructural development;

(v) development of
of an investment
investment programme;
programme; and
and
(vi) in 1983, rehabilitation
introduced in rehabilitation of
of land
land contiguous
contiguous to
to or
or
In the Kesedar region.
in the regivn.
The nature of
The nature of the
the activities
activities was
was to
to be
be determined
determined by
by Kesedar's
Kesedar's
executing agency
executing agency coordinating with the
the state's
state's planning
planning .units.
units.
 -- 191 -

During
Du!. the desl
the design of the
the pr9'ect,
project, It
f it was
was determined that rubber
determined that rubber
and oil estates
and palm oil r- -i and try would constitute the
cestry t the prir:rpal
peino! 1 economic
economic
of the
base of the re.rion.
region. forestry
F-restr( had been identified
had teen identified asas not
not hahav Jr,9
ng realized
realized
its income
its income potent.L1
potential cespite
despite the
the availabili,y
availability of
of natu'.,1
"atueal resources.
resources. The
planni ng design
planning design so_ -sfied Hed that
that the
the processing
proc,,r j of of fforestry
Sry produce would
increased suIrs.:
be inceeased .ally while
substantially while the e-,ro,t-
expocts of
of logs would reduced.
..';uld be reduced.
1

In addition, the
In addition, the fi-st
first forestry
forestry complex
complex at
at qua
Gua Musang, rcinforcing
reinforcing the the
town as
town as aa growth .rth centre, was to to help
help promote
promote thethe ,stablishment
establ ishment of of
integrated timber-based
,t-based industries
industries In the region.
in the

Thee project
project began
began in 1978 with
in 1978 with the
the focus
focus onon structuring
structuring thethe
organizational
Or(far framework
I of
of the pr r_re-t
project and recru! ting
recruiting staff.
Concomitantly,
Co, _Anitar- a land
a ,land settlement
settlement model,
model, whereby
whereby people
people would
would bebe settled
settled
the law]
on the land ry.--ediately
immediately with with provision for their
provision for their subsistence reouir-ments
requirements
was set
was set in motion.
- ion. Activities centred
Activities centred around
around landland clearing,
clearing, land
procurement and the I selection of
of the first wave of
of settlers.
settIcr.
Simultaneously, the the state
state government
government began
began infrastructural
infrastructural development.
development of of
area.
the area.

ay
By the
the early
eady eighties, with minimal
eighties, with minimal regional infrastructural
infrastrurttural
requirements completed,
requirements activities of the
completed, all activities the project
project were
were in
in various
stages of implementation.
stages of implementation. In 1983
In 1983 the
the project
project became
became an
an "umbrella"
"umbrella" for
for
all projects developing
all proiects developing the southern
southern Kelantan
Kelantan region
region including
including land
land and
and
crop rehatilitation.
rehabilitation.

3.2
3.2 7uation of the Proiect

As aa component
AS component of
of longer
longer term
term obiectives
objectives for
for the
thedevelopm,
development
- of
the Kesedar's achievements
the state, Kesedar's achievements have
have Yet
yet toto be
be :realized. Progress
7

toward those
toward those achievements,
achievements, however,
however, has
has been
been slower
slower trian
than anticipated
!-ticipa-, in
19
the strategy.
the planning strategy. identified by
The problems identified by the
the aauthor as imp,
,r as impeding
ng
Kesedar's have been:
Kesedar's progress have been:

(i) Recruitment problems

Recruitment problems as
as evidenced
evidenced in the difficulties
in the difficulties in
recruiting
recruiting staff for the
staff for the wide
wide range
range of
of expertise
expertise required
required
and
and in
in obtaining personnel:
obtaining administrative personnel;
( j i ) Difficulties jn
in coordinating project activities and
allocating them to
to the
the respective
respective agencies
agencies involved;
involved:

(iii) InstitH i mal problems

Institutional problems whereby
whereby activities
activities were dependent
ndent
upon other agencies
upon , , agencies performing
performing tasks prior to Kesedar's
Kesedar's
involvement:
involve- which resulted in lengthy delays of the
;

project (e.g.
(e.g. infrastructure,
infrastructure, water'
water and electricity);
electricity);

(iv) Due to
Due to restrictions
restdctions in in awarding
awarding logging
logging concessions
concessions (i .e.
(i.e.
to Bumiputra
to aumiputra firms
firms only),
only), the
the selection
selection process
process became
became
unduly lengthy thereby
unduly thereby slowing
slowing down
down project
project activities
activities
which would
would follow; moreover"
moreover, once concessions were
awarded, difficulties in
awarded, in land
land clearing
clearing occurred
occurred asas a
a result
re -Ilt
of delays in
of in infrastructural
infrastructural construction
construction and
and an
an abse
absence
, of
skilled
ski lIed labour;
labour;

(v) Due to
to the
the remoteness
remoteness of
of the
the area, were difficulties
area, there were difficulties
in attracting and
in and maintaining
maintaining labourers
labourers to
to work
work in
in the
the
infrastructure and construction sectors;
infrastructure and sectors;

((vi)
vi) Owing to
to aa number
number ofof factors,
factors, there
there were
were difficulties
difficulties with
with
settlers remain in
having settlers in the
the region
region (see
(see "Analysis
"Analysis ofof
';:r Project
Kesedar and
It); and
Project");
 -- 192 --

(vii) Delays in
in the procurement of materials and
and a poor
performance,
performance, onon the
the whole,
whole, of the construction
of the construction sector
impeded the
impeded the physical
physical progress
progress of variety of project
of aa variety project
activities.
A number
number ofof these
these problems
problems are,
are, in part, inevitable
in part, inevitable given the
given the
long-term nature and
long-term nature scope of
and scope of thethe development
development plan
plan in an undeveloped
an undevelnped
region~
region. Due
Due to the region's
to the region's isolation,
isolation, for
for example,
example, attracting
attracting lanourers
labourers
becomes intrinsical problematic.
intrinsically problematic. Furthermore, until certain minimal
Furthermore, until Ho ,Imal
levels of
levels of infrastructure
infrastructure are are realized,
realized, delays
delays in in land
land clearing
clearing andand
delivery of materials
delivery materials are unavoidable. The majority of problems
The
identified will
identified will not,
not, however,
however, be be ameliorated
ameliorated with
with the region's initial
the region's
development.
development. It is likely thatt the
likely th.' the problems
problems will
will continue
continue and
and be
be
exacerbated as as the
the project
project pi.,;resses
progresses unless certain
certain socio-economic
socia-economic
factors
factors are recognized and
are recognized and attempts toto rectify them are built
rectify them built in toto the
pro j ee t.
project.

In
In the discussion, analysis
the following discin:3ion, analysis of
of the
the above
above problems a
problems in a
conte"t will
socio-economic context will be
be presented.
presented.

3.3
3.3 Analysis of the Kesedar Project

The Kesedar project has

has had
had two
two main ectives:
main objectives:

(i) to
co develop the southern region
region of
of the
the state
state in
in terms
terms of
of its
its
natural resources and
natural and potentials:
potentials; and
and

(ii) to redistribute
redistribute incomes
incomes and
and increase
increase opportunities
opportunities for
for the
the
rural
rural poor.

Both
Roth goals intrinsically part
goals are intrinsically part ofof the
the NEP
NEP and
and the
the activities
activities
designed reflect the strategies
designed reflect strategies established
established in the Lhe NEP.
MEP. There is no
ioning of
questioning the strategies
of either the strategies or
or the
the activities
activities ofof Kesedar
Kesedar oror the
the
NEP. the Government
In fact, the should be
Government should be commended
commended for
for having
having taken
taken an
an
action-oriented
action-oriented approach
approach toto its
its development
development goals.
goals. The problems
problems which
which
have been
have been identified
identified inin the
the Resedar project have
Kesedar project have arisen
arisen because
because of
of an
intricately woven
intricately woven socio-economic
socia-economic milieu
milieu inin Kelantan
Kelantan which
which affects
affects all
facets of development in
facets in its
its southern
southern region.
region.

A shortage
shortage of
of staff
staff in
in terms
terms of
of administrative
administrative needs,
needs t expertise
expertise
for extension
for extension services
services and
and for
for operationalizing
operationalizing development
development strategies
strategies
has
has created
created problems since
since the
the beginning
beginning ofof the
the project
project and
and continues
continues to to
be aa bottleneck.
be bottleneck. This
This situation
situation is indicative of
in indicative of all
all projects
projects in
Malaysia where expertise
Malaysia where expertise is required.
is required. Facilities
Facilities to to train
train the
the experts
experts
are
are too few
few and
and reflect
reflect an
an overall
overall problem
problem in in the
the strategies
strategies of of the
the
educational
educational system (i.e. policies
system (i.e. policies have
have not
not always
always realistically
realistically followed
followed
the
the needs
needs and of the
and requirements of the labour
labour market
market and
and economy
economy as
as aa whole).
whole).

implementation, poor
Delays in implementation, poor implementation
implementation and and non-achieve-
non-achieve-
ment of
ment of goals
goals are
are synonymous
synonymous with
with shortages
shortages ofof staff.
staff. In Kesedar the
In Kesedar the
shortages in staff to
in extension staff to retrain
retrain settlers
settlers (usually
(usually former padi
former padi
farmers) in the cultivation of rubber and palm oil has has impaired
productivity and,
productivity and, hence,
hence, income
income generation. shortage of
A shortage of experts
experts inin
training
training construction
construct ion workers,
workers I road
road builders,
builder-s, land
land clearance
clearance labourers,
labourers t
for example,
for e"ample, hashas contributed
contributed to slow start
to the slow start of of the project and
the project and
continues
continues to plague
plague itit as
as activities
activities multiply.
multiply. xacerbate the
TO ""acerbate
To, the
situation, other
situation, agencies such as
other agencies as FELDA,
fELDA, FELCRA, RISDA l I and
FELCRA, RISDA all other
and all other

1/ FELDA Land Development

FFLDA = Federal Land Development Authority
Authori
FELCRA Land Rehabilitation Authority
FELCRA = Federal Land Authority
RISDA ~= Rubber Industrial Development
Rubber Industrial Development Authority
Authority
 -- 193 --

federal
-.al and s ta te agencies
and state agenc ies are
are equally
equall y seeking
seek ing experts
experts so
so that
tha t competi-
compe t i-
tion )r the
' ron for the human
human resources
resources available
available is is acute.
acute. In such
In such a a demand
demand
scenario,
scenario, few
few experts are willing
experts are willing to be
be recruited
recruited toto an
an area
area SO
so isolated
and
and underdeveloped as as Kesedar.
Kesedar.

Given thethe financial

financial resources
resources available
available in ~;alaysia and given
in Malaysia given
the
it potential of hJmen
poten t i al of human resources,
resources, due
due consideration
cons iderat ion should
should be given
given to
to
fr,ining experts as
training a ouickly as rossible.
quickly possible. With the
With the existence
existence of of aa
well-educat.ed rural Fcuth
well-educated rural youth in Kelort.n, the
in Kelantan, the developing
developing of of programmes
programmes toto
train
--ain them
them inin the skills required
required r-r
for integrated
integrated :,nd
land development
development schemes
schemes
should
should be
be aa priority.
prwrity. Under such proorammes,
programmes, the
the :1
skills
ills required toto meet
the demands of development would be achieved while concomitantly
providing alteinative non-farm
providing alternative employment for
non-farm employment for the
the youth
youth who
who do
do not
not want
want
to be
to be farmers.

In terms of problem analysis,

Tn analysis, it is evident
it is evident that
that the
the acute
acute
shortage of
shortag of technical
tec.,. expertise h-ls been and
has been and will
will continue
continue to
to be a major
major
bottleneck to
bott] to tke Sur,Ff7 of Knrroar.
the success Kesedar. Given the scale of land
Given land clearing,
clearing,
infrastructural
.7a1 devepment,
development, agricultural
ejr_cultural extension and construction
required, the scope cl of the
the project in is far in
in excess of the
excess of the capabilities
capabilities
and capacities
and capacaies of of human
human resources
resources available.
available. And yet,
yet, in
in 1982, the
the scope
scope
of Kesedar was increesed
of Kesedar increased to to include
include rehabilitation
rehabilitation of
of lend
land and
and expansion
expansion
primary resource industries thereby creating an ever-increasing
into primary
demand for skilled experts
demand for experts and
and labourers.
labourers.

The overall staff

The overall st.aff shortege
shortage is
is exarceb by giving preference
exarcebated by preference
to
to Bumiputras
Bumiput_ras for staffing and
for staffing and provision
provision of
of services
':vices for development.
for development.
This policy
This line with increasing
policy is in line increasing o:-nortunities for Malays to
opportunities for to
participate
parti.cip-.,, in
in the
the development process.
development pror tr, Per there is no
there is no problem with
with
such a policy. However, realistically are not
are not enough
enough Bumiputras
Bumiputras
who, as
who, yet, can1 deliver such
as yet, c such services. In thF
In the rrivate
private sector, forfor
example, contracts
cont.] -s were often awarded to inexperienced
incx,,rienced contractors
resulting in
resulting in ,m
untold.d delays
delays and difficulties in
and difficulties in dele
delivering
er'-.7 the
the agreed-upon
service/product~
service/product. There are
There are manifold
manifold socio-economic
socio-economic ramifications
raP.-cations inin such
aa situation affect the
situation which affect the outcome of activities
activities inin the project:
,:roject:

(i) are placed

Often expert personnel are placed in
in an
an area
area for
for which
which they
they
have
have inappropriate expertise,
expertise, e.g.
e.g~ a
a tobacco extension
tobacco
rubber plantations;
expert supervising rubber plantations;

(ii) In an
In area where
an area where there
there are
are already
already too
too few
few experts,
experts, the
possibilities ofof rec
recruitment
ilent are
are diminished
diminished further
further by
constraining hiring
constraining hiringt-toH,...Aputras
Burniputras only;
only;

(iii) Inexperienced contractors fail because of of their very

as a
inexperience as
inexperience a coneeouence
consequence of
of which
which they
t.hey end
end up
up being
being
viewed as incompetent;
incompetent;

( i v) The
The f,eduring of certain
favouring of certain ethnic
ethnic groups
groups at
at the
the expense
expense of
of
others in obtaining contracts has
has resul ted
resulted in aa
polarization
polati..etion of
of ethnic identities;
ethnic identiticS;
(v) Failures in
in businesses
businesses may
may re.,ult
result in
in the
the non-realization of
of
expectations
expectat'ons and aspirations for for many Malays
Malays and
and reinforce
reinforce
their ser,-e
sense ofof frustration
frustratior,arising
al.ng from
from not
not being
being able
able to
positi participate in
in economic development; and
:evelopment; and
(v i )
(vi) Difficulties in
in delivering
delivering se,vices/products
services/products has has resulted
resulted
in
in inordinate
inordinate and
and often unnecessary delays
often unnece6sary de which affect the
which the
progress of
of numerous
numerous components
components of
of the
the project.
project.
 -- 194 --

Kesedar and and other

other landland development
development schemes
schemes in in Kelantan
Kelantan must
must
coordinate with the the Government
Government agencies,
agencies, JKR (roads) and
JKR (roads) and LLN
LLN (electricity
(electricitv
and
and water)1/
water)l/ fcr the necessary infrastructure.
for the infrastructure. Yee,idar
Kesedar has has had t~
had tC
priorize iIs iTs development areas areas with
with five
five other
other land Idd development
development and
rehab iii ta t.i on schemes
rehabilitation schemes in In order
.'rder that .JKR and LLN
that JKR rJ.N schedule
-hPdule the ir work
their wOr k
programme.
Frc.drar^re. There isis n.
no need
r,eel to
to elaborate on tfe (1J7,1' ,f
the gamut of problems
probiems which
arise under such citedosfan:es,
,,ggee u8Jer circumstances" They are
are common
cammon to Is. all projects where
s.J projects
massive
mas,Ive coordination
c ordination and delineation
fr'ligation of specific
spec fi tasks occur..
accur. Their
ispg7t,, however,
ne,ever, in terms t,rm.- off delays
Delays in land clear,rn
in land clearing and the the permanent
settling of families will
nf families will be discussed.
1_

Due to
to delays
delays in
in road construction and
road construction and electrification
electrification in
in the
initial phase, it
initial phase, it was
was decided that only
decided that only males
males of aa household
household would work
work
the landholdings.
the landholdings. This would simplify
This would simplify housing
housing requirements
requirements which
which were
barracks. Without adequate roads
primitive barracks. roads for
for clearina
clearing and
and electrifica-
tion,
tion, the
the work
work on
on housing could not proceed
housing could proceed as
as originally
originally planned.
planned.

With the
the delays
delays inin physicil
physical infrastructure,
infrastructure, thethe construction
construction of of
the
the sgsial infrastruct6r( {i.e~ marketing
social infrastructure earfrecing facilities
facilities,1 servicing
servicing centres,
kt,.,
.

schools,
sch(Lle, etc.) was impeded
impeded and ccnsequently
,e,,iuertly did concurrently
did not develop concurrently
wi th the lond
witb Je elopnent ec.mrdert.
land development t. Construction
,struction of sicf
such ancillary sys-
tems
teme would determine
neteimine ¡terwhen tg-f.'s
lies could
cee,0 move into tnr
move into ;,,r7 in
the area in terms
terms of
schooling
schcolinj and
ind services
.7.,rvices and
ard when
W9C0 commercial
ee,goer:'al enterprises
enterprise- could
..n1J1,1 st.art up,
start up,
therety pis.k.di,,o
Iding needed services and
needed services and extra
extra employment
employment vpprrlunities
opportunities for
the ssIrli.rs.
sett The absence
'inc absence ofof such facilities in
such facilities in the
thc first
fir-I phase
Upase of the
of the
project strongly influenced
project influenced many
many settlers'
settlers' decision
decision not
not toto remain
remain in in the
the
programme.
programme.

It should
It should be be noted
noted that,
that, given
given the
the scope
scope and
and scale
scale ofof the
the
project and
project and the
the number
number of
of agencies
agencies responsible
responsible for
for various
various components
components ofof
it, the
the executing
executing agency
agency has
has p..g.grmed
performed well
well inin achieving
achieving the
the level of
level of
development
development it it has
has to
to date.
date. Since thethe beginning
beginning of of 1983, Kesedar's
Kesedar's
executing
executing agency
agency has
has taken over the
taken over the coordination
coordination of of the
the development '

projects of
projects of the
the entire
entire region
region and:d it
it is anticipated
anticipated that that many of the
[:he
mentioned above
administrative problems mentioneo above will
will be
be abated.
abated.

Awarding of logging
loggind concessions and land land clearing
clearingh.,: has created
Dr,..ated a
a
of te,,Llemi for
plethora Df Kesedar.
for Keeedai. ing concessions
_oncessions were tto be L0 awarded
iwarded
to Bumiputras d,
to Bumipittd, as a way
. way of inteoiDtiee [fie, into
integrating them into an extremely pirfitable
an extremely profitable
of snt
sector cl the Ess.nomy
economy in Kelantan _
in Lelantan. At the
At tne time of of Kesedar,
Kesedar f however,
however,.
nearly all
nearly all 1,3going
logging companies,
companies, notnot only
only in
in Kelantan
Kelantan but but inin Malaysia,
Mal ia, were
owned and rperated
owned and operated by by Chinese.
Chinese. The Chinese also dominated
The Chinese dominated all al ancillary
ancillary
systems
systems for
for thethe logging
logging industry
industry (sawmills,
(sawmills, truck truck leasing
leasing and and heavy
heavy
equipment companies, timber companies). The awarding of logging logoing
concessions to inexperienced Bumiputra companies resulted in
in an
atrophying of
atrophying of ethnic relations in Relantan.
in Kelantan. established logging
The established Igeding
companies and
companies and sawmills
sawmills proceeded
proceeded toto take
take two
two different
different courses
courses cr of osticn
action
in response
in response toto the
the concession awards ~
concess ion awaids. The first
Tirst was to to freeze
fr.eei.e. or make
difficult
access difl e.ult to all facilit',s
to all facilities arand equipment
eDe,d-int the the Bumiput.1
Bumiputra g,
would require
re-'. re to complete the.'
to complete their contracts,
or Such actions rresulted in a
guch actiorg
self-fulfilling
Self-fui prophecy - the new failing to execute
e-, their
tasks ,.cmpeterflì
competently ded/,_r
and/or on on time. Compound such formidable
formidadle constraints d,nts
with Oela3,s
delays in ig road construction i:d
rgg, zoestruction and it is is not surprising th,
not surprisinn that many of
'
Df
the new sonpar,ee
the rew companies did lid not
not rate highly in in fulfilling
fulfilling the the terms
tella3 of their
of tneir
contracts. An alternative
diternative and far more common response to the
concessions isue was tile
concessions issue the emergence
emergence ofof the
the "Ali
"Ali Baba ll
Baba" practice of of aa Malay
Malay
fronting
fronting anan essentially ChineseChinese operation.
operation. the "Ali
How the "Ali Baba"
Baba" functions
functions

JKR
JKR == Jabatan
debatan Kerja Paya
Raya
LLN =
LLN = Lembaga
Lembaga Lektrik Negara
 -- 195 --

has been described ear:Ior.

has earlier. The
71,:,end
endresult
resultof
of an
an "Ali
"Ali Baba" is
is the total
the total
circumvention of
of a Government polpulicy
r-:..reinment
z: - -on-the-job
on-the-job training
training for
for Malays to
Malays to
enable them to
enable to rperetr
operate effer_tively
effective y andand with
with skill
skill in
in the
the country's
country's
economy
economy...

actions reflect an underestimation of the extent

Both actions extent and
and degree
degree
opposition the
of opposition the Chinese
Chinese had
had to
to NEP strategies and
NE:P strategies and an
an even far more
even far more
serious underestimation
serious underestimation of of how
how polarized
polarized the
the ethnic
ethnic communities
communities had
had
become in terms of interaction,
interaction, cooperation and sharing
cooperation and sharing the
the "economic
n
pie
pie" discussed previously.
previously~

In
In an environment of limited skills and technical
an environment expertise,
technical expertise,
cooperation and
cooperation and interaction
interaction between
between the
the "have
"have and
and have
have nots" should have
nots!1 should have
been encouraged and
been encouraged developed.
and developed. Moreover
Moreover, human nature,
given human
1 nature l iit
t was
unrealistic to
unrealistic to have
have expected
expected the the Chinese,
Chinese, who
who perceived
perceived their
their share
share of
of
benefits
benefits as
as being
being diminished
diminished to to acquiesce
acouiesce without
without a a confrontation
confrontation ofof some
some
sort. Such problems should
Such problems should have
have been
been anticipated
anticipated when
when Kesedar
Kesedar was being
being
designed and
designed and ways
ways and
and means
means ofof diminishing
diminishing these
these negative
negative impacts
impacts should
should
have been
have part of
been aa part of the
the project
r..r-ject package.
package. The full impact of non-
full impact nOn-
cooperation and
cooperation and ofof "Ali
IlAli Babars u
,.1h.l's" has yet to be measut:ed~
be measured. There is
is no
doubt that
doubt that both
both actions
actions :aye
have severely
sever y impeded impeded Kesedar's
Kesedar's mandate
mandate to
encourage Bumiputra particip,tion
encourage Burniputra participation in in its
its development process and and the
the goal
the NEP
in the NEP ofof "accelerating
"accelerating the the process
procer...,.... restructuring Malaysian
oft restructuring
society to
society to correct racial economic imbalances."
racial -re-n--.'r r-rha.anoc." Perhaps of paramount
Perhaps paramount
importance is the further retrenching
r''trenr-K,nj ot of ethnic polarities which
or'lnic polarities which may
may
exaggerated in
become even more exaggerated IN future
futuie ende.vcurs.
endeavours.

forestry was
Since forestry was identifle.:
identified as as one ofof three main
r'..ree maineconomic
economic
bases of
bases of Kesedar,
Kesedar, care
care shoulc
should cae
havetern
beentaker,
taken toto a
assure its
its successful
lementation.
ir.plementation. GiVen
Given thether-r.r.,r-Ise,
expertise, 5, RIC RC
skills and equipment
riyment already
available
arailible in in the
rhe Chinese community, it miqtl m ht have been prudent
prudent to to have
have
integrated
1.ntegrated them imito the
thee into the antilr}
activity of restry eh,yelopment
or forc-str, development for for the
project.
or.,irct. logging and e,11JJ
The ic.;,ging ,,mparres ,ould
sawmill companies could nave
have been awarded
awarded
logging
10-:..;,ng concessions
concessions and and their
their emp1o5re,
employees util)7rn
utilized a-as extension
extension workers
workers onon
the understanding
anderstanding that training of
actual training
that actual of tho
the Bumiputras
Bumiputras waswas to take
to take
place. Not
NOt only
only would the-Malays
would the have reerved
Malays have received the
the training
training and
and skills
skills
to
V' competitively participate in
competitively participate in developing
developing thethe forestry
forestry base
base ofof the
the
r,ion,
ion, but land clearing would have been done faster and more
iciently for
,ICiclently the overall
for the interests of the
overall interests the project.
project. Equally important,
important,
such
such a a formula
formula might
might have
have deflected
deflected the
the ethnic
ethnic polarities
polarities from
from surfacing
surfacing
so strongly ••• with
strongly ... with anan air
air of
of cooperation and and unity surfacing
surfacing instead.
instead.

The land
The land development
development model
model used
used in
in the
the Ye:ydar
Kesedar project
project called
called
for the
for the settlers
settlers to
to be
be placed
placed on the
the land
land as
as soon a!, possible
soon as pr.,rr.iblewith
with their
their
SUbsistence
subsistence needs being met by
needs being by the
the Government.
Government. What happened, however,
Vhai happened, however,
was that
was that only
only the
the males
males were
were allowed
allowed onon the
the holdings.
holdings. Although thisthis
decision, as as discussed
discussed previously
previously waswas made duedue to
to land
land preparation
preparation
limi tat ions , the
limitations, consequences had
the consequences had far-reaching effects on
far-reaching effects on the set tIers
the settlers
and families:
and their families:

(i) The men,

men, accustomed
accustomed toto extended
extended family
family support
support r.ystems
systems and
and
the support
support of
of their
their kampong,
kampong, did
did not
notlike
likebei':r
being isolated
isolated
from those
those systems:
systems; in in many
many instances
instances thethe men left the
. the
project
project because
because they
they missed
missed those
those supportive
supportic systems. r.
(ii) The men,
men, accustomed
accustomed to
to aa divisicn
division of)f labour
lah,ar system shared
..hared
the extended
by the extended family,
family, found
found ir
it difficult to perform all
,n r,erlarrr, all
the necessary to
the tasks necessary to operatIcralize
operationalizerte.
the las,rhcldin4.
landholding.

((ill,
iii) Having
Having the head of household on the project created
immediate financial burdens
immediate burdens on
on the
the family
fami who,
who I in a sense,
in a sense I
was hav
was having to support two
te two households.
households.
 - 196
- 1% --

(iv) Often membersononthe

male members the project
project hadhad sought
sought seasonal
seasonal
empl.. elsewhere in
.t elsewhere
employment in Malaysia
Malaysia thereby
thereby supplementing
supplementing the
the
family income
family incomesubstantially;
substantiallyr financial
financial burdens
burdens for
Eor thethe
family resulted
[amLly resulted due
due to
to loss
loss ofof that
thatincome.
income.

( v) The rather primitive

The rather primitive conditions
ccnditions under
under which
wh i ch the neo lived
the men 1 i ved
making an
contributer] to making
contributed an already
alreaav difficult psychological
di fficuH psychological
situation
situation more difficult.
more difficult.

( vi) Delays inin infrastructure

Delays infrastructure and and construction
construction delayed
delayed even
even
further
further the
the time
time before
before the
the family
family could
could be
be reunited
reunited on
On the
the
new landholding; and
new landholding; and

(vi i) Delaysinfrastructure and

Delays in
infcastructure .ustruction meant
and construction meant that few
opportunities
opportunities to toaugment
augment inc),),s
incomesthrough
throughcasual
casual,mp(o,men,
employment
in other sectors sectors of of development (e.g.
(e.g. rommercial
commercial
establishments,
establishments, markets, markets, etc.)
etc.) would be be available
available to to the
tl,e
various
various members
members ofofthe the family
family once
oncesettled.
settled.
As aa result
As rilt of the
of theabove or aorcombination
above a combination of of
t)-_sm,
them, many settlers
many settlers
left
left the during the
the project during the initial
initial phase.
phase. Land develtnt schemes,
Land development schemes, in in
neral, have
general, have .,en
beenvery
verysuccessful
successfulinin Malaysia
Malaysiaand
and then:.
there have
have rarely
rarely beenbeen
r-oblems in
problems settlers to
attra:.:ting settlers
in attracting to narticipate
participate or crremain
remain on on them.
them.
higtl. organi
However, a highly .u'ganizedzed social stiuvture characterized
soci al structure chareaoteri zed by strong
by strong
family and
family and kampong
kampc.-r: .,..liancesand
alliances andmigrating
migratiu4labour
labour patterns,
terns, anan absence
absence of of
economic
economic infra,77uces {i~e~
infrastructures (i.e. transportation,
transportation, communication, financial
communicativn, financial
and marketing
marketing inszit:tHons, public
institutions, serv'o,s, water supplies
public services, supplies and
electricity) and
electricity) and anan ir
isolation ion reinforced
reinforced by by topography
t,pooraphyare aredistinctive
distinctive in in
their totality
their totality to to the
the Kesedar,eoar region.ion. Undet such
Under zuch conditions
conditions andand given
given
the land
land development
development 'pc, used, itt should
model ased, should not
not have
have been
been unexpected
unexpected that that
an appreciable drop-ou
an drop-out raterate would occur. Essentially,
,id occur. Essentially, the the first
firstwave
wave of of
settlers perceived
settlers perceived themselv-
themselves as as having
having been
been placed
placed in high-risk
in a high-risk
situation where
situation where the
theeconomic
economic ar, social costs
and social costs were
were higher
higher than
than they
they were
were
willing or
willing or could
could afford
afford to to pay.
pay.

Loosingparticipants
Loosing participants will,
will, necessarily,
necessarily, slow
slow down the project's
down the oroject's
overall r.rogress.
overall Moreimportantly,
progress. More importantly, itit points
pOints totoan
aninherent
inherentw...alness
weakness in
in
the project design
design whereby certaincertain socio-economic
socio-economic conditions in condins
Kelantar
Kelantanese society have either been underestimated or
society have either been underestimated or not taken taken into
into
considet u on. It
consideration. It is
isvery
very possible
possiblethat
thatmany
many of
of the pro:1,,.:, arising fcr
problems arising fer
the settlers suld have
the settlers could been avoided
have been avoided or or their act diminished had
their impact had the
the
socio-econo,
socio-economic .7.,torscontributing
factors contributing to them
them beem :ore thori,-,2nly
been more thoroughly analyzed
analyzed
in the pre-o.,,,,a phase of the prcject.
in the pre-design phase of the prcject.

Un - :estimating the influence

Underestimating influence of certain soci0-econornic
socio-economic
is evident also in the selection process for settlers.
conditions is evident also in the selection process fot' settlers.
conditi0ns
Reports abcut
Reports about Or or concerning
concerning thethe selectivity
selectivity process have been vague vague and
and
somewhatopen-ended
somewhat open-endedinin terms
terms ofcf thethe criteria
criteriatm to ,Aciine
define who
who is 4, the
the target
target
group
group and
and whowho should be selected within it.
should be selected within it. The Malay
The Malay rural
rural poor
poor
consisting of
consisting of the
thelandless, thethe
landless, underemplo-ed
underemployedandandcasually
casually employed
employed were
were
identified as the target group.
identified as the target group. The
The patt.J,:ulars
particulars of of who,
whc, how
how and
and why
why the
the
settlers were selected are not clearly stio.lated.
settlers were selected are not clearly stipulated. Consequently concern
Consequently concern
arises as to whom the actual benefits of the project went/go to; if,
arises as to whom the actual benefits cf the project went/go to; if, in
fact, there was/is an inc.'1 distribution taking place; and if an actual
fact, there was/is an income distribution taking place; and i f an actual
rest' ',tiring of the soo.,,H,
restructuring
, ...',s/has been
society was/has been set
set ina result of
in motion
motion as as a result of
se,' selection. As
settler selection. As ha, ;.,.,endiscussed
has been discussedearlier,
earlier, there
therewere/are
were/are':,-oups
groups
:ific
1 '

within the non-homoo,,Icous rural poor of Kelantan who, for

within the ~~n~~~~~9~~eous rural poor of Kelantan who, for specific
reasons, could
reasons, cvuld not o:pate in the project.
not participate in the project. These These people were most
people WH.,, most at
risk in terms of s.,gial
risk social and/or eccnomic
and/or costs if
economic costs if they were to to
 -- 197
197 -

participate. It
participate. It inisgenerally
generallyaccepted
acceptedinindevelopment
development planning
planning thatthat those
those
risk constitute the group to whose aid a major part of project
at dsk consU tute the group to whose aid a major part of project
at
planning should
planning should be directed. AA question
be directed. question then then arises
arises as astoto whom
whom the
themore
more
equitable division
equitable division of benefits from the land
of benefits land development
development schemes schemes g0.
go.
Moreover, a concept such as "equitable
Mut"eover, "equitetle distribution,tribution of benefits"U has
of benefits
emotive connotations
emotive connotationswhich, which,inIn practice,
irar ,. are actually difficult
aICe actually difficult to to
measure. Gi(er that,
Given that, can oneassume
can one asr' that the NEP NEPobjectives
iih;terives of of equitable
equitable
,ill
i

distribut.00 oi
distdbution of benefi bena:its from ec,.
ts from economic development A t(ooeit will be accrued accrued toto
those actually e(fe(iancing the greetest
actuall, experiencing greatest economicec.(nong_ imbalances? In
Kelantan. for
Kelantan, Lor example,
esoro e. the the poorest
poorestagriculturalists
o(it.l'arali.;a5 are arethe thepadi
padifarmers
farmers
trig-tzt,a
Jr fr
0n ntedlandholdings
landholdings whose
whose r-inily
family 7CIVW7, ire involved in an
members are inv0lved in an
,yttem which
ecin..(mirc system
ecOnOrn ,(lich attempts oit(ze :11 deenues oE di verse
attempts to optimize all avenues of diverse
1,ailable to
activities available meet the family's
L3 meet family's naed,..
needs. It is
It is an
an extremely
extremely
delicirely balanced
dellca systemwhich
balanced system whichhashas little latitude
little latitude for for either
eithervariance
variance
or disreption.
or disruption. Participation in
Participation in a land land development
development scheme scheme means
means aa
disruption in
disruption in that
that system. Essentially eliminated
Essentially eliminated from from participation
participation
becausethei
because their risks are
r risks are too
too high,
high, settler
settler selection
selection would would then fall to
then fall
those who
those whocan canafford
afford thethe risks.
risks. AsAs hashas been
beenproven
proveninin Malaysia,
Malaysia, benefits
benefits
from participation
from particl ationin in land development
land developmentschemes schemes are are impressive
impressive once once
production begins.
beg os. Given
Given the the income
incomep0tentials
potentials and andthatthat participants
participants areare
those who
those whocan canafford
affordparticipation,
participation, it it follows
follows that incomedistdbution
that income distribution
would likely
would likely be be On on aa horizontal
horizontal axisaxis and and would
would notnot represent
represent either
either aa
redistribution of
redistribution of income or an an eventual restruc( e ing of
eventual restructuring of society.
society. In
view it
th,is, it is
view oof this, is perhaps desirable that
perhaps desirable that the the p ectr' had
had been
been dazigned
designed
to encau:ige
to encourage those those in in greatest
greatest need
need of 0f receiviaa
receiving aid ,(
, tower ibrzeasing
toward! increasing
active capabilities
their productive
their r capabilities and and capacities
capacities and, and, tance,
hence, theirtheir incomes,
incomes,
to be able too participate
be (t't" icipate ininResedar.
Kesedac.

t.tracting labourers
Attracting labourers ta to work
work inin the
the physical ( ii'restiu.ture and
.1 infrastructure and
sector: inlitot,s
constrte. ..,(1 sectors
construction indicatesb.th boththethemagni
magnitude ri,d c_it(,J1rtj of the
'e and circularity of the
proble-3
pr0blems hatlort
facing KE,dar.
Kesedar. in, activity
Any c(ct,(ity ininReseeat
Kesedar has has beenbeei ,,otrient
ndentupon
upon
road re:,
a road k which,
network which wouldwould have ba-e to re be built from
be built (..rom the Ir
the g ni up.
op. Road
constoc_Lon could
construction coul(.1 not begin, begin, however, until until logging
logging concessions
( _tn.usei (ns were
awaziez and land
awarded clearing could
lano clearing could not begin begin until until sIre the rolls
roads were
const:icted. Abeitrr-,
constructed. Abetting this this circularity
circularityhas has been
been the the shortage
shor e ofofstaff
staff to
to
administer amt
administer a('.(-dinate the
and coordinate the activities
activitiesand and a shortage
shortage of skilledskilled andand
technical staff
technical staff to to exexecute
. Additionally, because
them. Additionally, because labourers
labourers diddid not
not
like working
like working unde-
under p( imltive ,ti.a conditions
conditionsin In such
suchremote
remoteareas,areas,they
theywould
would
work in the
work in the region
region i s only
only short
short periods
periods of of time to to supplement their
supplement their
family incomes.
family incomes. Thc
The areasareas werewere rem0te
remoteand andfacilities
facilities poor poorbecause
because
materials
materials and services could
and services could notnot bebe provided
provideduntil until thethe roads werebuilt.
roads were built.
Exacerbating
Exacerbating this this situation,
situation,the themigratory
migratory employment
employment patternspatterns evolving
evolving
from the
from the above resulted in
above resulted in increased
increased costs
costs andand demands
demands on on the
the staff
staff who
who
had to
had to be constantl, training
be constantly .eHg new labourers to
new labourers to replace
replace tho5e those who ha('left
who had left
the region.
the region. To add yet another anttter dimension
dimension to to the
the problrm
problem -- olhrr land
other land
development schemes
scht offered comparable e.irable wages
wages for for labourers
labourers under uzler better
(etter
conditions and
conditions cl
and closer io ¡.
in proximity to to their
their families
familiesand and villa4e.o..
villages.

It isisassurod
It assumed that
that FF'(
many of
ofthe
theproblems with retain
problems with ra labourers
retaining
will be
will be somewhat ameliorated
somewhat amel iorated a5 the project
as the project progresses
progresses and will
and wi 11 aus be
be
characteristic
characteristic ofof the
the initial
initialphase
phase only.
only.

Analysis of
Analysis t.(.5 proHr1-.3
of the ems ofof poor
poor performance
performanceinin the
the construction
construction
5ehtor and
sector and dif:ic(..1-,:e r
difficulties (1
in obtaining materials
obtaining materials for both
for both the
the
in,rastructure an
infrastructure r.tsroctiin sectors can succinctly be
and construction sectors can succinctly be stated stated asas an
eohodimentofofthe
embodiment the problems
pr.anlaosheretofore
hcrtt.f re discussed.
discussed. In one
In one way
way or
or another
another
tb.,-rtages of staff i(od lar:ocer., problems in awarding contracts to
shortages of staff and labourers, problems in awarding contracts to
aumiputras only
Bumiputras adminiartati,o bottlenecks
only and administrative influenced the
bottlenecks have influenced
performancecapabilities
performance capabilities and and capacities
acities of of the
the construction
construction sector
sector and
and
influenced the
influenced the ability
ability ofofcompanies
compan es to to deliver
deliver materials
materials toto that
that sector.
sector.
 -- 198 -

A numbe~ of
A number of these
th problems
Jlems will be sor
will be solved or their impact lessened
their impact lessened as
as the
the
region slowly
region slov oses toward
resses toward bei
being developed. Shortages of
Shortages of labour,
labour,
technical
technical and nistrative staff al
ctrative staff and ethnic terna will,
will, however,
,. however, not
sO easil,
be so easily abated
al without major
_ without majorchang..'
changes in

In the present
In the present analyses
analyses of
of the
the problems
.lems encountered
, encountered during
during the
early years of the Kesedar
early years project, it
Kesedar project, it is apparent there
is apparent there are
are linkages
linkages
between many factors
factors which
which have
have contributed
contributed to to the
the problems
problems evolving.
evolving. In
one form
one form or
or fashion,
fashion, these
these linkages
linkages are
are associated
associated withwith aspects
aspects ofof the
socio-economic
socia-economic conditions
conditions prevailing
prevailing in in Kelantan.
Kelantan. It is these very
is these
linkages which
linkages which make analyses
analyses of
of socic-economic
socie-economic conditions
conditions one
one of the
the key
key
factors for the
factors for the successful
successful implementation
implementation and and achievements
achievements of of aa project
project
such as Kesedar.
Resedar.

3.4
3.4 Major A,,inplishments
m,ior Accomplishments of
of the
the Kesedar Project too Date

In terms of progress
Ir tero. toward its
progress toward
.,i. its objecti ves, thethe Keseaar
Kesedar project
is well on
is well Its way
on its wiy toto attaining
attaining regional
regional'development. The
The difficulties
in operationalizing the
in operatioralizirg the project
project (given
(given rL.the sz,..oe and long-term nature)
and long-term nature)
are reflected in
are naturally ,e,:eoted in the
the slow
slow progress
progress aLhie'ed
eved during
during thethe initial
initial
phase (1978-19,0).
(1978-1980). With the complet
With the completion ion of
of main
ma;n roads (as of
r)ids (as 1984,
of June 1984,
604 km
604 km of
of roads
roil-. had been completed),
hal D00,1 completad), waterwater sunplio'.
supplies (increased
(increased by by 220%)
220%)
and electricity
and electricity (24j,
(24% of population in
cl population in southern
southern Kelantan
Kelantan now now have
have access
access
to electricity),
electricity), act.ivities
JcP-Ivities for construction of public services,
facilities
facilities forfor marketing
marketing and and commercial
commercial services,
services, housing,
housing, etc.,
etc .. , should
should
increase considerably.
increase considerably. Since 1978, land
Since 1978, allocated for
land allocated agriculture has
for agriculture
increased SOme
increased some 9898 percent
percent from
from 53 53 916
916 haha to
to 106
106 910
910 ha
ha as
as of
of June
June 1984.
1984.
The
The population of of the
the region
region hashas increased
increased from
trom 67
67 489
489 in 1978
1978 to
to 171 287
171 287
in June
in June of
of 1984.
1984. In
In terms
terms of the Kesedar
of the Kesedar land
land development
development scheme,
scheme, 31743174
families have been
families been settled
settled on on landholdings
landholdings of of 4 ha each.
each.

TO for Bumiputras
To create opportunities for Bumiputras in
in non-fa,
non-farm activities as
..ctivities as
part of Its
its overall i nves tment acti
ove raIl investment vi ties, Kesedar
activities, Resedar established three
companies:

(il Kesedar Sawmill

Sawmill Sdn.
.7.1n. Bhd. (1980);
(1980);
( if ) hhd. (19BI);
Resedar Inn Sdn. Bhd.
Kesedar (1981);
( iii J Kesedar Galian Sdn. Bhd. (1982).
(1982).

Kesedar Sawmill
Kesedar Sawmill wfswfs set
set up
up inin Gua
Gua Musang with aa capacity
Musang with capacity to to
produce
produce approximately 650 650 m
m of of sawnwood per per month.
month. The sawn timber
timber was
was
to be used fur for thethe construction
construction of settler housing
of settler housing with
with the residual
the residual
timber being
timber being utilized by by the
the settlers
settlers forfor their
their personal
personal needs.
needs. In
In 1981
4981
a second
a second sawmill
sawmill with with aa capacity
capacity forfor producing
producing approximately
approximately 500 500 mm of
sawnwood
s'.''nwoodper permonth
monthwas was built
built in
in RKT
RKT Paloh III.
III. Kesedar Inn, Inn, also located
located
in
in Gua
Gua Musang
Musang (which had had been designated as as the
the major
major growth
growth centre),
centre), waswas
established to meet the
to meet housing needs
the housing needs of of the settlers (i.e.
the settlers (i .e. to build
build
hostels for
h)stels for thethe first
first wave
wave of
of settlers).
settlers). Of an
OE an originally
originally1,[ pr ije.ted
ected 2121
hostels to
hoEtel: to be be ready
ready by by 1981,
1981, only
only 5.5, in fact, were
in fact, were built.
built. Reasons for
thc-, ielays have
these delays have been
been discussed
discussed pre/iously.
previously. Kesedar Galiar
Kesedar Galian (a brick
(a brick
la'.lor,;) was
4'13 set
set up up to
to provid.: LII-.5 fur
provide bricks for the
the constifi
constructionor re-2,Jireo..nts
irements
in the lb,s,dar
Resedar r'egion.
region. Llra,i'y
Its capaci ty was was set to to pr;lnoo
produce 800 10,1 r.-roks
bricks
eight times per
CIJfItime-; per year,
year, employirj
employing ,,,ont:
twenty people
people from
from th.=
the settler
s,ttlor community;
c
it has achieved
it achleJed this
hd...," this goal.
goal.

By 1981,
Hy 1981, 86
86 percent of
of all
all the
the contracts
contracts for
for development
development of of the
the
Kesedar region
rcoion were awarded toto Bumiputras;
BumiputraSI this
this increased
increased to
to 90.5
90.5 percent
percent
in
in 1983 and, in first half of
the first
in the
; of 1984, it increased
1984, it increased further
further to to 98
98
thereby
th,:ceby fulfilling
fulfilling one
one of
of the
the major
majar objectives
objectives of the project
of the project - -
opport.unities for develoment
oppor'unities for of Bumiputra enterprises.
develoment of enterprises.
 -- 199 --

Ldnd rehabilitation,
Land rehabilitation which be-ame
which
f beccllne aa Kesedar
Keseda:::- activity
activity inin June
,June of
uf
1983,
1983, has rehabilitated some 11 118
has rehabilitated 118 ha
ha of rubber
rubber trees
trees outout of
of an
an objective
objective
of 11 564 ha.
ha. In aa joint
joint programme with
with R/SDA,
RISDA, 33 272272 ha
ha of land
land was
was
cehabilitated
rehabilitated in 1983
1983 with
with an
an additional
additional 22424 424 haha converted
conver-ted to
to rubber
rubber-
estates with the
estates the provision of
of young
young plants.
plants.

In addition
In addition to
to rubber
rubbec estate
estate rehabilitation,
r-ehabilitation, activities
activities in 1983
in 1983
have
have also
also encouraged
encouraged the
the development
development of
of home
home gardens
gardens (383
(383 ha),
ha), coconut
coconut
groves (28 fresh water
ha), fresh
(28 ha), water aquaculture
aquaculture (20.2
(20.2 ha)
hal and
and animal
animal husbandry
husbandr-y
the provision
with the provision ofof 353
353 heads
heads of
of cattle.
cattle.

Kesedar has
Kesedar has also
also been
been involved
involved inin developing
developi ng the
the economic
economic
infrastructure
infrastructure of Gua Musang,
of Gua Musang, Jeli,
Jeli, Manik,
Manik, Urai,
Urai, Kuala
Kuala Krai,
Krai, Kemubu
Kemubu and
and
Dabong to
Dabong to meet
meet the
the demands
demands for
for public
public services
services and
and commercial
commercial activities
activities
genecated
generated by the project.
the project. region's overall
Since the region's overall development
development is
slated
slated for
for completion
completion between
between 1990
1990 and
and 2000,
2000, it is
is too
too early
early toto assess
assess
achievements in
achievements in general.
general.. It is
It is possible,
possible, however,
however, to
to state
state that
that major
major
development
development inputs
inputs have
have already
already taken
taken place
place and
and that
that the
the region
region isis
progressing toward the objectives stated in Kesedar's integrated
stcategy.
strategy.

305
3.5 Impl cations Eor
Implications for Future Projects
Projects in
in Kelantan
Kelantan

Prior to
Prior to the
the early
early seventies,
seventies 1 development
development andand growth
growth prospects
prospects
for Kelantan were less than satisfactory. The Malaysian
The Malaysian Government,
Government,
however,
however, recognized many of
recognized many of the
the bottlenecks
bottlenecks toto regional
regional development
development and
and
growth in the region
in the region and
and responded
responded with
with an
an integrated
integrated rural
rucal development
development
plan which
which would,
would, ostensibly,
ostensibly, improve
improve the
the economic
economic and
and social
social conditions
conditions
in
in the
the state.
state. The Government's
The Government's determination
determination andand commitment
conunitment to
to address
address
and recti fy these
rectify these bottlenecks
bottlenecks hashas been
been reflected
reflect.ed inin the
the New
New Economic
Economic
Pol i cy .
Policy.

Over thethe last

last ten
ten years,
years, land
land development
development schemes
schemes have
have changed
changed
appreciably in response to the social and economic needs of the
participants
participants asas identified
identified through evaluations of of the
the schemes.
schemesa For exam-
ple, land
ple, land development
development schemes
schemes in in the
the past
past have
have been
been criticized
criticized for
for not
not
creating anan environment
environment conducive
conducive to to self-reliance
self-reliance on on the
the part
part of the
of the
settlers in
settlers in terms
terms of development and and maintenance of of the
the land
land settlements.
settlements6
Clearly, the Kesedar
Kesedar project,
project, through its activities such
its activities such as as Kesedar
Kesedar
Sawmill, Kesedar
Sawmill, Kesedar InnInn and
and Kesedar
Kesedar Galian
Galian reflects
reflects aa recognition
recognition of of that
that
criticism and
criticism and an
an effort to to correct
correct it.it. revise activities
To revise activities in in response
response
to
to monitoring andand evaluations
evaluations is is vital
vital not
not only
only for
for the
the ongoing
ongoing project,
project,
but for
but for the
the design of of future
future endeavours.
endeavours.

Since major
Since major development
development and
and growth efforts
efforts are
are under
under way in
in
Kelantan,
Kelantan, experiences
experiences from
from the
the Kesedar
Kesedar project
project can
can prove
prove to
to be
be an
an
especially useful resource for
especially useful for the
the design
design of
of future
future activities
activities such
such as
as aa
pulp and
and paper
paper mill (to be
mi II (to be locat.ed
located at
at Kuala
Kual a Krai),
Krai), proposed
proposed by
by the
the Heavy
Heavy
Industries Corporation
Indust.ries Corporation of
of Malaysia
Malaysia (HICOM).
(BICOM). The
The site
site proposed
proposed is
is
contiguous
contiguous to the
the Kesedar
Kesedar project;
project; the social
social and cultural conditions
and cultural
discussed heretofore are
discussed heretofore are also evidenced
evidenced inin this
this area.
area. It is
It is hoped
hoped that
that
information and
information and experiences
experiences derived
derived from
from Kesedar
Kesedar will
will prove useful
useful to
to the
the
designers of
designers this new
of this new project.
project. More importantly,
More importantly the
the lessons
I lessons learned
learned
from past
from past experiences,
experiences, if
if built
built into
into the
the new
new project,
project, could
could be
be beneficial
beneficial
to the
to the projected
projected target
target group
group who,
who, after
after all,
all, can
can bear
bear enormous
enormous social,
social,
cultural and
cultural and economic costs
c,]st.s from
from planning
planning decisions.
decisions.

The Malaysian
Malaysian Government's
Government's recognition
recognition of
of the
the importance
import.ance of
of
programmes to
monitoring programmes to gauge
gauge their
their impacts
impacts on
on targetted
t.argetted populations
populations and
and
responses to problems once identified
responses identified would
would tend
tend to
to indicate
indicate that
that any
any new
new
project designed for
project designed fot' Kelantan
Kelant.an would
would utilize
utilize such
such experiences.
experiences. It will
It will
thus
thus be
be interesting
int.eresting tot.o note
note how
how future
future projects
projects in in the
t.he state
state (such
(such as
as aa
new
new pulp and
and paper
paper mill)
mill) will
will be
be designed
designed and
and implemented
implemented given
given the
the
from the
experiences from t.he Kesedar
Kesedar project.
project.
 -- 200 --

REFERENCES

Cheng, Keek Cheok, Khoo

Cheng, Khoo Slew
Siew Mun,
Mun, && R.
R. Thillainathan
Thillainathan eds.
ads. Malaysia:
1979 Some contemporary issues in
in socio~economic
socio-economic development.
development .
Persatuan Ekonomi
Ekonomi Malaysia.
Malaysia.

Government of Malaysia. Kota Baru urban

Nota urban development
development study:
study: Singapore.
1981
Jackson, J.C.
Jackson, & Rudner, M.
J.C. & M. in Malaysian
Issues in Malaysian development.
development. ASAA
1979 Southeast Asia
Asia Publications.
Publications. Lumpur:
Kuala Lumpur: Heineman Education
Heineman
Books (Asia).
(Asia).

Lembaga Kemajuan Kelantan

Lembaga Kelantan Selatan.
Selatan. Pembanyunan Kawasan Kelantan
1984
1984 Selatan 1978-1984.
1978-1984. Kota Baru.
Baru.

Mohamed.
Mahathir bin Mohamed. Dilemma.
The Malay Dilemma. Singapore Federal
Federal
1970
1970 publication.
Publication.

Dipak.
Mazumdar, Dipak. labour market and
The urban labour and income
income distribution:
distribution: A
A
1981 of Malaysia.
study of Malaysia. London,
London, Oxford University Press.
Press.

Min Financ€*
Ministry of Finance. Kelantan: An survey and implementation
An economic survey implementation
1979
1979 programme
programme...

W.R., ed.
Roff, W.R. Kelantan: Religion,
Religion, society and
and politics
politics in
in aa Malay
Malay
1974
1974 state. Lumpur. Oxford University Press.
Kuala Lumpur. Press.

Siang, Kit.
Siang, Lim Kit. Time bombs in
in Malaysia.
Malaysia. Petaling Jaya, Malaysia.
Malaysia.
1970
1970 Federal
Federal Publications.

Young, K.,
Young, KG f W.C~F~, &
Bussink, W.C.F., & P. Hasan eds.
p~ Hasan eds .. Malaysia: and
Growth and
1980 equity in
in aa multiracial society.
society. Baltimore and London.
Baltimore and London. John
Press~
Hopkins University Press.
 -- 201 --

GENERAL PLAN FOR TIMBER ESTATES DEVELCPMENT

TIMBEP ESTATES DEVELOPMENT
IN
IN INDONESIA

by

Apandi
Apandì Mangundikoro*

CONTENTS

Page

1. INTRODUCTION 201
201

2• SITUATION
SITUATION OF PRODUCTION FCRESTS
CF PPODUCTICN FORESTS 201

22.1
•I Forests
Tropical Rain Forests 201
201
2.2 Forest Plantations
Plantations 202
2.3 Demand Eor
Demand for Timber
Timber 202
202

3. TIMBER ESTATE DEVELOPMENT POLICY 203

203

3.1 Forest Resource

Resource Development
Development 203
3.2 Objectives of Timber Estate Development
Cbjectives 204
3.3 Linkage Development
Linkage with Regional Development 204
204
3.4 Incentives 204

4. TIMBER ESTATE DEVELOPMENT 205

4.1 Reforestation Plan

Plan 205
4.2 species
Species Recommended for
for Planting
Planting in
in Timber
Timber
Estates 206
4.3 Tree Improvement Programme
Tree Improvement Programme 207
4.4 Designation of Industrial
Industrial Forest
Forest Plantations
Plantations 208
4.5 Prospects for
for Production
Production 208
4.6 Timber
Timber Estates
Estates Development Costs 209

5. GENERAL DESIGN OF TIMBER ESTATE

ESTATE UNITS
UNITS 210

5.1 Requrnts
Requirements 210
5.2 Areal
Az'eal Extent
Fxtenl.ofof Timber
Timber Estates
Estates 210
5.3 Forest OrganiZation
forest ::rganization 211
5.4 pmad p,twork
Road Network 211
5.5 Timber
Timt,er Estate
Estate Management
Management 211

6. SOCIAL ASPECTS OF FOREST PLANTATIONS

PLANTATIONS 212

6.1
6.1 The Fcrest-
The F ' t-for-People Concept
Concept 212

6.1.1 Rais r the

tI social function of the
social function the forest
forest 212
6.1.2 An,ro-torestry
- y practices 213

REFERENCES 215

.
* ial Tlr
Special Adviser to
t the
the Minister
Minister of Forestry, Jakarta,
of Forestry, Jakarta, Indonesia.
Indonesia .
 -- 202 --

INTRODUCTION

Indonesia is an arch lagic country located between the

archipelagic
continents
cont of Asia
inents of As ia and
and Australia and between
Austral ia and between the
the Indian
Indian Ocean
Ocean and
and the
Pacific
Pacil .c Ocean. Its land 200 mill
surface is 200
land surface million
ion ha
ha with
wi th a
a 70 percent
70 percent
forest
51 cover.
.

general nature
The general nature of of its
its tropical
tropical climate is is wet;
wet; the
the maximum
maximum
-ature is
temperature is 33°C and
and the
the minimum
minimum temperature
temperature isis 210C.
2loC. The rainfall
The rainfall
vars
variesoreatly,
greatly,from
from700
700mmromtoto3600
3600mm,rom, averaging
averaging 2190
2190 mm.
rom. There are two
There are
pronounced weather
pronounced weather seasons
seasons which
which are the dry
are the dry season
season from
from June
June to
to
September and the
Scotember the rainy
rainy season fromfrom December
December toto March.
March.

on the
Based on the preliminary
preliminary Forest
Forest Land
Land Use (1982), 113.5
Use (19-1, 113.5 m,.3ron
million
ha rf
ha of tc
the total
total 143.5
143.5 million
million ha
ha of
of forests
forests ar,
are t,
to he
be maintained
maintained as
permanent forests and the rest will be reserved
permarenl reserve" for non-forestry
non-foresrry
purposes. The
pl,Tfo,es. The production forests,
forests, for
for which the
the torest
Forest Land
Land Use
Use Plan
Plan has
has
allocated
alloca,ed 64 million ha,
ha, are for over
are for OVer 90
90 percent
percent of
of the natural rain
the natural
forest type.
type.

planting has
Forest planting has been
been corred
carried out
out since
since early
early this
this cor
century.
ury,
It is centred on Java
is ,entred Java and
and consists
consiot: mainly of teak, mahogany
mainly of mahogary osiand pine
pine
species.
spec:( However, the last
However, during the last eloht
eight years,
years, forest
forest plantat:or:.
plantations h!vehave
been expanded
r',.ided to the other island::
the other islands as17 well with aa steadily increasing
well with inc;(.:ising
acreage.

Forestry plays
plays an
an important
important role
role in
in the
the national
national development
development as
aa source
source of
of employment,
employment, income and foreign
income and foreign exchange
exchange earnings.
earnings.. Timber
occupies second place
occupies second place after oil
oil in
in national
national exports.
exports. In this framework
In this framework
forest
forest resource
resource development has becomebecome extremely
extremely important
important and and is
is aa
development programme
development programme which has beenbeen given
given aa priority
priori status
status by by the
the
Government,.
Government.

2. SITUATION OF PRODUCTION FORESTS

FORESTS

2.1 Tropical Rain Forests

The rain
The rain foresto
forests of
of Indonesia
Indonesia belong to the the world's
world's tropical
tropical
forests
forests rich in in high-gualili
high-quality wood
wood species.
species. significant specier
The most significant species
association is is Dipterccaua:eae. The is_a.id
The island of Kalimantan is
of Kalimartan is the
the mcst
most
abundant habi
abundant habitat of tira genus.
QEAUS. There
Thece areare 2.50
450 species
species of
oi them, especial
znof, especially
of the genera of Shorea, Ehorri, Hopea,
ropea, Dipterocarpus,
LIFtc-roelrpus, Vatica, Dryobalanops,
(;().tylelobium
Cotylelobium and and Upuna.
Upuna.

The natural
The natural rain
rain forests,
forests, amounting
amounting toto ++ 60
60 million
million ha,ha, are
are the
the
ma in source
main SOurCe ofof timber product ion in
timber production in Indonesia.
I ndones ia. - Despite
Despi te the
the generally
generally
good
good condition of of the
the natural
natural forests,
forests, concern
concern has has been
been voiced
voiced over
over
degradation of
degradation of quality
quality and
and potential
potential of of the
the forests
forests as as aa result
result ofof
interfering
interfering factors
factors among which thethe most
most serious
serious are:
are:

(a)
(al Shifting
Shifting CUltivation ised by
cultivation as practised by 11 million families
families who
who
every year cut and
every year and burn
burn down
down hundreds
hundreds ofof thousands
thousands of
of
hectares of forests.
hectares of forests.

(b)
(b) Forest fires,
Forest fires, which
which annually clstroy 40
annually destroy 40 000-50
000-50 000
000 ha of
of
forests. In severe dry
In the severe dry 'ielson
season of 1982/83, conflagra-
of 1982/83, conflagra-
tion total forest
razed aa total
tion razed area cf
forest area of 3.5
3.5 million
million ha
ha in
in East
Kalimantan
Kalimantan...
 -- 203 --

have contributed to
These occurrences have to the
the degradation
degradation of
of over 15
15
million
million ha
ha of
of forests to less productive
to less productive forests or to
forests or tlal ang alang"
to "alang alang"
(grass), other
(grass), other unproductive scrub areas
unproductive scrub areas or to barren land,
land, and
and they
they have
have
caused serious environmental disturbances such
caused serious such as
as floods
floods and erosion.
erosion3

the 60
Of the 60 million
million haha of
of natural
natural forests,
forests, 4545 million haha are
are
~roductive
considered to be still Froductive with aa production potential of
approx ima tely 40
approximately mi 11 ion mm of
40 million of roundwood
roundwood per
per year3
year 3 Limi ted survey and
Limited and
research results indicate a forest
research results forest increment
increment of 1 m
m /ha/a.
/ha/a.

Large scale exploitation

Large scale exploitation by forest
forest concession
concession holders
holders started
started
in 13967.
only in ~967. The average production
The average production during the last
during the last decade
decade was
was 22.6
22.6
million mm ofof roundwood per year, mostly for
for export.

2.2 Forest Plantations

In 1981,
In 1981, the
the total
total area
area ofof forest
forest plantations
plantations covered
covered 2.7
2.7
million ha,
ha, of which 1.8
of which 1.8 million
million ha
ha can
can be
be developed
developed as
as Timber
Timber Estate
Estate
unitse On Java
units. Java 1.99 million ha
ha were
were under
under the
the direct
direct management
management of
of Perum
Perurn
Perhutani, the state enterprise
Perhutani, enterprise in
in charge
charge of
of forest
forest management.
management.

species planted
The species planted on Java are
are Tectona grandis
grandis (1
(1 053
053 200
200 ha),
ha),
Pinus merkusii (527 200 ha),
Pinus merkusii ha), Aghathis
Aghathis spp (81 800
spp (81 800 ha),
ha), Swietenia
Swietenia spp.
spp.
(77 400
(77 400 hal,
ha), Altingia
Altingia excelsa (58
(58 000
000 ha),
hal, other species
species (193
(193 300 ha).
hal.

So far,
far, the
the average
average yield
yield of th~ 1.99
of the3 1.99 million
million ha production
production
forest plantations
forest plantations has
has been
been only 758 900
only 758 900 m
m timber year.
timber per year. yield
The yield
will increasing rapidly
will be increasing rapidly in
in the
the coming
corning years
years asas most
most forests
forests on
on the
the
other islands
islands will enough to
will become mature enough to be
be cut.
cut.

greatest danger
The greatest danger of
of destruction
destruction threatening
threatening the
the plantations
plantations
is forest fires ~
forest fires. living in
People living forest environments
in forest environments are in the
are in the bad
bad
habit of burning
habit of burning the
the fields
fields preparatory
preparatory toto farming.
farming. In the dry
In the dry season
season
this may
this well be
may well be aa source
source of
of fire,
fire, which can easily
which can easily spread
spread toto forest
forest
plantations.

Since 1977,
1977, large scale reforestation averaging some
160 000 ha/a
160 000 ha/a has
has been
been carried
carried out
out under
under the
the Forest,
Forest, Land
Land and
and Water
Water
Preservation Programme
Preservation Programme. 0However, the reforestation
However, the reforestation is
is mostly aimed at
mostly aimed at
protecting watersheds and is
protecting is carried
carried out
out on
on eroded
eroded land areas~
land areas.

2.3 Demand
Demand for Timber

In 1983
In the population of Indonesia
1983 the Indonesia was
was 157
157 million.
million. With aa 2.2
2.2
percent
percent mean
mean growth rate a year,
growth rate it is
year, it is estimated
estimated to
to reach
reach 228
228 million in
in
2000. Despite a
Despite a soaring
soaring domestic
domestic demand
demand for
for wood-based
wood-based products,
products, which
which
is caused
is caused among
among other things
things by
by an
an improved
improved national
national income,
income, forest
forest
produce
produce harvesting
harvesting inin Indonesia
Indonesia will
will continue
continue toto be
be oriented
oriented toward
toward
export markets.

Employing population, Gross Domestic

Employing population, Domestic Product
Product growth,
growth, consumption
consumption
structure and
structure and industrial
industrial timber
timber growth
growth as
as indicators
indicators for
for his
his demand
demand
projections, Nasendi
projections, (1984 l drew the
Nasendi (1984) the conclusion
conclusion that
that the
the timber deman~,
timber demanl,
exclusive
exclusive ofof f,]elwood,
fylwood, in in 1990, 2000 3and
1990, 2000 3and 2020
2020 will
will be 27.7 million
be 27.7 million mm ,
59.5 million
59.5 million m m and 113.1 million mm respectively,
113.1 million respectively. Should timber be
timber be
supplied only
supplied from the
only from n~tural forests
the nItural forests with
with their
their annual
annual production
production
capacity of
capacity of 40
40 million mm , the
, the demand-and-supply balance
balance will
will bebe as
as
reflected in
in Table
Table 1.1.
 - 204 ~
-

Table 1

Timber Demand SUP~lY Balance

Demand and Supply Balance
(in million m
(in m )

Year Demand 1±"ERLY Balance

Balance

1990
1990 27.7
21.7 40
40 (i) 12.3
(+)
2000 59.6
5'J.6 40
40 (~)
(-1 19.6
19.6
2020 113.1 40 (~)
1-) 73.1

In order
In order to
to offset
offset these
these negative
negative balances,
balances, some
some 19.6
19.6 million
million mm33
of timber will
of timber will have
have to
to yee produced
produced from
from forest
forest plantations
plantations byby the
the year
year
2000 and
2000 73.1 million
and 73.1 million m 2020.
m by 2020. Immediate steps
Immediate steps must,
must, therefore,
t'- :ore, be
taken to establish forest plantations which
which should
should be able to '

counterbalance the
the estimated
estimated shortages.
shortages.

Table 2
2 indicates
indwi-e, the estimated total !'ements
requ nureati; for
industrial
in1u7tri51 roundwood and as fuelwood
tielwood for the
the years
years 1990,
1990, 2000
26,70 and
;nd 2020.
Requirements
Zerii,re7eits of
of roundwood
rounduv.,,l for the various forest industries are also
industriei, are also
shown.

Table 22

Estimated Industrial and

Estimated industrial and Fuelwood
)od Demand I

in 3_000 and 2020

in 1990, 3000
(thousand
(thiusand m
m of o: roundwood)

Product 1990
1990 2000 2020

1I.• Plywood 44 520 10 850

850 21
21 800
2.
2, Sawnwood 17 350
350 28
28 350 54
54 250
33.. Wood panels
panels 11 700 10
10 500 18
18 375
4.
4. Pulpwood 44 169 99 869 18
18 725

Subtotal 27 739
27 569
59 569 150
113 150

!'ue 1 wood
5. Fuelwood
5. 89 500
89 500 125
125 400 700
218 700

Total 239
117 239 184 969
184 969 850
331 850

3.
3. TIMBER ESTATE DEVELOPMENT1 POLICY
3TATE BEVEL-

3.1 t Resource

In an effort
In an effort to achieve a
to achieve a steady
steady increase
increase in
in the potential of
the potential of
the production
the production forest,
forest, the
the ,lovernment
Government adopted and carried
adopted and carried out
out the
following
following policies and actions relating to
policies and to forest
forest resource
resource development:
development:
 - 205
- 205 --

(a) natural fore:

Productive tropical natural e maintained.
forests shall be maintained.

( b) Urc
unproduct
T. i ve forest
forest areas
areas shall
shall be rehabilitated
rehab! 1 i tated by
establishing Timber Estate
Estate Units
Units of- industrial forest
industrial forest
planiatiohs.
plantations.

( c) The ._,,vernment encourages

Government capital investment
encourages capital investment by private
private
companies in the
the Timber
Timber Estates
Estates through
through extending
extending various
various
facilities within the range of its possibi/ity.
facilities within the range of its possibility.

(d) To ensure
To ensure proper implementation of
proper implementation rei:- ration in areas
of regeneration areas
logged-over by
logged-over by concession
concession holders,
holders, tH
the Gov,:\rnment imposed
in 1980
1980 oa US$ 41 performance
performance bond
bond on
on ev m
ii of wood
of wood which
which
the conoelon holders produce.
the concessi on hoI ders produce. TheseThese f,:s are deposited
are depos i ted
in the
in the Reforer,fation
Reforestation Fund.
Fund.

3.2 Objectives of
Objectives of Ti ir Estate
Timber EstateDevelopment
Development

Timber Estat
Timber --ent is a priori ty
Estate development priority activity
act i vi ty of forestry
forestry
development with the
development with following objectives:
the n. objectives:

(a) The rehabi_..:_ition

rehabil unproductive
i tat ion of unproduct forest
i ve forest areas for the
areas for the
prevention of
prevention of environmental disruption.
environmental disruption.

(b) Increasing the yield of forest products to satisfy the

Increasing the yield of forest products to satisfy the
demand for timber
demand for timber of
of the
the domestic
domestic and
and export
export markets.
markets.

(c)
(C) Supporting timber
Supporting industrial growth by supplying
timber industrial supplying wood
material
material in
in appropriate
appropriate quantities
quantities and
and quality.
quality.

(d) The expansion of

The expansion of employment andbusiness
employment and business opportunities.
opportunities.
The large scale
The large scale establishment
establishment of offorest
forest plantations
plaaafions 1; y.:p,ctaid
is expected
to
to curb
curb the
the exploitation
exploitation of the highly
of the highly valuable
valuable tr,s.c-cal forests
tropical natural forests
in 20-30
in 20-30 years
years from
from now
now on
on so
so the.- latter's sustned
tfie latter's
that the sustained survival is
safeguarded.
safeguarded.

3.3 Linkage with

Each Timber
Each Timber will require
-,te will
Estate infrastructure,
r(-Au.re an infrastructure, including
including
hauling
hauling roads,
roads, means
means of
of .:ncl other facilities. It will also
communication and other facilities. It will aiso
need a large work-force, which is difficult to acquire in certain areas.
need a large work-force, which is difficult to acquire in certain areas.

Meanwhile, the
Meanwhile, the Goverrunent
Goverrunent has hasprojected
projected development centres in
development centres in
remote
remote areas
areas as as part
part ofofregional
regionaldevelopment
development plans,
plans, which
which include
include
population transmigration, opening
population transmigration, openingofof new,
new,irrigated
irrigated agricultural
agricultural areas,
areas,
hOl!ticultural estates,
hort:,:ultural etc. Under the
estates, etc. the transmigration
transmigration programme, for
programme, for
ir7f
instance, 150 000
150 000 families
families will
will be
be moved
moved from lava every
from Java every yrar.
year. The
7 :it
Government will provide these
will provide velopment centres
the':., development centres with the poce,:ri,ry
wi th the necessary
infrastl!ucture and variousother
and various ot)7:cfacilities.
Ia-ilities. The selection of
The selection of colo:ation
relocation
area. ill conform
areas will conform to to exist
existing- Government development
development programmes.
programmes. Tnis
This
confi,....ity
conformity willwill give
give mutualli .1,..-1 results.
mutually beneficial
- results.

Likewise,
Li kewise, thethe estabm
establishment of Timber
nt of Estates will
Timber Estates will be in thethe
proximityofofexisting
proximity existingforest
forest industries
industries asas far
far asas possible.
possible.

3.4 Ir- .ritives

Governmi-t
Government
AHla',ulation No.
Regulation
in Indonesia are owned by the State.
All forests in Indonesia are owned by the State.
No. 21
Based on
Based on
of 1970, exploitation is, however, carried
21 of 1970, exploitation is, however, carried
out
out by
by priv.te
privateor or
Government
Government companies.
companies. The regulation also applies to
The regulation also applies to
the
the project:,1
projected Timber Estates.
Timber Estates.
 206 --
-- 206

The Government will subsidize 60 percent of the total

of
expenditure of every
every concession holder who establishes aa Timber
T Estate in
%state in
his
his work arca.
area. The
The subsidy will come
Come from
from the
the accumulateO eforestation
accumulated Reforestation
Fund, mentioned earlier.
Fund, menti,,,ed

4. TIMBER ESTATE ESTABLISHMENT

4.1 Reforestatioi an

There are
are al ent 2.7
at present million ha
2.7 million ha of
of forest
forest plantations,
antations, of
of
which 1.8
which 1.8 million
million ha be developed
ha cann be developed into
into Timber
Timber Estate
Estate Units.
Units. Up to
Up to
the year
the year 2000
2000 reforestation
reforestation is projected to
is projected cover an
to cover additional 4.4
an additional 4.4
million ha of Timber Estates,
Estates, which will make a a total
total of 6.2 million ha.
of 6.2 ha.

Table 3

Reforestation plan 1985-2000

1985-2000
(in hal
(in 1000 ha)

Concession State
Period area forest Total

Existing 11 800 1
1 800
1985 -
- 1990
1990 610 400 11 010
010
1991 - 1995
- 1995 11 075 500 575
11 575
1996 -
- 2000
2000 11 215
215 600 11 815
815

Total 2 900 33 300

300 66 200
(46.8%) (53.2%)

Table 33 indicates that in in the

the first,
first, second
second and third 5-year
and third 5-year
period reforestation
period reforestation will
will average 202 000
average 202 315 000
000 ha, 315 000 ha
ha and 363 000
and 363 000 ha
per year respectively.
per respectively. 2000 the
After 2000 yearly reforestation
the yearly reforestationisisexrc,--ted
expected
to continue
to continue atat the
the same
same rate,
rate, taking
taking into
intoaccount
accountthethevatne..r.s
vastness ofof
unproductive forest
unproductive forest areas which will still
still bebe in
in excess of
of 10
10 million
nill,,n ha
by then.
then.

Over 80 percent of the

Ov,s the forest
forest plantations
plantations will
will be
be established
established in
in
,od Java,
Kalimantan, Sumatra and Java, nearly
s,arly half
half of
of them by private companies
companies in
in
their respective cor.oession
their respective concession areas. shows the distribution
Table 44 shows distribution and
and
the
the areas of
of the
the planned
planned Tiazo,c
Timber Estate
E,tate plantations.
 - 207
- 207 --

Table 44

Distribution of
of Timber Estates
Estates
(planned
(planned areas in ha
areas in ha and
and percentages)
percentages)

Island
Island group Area Percentage
ha)
(000 ha)

1.
l. Kalimantan 11 965 31.7
2.
2. Sumatra
Sumatra 11 570 25.3
3.
3. Java 11 560 25.1
4.
4. Sulawesi
Sulawesi 450 7.2
5.
5. Maluku 215 3.6
6.
6. island groups
Other island groups 440 7.1
7.1

Total 6 200
6 200 100.0
100.0

4.2 Species for Planting

Species Recommended for Planting in
in Timber
Timber Estates
Estates

In
In selecting fast-growing, indigenous
selecting the wood species, fast-growing, indigenous ones
ones are
are
preferred. cons idered to
Species considered to have
have good
good prospects
prospects are
are listed
listed in
in
Tabl e 5.
Table 5.

Table 55

Species for Planting in

Species Recommended for in Timber
Timber Estates
Estates

Mean annual
Species
Species inc5ement
inc3'ement Rotation
jha)
(m /ha) (years)

wood
Construction wood

l.
1. grandis*
Tectona grandis* 5.1 80
22.• Swietenla macrophylla
Swietenia macrophylla 14
14 30
3. spp
Eucalyptus spp 20 25
44.• falcataria
Albizzia falcataria 45
45 15
5. latifolia
Dalbergia latifolia 20.3 25
6. Shorea stenoptera 26
26 30

Pulpwood

l1.. Pinus merkusii 18 10-15

10-15
22.• klinkii
Araucaria klinkii 20 30
3. Eucalyptus spp.
spp. 17
17 10
4. rnangium
Acacia mangium 43.9 10
5•
5. falcataria
Albizzia falcataria 38 10

Fuelwood

l.
1. auriculiformis
Acacia auriculiformis 23
23 10
22.• leucocephala
Leucaena leucocephala 25 5
5
3.
3. Albizzia falcataria
falcataria 45
45 15

** Planted Java.
Planted only on Java.
 -- 208
208 --

Research is
is now
now being made
i., .
nade into the possibility
into the possibility of monocultural
monocultural
planting
plantin of aa number of (feetree species
species of the the tropical
tropic.. natural forest.
natural
well-kno~n nnecies
well ' species ofof good
7.1 ;Aality
quality such
such as
as rnranti
meranti (§h?rea spp.), ~athis
(Ft- ....aspp.). Ag_athis
=-:==::.;,:;r'.;:.S, ramin
ramin (Uon-ltylus
(Gonystylus bancanus),
bancanus), matos
matoa (Pometla spp.).
sl;:.), etc.,
etc., are
genera Aow growinu'a[d
slow require aa close
growing and require close envir
environmentruban
when ttill
still young.
young.

An
An extensively
extensively planted
planted softwood
softwood species is Pinus merkusii,
-s is
is still
whereas Araucaria is still at
at trial
trial stage.
stage.

No Iintensive
ntensl ve development
development of speci al fuel
special fuelwwood-produci og Timber
Timber
Estates will
will be
be carried
carried out
out until
untilatatleast
leastfive
five years from
ye.,,.s now.
from now. The
,rr use
of fuelwood
of as aa source
fuelwood as source ofof energy or or toto gercrAlc
generate electricity
electricity is still
very limited
very limited and,
and, for
for the
the time
time heiag,
being, residue,
residues :-rom
from forest
forest industries
industries or
or
agricultural residues
agricultural continue to be utilized
residues will contipue utilized for
for this
this purpose.

4.3 Tree Improvement

Tree Improvement Procramme
Proqramme

As
As mentione~
mentione) earlier,
earlier, only fast s
fast growing specieses with an
an expected
expected
growth rate
growth of 15
rate of 15 m /ha
/ha and
and suitable
suitable qualities
qualities are
are selected
selected for
for Timber
Timber
Estates.
Estates. Furthermore, there
Furthermore, there should
should be
be sourCeS
sourPe of
of seed
seed that
that are
are capable
capable
supplying quality
of supplying quality seed
seed in
in sufficient
sufficientqutr
quantities.

For this
this purpose,
purpose, tree
tree impr,v. -ent programmes
improvement programmes have
have been
beencart:.:
carried
in aa more
out in systematic way
more systematic way since 1976. Up to
since 1..,6. to the
the end
end of 1983, 4 283 ha
of 1983, h7
of
of seed
seed sources
sources had
had been established, as shown in in Table
Table 6.
6.

Table 6

Established Seed Sources

Sources as
as at
at the
the End
End of
of 1983
1983

ALea
Area of
Number of of
Number of
Type of need source
of seed {hal
(ha) species locations

l. orchards
I. Seed r' Ards

a. Seedling
See 'ling seed
seed orchards
orchards 548 3
3 7
b. Clonal seed orchards
Clonal seed 40 11 22
c. Seed
Seed stands 33 695 10
10 66

Total 44 283

2. Others
2.

a. Mass selection 721 55 66

b~ Provenance trials
Proverance trials 14
14 55 4

Ministry of
of Forestry,
Forestry, Indonesia (1984)
Indonesia (1984)

The 1984-2000 work plan

The 1984-2000 plan envisages
envi the continuous
the continuous expansion
expansion of
of
the above activities and new activit es such as species trials,
activities
establishment of clonal
establishment of clonal banks,
banks, progeny
progeny tests,
tests, etc.,
etc., will
will be
be taken
taken up.
up.

The programme is
is backed
backed up,
up, ámong
among others,
others, by:
by:

(a) The Seed Research Laboratory of the Forestr Research

Institute.

(b) Technology Centre,

The Seed Technology Centre, Bogor.
Bogor.

(c) Improvement Centre,

The Tree Improvement Centre, Yogyakarta.
Yogyakarta.
 209 -~
~ 209
-

4.4 Designation of
of Industrial
Industrial Forest
Forest Plantations
Plantations

Based the demand

Based on the demand projections
projections mentioned in in Chapter
Chapter 2.3,
2.3, it
it is
is
reasonable
reasonable to infer at
to infer at this
this stage
stage that,
that, of
of the
the planned
planned 6.2 million ha
6.2 million ha of
of
industrial forest
forest plantations,
plantations, 85 percent will
85 percent will be designated for
be designated con~
for con-
struction timber, 10
struction timber, percent for
10 percent for pulpwood
pulpwood and
and 55 percent for
for fuelwood,
fuelwood, as
as
indicated
indicated in Table 7.7.

Tablee 77

Designation
Desi nation ofof Industria] ~orest Plantations
Industrial Forest Plantations
b.x~Jl.reas
by Areas andand in Percentages
In Percenta es

Designation
Designation Area percentage
Percentage
hal
(000 ha)

l~ Construction wood*
wood* 55 270 85
2. Pulpwood 620 10
3. Fuelwood 310 55

Total 66 200 100

** Comprising plywood, sawnwood

sawnwood and
and wood
wood panels.
panels.

4.5 Prospects for

for Production
Production

The reforestation plan

1985-2000 reforestation
The 1985-2000 plan envisages
envisages that
that the
the fifth
fifth year
year
will produce
will produce the
the first
first fuelwood,
fuelwood, the the eighth
eighth year
year wood
wood pulp
pulp and
and the
the
fi fteenth
fifteenth year cons tructi on
construction wood "eaul ti ng from thi
resulting nn! ngs.
thinnings. Peak
Peak
production will
production will be reached in in the thirtieth that is
thirtieth year, that is 2015, when
2015, when
logging
logging ofof the
the timber forests begins.
timber construction forests hegins.

A rough production estimate is

is based on the following
asswnptions:
assumptions:

Average Average
growth rotation

- Constcuction
Construction wood 15 m~/ha
15 m33/ha 30 years
- Pu1p."ood
Pulpwood 25
25 m/ha
m,/ha 10
10 years
- Fuelwood 30
30 m Iha
mj/ha 5 years

The estimated production

The estimated (exc~usive of
production (excl,usive of fuelwood)
fuelwood) in 2000 will,
in 2000 will,
therefore, amount
therefore, amount to
to 17.5
17.5 millioT
millio:p mm and
and in
in 2015
2015 iti t will
will reach
reach its
its
highest
highest point,
point, i.e. 94.55 million m
i.e. 94.55 m , as in Table
as shown in
, Table 8.8.
 -- 210 --

Table 88

Estimated Wood Producti')~

Estimated Wood Prodoci
Estates in
Timber Estates in 2000
2000 and 2015

Wood
Wood produ5tion
produ3'tion
Forest m )
(000 m )

Product Plantation
(000 hal
(000 ha)
2000 2015

1. Construction wood 55 270 000*

2 000* 79
79 050
2. Pulpwood 620
620 15
15 500 500
15 500

Subtotal 5 890
890 17
17 500 94 550
94 550

3.
3. Fuelwood
Fuelwood 310
310 300
9 300 300
9 300

Total 66 200
200 26
26 800 103 850
850

*
* Thinnings.

4.6 Timber Estate Development Costs

Calculations on
on the
the basis
basis of
of the
the areal
areal extent
extent of
of the
the forest
forest
plantations have
plantations have revealed
revealed that the
the average
average cost
cost ofof a
a Timber
Timber Estate
Estate
amounts
amour0-5, to
to US$ 600-650 per
US$ 600-650 per ha.
ha. The present average
The present average wages
wages for
for manual
worknrs are
workers are US$
US$ 2-3
2-3 per
per day.
day. Details of the
Details of the development
development cost
cost are
are as
as
follows:

cost
Average cost
ha
per ha Percentage

- Planning and preparation

Planning and US$ 26.0 4
4
- Seedlings 63.5 10
- Planting 430.5 69
Infrastructure
Infrastructure 103.5 17

Total US$
US$ 623.5 100

Accordingly, aa Timber
Timber Estate
Estate unit
unit ofof 50
50 000
000 ha
ha will
will need
need an
an
investment
investment of
of US$ 30 million.
US$ 30 million. This
This maximum expenditure
expenditure isis based
based on
on the
the
assumption
assumption that
that the area lacks
the area lacks transportation
transportat ion roads,
roads, housing
hous ing and
and other
other
facUi ties.
facilities.

explained in
As explained in Chapter
Chapter 3.4,
3.4, the
the Government
Government will
will reimburse
reimburse the
the
concession holders with 60 percent of the total
total cost for the
establishment ofof a a Timber Estate
tate and
and this
this repayment
repayment comes
comes from
from the
the
Reforestation Fund.
Fund.
 -- 211 --

5. 'DiTERAL DE:SIGN
GENERAL TrMBE:R ESTATE
DESIGN OF TIMBER ESTATE: UNITS
UNITS

5.1 Requirements
iirements

A Timber
Timber Estate
Estate isis aa forest
forest plantation management unitunit whi,'
which is
is
designed inin such
such aa way
way that
that it constitutes an economically
it constitutes economically vi viable,
te,
roundwood
roundwood producing unit.
unit. For progress
For progress' sake, some
some form
form ofofcoc.,
cooperation,
horizontal as
as well
well as
as vertic-,l,
vertical, isis needed in the timber
needed in timber business.
business.

tate development
Timber Estate devnt requires relatively
requires relativelylarge,
large, long-term
long-term
investments.
investment. Reasonable profits can be obtained through
pnable pr',3n's through careful
careful planning
planning
with
with due
due attention
attentin toto certai,
certain conditions,
conditions, such
such as:
as:

(a) optimal area of

optimal of the
the forest;
forest;
(b) proper forest organization and
ptnper forest and infrastructure;
infrastructure;
(c) efficient organization and
',indent organization and managemert.
management.

Indonesia
Indo,, a has
has gained
gained much
much experience
uxierienceinicr
the management
7,anagement of
of teak
teok
forests, conducted withIwith aa high
high '1.gree
degree ofof intensity.
r

With certaiu
With certain
adaptations,
adaptation4, the rrnagerial
managerialprinciples
principles are
are most
most likely
l_i,ely to work elually
to work equally
well in
in the
the be,
best interests of the
'
the Timber
Timber Estates.
Estates.

5.2 Areal Extent of Timber Estates

The
The determination
determination of the areal
of the areal extent of a Timber Estate must be
based on economic considerations,
based on considerations, especially on on the
the productivity
productivity per
per unit
unit
of area,
of area, wood
wood value
value and
and interest
interest rate.
rate. Prijasukmana (1984)
(1984) made an
an
extensive analy.,is
extensive analysis using the NPV (Net Value) as the
(Net Present Value) the main
ciitetion resulting
criterion resulting inin minimal
minimal area
area figures
figures where
where the NPV = 0, and
the NPV
optimal area figure,
YH,a1 area figures where
where the
the NPV
NPV is
is maximum.
maximum.

For
For the
the present,
present, the
the guiding
guiding size
size is
is between
between aa minimum
minimum of
of
10 000
10 000 ba
ha and
and aa maximum of 60
60 000
000 ha,
ha, as
as indicated
indicated in
in Table
Table 9.
9.

Table n

d7
Minimum and Maximum Areas
Suggested fo~
Suggested ,t Timber Estates

Average
Estate Unit
Timber Estate unit Mi nimurn
Minimum Maximum rotation
((ha)
hal {hal
(ha) (years)

1. wood
Construction wood 30 000 60
60 000 30
2. Pulpwood
Pulpwood 25
25 000 50
50 000 10
3. Fuelwood 10 000
000 55

AS aa matter of
As of fact, forest
forest plantation
plantation products
products are
are not for a
not for
single
single purpose,
purpose, but they are
but they are utilized
utilized for
for aa variety
variety of end
end uses.
uses. This
matter should bebe taken
taken imito
into account
account in
in determining the
the areal
areal size
size on
on the
the
basis of
basis of the
the results of feasibility studies
studies of
of the
the site
site concerned.
concerned.
 -- 212 -

5.3 Forest 7. ition

The organization
The organization oE the forest
of the forest is is closely
closely related
related toto the
the
hierarchy of the dilerent
oE the di fferent levels
levelsofofmduag,)ment.
management. total area
The total of aa
area oE
Timber Estate is
is divided into the
the smallest
,mallest areal units,
unitq, i.e.
compartments, which are operational
tments, which
,-, operational unIts
units for
t reforestation,
reforestati)r logging
I ,,jging and
and
acivities. The size of these
other related activities. ti.esecompartments
comoart,ents is 1, based
h,zed on
on the
fure.aWz capacity
foreman's c t f7,
for superv il. work,
supervisory work, relating
re',-_ng 10ularly to
parti:,Jarly
reforestation. tments varyvary
e' ,rnar,tori.7.-,nr.:-,rtm,,nts fromtim5050hahatoto 100
100 ha
ha according
a'cordiny toto the
the
implementation
:mph mer7a,.ion system
z},tem uused.'d.

For administrative
For administrative purposes,
purposes, these
these compartments
compartments are
are further
further
into resorts,
grouped into tresorts, resorts
resorts into
into ranges,
ranges, and
and ranges
ranges into
into forest
forest units,
units,
as shown in
as in Table
Table 10.
10.

10
Table 10

Administrative Division Organization

of a Timbt,

Division Areas (ha)

AreaS (ha) Supervisor

Total area 30 000

30 - 50 000 Senior gt,,duate
Senior graduate forester
Fot:est
Forest unit 15
15 - 20 000 forester
Graduate forester
Range 4 - 55 000
4 Senio~ tet.hnician
Senior technician
Resort 1 --
1 11 500 Technici an
Technician

Fo~est units
Forest units are
are areal
areal units fo~ planning
units for planning production
production continuity
continuity
under
under Forest
Forest Management
Management Plans.
Plans. The boundaries
The boundaries oE
of the
the forest
forest units
units
follow,
follow, as
as far
Ear as
as possible, the natural
possible, the natural boundaries oE
of watersheds or
or parts
parts
of them. Aerial
lIerial photos on aa scale
photos on scale oE
of 1:20
1:20 000
000 are ~equired
are required for this
purpose.

5.4 Awork
Road1 Network

The intensity of
The lntensity of the road network is
is lesigned
des ned in
in the
the interest of ,

refote.ptatt)n activities, but the

reforestation activities, the road network
networ,t will also be used for
also be
general rupor,ision
general supervision and in case
and in case of
of forest
forest fires.
fires. Roads for
for forest
f.:,rort
4111 not
exploitation will not be constructed
constructed until
until the
the forest
forest is
is math,:-for
mature fo~
logging.
logging

The road intensity

The road intensity isis planned
planned to
to be
be at
at least 10 m/ha,
least 10 m/ha, consisting
consisting
~oad and
of 2 m/ha main road and 88 m/ha
rn/ha branch
branch road.
road.

Branch roads
roads simultaneously
simultaneously functi00
function as fire-belts with both
fire-belts with both
sides cle so that
sides clear total width
that the total fs ++ 20
width is 20 m.

5.5 Timber Estate

--'ate Management

F.:ates, for
Timber Estates, for which
which Forest
Forest Management
Management Plans have been been
prepared based
b inventory results,
on forest invento17Y results, the
the physical
physical conditions
conditions of
of
the terrain and
the terra,1 the socio-economic aspects of
an.: the of the
the areas
areas concerned,
concerned, will
will
be placed under
be placed unde'! intensive management, similar
intensive management, similar to to the teak forests on on
Java.
Java.
 -- 213 -
-

The plantations will

The plantations will be
be given
given treatment
treatment according
according Lo
to intensive
intensive
silvlcultural methods in
silvicultural methods in order to accelerate
orde" to accele,ate tree
tree growth without damaging
the soil and
the soil and the
the environment.
environment. Research
Research and
and development
development will support the
will support the
forest development programme.
forest programme.

As middle management
As middle management units,
units, Timber
Timber Estates
Estates will
will be engaged in
be engaged
many activities.
many activities. Por example, in aa 50
For example, 000 ha
50 000 ha work
wot'k area,
area, the
the following
following
activities will
activities will occur
occur every
every year:
year:

Yearly
Yead:t activities

a. Reforestation
Peforestation 2
2 000 ha
Forest tend i ng
Foest Lending 10
~j/a
b. 10 000 hl
C.
c. '.00c:-.g, transportation
Logging, 750
750 000 mo/a
d.
d. Marrketing
Yarketing 750
750 000 m3/a
m'/a

The management organization

The ,7.anagement organization is on the
is founded on the areal
areal system
system as
as
follows:

Generral
General manager 11
unit
Unit managers -
2 - 33
Porest
Forest rangers - 15
6 - 15
Supervisors
Supervisors 18
18 -- 75
75

Requirements for
Requirrements for permanent personnel,
personnel, trom
from managers
managers down
down toto
foremen, 300 persons
toremen, are estimated at 300 persons per
per Timber
Timber Estate.
Estate. Recruitment isis
arranged
arranged in
in stages in pace with the
stages in the progress
progress of
of the
the establishment
establishment ofof the
the
forrest
Eorest plantation.

6.
6. SOCIAL ASPECTS OF FOREST l'TNTATIONS
PLANTATIONS

6.1 The Forest-for-People Concept

The Forest-tor-

There isis aa fiE-

firm, , general i.,:reness
awareness that
that forests
forests should benefit
should benetit
the community
the community asas much as polble
as possible in a a direct
direct way,
way, especially
especially t,, the
inhabitants
inhabitants of the zurroundinn
surrounding irea.
area. An interrelationship exists
exists betw>ci
between
the sustained growth
the sustained growth of '11, forests
of the and public
:,rests and public welfare.
welfare. A
A forest
forec',.. can
prosper
prosper well only in
well only in aa prosperous
pr,spei.a social
social environment. The re.ers.'
reverse w ti
will
happen if the
the people
people lilivee in
in pcwerh;. condition will
This condition will be,iomv ;.1-ct
become evident
if we trace it backDacl to ttte e ,ause; of forest degradation
of forest degradation in in many
D.'
developing countries.
countries.

Besides producing
producing wood
wood as
as chieE
chief objective,
objective, the
the forest
forest also
also
provides a
provides a wide
wide opportunity
opportunity for
for cultivation
cultivation of
of corn,
corn, rice,
rice, grass,
grass, edible
edible
mushrooms, honey-bees,
mushrooms, honey-bees, etc.,
etc., and
and other
other activities
activities which
which benefit
benefit thethe
torest dwellers.
forest T, ii basic
This basic idea
idea has
has led
led toto the
the developmeal
development ot of the
the
concept of Forests for the
concept DE I -1 Peplo,e, which
which has
has become
become the
the platform
platform fort )r the
hhe
development of the agro-forestry
development of system.
tial'c Jr; system. This system
This system comoinu,
combines farming
fa>:ming
forest planting
with forest planting ',,thout
without distupting
disrupting the
the main
mainfunction
functionDEofthe
theEi,refit.
forest.

Indonesia has
has aa long and extensive
long and extensive experience
experience inin the
the field
field of
of
agro-forestry in the
agro-forestry in the forests
forests DE
of Java.
Java. The following two
The following two chapters
chapters report
report
on the
on the situation and
and techniques ofof agro-forestry
agro-forestry and
and the
the results
results obtained
obtained
on Java.
on Java.

6.1.1 Raising the social function of the torest

Jaya with
Jara with its
its 132
132 187 km 2 land
187 km2 land surface
surface has
has aa density
density of
of 691
691
persons/km and is thethe most
most populous
populous region
region of of Indonesia.
Indonesia. About 8080
percent of the
percent the population
population are
are farmers
farmers with
wi th an
an average
average land
land ownership
ownership of
of
 -- 214 --

0.63 ha per
0.63 ha per family.
family. This condition has
This condi'ion has brought
brought about
about aa state
state of
of "land
"land
hunger" and aa low
hunger" low 1level
eve 1 of income.
income. It e>;erci
lt ses a
exercises a great
grea t piessure
pressuce on
on the
the
forests
forests which cover only
which cover only 2.3
2.9 million,n ha 22.7 heLhent
ha or 22.7 cent of the
the land
surface.
surface. The deteriorating forest condition is
Thy daterioratinc: is the
t result
re,1 It of
of over-
grazing, haphazard
grazing, collection of
naphizid collection of fuelIwood
wood and
and wood
wood for
for construction,
construction, and
and
land grabbing.
graola.n.

Besides
Resides taking appropriate security
taking appropriate security measures
measures to overcome the
to overcome the
problem, the Government has
problem, the has also
also adopted
adopted aa policy
policy relating
relating to
to the
the welfare
aspect
aspect under a
a programme known
known as
as the
the "prosperity
"prosped ty approach".
approach".

Perum Perhutani, the state enterprise in charge of of the

management of the
management of the forests
forests of
of Java,
Java, has
has nince
since long
long been
been carrying
carrying out
out this
this
among other
policy, among other things,
things, in
in the
thefolio,:
following ways,
(g ways:

(a) Maintaining
Mainta.ning the 1:
labour intensive nature
ni'- Ira of forest
management in
mabajo-tent areas of reforestation,
in areea , ...i,resiation, forest
f(rea*t tending and
and
exploitation. The entire
ei, ire 2.9 million ha forest
2.9 millipn forest area
employs 350 000 peor
enploys peoplele (1982), of which 15 000 are
permanent
er,,,anentemployees
employeesand
and 335335 000
000 seasonal
seasonal workers.

(b) Spreading the

the practice of
of the
the agro-Eorestry
agro-forestry system.
system.

( c) Other activities
Other activities aimed
aimed at
at promoting
promoting the
the prosperity
prosperi ty of
of the
the
inhabitants
inhabitants in
in the
the forest neighbourhood including
foist neighbourhood including fuelwood
fuel wood
production, construction
construc of
i
simple houses, school
buildings, catchments, etc.
buildings, water catm ,

6.1.
6.1.22 Aa-o-l"orestry

A(if
Agro-forestry
'stry methods
metf-iiswhich
which have
have been
been put
put into
into practice are,
practice are:

(a) Agro-silviculture
a.gro-silviculture (the tumpangsari system),
system), which isis the
planting of
of food
food crops
crops between
between rows
rows of
of young
young trees
trees during
during
the reforestation period.
the reforestation period. This is
is widely
widely applied,
applied, where
where
2-4
2-4 families take part in
families take in one
one hectare
hectare plantation.
plantation.

(b) Silvopasture, which

which is
is the
the growing "elephant-grass" for
growing of "elephant-grass" for
cattle feed among forest
cattle reed forest treed.
trees.

(c) silv.'-(iy
Silvofisheryor
or fish-mo-1
fish-pond forestry, which is fish
fish or shrimp
breeding in coastalma
1 coastal mangrove forests.

(d) -: orestry, i.e. thee p1a'r.1nq

Farm-forestry, of trees
planting of trees on
on farms
farms for
fuel wood or cattle feed.
feed.

(e) Apiculture to
to breed
breed bees
bees for
for honey
honey production.
production.

( f) Sericulture, i.e. breeding of

Sericulture, i.e. of silkworms
silkworms that
that feed
feed on
on leaves
leaves
of mulberry trees
of mulberr/ trees cultivated
cultivated in Eorest areas for the
forest areas
of raw
purpose of raw silk
silk production.
production.

The extent
extent of
of thaae
these activities
activities and
and the
the average
average output
output during
during aa
period oE
period five years (1976
of five (1978-1982) are set
1'82) are set out
out in
in Table
Table 11.
11.
 Table 11
11

Average
Average annual coverage oE
annual coverage agro-forestry
of agro-Eo restry and
and output
output on Java
on Java
(average figures
Eigures flor
Eor the period 1978-1982)
the perIod 1978 1982)

Yield
Type of Area Number oE
Nwnber of
agro- forestry
agro-Eorestry (ha)
(hal farmers
Kind
Ki nd Quantity

Agro-silviculture
1. Agro-silviculture
l. 50 000
000 150 000 corn, rice,
corn, rice, etc.
etc. •
2.
2. Intensified
IntensiEied agro- 33 567 11 031
11 Cvt:'O,
corn, rice,
t"ice, etc.
etc. 2 088 tt
IV
silviculture ....
V>

3. Obat-obatan
3. 82 •* ginger, etc.
etc. 13 tt

4. Silvopasture
4. 591
591 •* grass 863 tt

5. Si
5. 1 voEi shery
Silvofishery 40 •* fish, etc.
fish, •*
6.
6. Farm forestry 49 531
49 531 *• fuelwood 362 029
029 m3s
m3 s

77.
• Bee-keeping 3 004
004 1 594 honey 2 980 kg
kg

88.
. Sericulture 729 •* cocoon 84 724 kg
84 kg

Source: Perum Perhutani, 1983

Perum 1983

• Unrecorded.
 -- 216 -
216 -

REFERENCES

Alrasjid, Barun.
Harun. Aspek-Aspek pembanguna bufan
hutan tanaman
tanaman industri.
industri, Paper
r
1984 for
for Seminar Timber Estate
Seminar on Timber Estate Development,
Development, Bogo~
Bogor Agriculture
Institute, Indonesia.
Institute, Indonesia.

Mangundikoro,
Mangundikoro, Apandi. Pola dan strategi penge:oangan
dan strategi pengembangan hutan
hutan tanaman
tanaman
1983 Rinds, merkusii. Paper
paper for Symposiom oo
for Symposium on utilization
utilization of Pinus
of-,;:;~~:_
morionii forests.s. Forest products
Producto Research
-oh losti tute, flBogar,,
Institute,
fr;j_i'n,ta.

Mangundikoro,
Mangundikoro, Apandi. and programme
Policy and mJcimme for
for forest
forest resource
resource develop-
develop-
1983
1983 meot in Indonesia.
ment Paper poster session
Paper for postell -elon of of International
Symtusi4m on Strategies and
and Designs
Delions for Afforestation,
ion and
R'rLreItmtiOn Tree Planting. Agdcultural
Agricultural unive~sity,
University,
ngen, The Netherlands.
Waceningen, Netherlands.

Mangundi koro, Apandi.

Mangundikoro, Apandi. Rencaoa frmum
Rencana umum pembangunan Estate. Paper
pembangunan Timber Estate.
1984 for
for Seminar on Timber Estate Development.
Seminar on Development. Bogar
Bogor Agriculture
Institute, Indonesia.
Institute, Indonesia.

Martawijaya,
f1artawijaya, A. e:::.::.~:=::~
A ••.et al. Alas kayu
kayu Indonesia.
Indonesia. Forest
Forest Products
Products Research
1981
1981 Instit Indonesia.
Institute, Bogar,f Indonesia.

f1i l1i stry of

Ministry of Forest.
Forest. Rencana Pembangunan Kehutanan
Kehutanan RECITA
PEL ITA IV.
IV. Mi ni s try
Ministry
1983
1983 of Forest,
of Forest, Jakarta, Indonesia.
Indonesia.

B.D.
Nasendi, B.D. Proyeksii demand
demand dan
dan supply
supply kayo -ri
kayur,menjelang
ng tahun 2000
ahun 2000
1984 dan 2020.
2020. Paper for
Paper for Seminar onon TimD.- -es Development.
Timber Estates
Bogar
Bogor Agriculture Institute.
Institute. Bogar,
Bogar, Indon(-slo.
Indonesia.

Perum Perhutani. tahun 1978-1982.

Buku saku statistik tahun 1978-1982. Perum Perhutani,
1983 Jakarta.

perum
Perum Perhutani.
Perhutani. The
The role of forestry
role of forestry in
in rural
rural community development in
in
1982
1982 Java. Perum Pechutani, Jakarta.
Perum Perhutani,

Priasukmana, S.
S. Bahasan ekonomik pembangunan Timber Estate.
Estate. Paper for
for
1984 Semi oar on Timber Estates Development.
Seminar !log
Bogoror Agri cuI ture
Agriculture
Institute. or, Indonesia.
Bogor, Indonesia.

Ginting, A.N.
Cinting, A.N. et
et al al. agro-forestry dan
Proceedings seminar agro-forestry dan
1981 Perl angan.
Perladangan. Forest Institute. Bogar,
Forest Research Institute. Indonesia.
Bogor, Indonesia.
 - 217
- 217 --

LABOUR IN
TRAINING OF LABOUR IN A
A NEW
NEW CELLULOSE
CELLULOSE PULP
PULP MILL
MILL
ALTO S.A. AT PUERTO
ALTO PARANA S.A. PUERTO ESPERANZA,
ESPERANZA,
- ARGENTINA
MISIONES -
Based
Based on the work of
of

J. E.
J. E. Balcker*
Balcker*

CONTENTS

Page

1. INTRODUCTION 219

2. DESCRIPTION OF THE
THE AREA IN
IN WHICH
WHICH ALTO
ALTO PARANA
PARANA S.A.
S.A.
OPERATES 219

3•
3, DESCRIPTION OF THE
THE PROJECT OF
OF ALTO
ALTO PARANA
PARANA S.A.
S.A. 220

4• TRAINING 220

4.1 Training - Project and

Training - and Erection
Erection 220

4.1.1 related to
Comments related to training
training in
in the
the project
project and
and
erection phase 221

4.2 Training -
- Start-up
Start-up 221

4.2.1 Comments to training

Comments related to training in
in the
the start-up
start-up phase
phase 221

4.3 Operation
Full-Scale Operation 221

4.3.1 General technical

General technical training
training for
for existing
existing company
company
personnel 221
221
4.3.2 Special technical training
Special technical training for
for personnel
personnel joining
joining
the company
the 222
222
4.3.3 training (management,
General training (management, human
human relations,
relations,
supervisory relations, etc~)
relations, etc.) 222
4.3.4 Cultural company personnel
Cultural training of company personnel 222
4.3.5 Extension of technical
technical and
and cultural
cultural training to
communities in
in the
the area
area 222

4.4 Training in the

Training in the Forestry Sector 222

4.5 Outsiders
Training of Outsiders 223

4.5.1 Scholarships 223

4.5.2 Programmes for summer
Programmes for summer students
students 223
4.5.3 Temporary training
training jobs
jobs 223
4.5.4 Agreements with training
training institutions
institutions 223
4.5.5 Cultural training
training 223

5. POSITIVE TRAINING
POSITIVE POINTS OF THE TRAINING 223

5.1 Training for the

Training for the Plant 224
5.2 for Forest
Training for Forest Operations
Operations 224
224

* General Manager, Empresa Witcel Sacifia,

General Sacifia, Buenos
Buenos Aires, Argentina~
Aires, Argentina.
 -- 218 --

6. NEGATIVE POINTS
POINTS DF
OF THE TRAINING 224
6.1 for the
Training for the Plant
Plant 224
6.2 Training for
for Forest
Forest Operations
Operations 225

7. SUGGESTIONS FOR
FOR MINIMIZING PROD E S DURING FUTURE
PROBLEMS FUTURE
INSTALLATIONS OF THIS TYPE 225
225

B. CONCLUSIONS 225
225
 -- 219 -
-

1. INTRODUCTION
New industries
industries which are are going to to be
be installed
installed in in isolated
isolated areas
areas
will be
be subjected
subjected te to circumstances
circumstances that interfere
interfere with their erection,
with their erection,
start-up and subsequent
start-up subsequent full-scale
full-scale operation.
operation. The various problems which
The various which
present
r.,.:6entthemselves
themselvesarearea aconsequence
consequenceof of distortion
distortion -- real
real and
and imaginary
imaginary -
imposed on thethe region
region where
where thethe industry
industry will
will bebe established.
established. These
These
distortions
d;.,tortions affect
affect the
the local
local population
population on on account
account of of changes in the
iH the
sociologic
sociologic and
and economic environment and and in
in the
the infrastructure.
infrastructure. This
it:- will
harden the local
harden the local inhabitants
inhabitants in in clinging
clinging toto local
local uses
uses and
and habit.,
habits and
.,,nd may
may
lead
lead to
to resentment
resentment against
against the "intruder" and
the "intruder" political reactions.
and to political reactions.

To avoid
avoid these problems it
these problems it is, therefore, helpful to
therefore, extremely helpful
study
st,o!.beforehand
heforehand the
the impact
impact which
which the
the planned
planned industrial
industrial venture
venture will have
will 1ive
the region
on t1e region and
and on
on its
its local
local population.
population. This
This should minimize fr friction
tion
between the
the local
local inhabitants
inhabitants and employees attracted from from other
other arE
areas and
reduce resentment against
reduce resentment against the new industrial
the new complex~
'industrial complex. Such
Such aa was
carried
carried out
out by Alto Paraná
by Alto ParanA S.A.
S.A. and,
and. based on its f,ndings,
based on aons ,:ere
findings. actions were
taken
taken before
before start-up,
start-up, which
which proved to be
proved to be the
the correct
conr,cz approach.
appro&c.

2. DESCRIPTION
',:RTPTION OF
OF THE
THE AREA
ARH. IN
IN WHICH
WHICH ALTO
ALTO PARANA S.A. OPERATES
OPERATES

Alto Paraná
All,. ParanA S.A.
S.A. est
established
-)lished its mill in the
its pulp mill the province ofof
Misiones, named
Misiones, named after
after the
the m'
missions
.,,nsfounded
founded by
by the
the Jesuits
Jesuits in
in 1631.
1631. 2It is
,It is
situated
situated inin the
the north-eastern
north-eastern part of of Argentina,
Argentina, covers
covers 29
29 801 km
km`,, h2s
h:rs
455 000
455 000 inhabitants,
inhabitants, whichwhich translates
translates into
into 15.3
15.3 inhabitants
inhabitants per km • .

Misiones produces
Misiones produces corn,
corn, rice, sugar, teal (Paraguayan tea),
tea, mate (Paraguayan tea), manioc
manioc
and tung
and tung oil
oil (from
(from seeds of thethe tung
tung trees;
trees; used
used in in varnishes,
varnishes. paints
paints and
and
as
as aa waterproofing agent).

The province
province of
of Misiones has
has a forested
forested area
area of
of some
some 200
200 000
000 ha,
ha,
of w'.:ch
which approximately
approximately 80
80 percent
percent are covered by by pine
pine plantations.
plantations. This
forestry
forc:.,y extension resulted from the
extension resulted the favourable
favourable conditions
conditions for
for plantations
plantations
of :....twood.
of softwood. Misiones has hills
Misiones has hills which
which range
range from
from 100
100 to
to 300
300 m m above sea
sea
level, has
level, has aa subtropical
subtropical climate, with a
climate, with a yearly
yearly average
average rainfall
rainfall ofof
11 640
640 mm and an
mm and an average
average temperature
temperature of 19.3 0 C (minimum
of 19.3°C _3 0 C, maximum
(minimum -3°C,
40°C).
Taking advantage
Takin( ,ivantage of this exceptional gift
this exceptional gift ofof nature,
nature, Celulosa
Argentina S.A.
S.A. commenced from 1940
-menced from 1940 onwards
. ---ls wi th trials
with involving over aa
trials involving
species of pine
hundred speci, 'pine collected
collected fromr,. allover
all over thethe world.
world. Results
Results ofof
these trials ....wed
these trials showed amazing yields and felling
amazing yie--- i,lling cycles for for some
some species.
species.
For Pinus elliottii
For instance rinus elliottii (sle3),
(slash pine),
pine), which in in the
the south
south ofof the
the
U.S.A., its pi,ice
U.S.A., its of origin,
place of origin, regu4res
requ1res 40 40 years
years toto mature
mature and
and has
has aa yield
yield
which does not
which does not exceed
exceed 1616 to
to 17
17m /ha/a, produced
m /ha/a, produced much
much better
better results
results inin
Misiones with aa prcIductive
Misiones pr~ductive cycle
cycle that
that oscillates
oscillates between
between 1818 and 25
25 years
years
and
and aa yield
yield of 30 mm /ha/a.
fha/a.

Forestry
Forestry related
related research
research and development were
and development followed by sys-
were followed sys-
tematically
tematically establishing new new plantations.
plantations. Assistance was given to
Assistance was to local
local
farmers and
farmers and loggers,
loggers, byby making
making the
the results
results ofof research
research known
known to
to them,
them, by
by
giving technical advice,
giving technical advice, hy
by teaching
teaching them
them forest
forest practices,
practices, by
by supplying
supplying
seeds to
seeds to them
them atat subsidil.,d
subsidized prices
prices and creating nurseries,
and by creating nurseries, which
which
created aa strong
strong bond
bond between Celulosa
Celulosa Argentina S.A. and and the
the local
local popu-
popu-
lation. All these activit,,,s
All these activities made
made Misiones
Misiones the
the cradle
cradle of plants such as
of plante as
those
those of ParanA S.A.,
of Alto Paraná S.A., Papel
Papel Misionero,
Misionero. Celulosa
Celulosa Argentina
Argentina S.A.
S.A. and
and
the future one
the future one ofof Celulcsa
Celulosa Puerto
Puerto Piray
Piray S.A.
S .A. It also led
It aleo led to
to the
the dis-
dis-
tinction that
tinction that Misiones
Misiones today
tOday is is the
the most
most important
important forestry
forestry area
area of
Argentina.
 -- 220 -
-

3. DESCRIPTION OF THE PROJECT

PROJECT OF
OF ALTO
ALTO PARANA
PARANA S.A.
S.A.

The pulp mill that

that Alto
Alto Parana
Parana S.A.
S.A. installed
installed at at Puerto
Puerto Esperanza
Esperanza
in province is
in Misiones province is scheduled
sch-duled to produce
produce l77 172 500
500 tt of
of bleached,
semi-bleached
ser.-bleached and and unbleached
unbleached kraft--Iii pulp perper year.
year. The consumes aa
The mill consumes
total
total of 1.1 million tt of
1.1 million of scLiw-od
softwood perper year,
year, which
wlii includes
ncludes firewood
firewood to
generate
:sits steam and power.
steam In
In 0)1
forestry operations it employs 600
prof'eE,sionals,
ii,rfensienals, technicians
technicians and ann labourers;
lop,urers; the mill i dlnys 291
employs profes-
291 profes-
sii,rals, technicians
sionals, technicians andand administrative
admin.strative personn-
personnel and ood 114
104 labourers.
of the
the plant took place
plant took place in 1982.
in November 1982. Raw
Now material
material isis sup-
p_ted trim
plied rom softwood
softwood plantahionn
plantations located
located inin aa subtropioal
subtropical area,
area, semi-
isolated with regard to
isolated to roads
roads and
and population.
population.

personnel employed
The personnel employed by
by the
the company
company consisted
consisted of
of two
two completely
different
different groups; providing the
groups; one providing the raw material,
material, the
the other operating
operating the
industrial
industrial complex.
first group was
The first composed mainly
was composed mainly of
of settlers
settlers of
of the
the area,
ares, with
with
concepts of
different ..onGupts of social
social life,
life, strongly
strondly bonded
bonded to
to primitive N3DitS
habits and
customs,
customs, with limited cultural
with limited cultural bacNuiouvd
background and,
and, in
in some
si:Tecases,
csei, even
e-eo speak-
ing
ing aa different
diffeltent language.
language. Some had ac.oirei
Se-, hon acquired skills
skills asad corpeoters,, elec-
tricians
tricians and
ano motor mechanics a7:.
and aa limited oumber
number of
of tnom
them wo,e
were trained
trained for
for
certain jobs inin the
the industrial
industrial complex.
iip:ex.

The second
second group
group co--- sted of
consisted of higher
higher skilled
skilled technicians
technicians and
and
professionals for the
required for
professionals required the various
various stages
stages in
in the
the erection,
erection, start-up
start-up
and full-scale operation
and full-scale operation of
of the
the project.
project. Since
Since these not available
these were not available
locally, they had
locally, they had to be attracted from
from other
other parts
parts of
of the
the country.
country.

It
It must bebe pointed
pointed out
out that
that both
both groups
groups had
had toto live
live in
in the
the al-
al-
ready
ready existing
existing towns and in those
towns and those that
that would
would eventually
eventually have
have toto be
be deve-
deve-
loped. These groups of employees converged
These two groups converged into
into the
the Puerto
puerto Esperanza
Esperanza
area and created
area and created serious
se!!i ous problems
problems for the muni cipal i ties of
the municipalities of the
'he three
affected towns which
affected towns which found
found their
their lerv,cing
servicing capacity
capacity ove:'burienvo
overburdened by the the
influx
influx of these new
of thdo new arrivals.
arrivals. This was noticeable
Tais wad noticeable pa!:'i.dolarlv
particul relating
to
to drinking
drinkinu water and schooling Eaol'i'ues.
wi,er and facilities.

TRAINING
TRAINING

above information
The above information has been
been included
included so
so as
as to
to create
create aa better
better
understanding
understanding of
of the
the problems
problems which
which had
had to
to be solved in
be solved training for
in training for the
the
three
three distinct
distinct phases ofof development:

project and
and erection;
erection;
start-up;
full-scale operation.
operation.

4.1
4.1 Training - Project and Erection
Training - Erection

basic engineering
For basic neering the
the cdT^any
company was
was assisted
assisted by by technicians
technicians and
and
specialists with experiel,ce
specialists with in the
ence in the prcd, 'on of
production pulp from
of pulp from one
one of
of the
shareholding compan
shareholding companies. Lc..7.hnicians became
Some of these technicians became part of the
part of the
permanent staff
staff of
of Lhe
the ciompany.
company.

For
For detailed
detailed engineering aa contract
contract was
was signed
signed with
with aa local
local Firm,
firm,
which worked hand
which worked hand in
in glove
glove with
with an
an international
international consulting
conSUlting firm
firm a1-
-
ized in
ized in cellulose and paper.
 -- 221
221 -
-

Already at this
Already at this initial
initial stage,
stage, young
young professionals
professionals without
without any
any
previous experience inin the
the pulp and
and paper
paper sector
sector were
were hired,
hired, which
which allowed
allowed
these engineers and
these engineers and technicians
technicians toto gather
gather experience
experience and
and to
to train
train them-
them-
selves
selves from the beginning of the p~oject.
the project. In
In the
the later
later stages of develop-
stages of
ment they became
ment they became supervisors
supervisors ofof the
the area
area which
which had
had been
been their
their responsi-
responsi-
bility
bility during (under the
during erection (under the control
control ofof the
the consultants).
consultants).

The training
The specialists of
training specialists of the
the consulting firm and
consulting firm and of
of certain
certain
suppliers
suppliers contributed
contributed to the training
to the training plan
plan for
for the
the technical
technical personnel,
personnel,
which
which was
was hired
hired in
in stages
stages during
during the
the erection
erection period,
period, constituted
constituted work
work
groups for
groups for each
each area
area and
and were
were destined
destined toto become
become the
the operating
operating staff
staff of
of
the area.,
the same area.
At this
At this point
point the importance
importance should
should be
be stressed
stressed of
of the
the valid
valid
contribution made
contribution made by
by the
the external
external training
training specialists in each
specialists in each of
of the
areas
areas where
where they
they were
were responsible for
for training
training activities.
activities~

4.1.1 Comments related

Comments related to
to training
trainin. in
in the
the project and erection
eroect and erection 'hase
phase

prediction that
The prediction that the
the good
good professionals,
professionals, which
which Argentina
Argentina has,
has,
would prepared to
would be prepared to adapt
adapt themselves
themselves to to aa new
new job
job under
under the
the guidance
guidance of
of
consul tants and
consultants and equipment
equipment manufacturers,
manufacturers, proved
proved toto be
be correct.
correct. pro-
The pro-
fessionals were trained
fessionals were trained to transfer their their knowledge;
knowledge; they
they subsequently
subsequently
trained successfully in
trained new work groups successfully in their
their respective
respective areas.
areas. Language
differences
differences between the Argentinians
between the Argentinians and and their
their foreign
foreign mentors never
never
became aa serious
serious problem due to to the
the professionalism
professionalism of of both
both groups.
groupso
Mutual understanding is
Mutual is made easy
easy through
through technical
technical language.
language.

Only 10
10 percent
percent of
of the
the required
required labour
labour force
force of
of technical
technical level
level
came from
came from the
the area
area where
where the
the project
project would
would operate.
operate. Ninety percent came
Ninety came
from
from different
different parts of the
parts of the country;
country; of
of this
this 90
90 percent,
percent, only
only one-third
one-third
had experience in
had previous experience industry~
in industry.

Initially turnover of
Initially turnover of personnel
personnel was
was very high,
high, which complicated
complicated
hiring resulted in
hiring and resulted in duplication
duplication of
of training
training for
for many
many jobs.
jobs.

4.2 - Start-up
Training -

The groups
The groups created
created during
during the
the project
project and
and erection
erection phase
phase were
were
responsible for
responsible for the
the start-up phase
phase under
under the
the competent
competent management
management of
of the
the
foreign supervisors~
foreign supervisors.

The consultant
consultant firm
firm and
and the
the equipment
equipment manufacturer
manufacturer each
each supplied
supplied
one supervisor until
one until suitable
suitable local
local personnel
personnel with
with previous
previous experience
experience in
in
substitute these
similar equipment could substitute these supervisors.
supervisors. ToTo ease trans-
ease this trans-
fer, personnel
fer, personnel from
from Alto Paraná
Parana S.A.
S.A. had
had been
been trained
trained abroad
abroad toto gain
gain
technical
technical and operational experience
and operational experience with thethe equipment that
that would bebe put
put
under their
under their supervision
supervision after
after this
this training
training period.
period. In addition to
In to these
these
measures, help
measures, help was
was requested
requested from
from Scandinavian
Scandinavian and
and Brazilian
Bl!azilian pulp
pulp manu-
manu-
facturers
facturers which sent groups
which sent groups ofof technicians and operators for training
and operators
during
during periods ranging from
from three
three to
to six
six months.
months.

4.2.1 Comments
Comments related to training
related to training in the
the start-up phase
phase
Training during the
the start-up
start-up period
period was
was efficient
efficient and
and effective,
effective,
which be concluded
which may be concluded from
from the
the fact
fact that
that nominal
nominal production
production was
was reached
reached
ten
ten months
months after start-up.

4.3 Full-Scale
Full-Scale Operation
In
In order
order to
to provide adequate training
training in
in accordance
accordance with
with the
the
requirements of the
the plant,
plant, Alto
Alto Paraná
Parana S.A.
S.A. carries out the following
carries out
training programmes:
pfogrammes:
 - 222
- 222 --

4.3.1 General technical training

General technical training for com~any personnei
for existing company personnel

4.3.2
4.3.2 Special technical )ng for
technical training for personnel joining the
personnel joicing the company
company

4.3.3 General
Gerr-, training
raining (management, human
h relations, supervisory
,

Is, etc.)
relations.

Special
Sp-iial attention is is given
given to
to management,
management training. Although
technical
technical tr)niPg
training of
of all
all personnel
personnel is
is important,
important, it
it can be achieved , )

reI at i vely easily.

relatively eas i ly. Management
Management training
trai ni ng is,
is, howu:er,
however, ev)n
even more important
because it it tar,,
takes much,7-'1 time
time and effort to
and effort to develo
develop rc,i
real managers- wi th the
))th
necessal!Y special blend of
necessary spe, competence and
of competence and vision
vision necessary to manage le a
large group of men
large group families with
:)n and their families with such
such di
diffellent backgrounds
iAds
settled in
settled in isola:ed
isolated areas,
areas, and
and to
to avoid
avoid friction
friction hews
beween their personnel. ;

the local popUlation

the local populationand andthe
theauthorities.
autriH-s.
4.3.4 Cultul!al training of comp,r%
Cultural training company pe
personnel
tnel

The general training

training mentioned above and
and the
the cultural
cultural training
training is
for the
for the company's personnel,
personnel, aimed
aimed at
at aa better understanding
understanding of,
of, and
integration with the
the community.
community.

4.3.5 Extension of
of technical
technical and
and cultural
cultural training
n too c
communities
Pies in
the
the area

training is
This training is intended
intended to
to improve
impuove communication
communication between
between the
iinhabitants uf the
nhabi tants of the area
arrea and
and the company's
company's personnel
pel:'sonnel which
"'hich came
came from
fl:'om other
aueas of
areas of the country.
country.

The company
company has
has the
the fo ,ing sou.rces
following sources on
on which
which it
it can
can draw
draw to
to
carry out the above training
carry out training pros
programmes:
)s:

(a) company technicians

techni ci aos and
nd engineers
eng who give
i neers who give courses
courses after
after
WOlt k i og hours;
working hours;

(b) specially hired

teachers and professors, specially hired by
by the
the company;
company;

(c) techni ci ans and

technicians and ski 11 ed workers
skilled wOl:kel.'s hired
hi red by the
the company for
training purposes;

(d) national and

and international
internatioral organizations, located in the
country, which
",hich give
give tr.iiring
training courses in the
courses in the area
area or
Or in
in their
their
locations;
respective locations;
(e) national and provincial cultural organizations
organizations and well-
kno",n which give
known personalities which give lectures.
lectures.

4.4 Tllainiog in t)
o in the Forestry Sector
ry Sec)

Whi 1 e the
Whilr the :irojn
proj ect and erecti 00 phases
rdd erecti- pI ant wi)
the plant
phases of the were in
in prog-
ress, the forestry
ress, the figtry sector started with the
c,r.arted wit:. the training its own rersonnel
training of its personnel -

and, indirectly,
indirectly, with that of the
witn that personnel of the
the personnel VI for the
contractors
the conf
logging operations.
logging operations. Training these people, of
these people, of which
which the peculiarities
per),liarities
have been described
havg been described above,
above. was
was carried
caltt'ied out
out by
by technic:il
technical personnel
personnel which
which
Fci
had previously
previously been
been trained
trained ininc overseas
overseas techniques by ae foreign
techniques )/ foreign con-
sultant.
s,.1tant. These techniques
These techniques of felling,
felling, skidding,
skidding, loading,
loading, etc.,
etc., were
quickly and
absorbed quickly the training results
and the results were
wet'e excellent.
excellent.

Independent
Independent ofof training courses for
training courses company personnel,
for company personnel, tuition
tuition
courses wi 11 be
courses will extended to
be extended to different
different regional
regional organizations.
organizationS, so as to
so as to
create
create employment
employment sources and availability
availability of
of labour.
labour. This
This will
will not only
meet the requirements
meet the requi rements of the company,
of the company, but
but also
also those
those of
of the of
the province of
Misiones which
Misiones bases aa large
which bases large part
part of its employment
of its employment on the
the forestry
forestry
sector.
 -- 223
223 -
-

4.5
4.5 Training of Outsiders

Alto Paran6
Parana has
has not
not only
only taken
takencare
careofofthe
thetraining
trainingofofits itsexi.S;.-
exist-
ing pPrronnel but
ing personnel but it
it has
has also
also considered
considered the
the possibility
ibility ofof their
their replac,,-
replace-
ment
sen C. lIotation,
or tlrai oi og those
rotation, training t5.,-c professions
professionals,s, techni cians and
technicians and workc,n
workers
outside the company
outsine the company who
who might
might ire
be potential
potential candidates
candidates for for the
the ot'ganization
organization
or, possibly,
p_ssibly, elsewhere in the count"y
country to satisfy the country's
:requirements~
requirements.

The 1latter is achieved

ter is through:
achieved through:

4. 5.1
4.5.1 Scholarships
Scho"

These are e granted

granted to those
hose '-lrionals
essi onal s or
Or advanced students
advanced students
considered capable
considered cap ie of fuHi 11 ing the company's
of fulfi needs.
:'s needs. Subsequently they
they
may join
join the
the ccompany not.
mipany or not.

4.5.2 Prograrnmds for

Programmes for summer astudents

cular
These rrr,rammes
cular attention
programmes arr
attention Isis paid
paid during
rY
are meant for
dulIing ttheir
for forestry
forestry students,
with
students, to whom parti-
the company
with the
r company in
parti-
in order to
irder to
enlarge their
enlarge their tn.wledge.
knowledge. As inin the ous case,
the prev ous
1 future employment
case/ future emplGrenf is
is
not automatic cesul:..
not an automatic result.

4.5.3
4.5,3 Temporary
,orary training
f. jobs

Du:dng thei:r; last

During their last year of engineering,
yni:r c1 errr:Th.?,,,ing,students
studentsare
are allowed
allowed to
extend
r!,:v. their theoretical knowledge
1.::.,ledge by romlementing
complementing itit with ical
with practical
ence in
,,x,.erience the company
in the company...:-u-.' 'rrrnd
They are trained forfor specific jobs by company
specific jobs
personnel appointed
appoi nted as ins tructors; th
instructrzs7 Lr.s
i s allows
all ows tthe
he company
company to to choose
choose
possible candidates for for future
futUre employment
employment after
after graduation.
graduation.

4.5.4 Agreements with trainin9 institutions

Anothe~
Ancthc.: training
trainir.:: methodfor
method forpossible
possible future
future personnel
personnel ofof the
company consists
cona:,ts of r'r: with univecsities,
of aagreements tuition institutes,
universitierr. tnttion
schools, etc.
artisan scho,lc., etc. Thee purpose
. purpose of rents is
of these agreements is to
to share
scholarship expenses
scholarhio expenses for
for aa certain
certain number
number of
of studcnis,
students, some
some of
of whom
whom will
will
be e-pl.,;:'d
be employed bybythethecompany
companywhen
whengraduated,
graduated, while
while the
the rest
rest will
will find jobs
find jobs
within the
'-.rprovince.
province.

4.5.5 Cultural training

Cultural training

Finally,
Fin,-11y, within
within the
the framework
framework uf of integral
integral training,
training. Alto Parana
Rdran.3
S.A. offers
cr_ to the
rs to the communities
communities cultural
cultural training
training through
through lec lectures,
ir paint-
naint-
ing and sculpture
:ulpture COUrses
courses (given byby specialir's
specialists from
from the
the Federrl
Federal Capital),
physica1 training
physical training and
and elementary
elementaryhyqiene
hygienecourses,
cr r, etc. In
In other words it
othce words it
provides
provider; access
access to some of the
to some ameni ties of modern
the amenities modern life
I i fa such
such as
as those
found
found inin developed
developed centres ofof the
the country.
countrry.

5.
5. POSITIVE POINTS
POINTS OF THE TRAINING
TRAI~ING

The positive
The positive points
points relating
"elating to
to the training
training of
of personnel for
erection,
erection, start-up
start-up and full-scale operation
and full-scale operation of the
the plant
plant and
and for
for forest
forest
operations
operations are the
the following.
following.
 - 224
- 224 --

5.1 Traini'
T~aining fo~ Plant
the Plant

the b( inning
From the
From inning ofof the
the project
projectyoung
young engineers
engineers with
with drive
drive and
and
energy were incorped in the project and erection phase which proved to
energy we]?e incorporated in the pl10ject and erection phase which p]?oved to
be very
be very successful.
successful. It also
It alsoallowed
allowed these
these engineers
engineers totoobtain
obtainknowledge
knowledge
and gather
and gather experience
expedence which wouldhelp
which would helpthem
themeffectively
effectively during
during the
the sub-
sub-
sequent development stages.
development stages.

Considering the lack of local .fessional services and labour,

Considering the lack of local professional services and labour,
th- only possible solution was to hi
the only possible solution was to hire firms and and engage
engage labour
labour from other
from other
a. .s
areas of thethe country.
c tv Taking
. into acci
Taking into that only 20 percent of the
accountt that only 20 of the
pens.onnel had
hired personnel ! .!-evious
ous experience that production
experience Aand that production came
came on
on stream
stream
more ..)7 ies at tid planned time shows tne positive result of the training
a. -re or less at the aoned time shows the positive result of the training
oeco_atility of the Argentinian
and versatility Argentinian professionals.
professionals.

The firms which contributed to the planning and erection of the

The firms which contributed to the planning and erection of the
plant did not only show their capability to adapt to difficult situations
plant did not only show their capability to adapt to difficult situations
but also
but also aa depth
depth of
oftechnical
technicaland human
and human know-how whichprroved
know-how which proved theireligl-
their eligi-
bility for contributing to similar projects.
bili for contributing to similar projects.

Relations between the

Relations foreign consultants,
the foreign represn atives of
cons-oltants, representatives of
equimnL manufactur,r4
equipment Argentirian management
manufacturers and Argentinian 0,.l5gement remained
rer% i,ndly,
friendly,
whirn may be
which be the
the reult
resultofof
reciproca/ ur.ler7.tanding
reciprocal understanding on
on tec-:,i .atters
technical matters
cela,niii to
!relating to the
the erection
erectiin of
of the
the plant.
plant.

5.2 Training foi

Training operations
for Forest! Operations

Training proved
Training proved toto be
be successful.
successful. Personnel quickly
Personnel quickly learned
learned the
the
newtechniques,
new techniques, introduced
introducgl toto them
them by
by aa team
team of
of instructors
instructorswho
who had
had aa good
good
sociolo.liCalgrasp
sociological graspofof the
the mentality
mentality ofof the
the people
people under their supervision.
under their ion.
lo,:eptance by the local people of the instructors contributed to
Th, acceptance by the local people of the instructors contr buted to
The
improv, the
improve the personrol cv'ations between
personnel relations between these
these two It also in-
two groups.
groups. It also in-
creased the :fticien
creased the efficiency ofr the le workers.
workers.

iation by
Cooperation by the local communitieswas,
7.al communities was,doubtlessly,
doubtlessly, an
an impor-
impor-
tant ele.. the achi
tant element in the of these results.
achievementt of these results. When, becauseof
When, because of out-
out-
side reasons, a sl
side reasons, slackeni
ackeni of thi
of thiss coope<:'at
cooperation
i on was felt, an iimmediate
was fel t, an mmed i ate
reduction in
reduction in general
general efficiency
effie ency waswas noticed.
noticed.

The
The capability
capabi 1 i tyofof
company
company management tu understand
(nanagement to the various
understand the various
different kinds of personal problems uf the working force was one uf the
different kinds of personal problems of the working force was one of the
most important
most importantfactors
factors in in achieving
achieving the
the targets
ta~gets which
which had
had been set.
been set.

6. NErl7IVE POINTS
NEGATIVE POINTS OF
OFTHE
THETRAINING
TRAINING

!-ocative poiltn relating to the training for the various

The negative points relating to the training for the various
phases c.
phases !doject ate ti.-
of the project are the following.

6.1 Training for

The area in which the pulp mill prof!, it
The area in which the pulp mill project was was developed
developed did
did not
offer adequate facilities for echooling, housidd, health care and amuse-
offer adequate facilities for schooling, housing, heal th care and amuse-
ment, which
ment, whichare
are normally
normally provided developed areas of
pro,idel inindeveloped of the
the country.
country. This
was the
was the main
main r',:!on rag h,g, rotation
reason for the high Eotation rate personnel luring all
riI of
o, personnel during all
development phases.. Efforts :ale by time compdny to alle/lite ttet,e
Effor-..s we.-e made by the company to alleviate these
arly .4
*

short,mings,
sho.-tcomings, partiCUlarly of -Lie, those smenitien
amenities41. wete not,
Oli were
which iro,of-
di insuf-
not, or
ficlntl!,
ficiently, supplied tne !,overbmnt.
,!cl by the Government. This inv61-ed unforeseen
This involved unforeseen addi-
addi-
tional investment
tional i A" for the
for thecompany.
company.

The impact of the project on the infrastructure and services of

The impact of the project on the infrastructure and services of
the villages
the villages was
was vecy
very negative.
negative.With a lot of effort these services had
With a lot of effort these services had
been created by the villages to satisfy their needs. The influx of all
been created by the villages to satisfy their needs. The influx of all
the new
the people involved
new people involved with
with the
the development
development of
of the
the project
projectoverburdened
overburdened
 - 225 -

these services, and

these services, and instead
i of considering g the
the pulp
pulp mill
mill asas aa basis for
basis for
progress
progress of the aree.
of the acea, it,1", and
ar.1 the people inJ3lved
tie re,ple involved with
with it,
it, were
were seen
seen by
by
the
-Le local
lo,al population
pwilat:Ji as 17. 1L.iadcr,
invade"s. acti ria, casen
Actions, taken by
by the
the company
company to im-
im-
prove
PTW,. these
tFese services, compensated
7onpensaz,i atlt least
IciFt in
19 part forr the
part for the damage done toto
this celationshlp t_wevec, never
-elitl)rh,r which, however, never reached
reached the expected
expected level.
level.
Different La, r
L.:Ceren' habits, customs,
1," ns, needs
reo' aneand oh-Lios,phies
philosophies wece responsible fOIl'
were responsible for
this.

6.2 for Forest Operations

:L
The 3uripPh1ir3 7.90
ems surrounding the training
,:rairi7g for:
for forest
forest operations were
were
basicall
basically theC same
lqe as
1? those
01(.3(.. described above, but
DLIt to a lesse" degree. This
a lesser
be
may 7e to
t the
he fact
fa"- that f)re.try ..oe:atio:is
that for-estry have always
operations have always been
been asso-
ciated
ciai-: withh a certain amount of
rectiin amoun' "roughing it",
of "clu2n.;. and iitt certainly
it", and helped
certainly helped
that the instructot:s in forestry techniques
in f,rentry techniques had
had aa thorough
thorough knowledge
knowledge of
of
the lit
life
- style and petL'-'ir
pattern off the native inhabitants.
he nati'e inhabitants.

Extraneous factors
Extraneous factous of
of ideological
ideological and
and even
even political
political origin
origin
caused
caused slight
slight ,HfEiculties but no serious
difficulties but sedous problems.

7. rrinNS FOR
SUGGESTIONS
r FOR MINIMIZING
HINIMIZINGPROBLEMS
PROBLEHS DURING
DURING FUTURE
uZIONS OF
INSTALLA'rIONS OF THIS TYPE
TYPE

Considecing that these

Coi idering that these industrial
industrial establishments
establishments generally
generally will
will
be installeu close
be installed close to
to the
the origin
origin of
of the
the raw
raw material,
mate"ial, it is logical to
is logical to
think
think that
that everything that happened
everything that happened to Alto Paran
Parana S.A. could be repeated,
S.A. could
few changes,
with a few changes, during
during the
the installation
installation of of similar
similar plants,
plants.

In
In addition to to training,
training, attention
attention will,
will, therefore,
therefOre, also
also have
have to
be paid to
be paid to resolving
l7esolving or
or avoiding
avoiding aa series
sedes of humanhuman problems
problems that
that will
will
no~mally arise as
normally as aa result
result ofof the
the relationship
relationship between people
people from
from deve-
loped
loped countries
countries and those from
and those from developing
developing ones,
ones, but
but also
also between
between people
people
from
from developed and developing
developed and developing areas
areas within
wi thin the
the same
same country,
country. Before
Before the
physical installation
physical installation ofof aa project
project is
is initiated,
initiated, answers
answers should
should be
be found
found
for
for some
some basic
basic questions on On the
the people
people involved:
involved:

What is is the
the structure
structure ofof the
the established
established society
society in
in the
the area
area
where the the mill
mill will
will be
be installed?
installed? Which their habits,
Which are their habits,
customs
customs and needs? needs? Which their native
Which is their native language?
lang How is
Flow is
their behaviour
behaviour with regard to themselves and toward
n int.r:ude.r:st!?
"intruders"?

The same questions

The same questions should
should also
also bebe asked
asked about
about the
the arriving
arJ:iving
group, in
g110UPI in other
other words
words the
the "intruders",
"intrudet"s" I even
even though
though some
some are
are
of the same nationality.
of nationality. It
It is
is even more important
important toto obtain
obtain
information
information un on the foreign personnel,
the foreign personnel, whose
whose social
social and
and eco-
eCO-
nomical circumstances
nomical circumstances differ basically from from those
those of thethe
local personnel.
local personnel. native tongue
Their native tongue usually
usually is dif-
is also dif-
ferent from
Eerent from that
that of the
the local
local population.
population.

8. CONCLUSIONS

Well-planned, executed
Well-planned, executed and
andmaintained
maintainedhuman
humanpar l lei
c ion is one
is one
of
of the
the most factors contributing
most important factors contributing toward
toward aa positive
positive r,
return
'urn on the
investment.

The role played by

by local
local personnel
personnel during
during the
the development
development of
of the
the
project
project is
is fundamental;
fundamental; as such it must be
be recognized
recognized and
and analyzed.
analyzed.

The role of personnel

personnel hired abroad
abroad for
for training
training should be limited
limited
only to
only tu instructing
instructing and
and adv_sing
advising during
ducing each
each of
of the
the erection
erection stages,
stages,
without any operating respons bilities.
 -- 226 -
-

Foreign instcuctocs
j<'ol:'eign instructors should
should be
be able
able to
to judge
judge thee personnel
[lersonnel they
they
are training, not
are training, not from -bethe point
point of view
view of methods of rl own
of theit' JWII countdes
countries
of but with
of origin, but wi th aa r!:.ion
vision and
and understanding ofof the tc..
technical
ical and
and social
s?cial
capabilities of the the p ~sonnel to tk'ained. To achieve
to be trained. achieve this,
this, prelim,r9rz
plteliminary
r ,o must be
courses be mmi
g ven
vc. to all instltuctors and equipment
instructors equipment erection
ernrtio,
super:visors.
; ors.

Different
Diffnr,r.t.cultural
cultural levels
1-,els and languages
n-oes should
should not
not be
be impediments
to mutual
to undevstanding and
mutual undnrfranding and ofhicient
efficient ppersonnel
,-,r,n1 integration,
integration, provided both
parties know beforehand the
the level
level they
they will
will face.
face.

Foreign instructocs must

Foreign instructors practical training
must have an excellent practical training and
be qualified
in:lified as teachecS1 of
as teachers; these two
of these two conditions,
conditions, the
the latter is the
latter is the most
tanto
'tent.

Whichever is chosen for

Whichever language is for the
le full-scale
Full-scale production phase,
it must
it must allow
allow integral
integral and
and reciprocal 'standing.
reciprocal nundetrstanding.

The length
The length ofof stay
stay of
of eachh in-tlructor should be
instructor should be the
the maximum
possible.
possible. lost in
Time lost approaches and
fomenting new approaches
in fomentir: and eventual
eventual friendship
ft:iendship
between local and
between local foreign personn
and foreign personnel is
is thus
. thus avoided,
avoided, enabling the
the latter
latter aa
better understanding ofof the
the former.
forme".

In
In the
the optimizing
optimizing stage ofof the full-scale
full-scale operation of the
the plant,
personnel exchanges in
personnel exchanges in certain
certain areas
areas (maintenance,
(maintenance, quality control,
control, etc.)
etc.)
with foreign companies is
with foreign is advar'ageous.
advantageous.

It is felt
It is felt that
that the
the rrr,,
most neffective
effectiveway
way to
to train
train new
new personnel for
personnel for
an operation such
an operation as the
such as the one described in -his
scribed in this report
report isis for
for pedods of
periods of
not more
not more than
than four
tour months
months in similar operations
in similar oporations abroad,
abroad, and
andan
an equal
equal
period in the
period in the project of
of the
the hnne
home country.
country.
 -
- 227
227 --

EDUCATION AND TRAINING IN

EDUCATION IN FORESTRY

by

the Secretariat
the

CONTENTS

Page

1. INTRODUCTION 228

2. FAO
FAO AND
AND FORESTRY EDUCATION AND TRAINING 228

3. LEVELS
LEVELS OF FORESTRY EDUCATION
EDUCATION AND
AND TRAINING
TRAINING 229

3.1
3.1 University Education 229
229
3.2 Technical Education
Education 229
3.3
3.3 Training
Vocational Training 230
230

4. NEED FOR CHANGES IN

IN FORESTRY
FORESTRY EDUCATION
EDUCATION AND
AND TRAINING
TRAINING 230

5. TRAINING FOR
EDUCATION AND TRAINING FOR FOREST
FOREST INDUSTRIES
INDUSTRIES 231
231

5.1 Managerial Functions in

Managerial in Forest
Forest Industries
Industries 231
5.2 Operative Functions
Supervisory and Operative FUnctions in
in Forest
Forest
Industries 232

6. CONCLUSION 232

REFERENCES 233
 -- 226
228 --

1. INTRODUCTION

The importmceof
The importance of education
educationand andtraining
training in
in any
any field
field ofofhuman
human
knowledgeisissufficiently
knowledge suf'ihently recognized
therefore seem repet
might therefore
recognized by
repetitive
i t i ve and
and even
all sectors
by all sectors of
superfluous
even super
of society,
society, and it
fl uous totorerefer
fer toto th
this
is
it
aspect in
aspect in aa meeting
meeting organized
organized by byFAO.
FAO.

However,the
However, the Secretariat
Se";-etar.1atofof this
this meeting
meeti has desired
has desired to discuss
discuss
this
this topic
topiconce
oncemore because of the
morebeca the special
special relevance
evance ititacquires
acquireswhen
when
not only
not only technicians
technicians and p,-,-,usionals responsible
and professionals responsiblefor
for aa given
given social
social or
or
economicsector
economic sectorare
aretoto participate
parAcipate in in development efforts but
development efforts but also
also the
the
communitiesconnected
communities connectedwith
with this
Lhis sector.
sector.

implies adequate
This implies preparation and
adequate preparation training of
and training of technicians
and professionals
and professionals to
to ensure
ensure that
that inin their
their professional
professional activities
activities they
they
adopt an
adopt anattitude
attitude conducive
conducive toto such
such participation. It also implies
participation. It also implies
action to
action to prepare
prepare the
thecommunities
communi ties or or groups
groups concerned to play
concerned to play an
an
increasingly more
increasingly active part
more active part in
in development efforts.
development efforts.

These efforts
These efforts must, of course,
must, of course, bebe guided
guided by the policies
by the policies and
and
stretegies
stra ies that
that each
each country
country has
has set
set as
as short,
short,medium
medium oror long-term
long-term
objectives.
object ves. The types and and methodologies
methodologiesofof the
the education
education and
and training
training
Tr,;-'mmes -o-t be
programmes must be ,....:i..1 to the
t"elated to the economic, social,political,
economic, social, political, cultural
cultural
,thnic aspects
and ethnic -:ects ot
of eachn country.

2. FA() AND
FAO AND FORESTRY EDUCATION AND
FORESTRY EDUCATION AND TRAINING
Fromits
From its inception,
inception,FAO
FAD has
has been awarethat
been aware that progress
pi Jniess in
in the
the
forestry
forestry sector
sector of country, just
of a country,
a just as
as ininany
anyother
othereconomic
economic sector,
sector,
depends on
depends its ability
on its abilitytotoplan,
plan,organize,
ot"ganize, direct,
dil!ect, control and evaluate
control and evaluate
its own
its own development.
development. For
For this
this itit needs
needs not
not only
only adequate
adequate financial
financial and
and
material resources,
matedal but above
t'esources, but solid core
all aA solid
above all core of
of well-prepared staff.
well-prepal:'ed staff.
the field
This problem in the field of forestry f ny development,
development, forfor which
which the
theFAO
FAO
Forestry Department
Forestry Department is is responsibL...,
responsible, led led the
the Organization
Organization to to study
study these
these
aspects in
as;:c.-.(S in depth.
depth. Betwee
Between 1956 and 1964
10'16 and 1964 four
four meetings
meetings ofof aa Technical
Technical
Panel on Forest
oa Education in Forest17Y were
were organized, resulted in
organized, which resulted in the
erJablis',, at of
establishment of anan advisory ,;mittee to
advisory committee to assist
assist the
the Director-General
Director-General in in
this fie
this field.

The FAO
The Advisory Committee
FAO Advisory Committee on ,-stry Education
on Forestry Education isiscomposed of
composed of
29 expetts
experts nominated
nominated by
by the FAO Mes
FAO Nations designated
Member Nations designate" by by the
the
Director-General. Since 1964
Director-General. 1964 the Committeea has
theCommit has met 12 time,'
met 12 times inin va-iLcus
various
conhtries to
countries to analyze the various as levels of forestry
cts and levels
aspects ir .itry
E i ation.
education.

With
Wi th the
the guidance
guidance of this Committee
of this Committee the
the programme
programme ofof the
the
firestry sector
fotJestlfY in this
seeto" in field has
this field has developed along the
developed along following main
the following main
lines of
lines of action:
action:

(a) assessmentofofthe
assessment the needs
needsfor
for trained
trained personnel;
personnel;

(b) improvement
improvement ofofexisting
existing institutions
institutions and
and study
study plans;
plans;

(c) establishment of
of new educational
educational institutions
insti tutions of
of
different
different levels;
levels;

(d) distribution of
distdbution of information f ,:astry schools
information on forestJ;y uchools and
education centres
education centrestoto facilitate
facilitate the
the exc
exchange of experience
ence
and communicationsbetween
and communications betweeninstitutions.
institutions.
 -- 229 -
-

Following these lines,

Following these lines, estimates have been made of the the needs
needs for
for
trained, personne'l at
trained vrscnnel_ at various
various levels and in certain
::,..rtain specific areas of
spe.:ific areas of
act ion in
action 11- forestry
in the sector (e.g.
forestry sector (e.g. wood
woodte,1?.u-logy,
technology, pr imary mechanical
p.!*.ry mechan ical
wood industries,
wood industlis, forestry
forestry planning,
planning,etc;)
etc.)andanothe:ne situn, as
situation, as regards
regards
forestry
forestry education
education and training in
and training in practically
practically allall regicos
regions of the
the world
world
and in many individual
and in individual countries, has
has been
been reviewed.
reviewed~

In recent
In recent years,
years, asas aa result
result of the addition of
of the of the
the social
social
aspect of forestry to to the traditional objectives of
traditional objectives of conservation and
conservation and
production, the the educational
educational programme
programme ofof the forestry sector
the fooestry sector has
has been
been
devoting particular attention to updating and strengthening courses,
improving the methodology and and efficiency of teaching
te,.- ing and reorienting
curricula. The demands
curricula. demands made on forestry
made on are consLmtly
forestry are constantly increasing
increasing and
and
chang ing, so
changing, that it
so that is essential
it is essential for
for the
the currict.,
curricula ofof schools
schools atat all
levels to
levels to be
be somewhat
somowt, progressive.
progressive. If to
If to this
this is
is aoded
added the
the growing
growing part
part
that communities are taki
that communities taking oror are
are called
called on on to take in forestry
development, co,,Ilenge facing
dev,,icoment, the challenge ing those
those responsible
responsible for the the sector
sector is
enormous.
enc.::ous. They, therefore.
therefore, need training that that will
will provide
provide them
them with
with
appropriate instruments
approp,iate instruments for
for analysis
analysis and
and action.
action.

3. LEVELS
LEVELS OF FORESTRY EDUCATION AND TRAINING
It is obvious that
is obvi there can
at there can be
be little
little forestry
forestry development
development at
at
either national or regional
either national .onal level unless both the
level unless the necessary
necessary specialized
specialized
staff and the
staff and the local
local population concerned are
p nulation concerned arB educated
educated and
and trained.
trained. This
This
is not
condition is not always
always fulfilled,
fulfilled, particularly
particularly as
as regards
regards training.
training.

Many countries do not have the educational and training

facilities required
facilities required to t: provide the necessary
provide the necessary flow
flow of
of trained
trained personnel
personnel
or, where these
or, these f,,Lilities
facilities dodo exist,
exist, no
no provision
provision is is made for
for the
the
material and financial
mato7ial financial assistance necessary
necessary to
to make the
the best possible use
use
of them.
tionii. situation is
The situation is particularly
particularly serious
serious as
as regards
regards the
the training
training
of f,,,:e,:try
forestry and andforest
forestindustry
industry workers.
workers.

33.1
.1Un i v"Es i ty Education
University Educat ion

with
With regard to university education, Latin America and
South-East as a
Asia as
South-East Asia a whole are
are well
well off
off compared
compared with
with other
other developing
developing
regions, since
regions, since they have aa good
they have gc,0 chance of of being
being able
able toto meet
meet their
their
personnel needs.
needs. In some
some co. ,,ies there
countries there may even
even bebe aa surplus
surplus ofof
trained professionals.
trained professionals. The s.'
The situation
i'lon isis different 1n Africa,
different in Africa, where
where in
many countries the
many countries the need
need for
for well-trained
well trained personnel
personnel has
has been
been under-
under-
estimated for
for too
too long.
long.

However, many
many countrie,
countries 7:till
still need enormous efforts
need to make enormous efforts to
to
improve this
improve this level
level of
of training
trairi-.,-; by: devoting
by: devoting more
more attention
attention to to the
the
trairii
traini,. and refresher
J-fresher training
traini.,:, of the teaching staff,
staff; improving and
improving
increas ng equipment
increac -. equi,--nt andand latori,,:,ies
laboratories for education, in
for practical education, in which
many forestry soi
many forctry schools are deficient;
ools are deficient; adapting
adapting curricula
curricula toto the
the forestry
forestry
situation in
situation in the
the country
country andand national
national development
development programmes;
programmes, broadening
broadening
the areas of
the areas of attention
atteW m within
within thethe sector
sectorofofpc...!'essional
professional interest
interest and
and the
the
scientific discip]Hr
disciplines , connected with university education (ecology,
with univc23ity
environment, economics, sociology,
sociology, anthropolooy,
anthropology, administration, tech-
nologies, etc.);
nologies, and establishing
etc.), and establishing appropriate lnks between
appropriate links between theoretical
theoretical
training, practical
training, practical aspects
aspects of the profession and research programmes,
programmes, so
that practical solutions
that practical solutions may be be found
found toto solve
solve the
the problems
problems of of the
the
sector.

3.2 TechnicalI Education

Tech Education

A irh t still
A very great deal still remains
remains to to be
be done
done in
in all
all the
the developing
develoing
reg ions in the field of
regions techn ical
ot techni. 11 educa tion.
education. The present and
The present and future
1-1,ture
needs for forestry
needs for forescy technics
technicians gic.w
grow and
and become
become more
more acute
acute as
as aa con:
country7y
 - 230 --
-

commences to
commences organize its
to organize its forestry and initiate
forestry sector and field actions,
initiate field actions,
resulting in a need for staff skilled 1n many different aspects
in
(plantations, harvesting,
(plantations, harvesting, agro-forestry,
agro-forestry, logging,
logging, management
management of
of wildlife
and reserves,
and reserves, conservation,
conservation, control
control and inspection,
inspection, extension work,
training,
training, etc.)
is aa certain
There is certain tendency,
tendency, particularly
particularly in in Latin
Latin America,
America, to
have small regard
have small regard for
for technical-level
technical-level training.
training. is partly
This is partly due
due to
to
cultural,
cultural, social andand economic
economic factors.
factors. TheThe general trend is
general trend is to
to transform
schools into
into university centres,
centres, after
after they
they have
have been
been operating
operating for
for aa few
few
years, so
years, so that t'e
the technical
technical personnel
personnel so so necessary
necessary in in the
the forestry
sector is
is in
in even 3horter
shorter supply.
supply_

3.3 Voc aining

In countries the
In many countries the vocational
vocational training
training of workers and
of workers field
and field
staff
staff engaged in in forest management operations
forest management operations in natural forests
in natural forests and
and
antations, in
plantations, logging, road construction,
in logging, construction, industrial
industrial operations, etc~,
operations, etc.,
is still at aa very
still at elementary level
very elementary level and
and in many cases
in many cases is
is practically
practically
non-existent,
non-existent, although
although it it has
has long
long been
been recognized
recognized that
that vocational
vocational
training is
training is essential
essential ifif forestry
forestry operations
operations are
are to
to be
be carried
carried out
out more
more
efficiently
efficiently and the socio-economic
and the socio-economic condition
condition ofof the workers and
the workers and rural
communities is
is to
to be irnprovede
be improved.

Unlike professional
professional training, which is is the responsibility
the responsibility of
university institutions,
university institutions, and technical training, which is usually
training, which usually the
the
responsibil
responsibility of the
of the public sector or,
public education sector or, in
in some
some cases, of the
cases, of the
bodies responsible for for administration
administration ofof the
the forest
forest resources,
resources, vocational
vocational
worker training
or worker training in in the
the forestry
forestry sector
sector isis mostly left to
mostly left to the
the private
sector, i.e. to the enterprises themselves, which obviously
to obviously limit
themselves to to providing
providing basicbasic instruction
instruction in in each enterprise's
enterprise's own
operations, through
operations, through very
very short
short training
training courses.
courses.

4. NEED FOR CHANGES IN

IN FORESTRY
FORESTRY EDUCATION
EDUCATION AND
AND TRAINING
TRAINING

The new
new objectives
objectives ofof forestry development to
forestry development which reference
to which reference
has been made above present
has present aa further
further challenge
challenge toto forestry
forestry education
education and
and
training at
training at the various levels.
the various levels. The educational
The educational profiles
profiles of of the
professional
professional and and technical schools must
technical schools must be
be changed
changed to to embrace
embrace newnew
concepts and
concepts and to incorporate into the traditional
into the traditional subjects items from
subjects items from
other sciences
other sciences that
that will
will enable thethe new
new foresters
foresters toto carry
carry outout their
their new
new
tasks and to
tasks and to cope
cope with
with the
the newnew financial,
financial, organizational,
organizational, social, social,
requirements. The teaching
economic and technical requirements. teaching institutions
institutions must also also
encourage their professionals
encourage their professionals and technicians to update
and technicians update their
their knowledge
knowledge
and to run permanent education
and education courses.
courses. The participation and and motivation
motivaticn
of
of the
the rural
rural community,
community, which
which is is particularly
particularly demanded
demanded by by the
the nEw
new
philosophy of seeks to
of action which seeks to improve
improve the
the standard
standard of of living
living ofof the
people through a a more balanced use uSe of agricultural and and forest
forest land,
land, calls
calla
for more
ton extensive and
more extensive and continuing
continuing vocational
vocational training.
training.. This canno;
This cannot bebe
left to the private sector
the private sector alone.
alone. Direct, massive
Direct, massive and and decentralized
decentralized
action by
action by the institutional
institutional and teaching
teaching structures
structures of of the sector is is
required.

It
It is precisely
precisely here that the need for linking forestry
education
educal ion and training with research and extension
extension work
work becomes
becomes most
most
apparent. Research makes it
Research makes it possible toto provide
provide concrete
concrete solutions
solutions toto
the teinnical and
the technical and social
social problems
problems presented
presented byby forestry
forestry development
develcoont
depending
.ulding on the different ecological,
the different ecological, social, political and
social, political and economic
economic
circumstances
c .umstances ofof each country; forestry
each country; forestry extension
extension work
work makes
makes itit possible
possible
to disseminate,
to transfer the
disseminate, transmit and transfer the results
results obtained
obtained to
to the
the sectors
sectors
concerned, becoming a
concerned, a medium for
for training,
training, particularly
particularly atat vocational and
levels.
rural levels.
 -- 231
231 -
-

5. EDUCATION
EDUCATION AND TRAINING FOR FOREST INDUSTRIES
For aa time
time training for forest
training for industries has
forest industries has received
received less
attention
oni on in
in planning
nlarn,ng and assistance than professional and technical
than professional
education for management of
-ation for of the
the forest
forest resources.
resources.

FAO, its Regular

through its
FAO, through Regular Programme
Programme and
and under
under guidance
guidance of
of the
Adv isory Committee
Advisory Commi t tee on
on Forestry
Forestry Education,
Education, has deal t with
has dealt with education
education and
and
training
training for
for forest
forest industries
industries onon many
many occasions. Various regional
occasions. Various
meetings have
meetings have been
been organized
organized on on training needs in
training needs in this
this sector of of
forestry-related these have
forestry-related activity, and these have irrefutably
irrefutably shown
shown the
the extent
extent of
of
the
the deficiencies.

In develop
In develon.na countries various
.--Lcutries varicus training
training centres
centres have set
have been set
up for forest init.FtLie-,
for forest indus , oarticularly
particularly for
f.01_ sawmilling,
sawmilling, but in some cases
but in cases
their
ir impact has been
impact has neon only temporary, because
only temporary, they have
because they have not
not shown much
-iEy to
ability to surviee
survive oil
either
her for
for economic
economic reasons
reasons or because the the staff
staff
responsible for training
onsible for training had left.
left.

The need for

The need for education and
and training
training inin forest
forest industries
industries is
is
evident at all levels,
levels, managerial,
managerial, sup,rvisory
supervisory and
and operative.
operative.

5.1 Managerial Functions

Manager- Forest Industries
LL-7ns in Pcr :4ustries

In most of or the
le developing
develop!: - countries management of forest
_ndnetrie., usually
industries, usually inin the
the hands
hands uf
of various
various kinds
kinds ofof professionals
professionals
( ineers I foresters
tergir.ce.r..., foresters,r lawyers', economists, etc .. ) suffers
economists, etc.) from serious
suffers from ser 10us
iencies.
defie.iencies. This is
is reflected in in underutilization
underutilization of of the
the production
capacity in
capacity in most of thethe forest
forest industries
industries inin these
these countries.
countries. This
situation has
situation has undoubtedly played aa part in hindering
undoubtedly played hindering progress in the
forest
forest industry
industry sector and consequently
sector and consequently also
also inin plans
plans for
for forest-based
t-based
economic and and social
social development.
development.

At aa different
different level
level of complexity,
complexity, owing owing toto the size
size_ ofef the
industries,
industries, the same difficulty arises
the same arises inin the
the management of of small
.1711: rural
community industries.
or community industries. long as
So long as they
t have the
have the assistar.cc
assistance and and
technical
te..-hnical and
and even administrative
admisietrative superv sion from the public
supervision public or
financial
:':mancialbodies
bodies that
that promoted
ptomoteo and
and guided
guided them
them inin the
the initial
initial phase,, they
they
G¡,21.3.
operate and satisfactorily; but when, in
and develop satistootorily; in the
the second
second phase,, these
these
bodies hand
bodies hand over
over the
the manaciement
management ofof the
the enterprises
enterprises to their own
to their members,
own members,
all kinds
all kinds of problems arise owing owing to
to the
the managerial incapacity
incapacity of the the new
managers, this soon leads
managers; this leads toto the
the collapse
collapse or Inrmination
termination of the the community
experiment in
experiment the area
in the area where
where the
the forest
forest rerources
reSources are are being
baing logged
logged oror
utilized.

In this respect forest industry

this respect development prniFotn
industry dovelopscint projects cf of this
type, which materiali-,-L
type, which materialized L.7ter
after careful analyi,e
analysis cif -i.7.pe,ts relat
of the aspects relatleo
to
to planning, organization,
planning, organii.Lti ,n,monitoring,
monitoring, control
contiLl and
and evaluation
eLaluatlon, havelave j

largely ignored the

largely the important aspect
.spect of
of training
training the staff who will
the staff will have
to and administ,ir
to direct and administer the activities
.-tivities of
of these
these projects.

Whatever the
the degree
degree of
of complexity
complexity of
of aa forest
forest industry,
industry, without
without
competent
competent management
management it
it will practically
practically bebe impossible
impossible to
to ensure
ensure aa
satisfactory
satisfactory yield
yield and
and consequently
consequently the
the continued
continued existence
existence of
of the
the
industry.

It is not easy to
It is to propose
propose or
or define
define aa programme
programme forfor the
the 'rainim-;
tra
of forest industry
of forest industry managers,
managers, andand only
only very
very few
few institutes
institutes offFr
offer any
anys.ica
course.
course. The
The Ygryvery diversity
diversi cf
of the
the professionals
professionals who who perfor,
perform :hese
these
functions
functio s makes training di icult.
d..ffifoJt. However, it
Howeler, it .5
is obvious
obvious that the
tht the
success of
success ci aa manager in
in achieving
6c.-.71ng the
tha technical, economic and
economic
 -- 232 --

administrative
administrative objectives set by each enterprise
objectives set enterprise will depend not
will depend not only
only on
his personal characteristics and
personal characteristics empathy, but
and empathy, also on
but also on his ability to
ability to
and use
adopt and use the technical tools provided
provided in
in the
the various
various scientific
scientific
disciplines (sociology, administration, economics, policy
disciplines (sociology, policy etc.).
etc.).

55.2
. 2 SSupervisory
11.p.,rvisory and
and Operative Functions in
1n Forest Industries
Industries
In
In supervisory
supervisory tasks,
tasku, which
which normally
normally are the responsibility
are the responsibility of
technicians, training isis of
o' vital importance.
importance. In industrialized
industrialized
countries, techniciansar..
countries, technicians Hlly directly
are usually directly responsible the operation
respors h'e for the operation
of the
the production
production units.
units. This
t ci is not
is not always
always thn case in
the caSe in developing
countries, where many of
countries, of the
the ,Ifficulties
difficulties obscrv,d
observed in
in Industries
industries are
are due
to the incompetence
more to incompetence of Onthe technical
technical superviserc-
supervisors than
than to
to the
the lack
lack of
of
workers.
skilled workers.

Adequate training
training of
of the
the supervisors
supervisors is
is all
all the
the more
more important
important
when they
when they are
are responsible
responsible for
for training
training instructors
instructors and/or
and/or skilled
skilled and
and
semi-skilled workers to provide a multiplying effect rffnct in expanding
in
knowledge and
knowledge and acquiring
acquiring new
new technical
technical skills.
skills. Personnel at
Per-Tonne) level
at this level
are
are also
also an
an important
important driving
drivi force
force in
in the
the creatiun
creation ufof small
small rural
rural
industries
irWustries that can develop
that can develop theirir own
own activities,
activities, helpi
helping to diversify
divers:',
the
th,,, rural
rural economy
economy with consequent social
with consequent social and
and economic
economic f,
benefits for the
lic
community.

Lack ofof preparation

preparation and,
and, inin many
many cases, supervisory
cases, shortage of supervisory
staff mcroly
slotf merely confirms
conf inns what has
has already
already been
been stated
stated above
above regarding
regarding the
the
importance
importarke of(.,ftraining
trainingfor
forintermediate-level
intermediate-level technical
technical staff
staff inin national
national
and sectoral development. However,
and Teetotal However, studies carried out on staff require-
require-
ments
ment:- in
in the
the industrial
industrial sector
sector inin different
different regions
regions confirm, in in turn,
turn, the
the
shortage
shortage of technicians and
of technicians and skilled
skilled workers
workers and that in
and show that in most
most cases
their training is
their training is entrusted
entrusted toto the
the industries
industries themselves,
themselves, which
which do
do not
always have the
always the physical
physical and
and economic
economic means
means of
of providing
providing it.
it.

A special
special problem
problem arises
arises in
in the training of
the training of skilled
skilled workers.
workers.
Forest industries
Forest industries -- particularly
particularly in the
the wood
wood industry,
industry, which
which plays
plays an
an
important
importa: ,z role
iule in
!_11 the economy of many ddeveloping
the countries because
loping countries because of the
large extent
large e,', At of
of their resources - are
their forest resources - not always
Are not always incLuCerl
included in
in the
the
national training
nationn Ting systems
systems drawn up to meet
drawn up mec- the personnel needs
the personnr1 the
reecz of the
development
devel(-, , so that practic
so that practical responsibility
,sibility for for this
t.his ispect is
is
to the in:
left to ndustrial itself.
'rial sector itself.

This
'Oils staff
staff isis therefore
therefore trained
trained on
on the job, and
the job, and the
the quality
quality of
of
the training obviously
the training obviously depends the quality
depends on the quality and
and technical
technical ability
ability of
of
trainers and
the trainer-u and on
on the
the technical
technical and
and operational
operational level ofof the
the enterprise
enterprise
or industry.
industry.

The
The cost ofof these
these activities
activities and
and the
the managerial
managerial and
and technical
technical
staff's own
staff's own internal
internal vision
vision of the development
of the development of
of the
the industry
industry (which
(which
depends in turn
depends in turn on
on their
their own
own abilities)
abilities) obviously
obviously condition
condition the
the training
training
the operative
programmes for the operative staff.
staff.

6. CONCLUSION
CONCLLISIO%

The rsituation .on rOJcdLi,n and training for forest

regarding education ierest
industries
Industries can
can only be improved if
c it there
thnre is coord i na t ion betwonn
coordination between the
Ole
industrial sector
sizo . and the public sector
.:lortor fre5trv
responsible for forestry
development arTi
and for,r training, resulting in in anan education
education andand training
appropriate
programme approp requirements of
ate to the requirements of this
this sector.
sector.
 -- 233 --

In
In recent years new
recent new organizational
organizational and teaching methods
and teaching methods have
have
been developed
been developed thanks
thanks toto aa new
new awareness
awareness that
that has
has emerged
emerged in
in the
the settors
sectors
concerned. All
concerned. in all
All in all it
it may bebe concluded
concluded that
that education
education and
and training
training for
for
forest
forest industries is is at the
the take-off
take-off stage,
s ,although considerable efforts
although considerable efforts
will have to
will have to be made
made in
in the
the next
next few
few vc6rs
years to
to develop
develop specific
specific training
training
models regional and
models at both regional and national
national J*v,l,
level.

REFERENCES

Albin, R.H.
R.B. Survey
Survey of
of education and
and training requirements
requirements and
and
1978 personnel needs
needs for
for primary
primary mechanical
mechanical wood
wood industries
industries in
in some
some
Latin
Latin American countries.
countries. Document presented at at the
the Ninth
Ninth
the FAO
Session of the FAO Advisory
Advisory Committee
Committee on
on Forestry Education,
Education,
Jakarta, Indonesia.
Indonesia.

Beldi, F.
F. industries in Eastern Europe.
Training for mechanical wood industries .rope.
1981 Document the Eleventh
Do J ent ptesented at the Eleventh Session
Session oof the FAO AO
Advisory
.sory
Cc Education, Kyoto,
os Forestry Education, Japan~
Kyoto, Japa, .

Deherve, L.
L. Needs and
Oeds and isiLes
issues .nin education
education and
and tr,i
training for mechanical
iu,chanical
1981 forest industries
industiles _n in Africa. Document presented
pro, at the
the Eleventh
Session of the
Sesi.ion of tfie FAO Ac-.1:i.ory Committee on Forestry Education,
FAO Advisory LAucation,
Kyoto, Japan.

Hilmi, H.A.
H.A. Forestry education
Forestry o;, ,tion and
and training in Africa.
training in Africa. Document
1971 at the
presented at the World
rld Consultation on Forestry Education and
Training, Sweden.
Training, Stockholm, Sweden.

Hilmi, H.A.
Hilmi, H.A. Reappraisal and training
Reappraisal of education and training needs
needs for
for forestry
1980 forest industries
and forest industries in
in Africa.
Africa. Document presented atat the
the Tenth
Tenth
Session
Session of the FAO Advisory Committeee on Forestry
of the Forestry Education,
Education,
Rome~
Rome.

Leslie, A:J.
A.~J. Education and training
Educa-odn and training for
for mechanical
mechanical forest
forest industries.
industries.
1981 Document presented ro7.
Document at tf.n
the Eleventh Session of
Eleventh Session ofthe
theFA':'
FAO Advisory
Commi t tee0...
Committee on - Education, Kyoto,
l7:ucation, Japan.
Kyoto, Japan.

Mahlberg, F.C.
F.C. Survey
Surv-y of education
sm and
and training needs
needs for the
1978 mechanical wood
mechanical ww: industries in selected countries in in Asia ano
Far East.
East. Doc. TF-INT 286 (SWE)
EWE),, FAO,
FAO, Rome.
Rome.

Schmithflsen, F.
Schmith8sen, F. resources formation:
Human res, -r.iation: The
The missing
missing link inin
1983 forestry development. Docume'nt
forestry developmen _ presented at
ri,t 7resented at the
the FAO/SIDA
FAO/SIDA
Consultation on Forest Administration
. tration for
for Development,
Development, FAO,
FAO, Rome.
 -- 235 --

MEASURING TRAINING REQUIREMENTS AND

IMPACT OF TRAINING IN
IN FOREST
FOREST INDUSTRIES
INDUSTRIES

by

the
the Secretariat
Secretariat

CONTENTS

Page

1. INTRODUCTION 236

2•
2, METHODOLOGY 237

33.. RESOLTS OF ANALYSIS

RESULTS 242

REFERENCES 247
 - 236
236 --

L IINTRODUCTION
NTRODUCT ION

The governments
The governments at Lopingcountries
of ddeveloping countries have
have usually
usually endeavoured
endeavoured
satisfy
to satisfy the training
the training requirements those skills which were
lients only for those skills which were
only for
needed
nee(led for for the
the general
generaldevelca e.'t of
development of their
theireconomies.
vocational train-
economies. vocational train-
ing centres turned
ing centres out masons,
turned out carpenters, plumbers,
masons, carpenters, electricians and
plumbers, electricians
other tradesmen,
other but no attempts w-:e made to zover the small quantitios
tr--6-: cmen, but no attempts were made to COver the small quantities
of various
of zialized skills re-,
various specialized skills required spe,:lfic industries, such
i'ed for
for specific industries, such as
the prime; m ,ihanical wood
primary mechanical wood induc!,
industries. es. Conzeggerntly, training for
Consequently, training for these
is - carried out by the
.

skills was
specia'1'n.- skills was - and
specialized and gmm,riLAy
generally still ntIll is - carried out by the
Indus-Hes
industries themselves
themselves through
through Dir-ine-jDb Althoughthe
training. Although
on-the-job training. the indus-
iidus-
trie,, calized the importance and value of training, many were reluctant
tries realized the importance and value of training, many were reluctant
fi
tommhm.k large scale "hands
embark on large scale "hands on" training, because of
o,-," training, because of the the somewhat
somewhat
nhitt-sighted outlook that this type of training involves loss oh produc-
short-sighted outlook that this type of training involves loss of produc-
rii,n, reduction in quality, possible accidents
tion, reduction in quality, possible accidents and and damage
damage toto equipment.
equipment.
mn-the-job training has, therefore,
On-the-job training has, therefore, in in many
many instances b. en limited
instances been limited to
to aa
minim.- number
minimum numberofofcandidates,
candidates, usually
usually selected
selected from
from wi: nin the
within the industry,
industry,
in vi n of their familiarity with the temhaiques
in view of their familiarity with the techniques and procedures ecedures nf that
of that
indus,, . These
indus These circumstances fr. chrori tage of skilled
circumstances explain
explain the chronic shortage of skilled
r

workc
workers s forfor specialized
specialized industries
industries inindo,r1c,ging
developing countries.
countries.

The efficiency
The efficiency of oE industries
industries is
is influenced, by by aa balanced combina-
tion of their managerial
tion of their and labour skills.
managerial and labour skills. --ent out
Leaving management out of
this analysis, training requirements in existing rcmr,
this analysis, training requirements in existing forestL industries ndu,tries depec:
depend
on the difference between the influence which the
on the difference between the influence which the present labour skills labour skills
and what
have, and what theythey ideally
ideally should
should have,
have, on
on the y of the indus-
the efficiency of the indus-
trics. operations. But what are the skills rem.
tries' operations. for the primary
But what are the skills required for the primary
frrcst
forest industries? Skilled, semi-skilled
incliltrios? Skilled, semi-skilled and unskilled
ur,.,:e are the terms
rr,:*e the terms
aDimallyused
normally uso]when
whenclassifying
classifyingthethedifferent
different levels
levels of industry.
of labour in industry.
This geneial classification is,
general classification is, however, insufficieoL insufficient when ,,opraising
appraising
training requirements
training t"equirements in in existing industries, or
existing industries, or whe, just
- c.;zsing a just
when assessing
waie scale. It
wage It isiseven
evenmore
more inadequate
inadequate w: nn establishing
when siretely new
establi,ni a completely new
for.si Industry - or any ty;,-
forest industry - or any type of industry indust for that - in
that mmatter - in developing oping
countries
countries where the the selec;qof
selection and tr.): 1,,e
training of labour, parti-
palCticul L, for
for
speDific highly skiiled
specific highly skilled jobs inherent to that that industry,
inaustry, are of primal
of primal
importancefor
importance foc aa succe,-isful operation of
successful operation of the
the ventur.
venture.

This report
This report attempts
attemptstoto quantify
quantifythe
theskills
skills in
in industry utilizing
industry utiliZing
aa general
general reference
referenceofofskills
skills required for all
required for all jobs
jobs in
in the
the primary
primary forest
forest
industries.
industries.

Quantification of skills will provide a means to assess the

Qu anti fication of skills wi 11 provide a means to assess the
importance of available
importance of skills
available skills the versatility of
and the versatility cf these-, 'se available
available
skills when
skills when transferred
transferred to e-e of industry or, in c
to anothe.
another type of industry or, in other it
,r words,
words, it
will be possible to ascertain rei. zurately totowhat
will be possible to ascertain more accurately whateer.mm the required
extent the required
skills for a new industry can bn satisficai by the available skills of
skills for a new industry can be satisfied by the available skills of an
intn consiie:ation the voi.:atility
indusl.iy, taking into considel:ation the versatility of these
existing industry, these
ava,1 a! leskills.
available it will
skill,. It will loildight
tre requiremenr, for training, not
hlight the requirements for training, not
just relating to one industry sector, but to the natinn as
just relating to one industry sector, but to the nation as aa whole. whole.

Measuring training
MeasulCing training requirements
requirements in in terms of tire
terms of time andand costs
costs in-
in-
volved is
volved is problematic,
problematic, because the time
because the time required
required to t
to teach a ,7-pends on the
depends on
ability
abill of
of the
the instructors
instructors and and on
on the
the aptitude
aptitude of triinees. The
tr.' trainees.
of the
latter iss influenced by
latter the level
by the level ofof the
theso-called
so-called"n& ive intelligence",
"native intelligence",
aa "quick
"' uick min6", ,r whether
mind'l1, or the candidate
whether the candidate is is aa "quim- learner".~ Some
"quick learner u

trainees
tr nees will
will De eir make
never makethethe grade
grade even
even under
under the
the most
most elaborate
elaborate and
and
favourable tlCaining
favourable training conditions;
conditions; others watch aa job
just watch
others just job b,ing
beingperformed
performed
and carry on from
and carryon £r'om there,
there, becoming very skilled
becoming very skilled asasthey
theygn - ri experience
gain experience and
and
confidence in their job. Training requirements
confidence in their job. Training are also
requirements are if.' '.enced by
also influenced by the
the
level of
level of technology
technology and
and mechanization
mechanization oE the industry
of the industry fr., rich training
for which training
is contemplated.
contempl ated.
 -- 237
237 -
-

There is still widespread belief

There is still widespread belief that t.r.3t onl
only labour
labour intensive
intensive
indus t d es wi th aa low
with low level
level of oftechnology
tec hnology are
are app ate for
ate forde,7:*1 iping
developing
cou., ;se': . This
countries. This might
might be be applicable
applicable totothose
thoseindusli: i es which
industries for
which cater fot:
local markets
local markets only,
only,, but if the major
i f the part of
major part of the
the production
pt"oduction isis de-et.,ned
destined
for export
for export markets, industry with
markets, an industry with aa high
high level technolog, and
level of technology ond a
1 imi ted number
limited numberofof workers
workers is is recommended
recommended to to safeguard
saf eguard an an acceptable
acceptable export
quality product.
quality product. This
This is is particularly
pal:ticularlytruetruefor thethe
fOl: paper
paperindustry
industrywhere
whelCe
the choice
the choice between
between highhigh technology
technology and labour intensive
and labour intensive lowlow technology
technology
represents
represents an an option
option between
between the the""technology"
technology" of ofpapermaking
papermaking andand the
the"" art"
art"
of papermaking.
of papermaking.

2. . YLOYED
METHODOLOGY EMPLOYED

The correct
The correct :.erforfnance
ance ofof any
any job i ;,try requires
job in industry requires a a certain
certain
combination
combination ofof three tills, whereby
three skills, skill is
whereby skill is defined
defined as as"the
"the ability
ability to
to
use
use one's
one's knowledge ictively and
knowledge effectively and readily
readi inin execution
executionororpciperformance."
form 3ri.e."
The three skills
The three skills Leferred
ref r,o-1 to technical , judgemental
to are technical, judgemental and an I .fl-ooniza-
organiza-
tional, for the
tional; for the majority
m ority of industry, the
of jobs in industry, the importan,-
importance of cf these
skills isisgenerally
skills generally inn that
that order.
order.

Technical in this
Technical this context
contextmeans
means "having
.. having speci
special usually prac-
al,, usually pLac-
ti knowledge,particulaLly
tical.1 knowledge, r.:,.m.ularly ofof aa mechanic
mechanical subject ."n
ol subject. Technical skill skill
-e ability
is the ability to carry out the
:oz ;:y out mechanics of aa particular
themechani particular job, i .e. to
job, i.e.
know how to to start
sta::t cp
up aa pump,
pump, how
how to c saw-blade,
a saw-bl ade, tow
how tot.. adjust
ust aa
peele::
->eL knife. Th- amount
The amount of of techni, qlsi 11 required
technical skill required for the ine widely
widely
y ,g jobs
varying jobs in in -1J3try ranges
H. industry ranges from
from 11 ttle to
little to what hris been gained
what has
duL"ing
dui : years of app.enticeship,
years enticeship,technic
technical study,
study, practical
practical a,et otion and
operation
combinations the.,
Judgemental
Judgemental meansmeans "relatingtoto the
"relating the process
process ofof forming
forming anan opinion
opinion
evaluation by
or evaluation
or by discerning
discerning and and comparing."
compat"ing." Judgemental skill is is theskill
critical f aculty toto select
critical faculty select the the best
best solution,
solution, i.e.
i.e. to
to know whentoto start
know when start
up
up the
the pump, when to change
pump, wt... Change the the blade,
blade, when
whentoto adjust
adjust the
the peeler
peeler knife.
knife.
Some judgemen'
Some judgemental sk skill may be
.1 may be pre-taught. Most of this skill ,
pre-taught. Most of this skill, however,
requires
requires aa c, iliarity with
complete familiarity both
with bothequipment
equipment and
and ocess,
ess, which
which can
can
only be
only be a,acquired throughO experience.
experience. Higher levels
Higher echnical skill
levels u technical skill
will usually
will usually enable .e aa -erson
person to tomake
make more
more accurate
accurate judgements.

Organizational
Organizational means "rel ating to
means "relating to the
the act
act or
c .tss of
eS8 of organiz-
orgpniz-
ing or
ing or of
of being
being aganized
olCganized." Organizationalskill
." Organizational skill iis t ibility to plan
ability to plan
one's own
one's work on
own work I 'orto
and/or to plan
plan and direct others
and dit'ect others inin their ,work.
)rk . Most
I Most jobs
in industry
in industry ho-c,
have aa low
low organizational skill requirem
organizational skill requirement,, needing only the
needing only the
abi 1 i tytoto organize
ability a a ani zeworkwork foroneself
for oneselfand/or
and/orforfor aa hel,er
helper. Some jobs
Some jobs
require
require organi
organizing mg not
not only
only people
people butbut materials
materialsand andequipment
equipment as as well
well,,
e.g for maintenance
e.g.. for maintenance work.
work.

Tr ainingisis mainly
Training mainly identified
identified with
with the
the direct
direct transfer
t!:"ansfer of
of tech-
tech-
nical skill- which
nical skills, .41,ichundoubtedly
undoubtedlyis isone
oneofofthe
thekey
keyfactors
f acb.ri-ofoftraining,
training; the
the
goals for
goals for tc,..haoal
technical skills
skillsare arestrstraidhthtforward
forward and and thr cgul ts can
the results easily
can easily
be measured.
be measured. 'Tr-air ingEor
Training for organizat
org in.? *.t-onal onalskills
skills in t
in their ,fi lest sense
widest sense is is
aa rather
rather v v-rgac e coicept
concept and it ti letier ally been .leglc.:ted, possibly
and it has generally been neglected, possibly
because or
because of I ta dl 11F f iculty to
Eficulty to pi. are aner adequate relevant training pl
e ant training plan
for it,
for it, or oi toto me catire its
me asure its ef fEeoti
ec t veness. P arti cuI y in n isol
isol ated or,o-
ated a!:"eas
of developing
of developing countries
countries where
where aa large
I ergo partpart of
of the
theworkY-r,
worke!:"s for
fora anewnew i-i Jui -
indus-
try will
try willhavehave to tobe be selected
selected from from the the local toice, training
labour force,
local labour training for Co_
org aniz ational
organizational skillsisis alt'ost
skills alrost of equal impo::otance
of equal importanceasasthe thetraining
training for for
technical skills.
technical skills . Men Men who whopreviously
previously may may have been working
have been working in in seasonal
seasonal,,
small scale
small scale logging
logging operations
operations or 0::0 other
other activities
activities where
whereworking
working hourshours
were flexible
were flexible and and where
where thethe pace
pace of of work
work was set more
was set more by by inclination
inclination than than
by urgen,y,
by urgency, findf ind themselves
themselves all al l ofof aa sudden subjeot.dtotorigid
sudden subjected rigid discipline
discipline
and tight
and ti working schedules.
schedules. .One,e ofof the main ccauses for
the main for thethe large
large turn-
turn-
over c,l
over ti:. work-force in thin tepe of situatic.,
of the work-force in this type of situation is. that that manymany oEof thethe
locally engaged workers
locally eventually findd thems
,orkers eveic lv
themselves unablele foto cope
cope with
with the 'e
stress which the changes
stress changes in in rworking conditions
c uldition3 have imposed ,sc- onon them.
them.
 -- 238 -
-

usually
usually revert toto their
their previous
previous occupations
occupations and
and thus
thus a
a considerable
amount
amount of
of technical
technical training
training invested
invested in
in them
them is
is lost
lost to
to the
the industry
industry and
the
the nation.

an attempt
In an attempt to
to quantify
quantify the
the technical,
technical, judgemental
judgemental and organi-
zational
zational skills
skills needed for different job positions in
needed for in forest
forest industries,
industries, aa
list
list has
has been
been prepared
prepared of levels of
of levels of skills
skills acquired or required by workers
in well-defined occupations.
in well-defined occupations. It
It covers
covers the
the full
full gamut
gamut of
of skill
skill levels
levels
from those
from those for
for unskilled,
unskilled, semi-skilled
semi-skilled and
and skilled
skilled workers,
workers, to
to those
those for
for
technicians,
technicians, foremen
foremen and supervisors in
and supervisors in the
the production,
production, quality
quality control,
control,
maintenance and serv ice departments
service departments of of the primary
pr imary forest indus tries.
industries.
Excluded production managers, mill
Excluded are plant engineers, production mill managers,
managers, etc.
etc.

Table 11 defines
defines the
the levels
levels ofof technical
technical skills
skills utilized
utilized in this
this
study
study and them in
and ranks them in increments
increments of of 0.1
0.1 from
from 0.0
0.0 to
to 0.8
0.8 in
in which
which 0.0
0.0 re-
re-
presents lowest level.
presents the lowest level. It
It should
should be pointed out that that the
the incremental
incremental
levels of technical skills are used
levels used only
only toto denote
denote thethe different
different levels
levels of
of
skills
skills and
and that they must not not bebe utilized to to assess
assess training
training requirements
requirements
in
in terms
terms of time and
of time and extent
extent of of training.
training. person whose
A person whose level
level of
of skill
skill
has
has been classified in the 0.0-0.1
been classified 0.0-0.1 range
range could,
could, with limited
limited training and
within a a short time span, upgraded to the 0.2-0.3
span, easily be upgraded 0.2-0.3 level,
level, whereas
whereas
aa person
person classified inin the
the 0.5-0.6 range
range might require
require extensive training
training
over a a long period
period of
of time
time toto qualify
gualify for
for the
the 0.7-0.8
0.7-0.8 level.
level.

In the description of
In of levels
levels of technical skills
of technical skills (Table 1) aa few
(Table 1)
occupations such as
occupations,I such as radio technician,
technician, TVTV and computer repair-man and
computer repair-man and
air
air traffic included only for
traffic controller have been included for comparison's
comparison's sake.
sake.

In aa similar
In manner Table
similar manner Table 2 defines
defines the
the levels
levels of
of judgemental
judgemental
ability
ability required
required for
for the type of
the type of work
work to be
be carried
carried out,
out, based
based on
on aa scale
scale
of in which
of 0.0 to 0.6, in which 0.0
0.0 represents
represents the
the lowest
lowest level.
level. The level of 0.6 0.6
covers general
covers foremen or process
general trades foremen process foremen
foremen with
with many years
years of
of prac-
prac-
tical
tical experience in
in a large-sized
large-sized mill. Levels
Levels of ability above 0.6
of ability 0.6 would
staff which
be required for management staff which have
have been
been excluded
excluded from
from this
this study.
study.
 - 239 --
-

Table 1

Levels of technical
technl III
skill

~~~-,,~-,!!,-=I':.:l':.:l~
Level of skill Description of aa typical
Descr.iption typical individual
individual

0.0 with no training

trainingininme(7..an-,
mechanical skill,
skill, little education (or (or
ambition).
am»Itionl. May
May self-develop abilities to
se:77-:7::p abilities to perform
perform simple,
simple,
usu repetitive jobs adeql,etelv by
Tepetitive jobs by carrying
carrying out
out r:,me
same -
e$g. 'le-retal
general labourer
labourer,
f cleaner,
cleanet, manual
msrual debarker,
debarker, etc.

0.1 with
with little
little or formal education
or no formal education who has
has learned, by
:by
observation or
observation or through simple teaching,
through simple teaching, the ability to
perform technical
technical work
work -- e.g.
e.g. tradesman's
tradesman's helpei, ucine
helper, machine
operatorls assistant.
operator's assistant.

0.2 with little formal

formal education who
who has
has been
been trained
trained to
to carry
carry
out
out more
more complex tasks without
complex tasks without necessarily
necessarily fully
ful under-
under-
standing the technical principles
the technical principles involved
involved -- e.g. fork-
lift truck operator,
lift truck operator.
operator, chipper operator.

0.3 wi th 'SQMe,
wito some, vocational
vocational educa who has
tion who
ed.,,,ati- has been
been I,;:,ined
tra! ned at
school
F,cnool oror on
on the
the jar)
job to
tu carry
carl-, out 7ks with
technical tasks
cut tn,7hrica1 7:

Lrc,.,rstanding- -e~g~
understanding e.g.auto
alo mechanic, carpenter~
muchani:, c1r7enler.

0.4 has attended

who has attended aa trade
trade school
school or
or served
served an
an apprentice-
apprentice-
ship.
ship. Has knowledge
Has knowledge of mechanical side of the the trade,
trade,
including the
the principles involved
involved -- e.g.
e.g. welder,
welder, electri-
electri-
machinist~
cian, machinist.

0.5 may have

who may have attended
attended college,
college, trade
trade school
school and/or
and/or served
served
apprenticeship but
apprenticeship but in
in aa trade requiring more
trade requiring exercise of
more exercise
mental skill than
mental skill than physical
physical skill
skill -- e.g. control-
e.g. quality control-
ler, radio
ler, radio technician.
technician.

0.6 who, further tTolning

who, with further training inin his
his original
original field,
field, either
either
practical or
or theoTri Lei, raised
theoretical, raised his
his level of ability
level of ability --
e.g.
e.g. h.p. welder,
welder, TV repair-man.
V repalr-man.

0.7 As in
in 0.5
0.5 or
or 0.6
0.6 with
with further
further specialized
specialized training
training -- e.g.
e.g.
recovery boiler operator, computer repair-man~
computer repair-man,

0.8 with specialized

specialized training
training followed
followed by
by years
years of
of practical
practical
experience -- e.g.
e.g. machine
machine tender
tender in
in paper
paper mill,
mill, air
air traf-
traf-
fic controller.
fic
 -- 290
240 --

Table 22

Levels of judgemental ability required

Job
Job position Level of skill Extent of
of skill
skill

Labourer 0.0 No judgement required;

No judgement required; works to order
works to order or
or
routine.

Equipment 0.1 Operates

Operates simple,
simple, almost self-operating
operator equipment, judges whether knives need
equipment, judges
Grade 1I sharpening, feed is
sharpening, feed is excessive, etc.
etc*

Equipment 0.2 Operates

Operates more
more complex stationary machinery
operator and mobile equipment; must judge
judge whether
whether
Grade 22 working
working to capacity, engag-
capacity, overloading or engag-
ing work.
ing in unsafe work.

Process 0.2 Operates

Operates simple, proces-
simple, single operation proces-
operator ses,
ses, judges feed
feed operating correctly oror
Grade 11 that
that product
product looks
looks to
to be
be as it should -
as it if
- if
not,
not, notifies foreman~
notifies foreman.

Process 0.3 As for process

As for process operator Grade 1, but
but for
for
operator more complex processes
processes
Grade 22

Tradesman 0.3
0.3 Able to
to assess
assess best way to
to do job
job and
and re-
re-
quiring the way
little in the
quiring little way of
of original
or inal
thinking; worker.
thinking; repetitive worker.

Tradesman 0.4 Able to assess

Able to assess best
best way to do
do job
job and
and im-
im-
if necessary.
provise if necessarYe

Process and 0.5 Able to

to lead
lead small groups
groups of
of workers to
to
trade foreman successful
successful continuation conclusion of
continuation or conclusion of
job.

General foreman
foreman 0.6
0.6 As
As other foreman but on aa larger
larger scale
scale and
and
process foreman
proCeSS foreman able to cover
able to cover all
all trades/processes

Organizational skill, skill, as as mentioned

mentioned above,above, is is the
the ability
ability to to
organize
organize oneself and/or others
oneself and/or others in carrying out
in carrying out aa specific task.
specific task. Every
worker
worker will need basic
will need bas ic organizational
organl za t ional skill,
sk ill, interwoven
interwoven withwith discipline,
disc ipl ine,
merely to arrive at work work on
on time
time and
and toto appreciate
appreciate in in what
what manner
manner hehe must
must
carry task.
carry out his task. The
The majority of workers are classified classified in in this
this basic
basic
level
level of
of organizational
organizational skill,
skill, which
which has
has been
been set
set as 0.00.0 inin the
the analysis.
analysis.
verbal inStrUCtiOnS:
Normally they are given verbal instructions: the temperature
"keep the temperature at at X",
X",
'close the valve",
"close the "take that
valve", "take that pallet
pallet of of face veneerS to
face veneers to the
the glue
glue
spreader", tldo this",
spreader", "do thisll, tldo that,ll etc.
"do that," etc. Only aa limited
limited number
number ofof workers
workers
below the level
below the level of foreman,
foreman, such
such asas tradesmen
tradesmen and and some
some machine
machine operators,
operators,
require aa certain
require certain level
level of of organizing
organizing ability.
ability. Tradesmen
Tradesmen willwill have
have toto
organize not only
organize not only men but also
men but also materials
materials and and tools.
tools. operators
Machine operators
with helpers
helpers or or assistants
assistants must obviously have
must obviously have aa little more than
little more the
than the
basic
basic skill, they have more
skill, since they more than
than one
one job
job toto organize.
organize.

Table 33 indicates the organizational

indicates the organizational abilities required
required and
and used
used
in
in the
the analysis.
 -- 241
241 -

Table 3

required
Organizational skills required

Job
Job position skill
Level of skill

Labourer 0.0

Equipment
Equipment operator
Process operator to 0.3
0.0 to 0.3
Tradesman
Process
Process and
and trades
trades foreman to 0.5
0.4 to 0.5

Engineers,
Engineers, supervisors and managers 0.6 to 1.0
0.6
(not included in this study)
(not included study)

In order to
In order to compare
compare thethe levels
levels of skills required
of skills required forfor jobs
jobs in
five
five different forest industries,
different forest industries, every
every jobjob of
of these
these industries
industries was
was asses-
asses-
sed with regard
sed with regard toto the
the level
level ofof technical,
technical, judgemental
judgemental and and organizational
organizational
skills required for that
skills required that particular
particular job.job. For example, aa millwright
For millwright would
would
be required to
be required have attended
to have attended a trade
trade school
school and to to be
be well
well versed
versed inin his
his
which would
trade, which would qualify
qual ify him
him for
for aa technical
technical skill
skill value of "T"-O.4
value of "T"-0.4
assumed
assumed forfor that
that job.
job. He will be
He will be required
required to to decide
decide onon the
the best
best and
and
quickest
quickest wayway toto complete
complete aa repair,
repair, which would earn
which would earn him
him aa judgemental
skill
skill level
level of "J"-0.3 determined for
of "J"-0.3 for that
that job.
job. He He must
must have the ability
to organize tools,
to organize tools, equipment,
equipment, a a helper
helper andand possibly
possibly others
others toto carry
carry out
out
his work,
his work, which
which will
will entitle him him to
to anan organizational
organizational skill skill level
level of
required for
"0-0.2 required
'0"-0.2 for that job.job. This would give him
This would him aa rating
rating ofof T-0.4,
T-0.4,
J-0.3 and T-0.2
J-0.3 and T-0.2 and an an arithmetical
arithmetical average
average of of 0.3.
0.3.

All jobs
All jobs in
in the
the following
following primary
primary forest
forest industries
industries were
were rated:
rated:

Installed of
Number of
Type of industry
T;{!2e capacity em12loyees
employees

and kraft
Linerboard and kraft
mill
paper mill 42
42 000
000 FTPAli
FTPAL/ 335
335
Newsprint mill 30
30 000
000 FIPA li
FTPAll 360
360
Particle
Particle board mill 20
20 000
000 m,/A
m/A 169
169
Plymill 44 500
500 m;/A
m3/ A 83
Sawmill
Sawmill 42
42 500
500 m /A
m'/A 99
99

level of
The level of technology,
technology, mechanization
mechanization andand labour
labour intensiveness
intensiveness
of these
of these industries
industries varies.
varies. Since the skills required
Since the required for
for logging
logging opera-
opera-
tions in
in general
general differ
differ only
only marginally,
marginally, they
they have
have been
been disregarded
disregarded inin
this number of employees required
this study. The number required for
for each
each industry
industry (indicated
(indicated
above)
above) excludes
excludes personnel for
for logging
logging operations.
operations.

Based
Based on the general
on the general manning tables
tables for the
the above
above industries,
industries, job
job
descriptions were
descriptions were prepared for all positions in these industries, and
every
every position
position was rated in
was assessed and rated in the
the manner
manner described
described above.
above. This
provided
provided detailed information on
detailed information the required
on the required skills
skills for
for all
all workers
workers in
in
the five industries selected for the analysis.

l/ FTPA ~= finished
finished tons
tons per
per annum.
annum.
 - 242
- 242 -

3.
3. RESULTS OF ANALYSIS
RESULTS ANALYSIS

The information on
The information on the
the requirements
requirements for
for skills
skillswas
wassummarized
summarized and
and
is reflected in Table 4, by
is reflected by number andpercentage
number and percentageofof workers,
workers, and
and per
per
industry.
industry.
It in intcresting to point out at this juncture that, in spite of
It is interesting to point out at this juncture that, in spite of
the diffeterl degrees cf technol,
the different degrees of technology, ,mechanization
echanization andand labour
labour intensive-
intensive-
ness of the indJstries, re
ness of the industries, requirements c. :or the
for ranges of skills
the individ:
individual ranges of skills
for each
for i: t,v .ollow mare nr less the same
each industry follow more or less the same pattern. The largest
The largest
difference in
difference ,Atages of
:a percentages skills occurs
of required skills occurs ir
..,' lowest level of
in the lowest level of
skills,
sk ills,where
where the',La percentages
percentages range
range from
from6969percent
percent of
or tne
the work-fotc,
work-force of
the particle t,ali plant to
the particle board plant to 50 percent of of the
the worke...
workers of
of the
thenewsprar,t
newsprint
mill. In
mill. In the
the higher
higher echelons,
echelons, these differences
differences constiLute
constitute only
only 22 percent
percent
(in the 0.31-0.4 range of skills) and 4 percent (in the 0.41-0.5 and
(in the 0.31-0.4 range of skills) and 4 percent (in the 0.41-0.5 and
0.5-0.6 ranges
0.5-0.6 ranges of of skills).
skills).
In order
In order toto assess
assess to
to what extent available
what extent available skills
skills can
can be
be used
used in
in
another type
another type of industry, it
of industry, it will
will be benecessary
necessary to to evaluate
evaluate which part of
which part of
the available skills is specific kn the
the available skills is specific to the industry industry in in which
which they
they are
are em-
em-
r.d wh.ch
ployed and part could
which part could be utilized in
PC: 111-1:1Zee in other
other industries.
industries. The r,ul(
The results
will 31SC,
will ird)cate the
also indicate the naticnal rmportanceofcf training.
national importance training. The The regJii.cd
required and
acquixed skills of any industr,' are abviousi
acquired skills of any industry are obviously of ,f maximum benefit to
maximum benefit ta the
industry camnerned,
industry becausesome
concerned, because some of of theseskills
these skil:s will
will be
be peculiar
peculiar to that
industry.
industry.
Machine tendersof
Machine tenders of paper
paper mills,
mills, band-saw
band-saw operators
operators and
and sawdoctors
sawdoctors
of sawmills
of and peeler
sawmills and peeler operators
operators of
of plymills
plymills are
are highly
highly skilled
skilled operators
operators
whorank
who rankamong
among thethe keypersonnel
key personnelofoftheir
their respective
respective industry.
industry. It would,
It would,
however, bebe extremely difficult to find
extremely difficult find suitable
suitableemployment
employment for
for them
them in
different types of in other forest
different types of industry - even in other forest industries industries -- where
where
their
their acquired,
acquired, very
very specific,
specific,technical
technicalskills would
skills wouldbebeequally
equally valuable
valuable
and appreciated.
and appretiated. On Onthethe other
other hand,
hand, skilled
skilled eieotricians
electricians and
and millwrights
millwrights
fro"pa[er, saw and plymills can easily be tr_rs:erred to any kind of
from paper, saw and plymills Can easily be transferred to any kind of
industri, with only
industry, with only a minimum (aining in their new
minimum ofof on-the-job
on-the-j, training in their new
sutro,ndings.
surround ings.
This is where the concept of versatility of skills is introduced.
This is where the concept of versatility of skills is introduced.
indicated above, some technical skills are completely transferable;
As indicated above, some technical skills are completely transferable;
others may be of little or no value to other industries. In this study
others may be of little or no value to other industries. In this study
the versatility of those technical skills which are 100 percent useful to
the versatility of those technical skills which are 100 percent useful to
other industries has been classified as 1.0. Mach technical skill has
other industries has been classified as 1.0. Each technical skill has a
versatility factor
versatility factorwhich,
whiCh,depending
depending on
on the
the individual
individualjob,
job,may
may range
range from
from
0.0 to 1.0.
0.0 to 1. 0 .

It is
It is consideree that any
considered that judc,,an,e,talcr7rorganizational
any judgemental organizationalskillsskills
whi.d, aa percon
which person may may ha.'e
have a.*(1.1red
acquired in in one
one i equal value to any
is of equal
oth.r industry.
other Jtdgamnntal ani
Industry. Judgemental and organi za ..is both
skills both hale
have an iin-n-
variable versatility
variable versatilit} facfnr
factor ofof 1.0.
1.0.

Applying
Applying these theseversatility
versatility factors
factors to to the individual skills
the individual skills ofof
each worker
each worker provides information on
provides information on where
where additional
additional training
training would
would bebe
required inin the
required the various
various jobs,
jobs, ifif the
the levels
levelsof ofthese
theseskills
skillswould
would have
have to
to
be raised
be raised to to the
the generally
generally required skills for
required skills for industry
industry in in the
the country.
country.
Without
without going goingintointo too
too many
manydetails,
details, the
the results
resultsonlyonlyconfirm
confirm what
what already
already
transpired earlier, i.e.
transpired earlier, i.e.that generally
that generally speaking
speaking the thelower
lower thethe skill
skillwhich
which
ls
is being
bei assessed,
assessed, the the higher
hicher thethe versatility
versatility rate;
rate;forforexample,
example, aa plymill
plymill
c,.,oral labourer,
labourer. with with hardly
he.dly anyanyskills
skills toto his
his credit,
credit. will
willbebe 100
100 per-
per-
ce-; versatile
cent versatile when when he sfers to
he transfers to aa ..7,-ap faftcry as
soap factory as general
general labourer
labourer
with, :Askills.
without skills. As indicated above, above, band-saw
band-'awoperators
cperators andand peeling lathe
log lathe
are so
C....::6L'OES are
operators so highly
highly skilledlied in in the_t
their sie_ifi:Hie jobs that iitt will
jobs that will bebe
dJfficult totofind
difficult findsuitable
suitable employment
employment tot for them in another industry
1-1 another industry where
where
 Table 44

Resuired skills b numbers and b *ercentaoes o

Sers for the fiveselected primaryeindustries
ies

Linerboard
Linerboard Newsprint Particleboard Plywood Sawmill
Ranges of
of workers workers plant workers workers workers
Required skill No. No. No. % No. %
% No.
No. %
%

00 to 0.1
0.1 202 60
60 180 50 116
116 69 55
S5 66
66 63 64
64
0.11
0.11 to
to 0.2 33 10
10 88 24 19 11 14 17
17 16 16
0.21 to
to 0.3
0.3 43 13
13 45 13
13 20 12
12 66 77 12 12
0.31
0.31 to
to 0.4 25 7
7 24 77 10 6 55 66 55 55 w
'""'"
0.41
0.41 to 0.5
0.5 20
20 6
6 19
19 5 4
4 22 33 44 33 33
0.51
0.51 to 0.6 12 4
4 4
4 11 - - - - -

Total 335 100 360

360 100 169 100 83 100
100 99 100
100
 - 244 -
- 244 -

they
they would
would bebeable
abletoto utilize
utili,. these
'io.---,eskills.
skills. Their
Theile ve.:7-,-Iiiiil-y
versatility is, is, there-
there-
fore, Plectric?ar.,, millwrights,
low. Electricians,
fore, vvery low. m::lwrights, etc.,
et-., although
iiti-.iigh skilled
akilled w'rK-
work-
ers,
ers, have
hz-.- versW...f" - .,-..e.e,
a high versatility because their
rate, because their ..-..i:la
skills are ale 90
90 per,en.,
percent
gens al and lhe
general the rema'-'
Iremaining ]0 pe:, e.!. specific
- specific to , indiatry in
' the industry in which
which
they : .'oyed. In
thei are employed. 1,-. the c.
case of specialize?
..,..., of 9,,:ls these
specialized skills -ne.-,e percentages
percentages
are uSU 81
are ti-.e
-he reversal.
revers al •

above assessment of versatility relates to the transfer of

le above assessment of versatility relates to the transfer of
The
skills the forest industry sector to industries outside this field.
ski lIs from the forest industry sector to industries outside this field.
- 1-1

An analysis
An analysis wasalso made to see how easy - or how difficult - it is to
Was also made to see how easy - Or how di fficul t - it is to
transfer skills from one forest industry to another. The analysis is,
transfer skills from one forest industry to another. The analysis is,
however, based on many assumptions which in reality would be hard to
however, based on many assumptions which in reality would be hard to
realize.
realize ..

manydevelopi
Many developing countries
ng countr have- - forest
i es have forest resource9
reSources perm i tti ng - an
established sawmilling industry.
established industry. r-,'Lpp.Ising
ing thatthatininone
oneofaf these
thos,e countries
countries
plans are t j made to establish n ,,rochoard/kraft paper
pI ans are bei ng made to establ ish a nerboard/kraft paper mill and and assum-
aSsum-
in aa ee
ing, in
ing, T-e.hetical case,
very hypothetical case, LhoL ill required
that all fg, this paper
required laboui
I abour for this paper
mill
mill has pp.ied by the sawm;'1 ng industry, the e-ia:lable skills
has to be supplied by the sawmUling industry, the available skills
in the i,..iustry will ha-
in the sawmilling industry will have to to be
be measured again9t tire
measured against the required
required
skills linerboard mill. It was
for the 1 inerboard mill. It was also
skills for : assumel that through
also assumed that through
training, it mainly through practical experience within the sawmilling
training, 'but mainly through practical experience within the sawmilling
industry in the developing country, the required skills for all levels of
industry in the developing country, the required skills for all levels of
labour were
labour were acquired.
acquired.

Using the
Using the details
details of
of Table
Table 44 the
the following
following table
table shows
shows the
the com-
com-
parison
parison between the percentages
between the of available
percentages of available skills the sawmilling
skills in the sawrnilling
industry andthe
industry and the required
requiredskills
skills for
for the
the linerboard
linerboard mill.
mill.

Table

- skills in
Percentages of available skills in
Percentages
the
the sawmilling
sawmilling indus
industry required skills
and the required skills
for the linerboe _t paper
for the linerboard/kraft ,aper mill
mill

of available
% of avai lable I% of
of rec.( ed skills
required skills
Level of skill
Level of skill skills in
skills in for linr.
for fkratt
linerboard/kraft
ssawmilling industrz
awmi 11 in\! industr;;; p aEer mi 11

0 to
to 0.1
0.1 64 600
o0.11 to 0.2
. I l to 0.2 17 10
10
0.21 to
0.21 to 0.3
0.3 11 13
0.31 to
0.31 to 0.4
0.4 6 7
0.41 to
0.41 to 0.5
0.5 2 66
0.51 to
0.51 to 0.6
0.6 - 4

100
100 100

This
This demon9i-rales that the
demonstrates that the sawmillie.: industry operates
sawmilling industry operates with
with aa
larger
larger percentage
percentage ofof lower
lower skills
skillswhen
when co- p:. ol with
compared with the
the requir lent for
requirement for
the
the linerboard
linerboard mill
mill nc,
or, in
in other
other words,
words, tho levels of
the lower levels of ski'
skills ofof the
the
latter
latter industry
industry can
can - with
with aa limited ot on-the-lob
amok a of
limited amount on-the-job train.
traini say
,say :
one to
one to two weeks -- be
two weeks easily filled
be easily filled byr i
by workers from the
9 from the sawm ing
ling
industry.
indus try.
 - 245
- 245 --

Although
Al though the the percentege
percentageofof adjusted skills ranging
adjusted skills 0.21-0.3
ranging from 0.21-0.3
available
available in in the
the sawmilling industry is
sawmilling indus is below that of
below that of the
the requH
requiredrd skills
skills
for the
for the pulp andpaper
pulp and papermill,
mill,itit wou
wouldnotnotbehadifficult
difficulttotofill
fill the
the jobs
jobs ot
of
evaporator, causticiz';-..
evaporator, causticizing and t,:d kiln
kiln operator.i.,
operators, windermen, stoc. preparation
windermen, stock preparation
etc., with
men, etc., with workes
workers fomfromthethesawmilling
sawmilling industry
industry who, wth effective
who, with effective
on-the-job
on-the-job training
tl£aining oE ofbetween
between sixsix toto twelve
twelve months
months should
should be able to
be able to
handlethese
handle these different
different jobs.
jobs.

Evenobtaining
Even obtainingthe the skilled
skilled level
level ramge
range ofof 0.31-0.4
0.31-0.4 forfor the
the pulp
pulp
and pape"
and paper mill
mill from the swmilling
from the sawmilling industry
industry does
does nor
not present
present anyany serious
serious
training problo,lo.
training problems. Th]s qc'orp
This includes some
roup includes trad-ieo who,
some tradesmen who, asas po!nted
pointed out
out
above, are
above, are readily
readliy tran,iferable.
trans €lrable. To rWie these
To make these tra.esmen
tradesmen more
mOre val: 1lAe to
valuable to
the new
the indurtry, it
new indusU·y, it would advisable to
would be advisable to employ them alre,:t;
already during
,7fr.ruction or,
construction or, toto be
be more precise,during
more precise, Sting the
the installation
installation of of tl,e
the machi-
nery so so that
that they
they can
can familiarize
familiarize- -,selves
themselves with thethe
with equipment
equipmentDe. before
,t-up. Millwrights,
start-up. Millwrights, belonging
belonging to the che usually
usually foreign
foreign start-up
start-up cruw,
crew,
would train the
would t:r::ain the tradesmen
tradesmen on on operational
operatiwnl repairs
repairsand andmaintenance.
maintenance~

As
As may
may bebe seen
seen from
from Table
Table 5, the largest
5, the dis-:i-opincies between
-t discrepancies between
the skills
the skills of ofsawmill
saWTIlill and
and linerboard
linerboal£d mill
mill ex1i.
exist in the
i the level
l' el ranges
ranges frote
from
0.41
0.41 to
to 0.5
0.5 and
and 0.51
0.51 toto 0.6, the latter
0.6, the latter ofof which is is nor ,.en represented
not even represented
the sawmilling
in the
in sawmilling industry.
industry. The manning
The manning of tLis part
of t.his part of the pulp
of the pulp and
paper
paper mill
mill is is the
the most critical and
most critical and crucial
cru,:iai one.
one. On the one
On the one hand,
hand, the
the
sawmill has
sawmill has very
very few P:able candidates,
few ssuitable candidates, .- n with
sllen with some
some ofof the
the required
required
skills, and on
skills, an,j on the
the other handtraining
ott, hand training facilities
fac.l.fies for for the
the required,
required, very
very
specific,
specific, skills
skills can
can usually ly not
not be
be found
found inin developing
developing countries.
countries.

Sawmilling usii&ly the first primary forest industry to com-

Sawmi lling is usually the Eirst primary forest indus to com-
menceoperating
mence operating inin develonic
developingcountries,
countries,foll-.wbd
followedsubsequently
subsequentlybybyplywood
plywood
production and partic1e bca,d manufacture. liroie the hypothetical study
production and pal£ticle board manufacture. Since the hypothetical study
supplying the new l'i!,oard mill with labour from the saw-
of supplying the new linerboard mill with skilled labour f"om the saw-
milling industry demonst.raid the inability to satisfy the requirements
milling indus demonstrated the inability to satisfy t.he requirements
for the last two level racek of skills, the study was enlarged to see
for the last two level ranges of Skills, the study was enlarged to see
the plywood
whether the industiy and/or
plywood industry the particle board industry could
and/or the particle board industry could
possibly supply the highar skills for the linerboard mill, to which
possibly supply the higher skills for the linerboard mill, to which
Table 6 refers.
Table 6 refers.

Table 66
Table

Percentages of available skills in

Percentages of available skills in
the plywood
the andparticle
plywood and particle board
board industry
industry
and the required skills for the linerboard mill
and the required skills for the linerboard mill

I of available
% of available t of required
% of required
skills skills
ski lIs
Level of skill
Level of skill
Particle board
Particle board ti board
Linerboard
Plymill
Pl 11 plant
ant 1

00 to 0.1
to 0.1 56
66 69 60
0.11
0.11 ro
to 0.2
0.2 17 11 10
0.21
0.21 to
to 0.3
0.3 7 12
12 13
0.31
0.31 to
to 0.4
0.4 6 6 7
0.41
0.41 to
to 0.5
0.5 4 22 6
0.51
0.51 to
to 0.6
0.6 - - 44

100 100 100

 -- 246 --

Unfortunately the
Unfortunately cture presented
the picture presented by this comparison
by this comparison Is
is prac-
tically the sane
tically the same as
as shown
shown inn Table 4. I.e.
Table 4, i.e. aa larger percent
larger percentage of avail-
of avail-
able
able skills in
in the levels.
the lower levels. This highlights the
This highlights the necess ty not
necessity not only
of the
of the training
training for these
these very
very specific skills, but also
skills, but also the careful
the careful
selection of candidates for the jobs which require these skills. skills.

It would
It '"ould be most revealing
revealing to study which which percentage
percentage of of the
national
national economy
economy of developing countries
of developing countries isis directly influenced by
directly influenced by people
with a high skill
skill level
level and
and aa low
low versatility rate,
rate, i.e.
i.e. those
those specialized
specialized
skilled
skilled workers training is
workers whose training is generally
generally left
left to
to the
the private
private industry.
indus
Training for these skills,
Training for skills, partiiularly
partiiularly in in the pulp,
pulp, paper and wood-bas
paper and wood-based
panel industries, is
panel industries, is problematic
problematic forfor countries
countries where thisthis type
type of industry
indUS
has not yet been
not yet been established,
established, because
because the best
best way
way to train for
to train for any
any of
these
these specialized
specialized jobsjobs isis through
through on-the-job, "hands-on" training,
on-the-job, "hands-on" training, and to
and to
learn from
learn from mistakes which are
mistakes which li
are likely going to
going to be
be made.
made. unfor-
For these unfor-
tunate
tunate developing countries
countries thethe only 4ii to
only way tg train their future high
train their high skil-
led
led operators for for industries
industries yetyettoto!le
be e,,t,lolished
established isis to to send
send them
them abroad,
abroad,
which has
has many angles:
angles:

It
It is
is costly; therefore
rure candidates
at,lidrte, must
T.istbebeproperly
properly selected
selected
and scrutinized :',7!
before
,te sending
,elcin: them
ttem abroad, not only for
not only for
technical skills
skills but also3130 whether they seem
4netnsr they seem mentally
mentally pre-
pre-
pared work and
pared to work and live in in aa different
ilEferent cultural environment.
cultural environment.

Selection of
Selection of the
the plant which they
plant in which they will
will be
be trained
trained is
is
important; they be given 'le
important; will they the opportuni ty Eor
opportunity for·"hands-on"
hands-on"
training. will they only
training, or will , be allowed to watch how
be allowed how things
things
operate? Is Is anybody
anybody supervising
super, sing and/or guiding their train-
train-
iing
ng proglCamme?
programme?

What they do
What do they do when
when they
they come
come back?
back? (If they come
(If they come back?
Many trained
trained men
men fail
fail to return to
to return to their
their home
home country
country be-
be-
cause of political,
cause of political. economic
economic oror social
social woes.)
woes.) Do
Do they
to the
return to the company
company which paid
paid for
for their
their training,
training, or areare
they spirited
spirited away
away for
for aa few
few more
more cents pel:' hour
cents per hour by
by the
the
compeU tors?
competitors?

Are they
they enthusiastically showing their newly acquired
sk ills, or have
skills, have they
they all a sudden ',e,ome
all of a become too import ant
too important
for the menial
for skill for which they
menial skill t were trained?
wer- trained?

All side effects

All these side effects of overseas training
traini could be overcome if if
the governments of the
the governmonts developing countries,
the developing ably on
countties, pteletabli ar aa regional
basis,
baals, took
t,k on
c, the
the training
training for
for these
these high
hlgh skilled
,tilied obs. They
_hey might
might dodo so
if
if they
thri realized
rea.i7ed the importance
importance of these sk
of these skill3
ills ¡Dr the csvelopment
development of of
thei~
thei country and the
country and the multiplying effett whiLa these
effect which the,e skills generate.
7,enerate.

Some advanced
al,anced countries (including Brazil), in
countries (including in addition
addition to
to having
having
aa well
well ss'ar_cshel
established pulp, paper and
pulp, raper and wood-based
wood-based panel
panel Industry
industry -- and
subsquently
sub,.queot-i the means
,lieans and
and opportunity to train
opportunity to high-level skills
train for high-level skills --
also
also operate
operate government-sponsored training centres
government-sponsored training centres complete with manufac-
manufac-
turing
turing facilities for these specialized skills.
facilities for skills.
 -- 247
247 --

REFERENCES

Chalk,
Chalk, R.
R. Training
Training ininWorld
WorldBank-financed
Bank-financed pulp
pulpand
and paps, s.
paper projects.
1984 FO:PAP/84/Inf.9 -- FAO
FO:PAP/84/Inf.9 FAO Advisory
Advisory Committee
Committee on
on Pulp
pulp and •. 25th
session, Rome,
session, Rome, 16-18
16-18 May
May 1984.
1984.

Lawast, G.
Lawast, G. Actual experience
Actual experienceinintraining
training labour
labour for n -Mr of Oy
for rpulp mills of Oy
1984 Mets-Botnia Ab
Mets~-Botnia Ab in
in Finland.
Finland. FO:PAP/84/Inf.11 -- FAO Advisory
FO:PAP/84/Inf.l1
Committee on Pulp
Committee on Pulp and Rome, 16-18 'la,' 1984.
session, Rome,
and Paper. 25th session, 1984.

'n7, F.-C.
Mahlberg, F .-C. Survey of
Survey of cdrd:-.'d
education andr 1:raining needs
training tu r the
needs Eo;:' the primary
primary
1978 me'hai, cal
mechan; al wood
wood i ind.v,tri.- ad countri
OddS trl es ins el ected countries
es in
in Asia
As i a and
and the
the
as t . TF/INT 286
F' ar isBast 286 (S11..).
(SWE). FAO, Rome.

Picornell, P.M.
Picoroell, P.M. Expatriates and
Expatriates and underr._.tudies
understudies inin developing
developing countries.
countries.
1984 FO:PAP/34/Inf.8
£"0: PAP/84/Inf.8 -- FAO
FAO Advisory
MvisoJrY Committee on Pulp
Comm! ttee on Pulp and Paper. 25th
and Paper. 25th
session,
session, Rome,
Rome, 16-18
16-18 May
May 1984.
1984.

Sila-On,
511 a-On, Amaret.
AmaJret. Technology transfer- -the
Technology transfer therol
role of expatri
e of expatriates in mill
atea in mill
1984 operation
operation and training. FO:PAP/84/Inf.lO
and tJraining. FO:PAP/84/Inf.10 -- FAO
FAO Advisory
Advisory Committee
Committee
on Pulp
on Pulp and
and Paper,
Paper, Rome,
Rome, 16-18
16-18 May
May 1984.
1984.
 - 249
- 249 --

A STRATEGY FOR THE DEVELOPMENT OF

T"F nr",,:ci-mFt.: OE
FOREST INDUSTRY IN :.5V51OFIPC
FOR :* DEVELOPING c'Or"ERIES
COUNTRIES
(THE CASE
,L OF
CF MEXICO)
MPTCOI
by
by

Antonio Hernandez
HernAndo Murrieta'

CONTENTS

Page

L1, INTRODUCTION
INTRODUCTION 250

2. A "SYSTEM
A APPROACH" TO
"SYSTE~1 APFROACH" TO FOREST
FOREST INDUSTRIES
INDUSTRI ES 250

3. FACTORS RESTRICTING AN
FACTORS AN EFFECTIVE
EFFECTIVE FERFORMANCE
PERFORr1ANCE
OF FOREST INDUSTRY
INDUSTRY IN
IN AA TYPICAL
TYPICAL DEVELOPING
DEVELOPING
COUNTRY: THE
THE CASE OF MEXICO 253

3.1 Background Data

Data 253
3.2 Base Line Analysis 255

4. MAIN
MAIN CONCEPTS
CONCEPTS FOR
FOR THE FORMULATION OF
THE FORMULATION OF A SOUND
STRATEGY FOR THE DEVELOPMENT OF FOREST
INDUSTRIES 256

5.
5, THE
THE STRATEGY FOR DFVFLOPmPiT (THE CASE
DEVELOP~1ENT (TRP CASE OF
OF MEXICO)
MEXICO) 258

66.• A FINAL WORD ON STRATE57

STRATEGY FORMULATION
ION 260

• Director-General, Industry, Subsecretariat for

Director-General, Forest Industry, for Forestry and
Wildlife, Mexico.
Wildlife, Mexico.
 -- 250 -
250 -

L INTRODUCTION
In developing countries
In most developing countries thethe least
least developed
developed strata
strata ofof the
population
population are located in
are located in the
the f,,est
forest lands,
lands, arid
arid zones
zones included.
included. These
areas are characteri7ed
areas characterized by by aa standard
standard of living well
of living below the
well below the national
mean, with
with high
high rate:,
rates ,f
of unerq1c,.:,:ent,
unemployment, underemployment
urdurQmployment and
and social
social unrest.
unrest.
Therefore in these ,,hntries
in thesc countries the
H:c., forest
torear is not
not only
t.T, important factor
only an important factor
in the
t.he preservatier
preservation of the ecological
of the e0qlogicll balance,
nalance, but
but also
also a a natural
natural
resource with aa potential
resource with potential to produce much
to produce much needed
needed social
social andand economic
economic
changes.

The maximum
The maximum sustained
sustained harvests,
harvests, as
as well
well as
as the
the type of forest
type of forest
products potenti_lv
products potentially available
available in
in developing
developing countries
countries for
for the
the next
next
twenty thirty years, are
twenty to thirty ,. a variable which is
are a
, is more or
or less
less known.
known. The
stock is
stock is already
already there.
.ore. But, unless it
But, it is
is put to use
put to use with
with thethe active
active
participation otof the inLc.bitants
inhabitants of the forest zones,
the forest zones, th
these -ame
same people
will destroy it
will destroy it s-stema-..
systematically
,lly in
in search of less
search of less efficient
efficient alternatives
'ternatives
of
of land use as
land use as a a mean,
means ,f
of subsistence.
subsistence. This is aa very
y y important
difference between
between developw::
developed and developing
developing countries
countries th.
thatt must
must bebe taken
taken
account when
into account when considering
consideringforest
forestdevelopment
development strategies.
strategi,.._.

As opposed to
As opposed to other
other types
types of
of land
land produces
produces where
where self-consump-
self-consump-
tion and marketing of
tion and of the r_Laducts
products in their natural
in their natural state
state are
are possible,
possible,
thus
thus enabling the the peas3ntc
peasants to to obt.Jia economic gains
obtain economic gains inin aa relative
relatively
Simple way,
simple way, forest,
forest products
products require
reguir, anan industrial
industrial infrastructure
infrastructure to
process the harvest.
process the harvest. Without aa tughl,
highly productive
productive industrial
industrial establish-
estllish-
ment whose capacity is is in
in balance:n with thethe available
available forest
forest po,-ential,
potential,
the optimum -a development
development of this resource
of tht.,- Teource isis not
not possible. The experience
The exierience
of
of developing
devic.T.ing nations shows Tnat that any unbalance between
any unbalance between resources
resources and
industry
industry isis harmful
harmful toto both.
both. When existing plant
When existing plant capacity
capacity isis in
in excess
of the forest
of the forest 7otential,
potential, in6ustry
industry either
either exerts
exerts undue
undue pressure
pressure upon
upon the
resource, endangering it it by overexploi tation, or
by overexploitation, or indu,.`ry
industry is is forced
forced to
operate
operate atat ua yvery low level.
low productivity level. the othor
On the other hand,
hand, aa forest
forest
underutilized by lack lack of adequate industry tends to deteriorate Jeteriorate both
biologically and by by the
the depredatory
depreda actions of
actions of impove;i:,:d
impoverished peasants.
peasants.

Depending
Depending on on thetn. way
4ay it
it is
,r; exploited, the forest
,Jxploited, forest can can be
increased destroyed thu,
increased or destroyed thus affecting
affectinA the the society
society asas aa whole. That is is
why itit is considered aa Te-,,Jrce
is considered resource of public
potr,lic interest and why
interest and why its
its use is is
highly regulated by
highly regulated by governments.
governments. An efficient and
An efficient and rational
rational utiliz,.:on
utilization
of the
the forest is is the
the best
best and
and frequently
frequently the the only
only way
way for
for many
many developing
develaing
countries to
countriet t,, assure aa minimum of of social
social and and economic
economic watt-being
well-being for for aa
significant part of
significaba of their
their population
population which
which inhabits
inhabits thethe forest
forest lands,
lands, asas
well
well asas to
to achiqve
achieve a a much needed
needed social
social peace
peace without
without which
which progress
progress forfor
the socie
the whole S011i.N is not possible.
is not possible. That
1E31- is
is why the impact
why the impact of forest
of forest
industry
industry onon thethe netional
national development
development olof e7erging
emerg ing countri,-,
countries tTascends
trascends such
such
traditional
traditional aspects
o,pecns as as its
its direct contzlt,ution
contribution to to the GNP,
, ChP, the trade
balance and national
balance national employment.
employment. More important
More important is is its potential valuevalue
"rt,,ering arm"
as aa 'steering
as arm" toto induce
induce aa full
full andand optimum
optimum development
q,'elopment of of the
the
req,urces of aa nation.
forest resources
forest nation~

2.
2. A TO FOREST
A "SYSTEM APPROACH" TO FOREST INDUSTRIES
INDUSTRIES
The forest
forest industry
industry ofof any
any nation
nationisisa avery
veryU,P.,
complex reality. In
.qx reality. In
order to analyze
order to analyze the
the way
way it
it functions and and to
to find
findwb-,-
ways to ..mprove
improve it,
it, aa
simple
siaL,le model
modal is needed which
is needed indicates the
which indicates the vital1 aspecrs
aspects ofof forest
forest
industry without the
industry the many
many trivial
trivial details
details that
that mi:t.t
might cloud
cloud rn,
the analysis.
analysis.
The
Thc so-called
in-called "systems approach" provides such u,:h a model
a mvdel which is
is
graphically
.sally described
described in F ure 1.
in Figure 1.
 - 251
- 251 -
-

GOVERN(NG SYSTEM

'"
~

E
~ ~
~ ::E
c..
"-
~
v")
> Z
~
~
~

if>
=> >-
IV> v; ~ >-
u v")

I
fOREST INDUSTRY
FOREST INOUSTRY SYSTEM
S Y S TEM

! COMPETITOR SYSTEM

A
A system is is briefly
briefly defined
defined asas aa set of elements highly
of elements highly
interacting
inirractina with
with each
each other and the
other and the environment,
environment, aimed
aimed atat obtaining
obtaining anan
object which is
obiecl which is more relevant than
more relevant than the
the individual
individual objects
objects of of each
each
component.
compcnent. Forest industry,
Forest industry, which
which can be viewed
viewed as
as aa system
tern in
in itself,
itself,
is
is part of aa suprasystem:
suprasystem: the integral forest
the integral forest system,
system, whose purpose
purpose isis
greater more relevant
greater and more relevant to
to society
society than
than industry's
industry's own.
own. This also
This also
means that, whichever
means that, whichever the
the object of industry
industry may be,
be, it
it has
has to contribute
contribute
directly to the
the forest
forest system's
system's purpose.
purpose.

As in Figure 1,
As seen in 1, forest industry,
industry, conceived asas a
a system,
system, has
an operational environment with
an with at
at least
least four
four related
related systems:
(a)
a) The client
client system composed
composed of
of those
those who
who use
use the
the outputs
outputs of
of
forest industry,
forest industry, such
such as
as manufacturers
manufacturers ofof housing
housing and
and
furniture.

(b) The
The supplier
supplier system composed of those that furnish
furnish industry
industry
with the required inputs like raw materials, energy, cncrec,
information,
in'ormation, etc. The most important
The most timo
importan t COT:DDIPIt of this
e','Leo is
system is the integrated by
the set integrated by the
the fdr.st- vegetation, irA
forest veistlflog, the
forest productive infrastructure
infrastructure and
and thr
the inhabitants of the
rle
forest
-est lands,
lands, including the landowners.
including the landowners.
( c) The competitor
competitor system
nustem composed
composed of those who use
of thosr use the
the samc
same
inputs
inpLit', for alternative
n rez::ative uses and
aria those
:.ro who produce
substitute products for
sub:ftitute pro Eor the
the client
client system.
z.y.st-.m. Depredators,
Depredatvr,
 -- 252
252 -
-

producers ofof firewood, ecolog iea 1 g?

firewood, ecological groups (in
in a sense)
sense) as
as manufacturers
well as manufacturers ofof plastic,
plastic, metal andand other
other non-wood
non-wood
substitutes and
substitutes imports of forest products,
and imports products, can
can be included
included
in
in this system.
system.
(d)
(d) The governing nyptsc
governing system comrosed
composed of those
those who have
have the
the power
power
to regulate the lJt'ormance
regulate the performance ofof industry, such as federal
such as federal
and
and local government ageLcies.
local agencies.
From this
this environment
environment tha
the 'crest
forest industry
industry receives
receives inputs that,
inputs :net,
through aa process
through process of transformation, return
of transformation, return to
to the
the environment as
as outputs
outputs
with aa value added.
with added. These inputs
These inputs and outputs
outputs are
are well known
known and
anddOnot
do not
need
need to
to be specified
specified here.
here.

stated before,
As stated before, the
the forent
forest industry
industry asas aa system
system isis itself
itself
composed of many "elements" om or subsystems
'stems with aa high degree of
interaction and interdependence.
interaction interdependence. '.:(r1 analyzing a
When analyzing a national
national complex
system
system such this, it
such as this, it helps
helps to
to regroup
regroup itsits components
components inin subsystems:
subsystems!

(a) The humsn surses subsystem

human resources subsystem momposed
composed of
of all personnel
all personnel
working in
working in t:m
the industry,
ind,Jstry, whether
whcther as
co labourers!
labourers, technicians,
clerical workers
workers or
or as
as executivei..
executives.
(b) The physical reSourceS
resources subsvstem
subsystem composed of of all the
the
ph ical
physical facilities, such as machinery, equipment,
bu dings, land
buildings, land and
andfui-,)s
funds available
;_lable to
to industry.

( c) The orS)"n i za tional/technolog ieal

oroatin resources
ossirce:, subsysstem
tern
composed oí
compotcd of ail
all t.o
the systems, procedures, methods and tools
of tembnolt,IY
technology that organize and regulatetsculate work in the
work in the
industry.

The interaction
interaction br'woen
between these
these subsystems
subsystems gives
gives rise
rise to the
the
processes that
that determine
determine the
the peuiormance
performance of the industry.
of the industry. For
For the
purpose of ana is, three main processes
analysis, processes should
should be
be considered:
considered:

(a) The mAucti,e ps'ess

The Jlroductive processmomprising
comprising all activities such
all activities such as
as
debarking. sawing, drying,
:swing,
deinsrkir.g, dryins, etc., related to transforming
related to
raw
r- materials and
abd other
othp,- inputs into products with
into products with value
value
added.

(b) The
T regulating all activities
comprising all
regulating process comprising activities such
such as
as
control, quality control,
production control, control, cost accounting and
cost accounting
obtaining feedback
feedback from
from clients
clients in
in order to
to assure
assure the
the
level.
desired output leve".

(c) The learning/adapting

learning/adaptibc process
pronnn comprising
comi-nnisf-n all activities
such as
such as market
market :ese-,?ch,
research, product d-valcn-lt
development sad
and strategic
strategic
aimed at
planning aimed at dctecting
detectinginsI.mntly
instantlyi,i-Jnifidant
significant changes
in the
the environment
env i ronmen t soo as
as to ada.it
adapt industry,
irsisitry, consequen tl y
consequently
deviations in
preventing deviations in its
its performamoo.
performance.

When applying
applying this
this model
model to analyze the
to analyze forest industry
the forest industry of
of aa
particular country
particular country with
with the
the object
object of
of designing
designing aa sound
sound strategy for its
stra--y for its
development, attention should
development, careful attention should be
be given
given to
to the
the followi;
following items:

Which is the
Which is the desired
desired purpose
purpose of
of forest
forest industry
industry as
as part
part of
of
the integral forest
the integral forest system
system of that
that particular
particular country?
country? To
the desired purpose been
what degree has the been attained?
attained?
Does the
Does the industry
industry have
have the
the potential
potential capacity
capacity -
- indicated
by the
by the nature
nature of
of its
its human,
human, physical
physical and
and organizational/
organizational/
technological
technological resources -- to
to attain
attain the
the desired
desired goal?
goal?
 - 253
253 --

Are the outputs of industry fulfilling the needs of

Are the outputs of indus fulfilling the needs of the
client
cl ientsystem, including cc-ornment
system, including government iiff such isis the
the case?
case?
Is the competitor system
sys.-e, affecting the marketing
affecting
opportunities for
opportunities for the
the national
national industry,
industry,imports
importsincluded?
included?

Are the
Are the main inputs, i.e.
main inputs, i.e~roundwood
roundwood and
and transport u,,rvices,
services,
suppliedinin the
supplied the required
requiredquantity,
quantity,quality,
quality, opportuni
ipportunPitndand
price? Whichare
Which arethe
themain
mainconstraints
constraint;ofof the
the supp
sup:.ier
ier
:iv
system? the competitor
Is the systemaffecting
competitor system affect,-.g the
the supply
suppl- of
of
vital
vital inputs?
inputs?

Howefficient
How efficient isisthe
thenroductive
productiveprocess?
process? Are
Are means
means uf
of
production and
production and technology
technoiy adequate for the
adequate for the type
type of
of raw
raw
materials and
materials and available
available lal,our?
labour?

Howeffective
How effective is the regulating
is the regulating process
process in in maintaining
maintaining aa
high level
high of productivity
level of productivity throughout the industry?
t.e. industry? Do
government andindustry
government and industry boards
boardsparticipate
partici-.,a!-einin carrying
carrying out
out
this process?
this process?

How effective is
How effective is thethe learning/adaptive
learning/adaptive processprocess toto prevent
prevent
the impact
impact of of negative
negativechangc,-
changes fromfrom thethe environment?
environment? To
what extent doss
what ?c-ernmentparticipate
does government p,rticipate in this this process?
process?
Is there
therea agoverumPnt
government agency agency at thethe appropriate
appropriate level
levelwhose
whose
sole
sole purpose
purpose is is t,tode'elop
developlene--
forestt industry?
industry?

Are state-owned
Are industries -- if
state-owned industries a',./ -- contributing
i f any contributing in a
direct and
direct and significant
significantway way to
to the
the ac..i friinhment of
accomplishment of the
the aim
aim
the forest
of the forest industry:
industry? Are the inputs of of the
the governing
governing
system, such
system, suchasas laws,
laws, administrative
administrative procedures, policies,
procedures, policies,
incentives, etc.,
incentives, etc., inducing
inducing aa high
high level
level ofofperformance
performance by by
the forest
the forest industry?
industry?

The use
The use ofof this
this model
model in in analyzing
analyzing the tt 'e,-formance
performance and and the
the
con--aints
constraints of of the
the forest
forest industry
industry is is an iterati rather
an iterative »,er than
than aa linear
linear
process.z5. The results
The results will
will not
not be be better
better than
than the iformation inputs;
the information inputs; soso
a
a titift-hand
first-hand knowledge
knowledge of of the
the industry
industry and and its
its operating
operating environment will
environment will
be
be necessary to aDi,ly
necessary them successfully.
apply them successfully. This is is particularly
part icul arly so
so in
develo:Ding countri- wiire
developing countries where statistics
statistics are unreliable or or non-existent.
non-existent.
Special care
care should De taken in
shoulit be in obtaining
obtaining all
all data
data pertaining
pertaining to the
socio-cultural
socio-cultural peculiarities
peculiarities of
of the
the country.
country. Local values,
Local values, norms,
norms, habits
habits
and attitudes
and attitudes as
as well
well as the patterns
as the patterns of
of behaviour theyelicit,
behaviour they elicit, are
are a
vital
vital factor be taken into
to be
factor to into account
account when establishing policies
when establishing policies and
and
.,....tatcgiesfor
strategies for the
the development
developmentofofforest
forest industry. The implementation
industry. The implementation of
suggr.,tiors
suggestions made by developed countries
by experts from developed countries have frequently
frequently
failed because
failed i,-;-. important component
this very important component ofof analysis
analysis had
had not
not been
been
conside, e by
considered by them.
them.

3. FACTORS RESTRICTING
FACTORS RESTRICTING AN
AN EFFECTIVE
EFFECTIVEPERFORMANCE
PERFORMANCE OF
OF FOREST
FOREST INDUSTRY
INDllSTRY
IN AATYPICAL
TYPICALDEVELOPING
DEVELOPINGCOUNTRY:
COUNTRY, THE
THE CASE
CASE OF
OF MEXICO
MEXICO

3.1 Background Data

Background Data

Approximately7070percent
Approximately percentofofMexico's
Mexico'stotal
total area
area is
is forest
forest land
land
and
and includes
includes the
the three
threemain
mainforest ecosystems
forest ecosystemsasasshown:
shown,

Temperate forest
Temperate forest 273
273 322 km 22
322 km2 19 %
%
2
Tropical forest
Tropical forest 132 006
132 006 km
km22
9 %%
land vegetation
land vegetation 677 414
677 414 km
km 47 %%
Other 346
346 772 km 2
772 km2 25 %%

Total forest
Total forest land
land 11 429
429 514 km 2
514 km2 100 %%
100
 -- 259
254 -
-

National parks
parks and
and reserve
reserve areas
areas comprise
comprise 59
59 million
million ha.
ha. The
volumetric
volumetric potential is is considerable.
considerable. The temperate a~d
The temperate tropical forest
ad tropical forest
inventory indicates
inventory indicates approximltely
approximjtely 33 000 000 million mm withwith an
an annual
annual
increment
increment of
of about
about 27 million m.
27 million m .In
In spite
spite of
of this potential, the annual
cut
cut during
during the
the last
last five
five years
years has
has been approximately 99 million
been approximately million 3 or 33
mHior 33
the,'annual
percent
percent of the increment,
of the increment, which
which represents
represents onlyonly 1.7
1.7 percent
percent of
of Mexico's
Mexico's
GNP.

The
The structure of
of Mexico's forest primary
Mexico's forest industry reveals
primary industry reveals aa high
high
percentage
percentage of plants that
of plants that manufacture
manufacture low
low value
value added
added products
products as
as shown
shown
below:
below:

of
Number of
Type industry
Type of industry plants

Sawmills I1 325 62.5

62.5
boxes, crates,
Wooden boxes, crates, etc.
etc .. 636 30.0
Wood-based panels 50 2.4
Pulp mills 10 )

Paper and pulp

pulp mills 14
14 ) 3.3
Paper mills 45 )

(resin, impregnation,
Others (resin, impregnation, etc.)
etc.) 40
40 L8
1.8

T01'AL
TOTAL 22 120 100.0

During was as
During 1983 timber production was as follows:
follows,

in~ake
Wood in ake
Product
Product m )
(000 m ) %

Sewnwood
Sawnwood 55 072 58.0
Railway ties
ties (sleepers)
(sleepers) 214 2.4
Pulp material 22 460
460 28.1
Poles and piles 228 2.6
and veneer
Plywood and veneer 214 2.5
2.5
Firewood 560 6.4

TOTAL 8 748
8 748 100.0

The productivity
productivity level
level of
of most
most of
of the
the forest
forest industries
industries is
is low
low
as the
as the utilization percentages of
of installed
installed capacity
capacity show:
show,

utilization
Utilization
Type of industry
industry percentage

Sawmills 80
panel plants
Wood-based panel plants 52
pulp
Pulp mills 70
Impregnation plants 30
30
Resin plants 38
38

Weighted
Weighted mean 65
 - 255
- 255 -

mexico's jpr
Mexico's y Eorest
forest industry
indust.ryemploys
employs close
close toto100100000
000 people
people
comprising labour,
comprising Le, alicians
labour, techn cians andandclerical
clerical staff;
staff; this
this figure
f does
does not
not
include personnel
include en ,aged in logging
personnel engaged logging operations.
operat.ions. Secondary industry,
Secondary industry,
including production of
including the production furniture, building
of furniture, building elements,
elements, houses and
other high
other high value
value added
added goods,
goods, represents some900
represents some 900plants
plantswith
with close
close to
to
100 000
100 000 employees.
employees.

Mexico hasrun
~\exico has rana adeficit
deficit in
in its
its Irade
trade balance tiv several
balance for aral years.
years.
sta'.,ticm on
In 1983 the statistics on foreign i.-lating to the forestry and
foreign 'trade relating
forest ,o.tor,
industr,a,' sector, expressed
forest industries' i:lion U.S.
expresi I in million U.S. dollars, -evire
were as
follows:
follows:

Wood Droducts
wood products Non-wood products
Non-wood products

Exports
Exports 52 20
Imports
Imports 172 45

Deficit
Deficit 120 25

Imports of pulp andand paper

paperaccounted
accountedfor
for7979percent
percentofof the
the forest
forest
products' trade balal
products' trade deficit which
balance.; deficit which represents
represents about
about 17
17 percent
percent of of the
the
total
total trade
trade balance aaficit of
balance deficit of the
the nation.
nation.

3.2 Base Lin!lml'malysis

Base Line Analysis
During the
During the first
firstmonths
months of 1983 aa survey
of1963 of the
survey of the actual
actual state
state of
of
forestry industry
the forestry Mexico was
in Mexico
industry in wasconducted
conductedwith
withthe
the object
object of
of
identifying the
identifying the main
main constraints
constraints for
foritsits
development.
development. At
At that
that time
time the
the
country had
country hadreached
rcion.d the
the lowest
lowestpoint
point ofof the
the worst
worst ecamcmic
economic crisiscrisisinin its
its
history and
history andman,.
many of of the
the constraints
constraints were,
were, therefore,
therefore, nf
of aa circumstantial
circumstantial
nature, such
nature, such asOFthetheplummeting
plummeting of of internalmarkets,
internal markets,a avery
varyhigh
highinflation
inflation
rate, lack ol licetaiancurrency
rate, lack of foreign currency and
andso so forth.
forth. AnAn effort
eiiiort was
was made
made to to
identify these structural
identify struatural constraints that woull
constraints that would have
ioave toto be corrected
be corrected
through
through medium
medium and andlong-range
long-rangestrategies.
strategies. AmongAmongthe themost
most important
important
findings of
findings of the
thesurvey
survey were:
were:

The general
The general forest
forest policy
policyof of
thethe
newnewFederal
Federal Government
Governmentwas was
in the
in the formulation
formulati.on stage.
stage. Extremeattention
Extreme attention was given to
was given to
considering which
considering should be
which should be the
the main objectives to
main objectives to be
be
achieved in
achieved in the
themedium
medium and
and long
long range.
range. The backward
The state
backward state
forest activities demonstrated the failure of past
of forest activities demonstrated the failure of past
of
pa-icies. The
policies. The role
rale of
of federal and and state
state governments
governments in in
-:st
forest deve e incorporation of
develoo;e;,t,, t hthe of peasants
peasants and
lanaowners in the
landowners th, product
!L:aiction tha suitability of
ion proaes,,
process, the sui tabil i of
viving forest
giving to privar inMi,try, the rnlr
forest,onc,.:.n.ir:i;
concessions to private industry, the or
of
public
publ i c industry
industry and otherotner relatfa 3'-';UCS were carefili
related issues
analyzed.
analyzed. It also transpired that the main purp,cv uf
It also transpired that the main purpose 0
forest industry
forest industry in in the general
general framework of forest
of forest
development
development had had never
never been defined. As aa result,
been defined. result, industry
industry
throughout the
throughout the country
country had
had developed without aa plan
developed without plan and
and the
the
main consequences
main consequences areare reflectedinin the
reflected the figures
figures given
givenabove.
above.

On the
On the one
onehand
handthere
therewas,
was,and
andstill
still is,
is,an anunused
unused forest
forest
potential and,
potential and, on
on the
the other
other hand,
hand, there
there is is the
the largest
largest andand
richest market
richest market in in the
the world
world -- the
the 'tilted
UnitedStatesStatesofofAmerica
America
so close
-- so close !oto mexico.
Mex ico. In spite c'
In spi te of th !his, the estmb:iished
is, the establ ished
industrial
industr ial pim-r
plans did
did not
nothave -1e capacity
have the ir f5'toto piodiicr
produce at at
the quality
the qu]it!.- ind
and price
price levels
levels requ:'
required to ' make sv.,tel,-itic
make aa systematic
 - 256
- 256 --

entry
entry into
intothe
theAmerican
American market.
market. Its physical
Its physical and
and organiza-
organiza-
tional/technological resources
tional/technological resources were
were not
not adequate.
adequate. The
general level
levelofof
mananement
management was
was poor. They had
poor. They had been
been unable
to instil
to instil their
their force with
lab. - force
labour sense of
with aa senSe of quality
quality and
and
productivity.
productivity. The
T ountry had
country manysmall
had many small inefficient
inefficient
i-dustries,
industries, maidymainly sawmills,ills, and
and very
very fewfew large
large integrated
integrated
cc.:.: lexeswhich
complexes which lirr.tedthetheutilization
limited utilization of of the
the whole
whole treetree
sol%o- with
volume with the
the MOE: Trofitable use.
most profitable use. Industry had
Industry had neither
neither
the equipment
the equipment nornor the
the technology
technology required
required for for the indus-
the indus-
trialization
trialization ofoftropical
tropical woods
woodsandandother
othernon-conventional
non-conventional
like oak. On
species like
species , On thethe positive
positive side,
side, there
there was was a a large
large
portion
portion of un,
of unused 21ant capacity
plant capacity that
that could
could be be marginally
marginally
utilized for for oxport
export purposes
purposes and andalso
alsoaa great
great willwill on on the
the
part several segments
part of several segments of of private
private industry
industry to to gogo ahead
ahead
L y to
and try to solve
solve the
the internal
internal crisis
crisisthrough
through exports.
exports.

One
One of of the
the vital
vital constraints
constraintswas, was, and still is,
and still is, thethe poor
poor
supply of
supply of raw
raw material.
material. This
This isis aa result
result of oftwo twomainmaIn
negative factors
negative factors in in forest
forestproduction:
production: lack of
lack of infra-
infra-
structure and
structure and organization.
organization. There
There is is aa great
great need need ofof
roads. Many
roads. manyofofthetheexisting
existing ones
ones are
are so
so poor that they
poor that they can
can
be used
be used only
only during
during aa shortshort period
period of of the
the year.
year. This
This
cc,,,',tion also causeS
cond i t ion also causes unduly high transportatransportation costs.
t ion costs.
LGsq_ng operationsarearevery
Logging operations veryinefficient
inefficient duedue to to aa lack
lack ofof
approp:-Iate equipment,
appropriate equipment, cou coupled with aa low
ed with productivity
low productivity
h.rel ot
level of the
thelabour
labourforceforcewhich
wh ch consists
consists mainly
mainly of
of peasants
peasants
into crew
t.-.rr.cd into
turned crew workers without the
workers without the required
required training
training and
and
organization. One
organization. ene ofof the
the reasons
reasons for
for the
the poor
poor supply
supply of
of
raw materials
raw materials is also the lack of adequate financial
is also the lack of adequate financial
schemesfor
schemes for all
all stages
stages ofofforestry
forestrydevelopment.
development. Most wood
Most wood
pulp
pulp mills
mills are
arelocated
located outside
outsidethethe
acknowledged
acknowledgedeconomical
economical
supply radius of
supply of 150
150 km
km and
and the
the establishment
establishment of ofcommercial
commercial
plantations is
plantations is almost
almost impossible
impossible due the high cost of
due to the high cost of
money(up
money (uptoto 70%/a)
70%/a)and andproblems
problemsrelating
relating to
to land
land tenancy.
tenancy.

Forest
Forest industry
industry asas aa whole hadfailed
whole had failed toto detect
detect trends
trends and
and
changes inin the
changes the environment
environment and andtotoalter
alter its
its structure
structure and
and
functioning accordingly.
functioning accordingly. It has
It has been
been more
more ofof a a reactive
reactive
type
type of of system orientedtototry
system oriented try to
to get
get the
the best
best part
part of
ofany
any
opportunity
opportunity which whichoffered
offereditself.
itself. ThisThis circumstantial
circumstantial
approachisis largely
approach largely responsible
responsible for for the
the pres,-rt
present incapacity
incapacity
of industry
of industry to to project
project strongly
strongly on on the
the expor:
export market, to
use thethe great
great reserves
reServes ofof tropical
tropical woods
woods or or to
to obtain
obtain aa
fair
fair share
shareofofthe expanding
the expandingmarket
market forforlow-p, :oed housing.
low-priced housing.

Up to the
Up to the first
firstquarter
quarterofof1983 there was
1983 there was no
no Government
Government
agencyspecialized
agency specialized inin forest
forest industry.
industry. The pertaining
The pertaining
functional
functional re,v.nsfhilities
responsibilitieswere
werescatte:c:,,:
scattered around
around d.
different
units
units of
of the
the Undarrncretariat
Undersecretariat of
ofForez-try.
Forestry. There w, ^o
were no
incentives dv:_,Ign,-d
incentives ,,peciallytotopromote
designed specially prom,:lethe
thedevelopment
develonent of
of
forest industry.
forest industry. Most public
Most public forest industries Operated
forest industries -trated
with
with losses
losses and
and none of them
none of contributed in
them contributed in any significant
any significant
way to the
way to the achievement
achievement of of the
the national
national goals.
goals. They were
They were
poor duplicates of
poor duplicates of private
private industries,
industries.

4. MAIN CONCEPTS
MAIN CONCEPTS FOR
FOR THE
THE FoRMULATION
FORMULATION OF
OF AASOUND
SOUND STRATEGY
STRATEGY FOR
FOR THE
TilE
DEVELOPMENTOF
DEVELOPMENT oF FOREST
FOREST INDUSTRIES
INDUSTRIES
When designing strategy for
a strategy forest
the development of forest
for the
industries in aa developing
industries developing count:, several political,
country,, several political, soclo-cultural,
socio-cultural,
economicand
economic andtechnical
technical issues
issues shou:r:
should be
be .7arefully
carefully considered.
considered.
 - 257 -
- 257 -

The peculiarities of
The peculiarities the prevailing politi.1 s:--tem are vital
of the prevailing political system are vital
define, among other thingF,
because they define, things, whichwhici are the r.,.05 roles of
government
government and andother
otherpolitical
political forces
forces reglrding Ist-ial deve
ing industrial development.
Is the
Is the government's
government's role role restricted
restricted to to rudu'ation
regulation through ugh administration
adminr.ication
of policies
of policies that
that may
may induce
induce the the private
private sector's ,Ic:r1.3,orordoes
sector', .efforts, des it
it also
also
i lude the
include the establishment
establishment and and operation
operationof ofpub oterprIsr3' Is
:-.c enterprises?
public Is mixrd
mixed
:oestment, i.e. by public and private se'
investment, i.e. by public and private sectors, politically viable? viabl,:
_ch is
Which is the
the accept-,1 role of
accepted role of intermediate
intermediate organizations
organizations such
such asas induutly
industry
..--ociations or
associations or fa)
farmerr and
and workers
workers unions?
unions? Is Is planning
planning formulated
formulated solely
by
by government ag,-, 'os or
government agencies or is
is there
therea asyE
system t ' promote
- to promote aa consensus
consensusofof all
all
sectors? Is for
sectors? Is foreign investment
investment encoun,,
encouraged or forbidden? Which kind
Which kind of
of
forest land
forest land tenan,
tenancy, prevails?
prevails? To what
To -.bent does
what extent does government
government regulate
regulate
forest activities?
forest activities? The
The answers
answers to tlo above-mentioned
to the questions will
above-mentioned questions will
it possible to determine the best wiy to share the effort of
make it possible to determine the best way to share the effort of
development.

socio-cultcr.al peculiarities
socio-cultural peculiarities are
are -'ic. very important
also very important inin strategy
strategy
formulation.
formulation. ti.ure marked
Lft there
Are ethnic git':,rences
marked ethnic differences between
between groups
groups that
that
makeregional
make regionalintegration
int.,gration difficult?
difficult? Whicb
Which are arethe
the prevailing
prevailing attitudes
attitudes
toward private enterprise?
toward private enterprise? Which
Which areare the
the main
main attitudes
attitudes ofof workers
workers
towardsuch
toward suchissues
issuesasasproductivity,
productivity, quality,
quality, discipline
discipline and
and so
so forth?
forth?

Are mana,.:i,ic
Are industries conservative
managers of industries conservative oror risk-oriented'
risk-oriented? Is
there ir,dition
an export tradition among wrong forest industrialists?
forest industrialists? C'-uln
Could an
industrial
industrial cultur( viably rromoted
culture be viably promoted among peasants which
among peasants whichmight
mightresult
r,sult
in efficient loggir4 and pr,-e=sing?
in efficient logging and processing? Is the attitude of government
Is the attitude of government
towird peasants
toward peasants one
one ofof paternalism? The answers
paternalism? The answerstoto these
these questions will
ions will
inli,ate the
indicate thenature ofof
nature those development
those developmentprocesses
processes which
which are
are more
more likely
likely
tc,
to succeed.
succeed~

Economic conditionsplay
Economic conditions play aa major
major role in strategy
role in strategy form,.. tion.
formulation.
Which are the prevailing economic
Which economicconditions
conditionsinin the
the forest
forest areas? Is
Is
there
there aa strong
strong mig:al.fon
m ion from forest zones
from forest zones to
to urban
urban areas?
areas? Is qualified
labour available close
labour available close forest areas?
to forest
to areas? there an adequate
Is there
Is
infrastructure of support
infrastructure support services
serv ices such as as transport,
transport, maintenance,
training,
training, etc.?
etc.? there sufficient preferential financial resources
Are there sufficient preferential financial resources
for
for such
such items
items asas plantations,
plantations, roadroad construction,
construction, tcan,port
transportandand logoing
logging
equipmentand
equipment andsoso forth? How strong is the loca, ccmand for f-rest
forth? How strong is the local demand for forest
products? Are
products? Are there
there prospective
prospectiveforeign
foreignmark,-?.ts
markets andand export
,,ioort intentives?
incentives?
Is there
Is ,-immcrcial type
there a commercial type of forest still ,cilable for
of forest still available for a sustained sustained
rowth of industry?
growth H-w
How is the S,alince
is the balance between forest potential
betv, forest potential andand
plant capa
capacity?cy? Thesu and
These ,nd many o+ner related
many other rel a questions
questions should
should bebe
carefully ..c';wered
answered before attempting
attemptirg to to i,,sign
design strategy of
the strategy
duvelopment.
development.

There are
There are also
also important
important technical
technical issues to be
issues to be considered in
considered in
developing a stiegy.
developing a strategy. Which are the
Which are the main
mainspecies
speci..s available
available for
for futur,i
future
industrialization?? Is th,
the technology
technology for its
h:).istrialization airee
for its industrialization already
known or in
known or in aa stage
ziage ofofdcvci.ppment?
development? Howmarketable
How mr),,),ble are
are these
thesespe,-icc'r
species?
t, kilntried?
they be kiln-dried?
Should they size and automation degree
What size degree are
ac,
appropriate in
appropriate the case
in the case ofof mecic,a1
mechanicalwood-processing
wood-processing plants? Which are
plants? Which
the
the possinili.ties
possibilities of ofgrowth ,,isting plants?
growth of existing plants? Can Can the
the value
value added
added of
of
the
the present
present output
output ofof industry
industry bee increased?
increased?

A sound
A so ,nd strategy
strategy for
for development clearly defines
development clearly defines the
the course
course of
of
of forc,t
growthi of forest industry
industry asaswell
wellasasthe
themore
more efficient
efficientways
ways totoachieve
achieve
growth cien the peculiarities of the country.
this growth given the peculiarities of the country. Somevital
Some vital features
features
of aa sound
of strategy for
sound strategy for the
the development
development of of forest
forest industry
industry are:
are:
(a) Industry goals represent direct contribution to the
Industry goals represent a direct contribution to the
national forest policy, i.e. full use of all available
national forest policy, i.e. full use of all available
species, low
species, rates of
low rates maintenance of
of waste, maintenance of balance
balance between
between
forest potential
forest and plantI capacity,
potential and capacity, etc.
etc.
 -- 258 -
-

(b) The particii1ar

particular interest
interet of
of each party is
each party is considered
considered inin the
the
setting
setting of
of national
nitiinal toals with aa vision
vision of
of aa "total
"total system"
so
so as to assure
as to national interest.
assnrc national interest.

(c) It
It is the
the product
product of real consensus
of real consensus among
among all
all interested
interested
to promote
parties to promote involvement.
involvement.
(d) required effort
The required effort is
is shared
shared by
by all
all sectors
sectors -- public,
public,
private, communal organization, etc. - according to the
communal organization,
roles they
roles they play the country,
play in the country, but
but well
well coordinated
coordinated
through
through mechanisms and joint
mechanisms of agreement and joint action.
action.

(e) is built
It is bJ on realities.
realities. Assumptions of
Assumptions in basic
of changes in basic
conditions
conditi is are
are carefully tested
tested for
for viability.
viability.

(f) It si, fies permanent

It to structural constraints
s:manent solutions to
such as lack of roads,
roads, low labour proc'rt
productivity,
ty, etc.

considering the
When consicr: the course
course ofof action
action to be taken, it is
'

to identify
important to identify the
the -real
real causes
causes of
of problems
problems instead
instead of
of the
the apparent
causes&
causes.

are the
Results are the product
product of actions,
actions, butbut actions
actions are
are carried
carried out
out
by human, phys icaland
physical and organi zat ional/technological
organizational/technological resources.
Inefficient
Inefficient actions
actions oror lack
lack of of proper
proper actions
actions seem to be
seem to be the
the causes
causes of
of
results.
poor results. This
This only appears to to be
be so.
so. The actions are
The actions are not
not properly
taken because
taken because the
the available
available resources
resources are are not
not adequate
adequate in in quality,
quality,
quantity oror both.
both. In order
In order to to achieve
achieve aa change
change in in results,
results, it is
it in
therefore necessary to
therefore necessary to introduce
introduce aa change
change in resources.
in resources. TO state
To state that
that
the
the yield is low due to inefficient
yield is inefficient sawing
sawing operations
operations isis not
not enough.
enough. Why
are these operations
are these operations inefficient?
inefficient? Is it lack
Is it lack of training
training ofof operators?
operators?
IS it obsolete equipment?
Is it equ ? IS it inadequacy of
Is it of method
mPthod or standard?

It is
is also
also important to to remember
remember that
that inIn aa complex system, such
complex system, such
as forest indus
as forest indus is,
i=, the
thP functioning
functioning ot of eo
each part affects the
affects all the
others. There is
There iS a strong
a stroig interdependence
interdependenci among parts of
o.. rs(rts the whole.
of the whole.
That is why
That is why careful attention
, attention should be
1 be gi,
given to the identification
icentification ofof
restricting ffactors, which
,which should be be dee_t
dealt ,with first, so
. as to
so as to improve
improve
the whole
whole systeas. For instance, aa chronic
For instance, chronic deficit
;( in the supply
11 in supply of
of raw
raw
for lalack
material for :k of roads will
of roads will make
make all
all improvements
impr 7( cits in
. in equipment
equipment and
and
technology ineffectual.
ineffectual.

5. THE STRATEGY FOR

FOR DEVELOPMENT
DEVELOPMENT (THE
(THE CASE
CASE OF
OF MEXICO)
MEXICO)

In
In June
June 1983,
1983, nine
nine objectives
objectives were
were set
set out
out as
as priorities for
priorities for the
the
development of of forest
forest industries
industries inin Mexico,
Mexico, each one one with
with aa set of
of
stra teg lc cut]
strategic ou tl ines wh lch have
which have been omi t ted from
been omitted from this
th is paper
paper because
because of
of
lack of
of spaci_i
space; these
ti. nine
line objectives
objectives are following:
are the following:
(a) TO achieve
To achieve and maintain the balance between forest
potential and
and plant
plant capacit:-
capaci in all
in all regions.
reg ions.

(b) achieve the

To achieve the requiree
required levels of quality and
and productivity
forOr industry
f industry in
in order to be competitive
order to in foreign markets.
,.sitive in

(c) supply the

To supply the country's
country's di
demand for forest
ird for forest products
products and to
generate surpluses which
which can
can be
be exported.
exported.

(d) maximum value

To obtain the maximum value added
added of
of forest
forest raw
raw materials.
materials.
 -- 259 -
-

(e) To industrialize all non conventional species (mainly

tropical woods).
(fl TO living and
To raise the standard of living and generate employment
employment for
for
the
the population of the
the forest
forest areas.
areas.
(g)
(q) To make public
To make public torest
forest industries
industries contribute
contribute directly
directly and
and
significantly
significantly toto the goals of forest
goals of development and
forest development and to
to
operate with an
an adequate
adequate ROI.
ROI.

(h) To optimize the allocation of investment resources

available for
for the
the development
development of
of forest
forest industry.
industry.

(1) To assure anan adequate

adequate and
and continuous
continuous flow
flow of
of financial
financial
for all
resources for all industrial
industrial activities.
activities.
these objectives
All these objectives have
have aa set
set of related indexes
of related indexes and
and ratios
ratios
it possible
which make it possible to
to set
set specific
specific goals
goals and
and to
to measure
measure progress.
progress. In
an effort toto achieve the above-mentioned
above-mentioned objectives,
objectives, aa three-pronged
action was decided
course of action decided upon:
upon:
(a)
(a) Operation "F", directed at
nFfl, directed at improving
improving the
the effectiveness
effectiveness and
and
productivity of private
private industry.
industry.

(b)
(t) ..Qperation Pids", directed
rration "Plus", at strengthening
directed at the peasant-
strengthening the peasant-
operated forest industries
crated ftic,oi. industries and making them
and making them profitable
profitable and
and
self-sufficient.

(c)
(c) Operation "Delta" , directed
Operation "Delta", directed at
at transforming
transforming public
public forest
forest
industries
industries into
into efficient tools of forest development

As aa mechanism for agreement

mechanism for agreement and
and joint
joint action
action that
that will
will assist
assist
in
in the implementation, aa national
the strategy implementation, task force,
national task force, the
the Forest
Forest
Industry Committee for Productivity
Comm:ilee for Productivity and
and Quality
Quality Assurance,
Assurance, was
was integrated
integrated
with all
all concerned
concerned federal agencies and industry associations in
industry associations in the
first quartcr
quarter of
of 1984.
1984. This task force
force is
is engaged
engaged in
in several
several activities:
activities:

(a) The design and

The and installation
installation of
of an
an Integrated
Integrated Financial
Financial
for Forestry Development.
Programme for
(b) The promotion
promotion of
of joint
joint export
export programmes
programmes at
at international
international
and quality
price and quality levels,
levelS, for
for instance
instance board
board and
and furniture
furniture
manufacturers~
manufacturers.

(c) The installation of productivity

The installation productivity centres
centres for
for each
each type
type of
of
industry designed to to reduce
reduce waste and to utilize
and to utilize raw
Law
material
materi residues~
residues.

(d) The development

development of
of technology
technology for
for logging
logging and
and industriali-
industriali-
zation of tropical woods.
woods.

(e) The promotion

promotion of
of supply
supply agreements
agreements between
between landowners
landowners and
and
industries.,
industries.

If) Studies to
Studies reduce the
to reduce the cost
cost of
of inputs, as transport,
inputs, such as transport,
glue, etc.
etc.

The Undersecretariat of
The Undersecretariat of Forestry has been
Forestry has engaged in
been engaged in several
activities to the
activities related to the development
development of
of industry
industry which
which include:
include:
 -- 260 --

the application
the application ofof policies
policies relating
relating to
to foreign
foreign trade,
trade,
logging permits and
logging permits and the
the establishment
establishment of
of industries
industries aimed
aimed
at
at inducing the utilization
inducing the utilization of
of tropical
tropical woods
woods and
and other
non-traditional species;
species;

the
the channelling
channelling of international low-cost
of international low-cost funds
funds to peasants
for the development of
for the of roads,
roads, plantations
plantations and
and financing
financing of
of
mechanical for logging
mechanical production means for logging operations;
operations;

promulgation of a
the promulgation a new
new forestry
forestry law
law that
that will stimulate
stimulate
development
development actions
actions and
and reduce the bureaucratic
reduce the bureaucratic controls
controls
which affect the logistic
logistic process;

the integration
the integration of
of aa "package"
"package" of
of incentives,
incentives, fiscal,
fiscal,
financial, etc~,
financial, etc., designed
designed to
to promote the development
promote the development and
and
of forest
effectiveness of forest industry;
industry:

the promotion
the promotion of
of joint
joint ventures
ventures designed
designed to
to establish
establish
small scale pulp mills appropriate
small appropriate to
to conditions
conditions prevailing
prevailing
in Mexico,
in for the
Mexico, for the purpose
purpose of the large
of reducing the large deficit of
of
the trade balance of forest
the trade forest products.
products.

6. A FINAL WORD ON STRATEGY

A STRATEGY FORMULATION
FORMULATION

When aa complex
complex system,
system, like
like forest
forest industry,
industry, isis not
not performing
performing
as desired,
as desired, the
the first
first thing
thing that
that comes
comes to
to mind
mind is
is how
how to
to improve
improve it;
it; in
other words, how to
other words, to correct
correct those
those parts
parts ofof the
the system
system that
that are
are notnot
properly.
functioning properly. Under
Under thisthis approach
approach the the design
design ofof the
the system
system
fixed and
itself is fixed and is, therefore,
therefore, not questioned~
not questioned. The experience of
The of
developing nations shows,
developing nations however r that,
shows, however, that, when
when aa complex
complex system
system is is not
not
performing effectively,
performing effectively, it is almost almost always
always necessary
necessary to to redesign
redesign it.
This is
This is aa very challenging
challenging and and highly
highly creative
creative task,
task, because
because it it forces
forces
one to
one to break
break with
with existing
existing thinking
thinking patterns
patterns about
about how
how forest
forest industry
industry
should operate and
should and what its its contribution
contribution to to national
national goals
goals should
should be.be. It
seems that
seems tha t individuals
ind i vidual s tend to to look
look more
more for
for improvements
improvemen ts within
wi th in the
the
established conditions than
established conditions than to search
search forfor radical
radical and permanent
permanent solutions
solutions
to the
to the main constraints.
constraints. The need to
The need to redesign
redesign thethe forest
forest industry
industry system
arises mainly
arises rna i nly from
from the the fact tha t many
fact that many of of the
the environmental
environmen tal conditions
cond i t ions
prevailing when it
prevailing it was
was originally
originally established
established havehave changed
changed considerably.
considerably.
The type
The type and
and physical
physical properties
properties of of available
available roundwood,
roundwood, thethe length
length of of
economical
economical supply radius, the pressure of ecological groups, the
availability of substitute
availability substitute products
products of of non-wood
non-wood materials,
materials, thethe attitudes
attitudes
of peasants
of peasants and and landowners
landowners toward
toward industry,
industry, the cost of
the cost money and
of money and the
the
rate of
rate of inflation
inflation are are some
some of
of the
the many
many conditions
conditions that
that have
have dramatically
dramatically
changed
changed in emerging countries
in emerging countries during
during thethe past
past decade.
decade. A new
new and
and more
more
appropriate forest
appropriate forest industry
industry isis needed
needed if if these
these nations
nations are
are toto narrow
narrow thethe
gap with developed countries.
countries.
 -- 261 -
-

DEVELOPMENT OF A
A FIBREBOARD
FIBREBOARD FACTORY
FACTORY
AT FLBURGON,
ELBURGON, KENYA
KENYA

by

F.M.
F.M. Kamau*

CONTENTS

Page

1.
1. INTRODUCTION 262

1.1
1.1 Timsales Limited 262
1.2
1.2 Sokoro Group 263

2.
2, PRELIMINARY
ARY INVESTIGATIONS 263
2.1 Fibreboard
F ird Feasibility
E Feasibility Studies 263
2.2 Location
I )( 1 of the Factory 264
2.3 Raw
8 Materials
.,, 264

3. SORORO FIBREBOARDS LIMITED

SOKORO FTBREBOARDS 265

3.1 Machinery and

and Building 266
3.2 wood-Fuel
Wood-Fuel 267
3.3 Wood-Fibre
Wood-Fihr, 267
3.4 Machinery Maintenance
Machincr- Maintenance 268
3.5 Refiners
Refiner.: 268
2
3.6
3.6 Bref muni Presses
preforming Freaes 268
3.7
3.7 Hot-Press
Hot-P,0,,7 269
3.8 By-,r9u;1ics6
Hydraul 269
3.9
3.9 Thermal Chamber
Theimal 6tamter 269
409
3.10
3.10 Production ity 269
3.11 Effluent Disposal
Efflert .)iwars31 269
3.12 Encinecriu
Engineering ity 270
3.13
3,13 Woih-Forme
"ork - Force 270
3.14 Industrial Relations 270
3.15 The
The product
Product 271
3.16 Machinery 271

4• BENEFITS 271

4.1 Socio-Economic Benefits

Benefits 271
4.2 Contribution to Government Policies
policies and
and
Revenues 272

5. CONCLUSION 273

6. FUTURE 273

•
* Timsales Limited,
Sales Director, Timsales Limited, Nairobi,
Nairobi, Kenya.
 -- 262
262 --

1. INTRODUCTION

1.1 Timsales Limited

Timsales Limited

In
In July
July 1932,
1932, when the world
when the worldwas
wasinin the
the grip
grip of of aa great
greateconomic
economic
depression, the
depression, East African
the East African Timber
Timber Cooperative
Cooperative Society
soc was
was formed in in
Kenya by a small group of sawmillers who had decided to pool their
Kenya by a small group of sawmillers who had decid to pool their
resources to
resources to market
market their
theirown As they were also farmers, the
own timber.
timber. As they were also farmers, the
idea
idea no
no doubt
doubt sprang
sprang from
from the
the highly
highly developed
developed andand successful
successful coopera-
coopera-
tives which
tives which marketed
marketed their farm and
their farm and dairy
dairy produce.
produce. The
The organizatir
organization n
gradually
gradually became knownasas"Timsales",
became known "Timsales",whichwhichwaswasitsits telegraphic
telegraphic addrrr.-,
address,
it determined prices,
and it determined prices, discounts, terms of trade and irls
discounts, terms of trade and codes of
practice.
practice. In this it was so successful that its price lists, grading
In this it was so successful that its price lists, grad
rules and
rules and conditions
conditions ofof sale
sale were
were adopted by the
adopted by the industry
industry as as aa wh,le
whole and
and
by Government
by departments
Government departments as asthe
thebasis for their
basis for their tender
tender documents
documents for
for
supplies
supplies of
of timber.
timber.

Some years after

Some years afterKenya
Kenya achieved
achieved independence
independence in 1963, 1963, thethe
original
original formform of
of the
thecooperative
cooperativebecamebecame inappropriate
inappropriatebecause
because major
major
changes inin ownership
ownership of farming land
of farming land in thethe highlands
highlands gave
gave rise
rise toto aa
large number
large number of of agricultural
agr icul tural cooperatives, and the
cooper at i ves, and the Government
Government found
found it it
necessary
necessary to to pass
pass new
newlegislation
legislation to to control
control their
their operation.
operation.

Underthis
Under this legislation
legislation limited
limited liability
liabilitycompanies
companies could Ict be
could not be
membersofofa a cooperative
members cooperative and, and, asas all
allTimsalee'
Timsales'Temhers
members uere
Were ino thisu
L

category,
category, aa drastic
drasticchange
changeof ofstructure
structure became
became imperat:ve
imperative. Acnc,dliclv,
Accordingly,
in
in 1967
1967 the entire':undertaking,
the entire undertaking,assets assetsand
andliabilities
liabilities were
'ere ,ranc'rrred
transferred
to aa subsidiar
to subsidiary company. Timsales Timsales Sawmills Li,ited, wbioh
sawmills Limited, which WJF
was then
then
convertéd
converted intoirto ae public company
company andand renamed
renamed Tims91es
Timsales Li.70-ed.
Limited. By th,l
St that
11,-,sa:
time Timsales
indigenous
Kired six
had acquired
forest and
six sawmills
sawmills fro.7
two which had been built
from memlers,
members, four in
f,1 , in
spuificll for
bull,- specifically
re
the
rr
piautati,r ssoftwood thinnings.
plantation s.ings. In In 1969
1969 the
the puronase
purchase,f of
Isma:gemeted
Amalgamated SawSaw
11s.
a 1(4(1 three more mills.
Millss added

cIl that
Pes izing
Real the future of the industry lay
';11-, the future of the industry lay in the the softwood
softwood
r.,,ttic than
ions rather than the
the indigenous
indigenous forest,
forest,the Group
the Groupdisposed
disposed of
ofsome
some
of tno-, workivgsolely
those mills work erriely on
on indigenous
indigenous input,
input, and
and converted
converted others
others
en'irelv t
ent to nlart)tiotionwood.
wood. Meanwhile,inin1964
Meanwhile, 1964itit had
had acquired
acquired aa small
small
Mill Limited, which throughout its life had
snerehqdinc, ri, Sokoro Saw, Mill Limited, which throughout its life had
uewn
sawn only plont,t_,P
ion w,od.
wood.
More than fifty years after the founding of the original
More than fifty years after the founding of the original
thP backbone
ive, the of Timsales
backbone of business is still the production
Timsales' business is still the production
and cawn timber.
'e of sawn
d sale It has also developed a wide range of goods
timber. It has also developed a wide range of goods
1 ' i
which cater 1,t consumers
.r for of forest
consumers of forest products.
products. These include
These include panels
panels such
such
hardboard, softboard,
blcckboard, hardboard,
as plywood,, blockboard, prefabricated
softboard, chipboard, prefabricated
bui cinls, d,mponents ranging from timber shell roofs to doors and
buildings, components ranging from timber shell roofs to doors and
windows, mouidrngs and floorings of all kinds, industrial pallets, cable
windOWS, mould and floorings of all kinds, industrial pallets, cable
a great diversity of custom-made joinery and packaging
drums, and a great diversity of custom-made joinery and packaging
products.
products.

In addition to
In addition to maintaining its position
maintaining its position as
as the
theleading
leading timber
timber
exporter,
exporter, Timsales
Timsales now operates ten
now operates ten yards
yards in in the
the major
major towns
towns ininKenya,
Kenya,
five of
five of which
which are
are equipped
equipped with
with resawing
resawing andand manufacturing facilities.
manufacturing facilities.
Expansionplans
Expansion plansare
areininprogress
progressininallall areas
areas ofof operation.
operation.

Timsales
Timsales hashasnonooverSeaS
overseasaffiliations,
affiliations, and
and its
its shares
shares are
arequoted
quoted
on the
on the Nairobi
Nairobi Stock
StockExchange,
Exchange. At the
At time of
the time of writing,
writing, there
there are
are 643
643
shareholders and,
shareholders and, of
of these,
these, 509
509 are
areemployees
employees oror retired
retiredemployees
employees ofof the
the
almost all
Group, and almost all of them are Kenyans. largest single
The largest single
shareholder is
shareholder the Development
is the Development Finance
Finance Company
Company of of Kenya
Kenya Limited,
Limited, a
parastatal organization
parastatal organization holding
holding approximately
approximately 30 30 percent
percent of
of the
the equity.
equity.
 -- 263
263 -

1,2
1.2 roup
Sokoro Group

1941, when
Ii 1941,
In when the
the bulkbi of the
of the timber
timber industry
industry thought
thought only
only in
in
terms of the
terms t indigenousconifers
indigenous conijorspodo podoand andcedar,
cedar,a aretired
retired forest
forest officer
officer
started aa small
started small sawmill
sawmill at
at Flburgon
Blburgon to to convert
convert exotic
exotic logs
logs (=tom plata-
from planta-
tionn. He operated the mill
t.ions. in the name of his farm and Lt the ?.u,t
rrii'i! in the name of his farm and for the next
el-ova years
eleven years tsethe mill
millsurvived
survivedsolelysolelyononthinnings
thinningsofofthethec._,^paraiively
comparatively
unkn,wn cypres timber,
unknown cypress timber, which
which was marketedentirely
was marketed entirely through
through Timsales.
Timsales.

As the
As of raw material increased, and cypress timber
the volume of raw material increased, and cypress timber
gained acceptance
gained acceptance in in ;the
is local
local market,
market, soso the
themill
millneeded
needed to
toexpand,
expand, and
and
in 1952
in 1952 it
itwas
was incorporat...
incorporated. as as aa lLm .;
limited liabilH.7 company
liabil company called
called Sokoro
Sokoro
Saw Mill
saw Mill Limited,
Limited, named
named after
r the fci.n. lade inin,..ftich
the forest glade it was built.
which it was built.

In 1964
In 1964 further
further major
major expansion
expansion became necesratyasas large
became necessary large areas
areas
of matu,
mature Jntations of
antations of cypress
cypress became availablefor
became available for clear-felling.
Aear-felling. In
addition to new
addition n-4 sawing machinery,there
sawing machinery, there was
was aa great
great ne-i
needfor
formore
morepower,
power,
as the
as the exi-ling
existing diesel
dieselgenerator
generatorsets
setswere
were inadequate,
inadequate, due
due both
both te
to ageing
ageing
and the
and the high
high altitude of i.he
altitude of mill site,
the mill site,2400
2400 mm above sea level.
above sea level. It was
It was
decided to contribute
decided to contribute tow-,..
toward the
the cost
cost of
ofconstruction
constructionofof1010km km of
of 3-phase
3
mains electricity servio
mains electricity service line, and and this
this provrd
proved toto be
be aa milestone
milestone in in the
the
development
development ofof both
both the ...mpary and
ti' company and the railway station
the small railway station town
town ofof
Elburgon,
Blburgon, which
which was
was to
i ,come the
become the main
main sawmilling
sawmil1ing centre
centre inin Kenya.
Kenya. At
the time
t.he time of this SE
of this expansion
second e"pans
' Soki,ro Saw
ion of Sokoro 9aw HiMill
11 Limited,
Limi ted, Timsales
T imsales
became
became a ashareholder
shareholdertoto the
the extent
extent of
of 15
15 percent.
percent.

Two
TwO ye.. later, inin1966,
years later,
- 1966, another
another major
major step
step was
was taken ,
taken with he
the
formation
formation of
of Solnro
Sokoro Plywood Limited, in
Plywood Limited, in which
which Timsales participa
Timsales participated to
the
the extent
extent of
of 2020 percent. Machinery
Machinery was
was ordered
ordered and the buildir
and the building was
was
started.
started. Production commenced in 1967, making plywood for the
Production 'he
manufacture of of tea
tea chests,
chests, to
to be for the
used for
be used the export
export of Kenya's
of Kenya's
increasing
increas tea crop.
ing tea crop. It was a successful venture from the start,
I t was a successful venture from the start, and
paid a dividend after the first full year's operations, by which time it
paid a dividend after the first full year's operations, by which time it
was working on a three-shift basi, , In addition to its matspting
was working on a three-shift basis. In addition to its marketing
function,
function, Timsales
Timsales had
had now become
nOw become inv lvedininthe
involved thedirection
direction ofof poli:
pol of
these two
these two companies, and this
companies, and tient was
this involvement
in,. was toto lead
lead totoa much
a much grca...er
greater
level of integration at a later
level of integration at a later date.

2. P.ELIMINARY INVESTIGATIONS
PRBLIHINARY INVEf JGATI.»IS
2.1 ^ rd F
T.,- ales and
Timsales and i. ...vidual members
individual members of of the
the cooperative
cooperative had had been
been
establishing aa fib,
interested in establishing
interested InDad factory
fibreboad factory for
for aa long
long time.
time. In 1955
1955
samples
samples ofof podo and cedar
podo and cedar were
were sent
sent totoSweden
Sweden toto be
be made
made into
into hardboard,
hardboard,
and the samples proved satisfactory, but the project was considered
and the samples proved satisfactory, but the project was considered
over-productive and
over-productive andtoo
too capital-intensive
capital-in'n,-ive totobebeimplement-
implemented' at that
that t'me.
time.
ther study
Another study was
was carried
carried out ,les in 1963, wh-'
out by
by Timsales in 1963, which revealed .:vealed that
1F,nt
fibreboard had
nnumption of fibreboard
consumption had Q.:own all
rapidly in all three
grown rapidly East Afri,ar
ti,. , Bast African
_nity territories -
Community territories Kenya, Uga,,,_
Kenya, Uganda andand Tanzania.
Tanzania. The
The technology had had
developedto
also developed to the
the point
point where
where aa smaller unit
unit had
had hec.ile
become economically
economically
viable, but
viable, but was still considered
was still considered too
too productive
productive andand costly
costly for
for the
themarket
market
to support.
to support.

In
In 1970
1970 aa prefeasibility
prefeasibility :,--ndv wascarried
study was carried out
out by experts of
by experts of the
the
Industries Advisory
ECA/FAO Forest Industries Advisory Gr.up
Group (FIAG)
(FlAG) on
on behalf
behalf of tn- Kenyan
ini. the Krnir,,an
Goueinment, concluded that
Government, which concluded Lt.-re had
that there had again
again been
been a E,:7:1E' intial
a substantial
in:rease in the
increase the consumption
consumpt ion of fibreboard and
of fibreboard and that small f.:-eboard
tha t a small fibreboard
mill,
mill, r:inufacturing
manufacturing both
both softboard
softboard and
and hardboard
hardboard at at the
the rate
rate ol of 10 t/d,
20 tid,
ffible
was feasible for
countr
countries ..
for Kenya, with export opportunities to
export opportunities to neighbouring
 -- 264
264 --

the same
In the same year
year the
theTanzanian
Tanzanian Government decided to
Government decided oro-t- a
to erect
factory
factory to
to produce
produce hardboard
hardboard only,
only. with
with aa nominal
nominal capacity
capacity of
of 50 t d. to
50 tid. to
be sited
be sited at
atArusha,
Arusha, close
close totothethesouthern
southernborder
borderof
ofKenya.
Kenya. During this
During ihis
period both
both the
theEast
EastAfrican Community
African Communityand
andthe
theEast African
East Common
African Common market
Market
were functioning so that a part of Tanzania's production would have
were functioning so that a part of Tanzania's production would have
access to
access to both
both Kenya and Uganda,
Kenya and Uganda,and
andthis
this was
wasundoubtedly
undoubtedlya afactor
factor inin the
the
selection of the site.
selection of the site.

Meanwhile, Timsales
Meanwhile, Timsales continued
continued with studies
with studies based on
based the FlAG
report
report and
and concluded that the
concluded that the East
East African
African market
market could .15','.': thee
could sustain
output of
output of two
two mills.
mills. In 1972
In 1972 aa new
new company
company to to develop
develop aa H.
fibreboard
was formed,
project was formed, Kenya
Kenya Fibreboards
Fibreboards Limited,
Limited, in in which
which equity
equity cA:qtal
capital
was to be held held 60/40
60/40 byb, Timsales and the Industrial
]j,.5,11pa Commercial
Industrial &6 Commercial
ner, Corporation
Development Thrporation 11,1ted, eifh
Limited, with minor adjustment
ible minor adjustmentofof this
this
N.',5sb1e

rai - 'aovnodate othPr

ratio to accommodate other i it.:saora, but
investors, but always
always with the the
thee controlling
controlling inzfrcat
interest h,
.

irrtentir that
intention t be held by' Timsales Limited.
Timsales

Overseas Industrial
Overseas Industrial Consultants of ,f Vienna,
Vienna, whose
Consu1fan,swhose partners
partners had had
te.on involved in the
been the planning,
planning, installation and and initial
initial operation
operation of
insfallatirn of a
fibreboard plant in
ttPrraboard plant in Madagascar, completed in 1970, were appointed
appointed
t,O,nical
technical consultants
consultantstotoKFL.
KFL.

2.2 Location of
Location of the
the Factory
Factory

Three possible
Three possible sites
sites for
forthe
theKFL
KFL factory
factory were
were considered:
considered:

Rongai,
Rongai, because
because ofof reliable
reliablewater
watersupply
supplyfrom
from the
theMolo
Molo
River,
River, but
but finally
finally rejected
rejectedon
on the
thegrounds
grounds of
of distance
distance and
and
aa poor
poor access
access road
road from
from the
the forest,
forest,1515km
krnaway.
away.

attached to
Njoro, attached slwmill of Amalgamated
the Njoro sawmill
to the
Sawmills Limited,
Sawmills Limited, because
because of
of pr,,imlin to the
Iml ty to the forest,
forest, 55km,
km,
but finally
but finally rejected
rejectedbecause
because of Phe
the unreliable
unreliable water
water supply
supply
from the
from the Njoro
Njoro River
RiVer and
and poor r, 'rd of
poor record boreholes in
t,f boreholes in the
the
area.
area~

Elburgon, attached to the

Elbr;a:,r, attached to the Sokoro
.5-0 companies, 'aecause
because ofof
to the forest,
prax:mit, to the forest,S5 km,
proximity la, and
ind reaord of
record tf water
water
su[L..1e.',
suppl ies from from boreholes.
boreholes. IIrn addvld,mt zd,ae, the site
i tion to these, tne site
also ff'-red good
al5_ offered good communicatlant
communications t ta,th
both road and rail, toad and rail,
tlephone and postal
good telephone seivi,aes, proximity
postal services, nr,imity to the
township of
township of Elburgon, with social
Elburgon, with social amenities
amenities such
such as
as shops,
shops,
schools, churches, police station, medical services, and a
schools, churches, police station, medical services, and a
Governmentadministrative
Government administrativecentre,
centre, including
including the
the Divisional
Divisional
Forest
Forest Office.
Office.

The overriding
The overriding attraction
attraction offered
offered by
by integration with
integration with the
the two
two
Sobro
Sokoro companies,
companies, comprising
comprising the
the sawmill
sawmill and
and the
the plywood factory, was
plywood factory, was the
the
deciding factor.
deciding factor. Between them
Between them they
they offered
offered common services such
COmmOn services such asas
expertise in the
logging, managerial expertise
logging, establishment of the plywood
the establishment
factory, availability
factory, availability of of workshop facilities and
workshop facilities staff, aa good
and staff good pool
pool of
of
housed workersexperienced
housed workers experiencedininforest
forest industries,
industries, and
and existing
ex ingaccounting
accounting
secretarial services.
and secretarial services. addition there
In addition
In there was
was a-ailFtalo
available on nearby
farms housing
farms housingsuitable
suitable for
for those
those expatriates
expatriates needed
needed for p.stablishment
for the establishment
and management of the project
the failities for
boarding-schet.1 facilities
project and boarding-school for
expatri, children
expatriate ildren only
only 88 km
km away
away atat Turi.
Turi.

2.3 s

had shown
Studies carried out had that eucalyptus
shown that an axte left
eucalyptus 71,;,'
made an excellent
board, much s
board, tffn tne standard hardboard tradat1frall7 trilz,rteg
than the standard hardboard trad! tional imported
into Fas r:,a fram turw,e. It was learned that outal'lt tavss Le..vg
East Africa Europe. It was learned that eucal was being
 -- 265 --

used successfully
used successfully in in Madagascar
Madagascar and
and that it was
that it was also
also used
used to
to make
make
Masonite,
Masonite, aa brand
brand of hardboard that
of hardboard that was in East Africa.
was extremely popular in Africa.
It was
It was assumed
assumed that
that Kenya
Kenya plantation
plantation softwood
softwood could
could bebe mixed
mixed with
with
eucalyptus
eucalyptus to produce a
to produce a satisfactory
satisfactory board,
board, so that
that waste
waste material
material from
from
bot.h
both the sawmill and the plywood factory could be used in the
manufacturing process.
process~

At the turn of the

turn of the century,
century, the Forest Department
the Forest Department. had
had become
become
concerned
concerned with the need
with the need to
to safeguard
safeguard wood
wood fuel
fuel supplies
supplies for
for the
the Uganda
Uganda
Railways
Railways locomotives,
locomotives, which had then
which had then reached
reached Nairobi.
Nairobi. The planting of
The planting of
eucalyptus
eucalyptus for this purpose
for this purpose soon
soon followed
followed and,
and, after
after various
various trials,
trials, E.
Eo
saligna and E. globulus
saligna and were selected,
globulus were selected, with
with the former taking up
former taking up the
the
greater
areater area planted.
In
In the
the early fifties wood
early fifties fuel was
wood fuel abandoned by
was abandoned by the
t.he railways
railways in
in
favour
favour of
of the
the cheaper and more conveniently stored oil fuel,
cheaper and fuel, and
and for
for this
this
purpose all the
purpose all the locomotives
locomotives were
wer-e converted
converted to
to oil
oil burning.
burning.. Thereafter,
the
the only
only outlets for eucalyptus
outlets for eucalyptus plantations
plantations were
were telephone
telephone andand power
power
poles,
poles, minor industrial fuel
minor industrial fuel and
and charcoal for
for domestic
domestic purposes.
purposes.

Attempts to
to use
use eucalyptus
eucalyptus for
for sawnwood
sawnwood and
and veneer
veneer for
for plywood
plywood
proved unsuccessful
proved due to
unsuccessful due to difficulties
difficulties in
in conversion
conversion and
and the
the excessive
excessive
splitting which took
took place.
place. Nevertheless,
Nevertheless, Eucalyptus became
became popular
popular with
farmers,
farmers, in
in the
the first
first instance
instance for
for wind-breaks
wind-breaks and
and later
later because
because of
of its
its
excellence for fuel
excellence for fuel for
for pyrethrum dryers.
dryers.

was estimated
It was
It estimated that
that the annual
the annual round-log
round-log needs
needs for
for the
the
fibreboard
fibreboard factory would
would be:
be:

Fuelwood 4 000 mi3

4
Fibre
Fibre production 800 in'
2 800

6 800 m

It
It was
was known
known that
that Elburgon
Elburgon forest
forest district
district contained
contained about
about
I1 000
000 ha
ha of
of mature eucalyptus plantations,
mature eucalyptus plantations, the
the majority of this
majority of this being
being E.
E.
sa~ig~~ and E.
saligna E. globulus.
lobulus.

It was calculated
It calculated that
that these
these plantations
plantations would
would yield
yield sufficient
sufficient
raw materials
raw materials for
for the factory
factory toto operate
operate for
for the
the first
first sixteen
sixteen years,
years 1
thereafter utilizing material from the natural regeneration which,
together
together with its fast
with its fast rate
rate of
of growth,
growth, is
is such
such an
an attractive
attractive feature
feature of
of
these species.
these species. The Forest
The Forest Department
Department welcomed
welcomed thethe new
new project
project and
and
guaranteed a
guaranteed a sustained supply
supply of
of the
the volumes
volumes needed,
needed, initially
initially priced
priced at
at
the
the ruling
ruling fuelwood
fuelwood rate,
rate, with provision forfor review
review after
after the
the first
first seven
seven
operation~
years of operation.

3.
3. LIMITED
SOKORO FIBREBOARDS LIMITED
Ha v i ng decided
Having dec ided upon
upon the
the site
site for
for the
the factory,
factory, the
the company
company was
was
renamed Sokoro
renamed Sokoro Fibreboards
Fibreboards Limited.
Limited. Meanwhile potential investors
Meanwhile other potential investors
were approached and, after prolonged
prolonged negotiations
negotiations with
wi th the
the promoter,
promoter,
Timsales Limited,
Timsales Limited, shares
shares were
were taken
taken up
up by:
by:

Limited
Timsales Limited 51.5%
51.5%
I.C.D.C,
I.C.D· ,
T 1/ 34.2%
SIFIDAI/
SIFIDA 8.6%
D.F.C.K. I/ 5.7%

1/
1/ SIFIDA ~
= Sifida Investment
Investment Company
Company of
of Luxemburg
Luxemburg
D.F.C.K.~
D.F.C.K.= Development Finance
Finance Company
Company of
of Kenya
Kenya
 -- 266
266 --

D.F.C.R.
D.F.C.K. was no stranger to the Sokoro companies, having
participatrd
participated in
in the
the development
development of
of both
both the
the sawmill
sawmill and
and the
the plywood
plywood
factory by way
factory way of
of both
both loan
loan and
and share
share capital.
capital. SIFIDA, a
SIFIDA, a consortium
consortium of
West Eurc:.,=n
European banks
banks based in in Switzerland, was to lend US$
to lend US$ 560
560 000
000 with
with
which to
to purchase
.r.:hasethe themachinery
machinery to
to be imported.
be impo:I j. In
In addition, aa loan of
Kenya
Kenya fE 200
2f.,J000AO was
was arranged
arranged with
with Barclays
Barclays Bank,
:a0c, with
with whom had
whom Timsales had
been banking for
for more than
than forty
forty years.
years.

The estimated
The estimated total
total cost
cost for
for the
the fac
factory,
ory, including buildings,
including buildings,
plant and machinery, boreholes,
boreholes, vehicles
vehicles and
and logging
Jtging equipment, was K?.ri
equipment, was Kenya
!5 800 000, of which
100 000, which 555- rpercent was for
roent was for fib:-.
fibreboard
iard machinery andand steam
s
generation plant.
plant. The est estimates provedre','
-tes proved remarkably
,)ly accurate the final
accurate and the
cost
not,t was
was in
in fact
fact KB
KB 824
824 135.
13.

3 .l"ach
3.1 i n e r y and
Machinery and Buildings
Bu ild lngs
Quotations
Quotations for for the
the provisic-
provision and
:nd installation
installation of all machinery
of all
were obtained from
were obtained from four
four sources,
sources, thin
three ofof which were manufacturers,
which were manufacturers, and
one, Overseas
:.verses Industrial Consuletmg
Consulting (U.T.C.),
(O.I.C.), consultants. Earlier,
visits had beenbeen made
made toto Madagascar
Madagascar and
and Ethiopia,
Ethiopia, in in both
both of
of which
which
small sc.,le
scale hardboard plants were operating, based
hardboard plonts based on forming by the
orig inal deckle-box
original deckle-box s15.1.m,
sys tern, to
to which
which aa pre-press had been
pre-presa had been added.
added. I"rom
From
these visits
these visits itit had
had born
been concluded
concluded that
that this
this batch-forminl
batch-forming syi,ten
system is
is the
the
key toto small scale fibreboard production. The modern
The method of
m,Jern mothod
continuous fibre-mat production
continuous fibre-mat production on a a wet-lap
wet-lap oror Fourlituier
Fourdrinier typu
type forming
forming
machine was
was considered
considered unsuitable,
unsuitable, because
because its
its high
high cost and pioductivity
cut and productivity
were far beyond the
were far the level
level which the
the East
East African
African market
market could
could sustain.
sustain.

The
The O.I.C. included chip
0.I.C. process included chip digestion
digestion inin aa simple
simple revolving
revolving
pressure vessel f offering considerable
pressure vessel, considerable reduction
reduction in
in power
power consumption
consumption and
and
capital cost over
cu-ital cost over the conventional defibration
the more conventional defibration equipment
equipment used
used in
in
largee scale factories
factories and
and this,
this, together
together with
with the
the batch
batch forming
forming presses,
presses,
and the fact that
the fact that no
no synthetic
synthetic resins
resins are
are used
used inin the
the process
process were
were the
the
deciding factors.
dirj factors.

On the basis of cost and

On the and experience
experience with
with small
small scale
scale plants,
plants, the
the
contract to 0.1.0.
contract was awarded to O.I.C. Orders for
for machinery were placed late
late in
in
1972, and deliveries to
1972, and to the
the site began
began during
during 1973.
1973.

Build ing
Building plans were drawn up
up by aa local arch i tect
architect in
conSUltation
consultation with O.I.C., and
with 0.1.C., and construction
construction -f the factory buildings
the factory buildings was
was
in mid-1973
started in mid-1973 and
and completed
completed in late 1974
in larc 1974 byby aa Nairobi-based
Nairobi-based
contractor.

CURRENCY
C :ENCY EQUIVALENT
EQUIVALENT
Name of currency' Kenya Shilling (K.shs.)
of currency: (K.shs.)
Kenya pound (KB) equivalent K.shs. 20.00
p und (KB) 20.00

Currency
Cu -tncy Exchange
Exchange Rate:

1973
1973 IR.S LOa
US$ 1.00 = K.shs. 6.00
1974
1974 uS$, 1.00
wtS LOO = K.shs. 7.14
7.14
1980
1980 US$ l.00
1.00 = K.shs. 7.50
7.50
1982
1982 US$
17 1.00 = K.shs. 10.00
K.sbs. 10.00
1984
1984 US$ 1.00 =
.---. 15.00
K.shs. 15.00
1984
1984 US$ 1.33
USS 1.33 = K!5
KB 1.00
 -- 267 --

For thr
the main rreductien
production hall
hall and
3rd warehouse included
warehouse the design included
treated
-atad eucalyptus poles for columns,
eoralpt,s toles :olu-r9s, with
with timber
timber trusses
trusses to the
to carry the
galvanized iron
irt,n roof
Loci sheeting.
ng, This
This kept framing
framing cost low, and
cost low, and had
had the
added
ded benefit
berrlit ofc being
bellg corrosion resistant,
,e.Pistant, this being of of particular
particular
the area
value in the area of
of the
the hot-press.

A chief engineer
A engineer was engaged
engaged i9
in time
time to
to supervise
supervise thethe completion
completion
of the factory
of the factory building,
building, the installation of the
the installiticr the fibreboard
fibreboard machinery,
machinery,
the and furnac--
the boiler and furnace, ancillary
ancillary eg,Liome3t,
equipment, the
the drilling
drilling of of boreholes,
boreholes,
installation
installation ofof pump,
pumps and.1c1 the construction of butly-lined
the construrtion butly-lined water-stordge
water-storage
reservoirs. DIC. t,;-..rdel
O.I.C. provided the the full-time
full-ta services
services of of aa partner
partner atd
and two
two
fitters,
fitters, oneor,electrical
el, and one rne.
a.id L
mechanical. Machinery installa..iiewas
installation was
completed in.1 the
',..e first quarter
J,arter of of 1975,
175, byby which
which time
time the
the East
East African
African
Power ar
and Lighting
it C9.,
Co., Limited, had cc-pleted
Limited, had completed its special trans'crmer
its special transformer
station in
in i_wurgon
Elburgon town.
town.

Production trials
trials were started
started in
in April
April 1975 and continued
1975 and continued for
for
four months,
four during which
months, during which time
time many
many variables
variables were
were determined,
determined, such as
as
cooking times
times for different species of wood, control of slurry
consistency, and hot-press platen temperature and pressing times for
various thicknesses.
various thicknesses. O.I.C.'s insistence that
0.I.C.'s insistence no resin
that no resin additives
additives were
were
needed for hardboard production proved
needed for proved correct.
correct.

At the
the end of the
the trial period it it became apparent that that corrosion
to the
due to the acidity
acidity ofof the
the slurry
slurry waswas to
to be
be aa major
major problem,
problem, and
and at
at this
this
time the
time the four
four pumps which transfer
transfer slurry
slurry from
from vat
vat toto vat,
vat, and
and from
from vat
vat
to
to preformer
preformer storage tanks, were
storage tanks, found to be so badly corroded
were found corroded that
that they
they
had to replaced with
be replaced
to be with newnew pumps
pumps made
made of of stainless
stainless steel.
steel. The
corrosion problem
corrosion problem has
has never
never been fully
fully overcome
overcome to to this
this day,
day, and
and there
there
has been
has been much replacement
replacement of of corroded
corroded parts,
parts, with
with spare
spare parts
parts specially
specially
fabricated in stainless steel. incurring
stainless steel, incurring highhigh costs
costs and
and long
long delivery
delivery
times. This has reached
This has reached the
the point where
where parts
parts must be be ordered
ordered 1818 months
ahead,
ahead, and stocks of
and stocks of parts
parts and
and consumable
consumable stores
stores held
held average
average inin excess
excess
of
of KB
Kt 100 at all
000 at
100 000 all times.
times.

Experiments
Experiments with salts to
with alkaline salts to correct the
the pH of the slurry
of the
have
have proved cost more
proved that the chemicals cost more than
than the
the replacement
replacement of
of corroded
corroded
parts. They also
They also cause
cause foaming
foaming of
of the
the slurry
slurry and
and discolouration,
discolouration, with
with
the added
the added disadvantage of weakening the
the board.
board.

3.2 Wood Fuel

Fuel

During the course of factory construction and machi

machinery
manufacture, the
the 1973 world oil
1973 world oil crisis took place,
crisis took place, and it was decided
it was dec
that
that steam
steam generation
generation for the factory
for the factory would
would be
be based
based entirely
entirely on woodwood
fuel with
fuel with nono stand-by
stand-by oil-burning
oil-burning facility.
facility. E. saligna proved
proved an an
excellent fuel for this {'urpose when
this purpose when dried
drled and
and used in the specially
specially
designed furnace
furnace provided,
provided, anu
abc] it
it has been possible to
has been to raise
raise steam
steam to
to 20
20
atmospheres throughout the
atmospheres throughout the life-
life,of
,of 1he
tpe factory to date.
factory to date. Consumption of of
wood fuel
wood fuel has
has run
run at
at about
about 3000 la, which
3000 mm /a, which is
is less
less than
than originally
originally
estimated.

The
The decision away from
decision to turn away from imported
imported fossil
fossil fuel
fuel and
and to
to rely
rely
solely
solely on
on locally
locally available
available wood fuel has
wood fuel has contributed very
very 1largely to
to the
the
viability of the project.
project.

3.3
3.3 Wood-Fibre
Wood-Fibre

based on
Early production runs were based fibre
On 100 percent: eucairtns ilure
and it was
and it was quickly
guickly discovered
discoveredthat
thatE. glrbul.,,s WaS
W,7,5 more su
moro 9ultit'e than E.
riel [1,
saligna for this
saligna for this purpose.
purpose. Cautious e~'PE~~~'t
Cautious admixtures of
e)pcip,u9tal aC,J>ture- ,f pine and
tire and
cypress sawmill
sawmill waste were made, and
3rd thereafter
rgere,fter for some irme years
yeers
 -- 268 --

satisfactory
' hardboard was
sfactory hardboard was made from
from aa mixture
mixture comprising
comprising 50
50 percent
percent E.
E.
.iulus and
and 50
50 percent waste.
percent softwood waste.

However, falling availability

However, falling availability andand rising
rising costs
costs of transport led
of transport
to greater utilization
to utilization of of sawmill
sawmill iwaste,
.ste, waste vene,r
veneer and,
and, lately,
late: .,
plywood
pl.:wood peeler cores, to
peeler cores, the point
to the point ,j
where
ire the ratio is
the ratio is now
now 7575 percent
percct
softwood waste and
sofiwood waste and 25 percent E.
25 percent E -:lobulus.
globulus. This
11 is has been
been achi(%.2d
achieved
without
without reducing
reducing the
the quality
quality of board and
of the board and with
with the advantage J. of aa
lighter
ihtf- colour
colour which
which isis more acceptable
acceptable to to buyers
buyers Loan
than the
the eariler
earlier
product.
The chipping of
The chipping of waste
waste veneer
veneer was
was not
not successful
successful until
until it
it was
discovered that,
that, when
when rolled
rolled into bundles, it is
into bundles, is readily
readily acceptable
acceptable to
the ch ipper.
the chipper. For this form
For this form of was te. cooking
of waste, cook ing time
time had
had to
to be
be reduced
reduced
because of
because of the
the thin
thin section
section of the
the chips
chips produced,
produced. but
but it is is now
now
established as aa suitable
suitable raw
raw material.
material.

It has
It been shown
has been shown that
that acceptable
acceptable board
board can
can be made
made entirely of
softwood without the
softwood the addition
addition of
of synthetic
synthetic resins.
resins.

3.4
3.4 Machinery Maintenance

The equipment which has functioned

The equipment functioned well
well with normal
normal maintenance
throughout of the
throughout the life cf the factory
factory to
to date
date comprises:
comprises:

the
the bore hole pumps;
pumps;
the
the boiler,
boiler, with
with separate
separate wood furnace;
wood furnace;
the
the main
main chipper;
the
the two digestors;
the
the vat
vat stirring equipment;
the
the trim saws.
tJim

3.5 Refiners
E ' rs

The
Th- greatest problem
problem area
area has
has been
been with
with the
the original
original tf threee
refiners, which trouble from
which gave trouble the start
from the start with
with thethe gri.nd,,
grinding SE segment ,t
edges crumbling. due
edges crumbling, due to excessive hardness,
to excessive hardness, overcome
OVercome with...h.:. the help
th: be: of
manufacturers by changing
changing the
the segment
segment design.
design. Later, problems arOse
Later, [-noble.. ,at: from
irom
the fact that
the fact the machines
that the machines had
had been
been installed
installed on on aa suspended concrete
suspended concrete
floor. This
This gave rise to
gave rise to excessive
excessive vibration,
vibration, resulting
resulting in in bearing
bearing
damage to those
damage to those machines which were standing
standing idle.
idle. As theythey were were not
not made
made
acid resistant
of acid res istant metal, corrosion also
metal, corrosion also took
took heavy
heavy toll of these
machines,
machines, and
and extreme
extreme measures had to
measurs had to be
be taken,
taken, suqh
such asas the
the lining
lining of of the
the
casing
casing internally
internallywithwithbrazing.
bra19. The The usage of r[dre
spare parts has has been
been high
high
throughout. A further
A further prc,
problem
Lea has
has been that
that tic.:
the electric
electric motors, each
motors, each
200
200 kW.
kW, have sE.- .1 times
have burnt out several times and
and had
had to be rewound
rewound locally.
locally. This
is
is thought
thought toto have
have been
been due
by to the high percentage of
co the of dense
dense heartwood
heartwood in in
causing overloading.
mature eucalyptus, causing overloading.

Finally, th,r.- three machines

these three machines were
were replaced
replaced inin 1983
1983 with
with aa
raffinator made by
raffinator by fl-fibr:,tor
Defibrator ofof Sweden,
Sweden, which
which to
to date
date has
has proved
proved
successful, in that it easily
in that eas ily produces
produces all
all the
the fibre
fibre needed,
needed, with
wi th lower
lower
consumption and
and much reJuced
reduced maintenance
maintenance cost.
cost.

3.6 Preforming Presses

Another major
Another major trouble
trouble spotspot is that
that of of the two preforming
two preforming
presses, which again have
presses, which have suffered
suffered excessively
excessively from
from corrosion.
corrosion* Also, the
Also, the
is such that,
design is that, after
after the
the mat
mat of
of fibre
fibre has
has been
been formed,
formed, itit is
is raised
to
to the
the head
head of the machine and
of the and compressed, discharging
discharging a large
large volume
volume of
water onto the
water onto hydraulic lifting
the hydraulic lifting equipment
equipment below.
below. On occasion, it
On ociarion, it has
been necessary
been necessary toto change
change hydraulic
hydraulic seals
seals every
every day,
day, sometipes
sometimes byby use
use of
of
raw leather
raw leather washers
washers made in the
made in the factory,
factory. while
while waiting
waiting for
for new
new seals
seals to
to
 -- 269 --

arrive. The maintenance has

The maintenance has nownow settled
settled down to a
down to a major overhaul
overhaul for
for
each
each machine months, and numerous
machine every six months, numerous modifications
modifications have
have been
been made
made
in
in the
the process
process of this
this work,
work, some
some at
at the
the suggestion
suggestion of
of the
the manufacturer,
manufacturer,
who visited the
the factory
factory for
for that
that purpose.
purpose.

3.7 Hot-Press
The hot-press
hot-press has
has suffered
suffered similar
similar problems
problems -to those
those of the
the)

ing pre..7)7.e7.,
prr.forming presses, withwith
thethe
added
addedhazard
hazard that
that the jtrc'
juices ,ressed under
great
grrat pressure
pro,p,ure and
a,rd high temperature from
hut temperature from the press platens aree of 7,4ffl
the press much
grer .ontoive
greater ple,,oy. After
corrosive potency. service on
After nine years of service on aa three-shift
three-shift
basis, a re
recent
,,-A examination
e,a.,iflat..,n hashas
revealed
revealedthat
that the
the press
press frames
trames of 4040 rnrn
um'
plate are corroded
pl)te are corroded in nU'.-cs
places to
to aa depth
depth of
of 10
10 mm,
rnrn, so
so tnat
that the
the press is
rapidly
rapidly reaching the
:' end of
.- its
its economic life.
economic life.

new bx,),),
A new 5S is now on order,
r,..)w on order, incorporating
incorporating several
several design
design
modifications,
m,di rations, aro itIt is interesting to note
is int'resting note that the replacement cost
cost of
of
the pre=.3 after ten yPai3
cite: ter years in in service
service will
will cost Kenya
Kenya about one year's
sav ,1 fore
tpreign ,,..ohangeononimport
importsubstitution
substitution of
of hardboard.
hardboard.

3.8 Hydraulics

All three
.rree are linked to
are linked to aa common
common source
source of
of hydraulic
hydraulic
pressure, so that norr seal
_)cal or valve leaks
or valve leaks result
result in
in frequent
frequent machine
machine
stoppages
.ç- and loss- of [r
production.
,JuLtion.

3.9 Therr.-1 Chamber

thermal chamber
The thermal chamber waswas installed
installed to
to produce
produce tempered
tempered hardboard.
hardboard.
It relied on absolute
It relied absolute consistency
consistency ofof board
board thickness
thickness for
for the
the feed
feed chain
to
to function
function properly
properly and,
and, as this consistency
as this consistency has never been
has never been achieved,
achieved, so
so
the
the machine has never
machine has never operated
operated successfully
successfully and
and it
it has dismantled
has been dismantled
and removed
removed from
from )',e
the fae
fa, tory.

3.10

outcome of
The outcome of the
the machinery
machinery problems
problems listed
listed above
above is
is reflected
reflected
in
in the
the production
production achieved
achieved over
over the life of the
the life the factory
factory to
to date,
date, which
which
has 10 t/d.
has averaged 10 tid. The theoretical production
The theoretical production capacity
capacity was said to
was said to be
24 t/d,
tid, with an anticipated
with an anticipated practical
ical production
production ofof 20
20 tid.
t/d. The best
The best
ever
ever achieved
achieved was
was 17 in one
17 tt in one day,
day, under intensive
intensive supervision
supervision when the the
machinery was
was new.
new.

3.11
3.11 Effluent Disposal
Disposal

As no chemical
As chemical additives are
are employed
employed in
in the
the process, waste
water from
water from the
the factory
factory is
is not
not offensive.
offensive. The original disposal
disposal system,
system,
which is
which is still
still in use-,
use, comprises
comprises aa very
very large
large soak-pit
soak-pit atat a
a site
site about
about
600
600 m
m distant the factory
distant from the factory and
and well
well above
above it
it in
in height.
height.

Over aa period
period of
of time
time this
this becemP
became cl. ad with
with fibre,
fibre, andand aa new
series shallow oxidization
of shallow
series of oxidization andand iiv.7%pc,r3tiion nitl
pits was
was dug,
dug, so so asas to
permit cleaning of
permit cleaning the original
of the original system.
system. Effluent
,,ant is pumped
pur.;)t-1 from the
from the
factory
factory to the
the original
original soak-p)t,
soak-pit, and then flows by gravit
ard tie' to the
shallow
shallow pits,
pits, which in in turn
turn are extended by a maze of
are ror,,ded [ c' hundred
se,,,sA hundred
soak-away trenches.
metres of soak-away trenches,

This system works satisfactori in years of

above-average rainfall.
rainfall. order not to b0 .)m, detrimental
In u'rdor trimental to the
the
surrounding
sur7,ci.)'icg ecology,
ecology, in sllch year-,
in such years aa way
wav had t, found the
foond to balance the
diSCharge
disG)1),I):: from the factory,
from the factory, wi th the varying ab,orptiun
wi.!-_n ion and
and evaporation
evaporation
capacities of the pits.
of the pits.
 -- 270
270 -
-

Inevitably this
this has
has led
led to the
the adoption
adoption of a partially
of a partially closed
closed
system within
system within the
the factory,
factory, whereby
whereby white
white water
water isis recycled
recycled many
many t.mes.
times.
Although
Although reducing
reducing overall
overall water
water consumption,
consumption, thethe closed
closed system
system creates
orates aa
production
production problem in that the "fines", formerly formerly discharged
discharged with the
with the
effluent, build
effluent, build up in the
up in the recycled
recycled water to the
water to the point
point where cause a
where they cause a
reduction in average fibre length.
fibre lengIh. This is turn turn results
results in the
in the
production of weak or
production of or broken
broken boards, particularly
: particularly at the the corners.
corners. This
is
is caused by the fact that the seal surrounding
that the surrounding the deckle-box table
the deckle-box table
wears most at
wears the corners
at the corners so that,
that, when
when vacuum
vacuum is water and
applied! water
is applied, and
fines are
fines are drawn
drawn faster to thethe corners
corners than
than to
to the
the remaining
remaining major
major area
area ofof
the mat.

3.12 Ce7,-c4
Engineering Capacity

In addition
In addition to normal
h 'al maintenance, the extraordinary po;)lems
the extraordinary problems
encountered
encountered have
have made it
it n(.essary
necessary toto improve
improve engineering
engineering faciliti,,.
facilities. In
addition to normal repeir repair work, the workshop is now capi.le capable of
manufacturing auxiliary equipment
manufacturim7 n..uiliary equipment such
such asas hydraulic log-splitters,
log-splitters, board
board
trimming mac;
trimming machines, waste
waste extraction
extraction fans
fans and
and specialized
specialized spare
spare parts
parts in
in
stainless steel.
stainlecs st,ci. This facility also benefits
This facility benefits both
both the
the sawmill
sawmill and
and the
the
plywood
plyw(.,d factory,
factory, in
in that
that skilled
skilled engineering
engineering service
service is
is available
available to them
on sit€~
on site.

3.13 Work-F-

Since
Since completion
coletion ofofthe
thefactory,
factory, there
there have
have at
at no
no time
time been
been trre
more
expatriates in
than two expatrfLates in full-time employment.
employment. TheThe post
post ofof chief
chief engineer
enOn.er
is at
is at present held
held by
by an
an expatriate,
expatriate, but
but that
that of
of electrician,
electrician, which
which w:.s
was
held for
held for three
three years byby an
an expatriate,
expatriate, hashas since
since been
been taken
taken up
up by
by aa
Kenyan.

The production and

The production and maintenance
maintenance managers
managers are
are both
both Kenyans,
Kenyans, and
and
the total work-force for
the total for three-shift
three-shift operation
operation has
has remulined
remained steady at 225
for years.
for several years. These comprise shift
These men comprise shift susupervisors,
'visors, machinery
boilermen and labourers,
operators, boilerrer labourers, with aa maintenance Fiance fitter and
storeman for each shift. The
storeman for figure includes
The figure includes office c%air,
staff, warehouse
warehouse and
and
stores clerks, watchilen,
stores clerks, watchmen, drivers
drivers and workshop staff.
and engineering workshop staff. Apart
from the
from the top
top six posts,
posts, which
which are
are recruited
recruited nation-wide,
nation-wide, all all other
other
employees locally.
employees are engaged locally.

The transfer of
of technology
technology has
has been
been made
made by
by on-the-job
on-the-job training,
training,
with extensive upgrading
with extensive upgrading of
of untrained
untrained artisans,
artisans, and
and at
at all
all times
times there
there
are
are not
not less than four indentured
less than indentured engineering
engineering artisan
artisan trainees
trainees onon courses
courses
at polytechnics,
at polytechnics, working
working for
for practical
practical experience
experience at at the
the factory
factory inin
between
between formal terms.
formal training terms.
indirect employment
There is indirect employment of between
between 50
50 to 60
to 60 workers,
workers,
engaged
engaged by
by log and road transport
log and transport contractors.
contractors.

3.14 Industrial Relations

The management
management andand supervisory
supervisory staff
staff ai'e
are on contract
contract terms,
terms, but
but
all worFers are
all other workers are unionizable, andand their
their ',!;!:s
terms ofof service wages
service and wages
are negotiated ,ollectively
are negotiatPd collectively with the the Kenya
t e.Timber and Furniture
TimLi. and ~Iorkers
Furniture Workers
Union, falls under
Union, which fdlls under the
the Central
Central of;:ani7a:ion
Organization of of Trade
Trade Unions.
Unions. The
Industries' Employers
Timber Industries' I loyers Association,
Association, affiliated to the the Federation
Federation of
Kenya Employers, acts
a( for the industry via a Joint Negotiating
for the Negotiating Committee.
Committee.
Agreements
Agreements or
or disputes
di-putes are processed
processed through
through the
the Ministry
Ministry of Labour
Labour and
and
final
final settlement
settlement isis made
made at
at the
the Industrial
Industrial Court.
Court. This
This whole system isis
and ha
well organized and has worked satisfactorily
satisfactorily forfor many
many years.
years.
 -- 271
271 --

3.15 The Product

The original
original intention
intenti,n waswas to
to produce
producehardboard,
hardbo medium density
board softboard (insulat,
board and softboard (insulation 'A board). In fact
In fact th the ion of 'f both
medium density and
medium density and softtourd
softboard proved
proved impracticable
impracticable t two reasons:
two reasons:
spacer bars
bars have toto be
be introduced
introduced into
into the
the hot-press
hot-press to to ensure
- Isure consistent
consistent
ickness, entailing
thickness, unproductive down
entailing unproductive time, and
down time, and moistuie
moisture reduction
reduction to a a
satisfactory level takes
satisfactory level takes four
four times
times as
as long
long asas for hardboard, reducing
for hardboard, reducing
output an uneconomic
output to an uneconomic level.
level. Thus hardboard
hardboard is is the
the sole
sole product.
product. The
standard size
standard size is 88 ft ft byby 44 ft (2.44
12.44 m m xx 1.22 m) m) and
and the
the bulk
bulk ofof
production is
is in
in 3 mm thickness.
thickness. Other thicknesses up to
Other thicknesses to 12
12 mmmm are
are also
also
produced and
and two special products
two special products in in regular demanddemand are:
are: 2.4 mm
thickness
thickness for the vehicle
for the vehicle assomhly
assembly industry,
industry, used for car
used for car and
and truck
truck door
and roof linings; 66 mm [ncdboard,
hardboard, faced with thick
faced with thick white
white paper,
paper, as aa
substitute for
for imported
imported softbant-J.
softboard.

3.16 Marketing

Throughout the the life

life ufof the
the factory
factory all
all production
production has been
has been
marketed
marketed byby Timsales,
Timsales, both through its
both througn its own
own network
network ofuf ten
ten depots
depots and in
and in
wholesale quantities tr
wholesale to rterchiuts all over the
merchants allover the country
coo5trv whowh, trade
trade inin
building materials.
building materials. In the
ti rie early stages, when
enrly stages, ,,ccr, the
tho percentage
T,...rcentage of
undergrade boards was
undergrade boards was ver',
very high
hIgh and
and the
the colour very J-,k,
colour %ery dark, thore
those merchants
who had traditionally
who had imported hardboard
traditionally Imported hardboard from
from ).erLoas
overseas huilt
built up large
up large
stocks inin anticipation of resistance
c.,,:istance by their customers
ou;t- rm-c, to the local
to
product, penetration was
product, so that penetration was very
very difficult.
difficult.

Arising out
Arising out of
of aa shortage
shortage of
of foreign
foreign currency,
currency, the
the Government
increased
increased the import duty
the import duty so as toto discourage
discourage importation
importation of goods which
could be
could locally, and
be manufactured locally, and gradually
gradually stocks
stocks of
of imported
imported material
material
were
were depleted.

coffee and tea boom in

The coffee in 1977/78
1977/78 put
put extr,,
extra cash
cash into the hands
hands
of small scale
of many small scale gr,,
growers,
s, and this brought :urrt
this broucn about greatly increased
increased
spend ing on home
spending home hoildi,,
build log and improvement. In
And improvement. houses are
In genoral nouses are of
of the
the
timber
timber frame
frame t;pe,, with
with external cladding of
tternal cladding of sa:.,:n
sawn :.E,,re-edged
square-edged off-cuts
with the bark lettt onon th,
them, and
rTd hardboard is used extensively inside
hardboard is inside such
buildings fOl:" ceili
for c,ilihjs and internal wall linings.
internal wall lininys. This
-:is market is is now
well established
well estahlisf,1 :iinues to
continues to grow
grow with
with the
the Lising
rising population,
population,
despite
despite some
some degree ofof competition fromthe
c- Etition from thelower
lowergr;-:es
grades of
of plywood.
plywood.

growth of
The growth of the
the prefabricated
prefabricated building
building industry
industry has
has widened
widened
the
the use
use of hardboard, as has
of hardboard, has its
its acceptance
acceptance for
for office
office partitioning.
partitioning. It
It
has also proved
has also proved popular
popular with
with furn i ture makers
furniture makers for cupboard backs
for cupboard backs and
drawer bottoms.
drawer bottoms. Exports to neighbouring countries
to neighbouring countries are
are slowly
slowly gaining
gaining
ground.

4. BENEFITS

4.1 Benefits
Socio-Economic Benefits
The most significant
t grli.ficantfactor
factorininthe
the development
development of of Elburgon into
Elburgon into
the larcor.
largest forest industrial centre in Kenya is undoubtedly undoubtod]v the
availabilas
availabil electricity,
of mains electricity, brought about by
broulhL aboj. the expar
by the expansion of
Sokoro Saw Mill in 1964. :)(4. The joint
The joint ilfractions
attractions of of ample
ample forts,:
forest and
n,,n
electrici
electricityty resul ted in in the
the establishmfnt
establ ishment of another eleveneleven sawmills in .n
or near
near the
th..: town. lis
This was
was followed
followed byby W._
the bui'lf.t.g
bu ilding of of sol:oro Plywood
Sokoro Elywo,:d
Limited
Limited in 19i 1967, which
, -h offered
offered more jobjob opp
opportunities, furthere:,0,:ted
rtuilies, further
as it came tc
as it to three-shift operation.
snift operation. Another major Step
Anoth,r nvior step was
was ta-'en
taken wit)
with
the establishment of the
the the fibreboard
fibreboard m. mill in
I
In 1975,
I
1975, again
againenhanced
enh.eJ by by
three-shift operation. All this this developmtnt
development brought
brought iobjob seekers
seekers unte
into the
the
 -- 272 -
-

area, and these were followed

these were followed by traders who
by traders who established
establ ished improved
improved
shopping facilities
shopping facilities andand service
service industries
industries such
such as
as garages,
garages, petrol
petrol
sstations,
ta t ions, furn i ture and
furniture metal workshops.
and metal Landowners built
Landowners bu i 1 t shops and
houses for rent.
houses for rent.
Churches and schools developed,
and schools developed, and the
the increased populat ion
increased population
attracted medical practitioners.
attracted medical The existing
The e"isting piped
piped water-supply
water-supply was
extended and the
extended and the mains
mains -electricity
electricity system
system was
was expanded to meet
expanded to meet the
the
greatly increased
increased demand.
demand.
The supply of eucalyptus
The supply eucalyptus needed
needed by SFL created
created aa new
new source
source of
of
cash income for
cash income for local
local farmers
farmers who had trees
trees to sell,
sell, and
and they
they found
found that
that
this
this work
work could
could be fitted into
be fitted into the
the annual
annual programme
programme between
between crops,
crops, using
using
farm tractors and trailers
farm tractors trailers toto carry
carry logs
logs to
to the
the factory.
factory.

Both road and

Both road and rail
rail transport
transport have
have benefitted
benefitted greatly
greatly from
from the
the
increased
increased volumes
volumes of forest products to
of forest to be carried to
to major towns.
towns.

Essentially Elburgon
Elburgon has
has been
been converted
converted from
from aa small
small agri-
agri-
cuI tura] produce
cultural produce buying centre into
buying centre into an industrial centre
an industrial centre with
wi th regular
regular
cash income throughout
cash income throughout the
the year,
year, stable employment
employment for
for aa large
large number of
of
people, with a general improvement
people, improvement in
in their
their standard
standard of
of living.
living.

4.2 Contributions to Government Policies and Revenues

By building the
By the factory in
in aa rural
rural environment,
environment, creating
creating aa large
large
number of
number of job
job opportunities
opportunities and
and utilizing
utilizing local rawraw material
material directly
directly
owned by
owned by the
the Central
Central Government,
Government, the Group has complied
the Group complied precisely
precisely with
with
the stated
the stated policy of prevention
prevention of of drift
drift of
of population
population toto the
the major
towns. The Sokoro Group of Companies -
The - SSML,
SSML, SFL,
SfL, and
and SPLY,
SPLY, -- have
have as
as aa
matter policy favoured
matter of policy favoured simple
simple labour-intensive
labour-intensive operational
operational methods
methods asas
opposed to
opposed to automation.
automation. This is
is borne out by
borne out the fact
by the fact that
that the
the Group
Group
800 workers
employs about 600 workers who
who between
between them
them produce
produce each
each month:
month:

000 m~
11 000 m3 sawnwood
300
300 m plywood
m3 plywood
250 tt hardboard
250

In addition ~ the
In addition, contribution to
to Government revenues is
is very
Significant, including:
significant, including:

tax at
Corporation tax at 45
45 percent
percent
Sales 17 percent
Sales tax at 17 percent
Personal
Personal Income Tax by P.A.Y.E.
Trading and vehicle licences
Trading and licences
Land rents and rates
Land rents rates
Training
Training levy
Stumpage
Stumpage payment to Forest Department
payment to Depart.ment
Dividends finance companies
Dividends to parastatal finance companies
Foreign
Foreign currency saving by by complete
complete substitution
substitution of
of hardboard
hardboard
imports, plus
imports, plus minor exports

In
In return the Sokoro Group of
return the of Companies
Companies has
has the
the benefit
benefit of of the
the
protection afforded by by the
the increase
increase of of import
import duty
duty from
from 3030 to
to 40
40 percent,
percent,
which has discouraged
which has discouraged dumping
dumping by by other
other producing
producing countries.
countries. Grants ofof
land
land for the factory and workers'
for the workers' housing
housing have
have been
been readily
readily made,
made, and
and the
the
or inal guarantee
original guarantee of log supplysupply hashas been fulfilled.
been fulfilled. Allocations of
Allocations of
foreign
foreign exchange for spare
exchange for spare parts
parts and
and new
new machinery
machinery have
have been
been made,
made, even
even
in
in times
times of severe stringency.
of sevcre stringency. relief was granted
Tax relief granted by by an
an investment
investment
allowance, and work permi ts
permits for expatriates have been allowed.
Generally, the Sokoro complex has
Generally, the has been
been given
given the
the support
support of of both
both central
central
and local Government
and Government. authorities.
authorities.
 -- 273
273 --

5. CONCLUSION

The project
The project has
has been
been successful
successful andand has p-,id dividends
has paid divilends to its
to its
shareholders for
shareholders last six years. It ha, olio repaid 11 initial
for the last six years. It has also repaid its initial
loans, with interest, both tu Barclays Ba..k to SIFl, %itfout
loans, with interest, both to Barclays Bank and to SIFIDA without
default. The
default. The SIFIDA
SIFIDAloan
loan was
was made
made in u.s. dollars, which
in U.S. which at t),0 time
at the time ofof
receipt inin1974
receipt 1974 were
were bought
bought for
for six
sixKenyan
Kenyan shillings= each. As
A r,-sult
a result
devaluations of
successive devaluations
of successive of the shilling, for the final
the Kenyan shilling, final
repayment at
repayment at 3131 December the dollar will cost fifteen Kenyan
December 1984,
1984, the dollar will cost fifteen Kenyan
shillings, and this applies to both capital and interest.
shillings, and this applies to both capital and interest. This has
This has
increased the total investment in the project by KS 105 000 wit' .:ut
increased the total investment in the project by KE 105 000 without
addition to
addition to assets.
assets. As exchangelosses
As exchange losses are
are not
not allowed for tax
allowed for tax pur
purposes,-

a further cost of
a further cost of 45 45 percent
percent of
of that
thatsum
sum must
must be
be included.
included. The major
reasons for
reasons for this
this success
success are:
are:

The acquisition
The aco.uisition of SSML aril)SPLY,
S;.))1, and SPLY,forming
formingananintegrated
integrated unit
u.),, of
of
log utilizat.e.
log utilization. In the early \eais of haidboard
In the early years of hardboard production and market
penetratior, neavy
penetration, heavy losses
losseswer= MJ-It.,
were made. These %el= art by profi-::rca
These were offset by profits from
timber and
timber and Flywiod
plywood and, had this not been so,
and, had this not been so, ao mossive injection of
massive injection of
fresh working
fresh capital would
working capital would hay,
have beent.--ennecessary
necessary to
to keep
keep SFL alive.
SFL alive.

The decision to
The decision to rely
rely solely
solelyupon
upon local
localwood
wood fuel
fuel has
has shielded
shielded
the factory
the factory from
from the
the enormous escalationinin the
enormous escalation the price
price of
of imported oil and
imported oil and
kept production
production cost
costdown.
down.

The 0.1.1.'5
acceptance of O.I.C.'s basic conoeft of production
acceptance productics
machinery, some
machinery, someitems
i)-emsofofwhich
whicnwould
wouitbebeconsidered
consider=0obsolete
atsaiete in
in desic9
design in
in
veloped countries,
developed COU.41,-0,has hasproved
provcdappropriate,
aporopriate, in
in LLat
that production
production has
has met
m.,t,
the country's eds at a capital
country's t)needs at a capital cost which
which the company's
company's promoters
promoters were
were
pr, aared to
prepared to risk.
risk.

Failure to achieve
Failure initial
achieve the initial production target and the
production target the
maintenance problems
maintenance problems encountered
encountered have
have been minimized by
been minimized by constant
constant feedback
feedback
both to and from the original consultants, 0.I.C., who have paid visits
both to and from the original consultants, O.I.C., who have paid visits
to the
to the factory
factory each
each year.
year.

Timsales hving
Timsales having taken con the burd,-, matk,`ing, debt
burden of marketing,
collection
collection and tilt procurement
and the of spares and
procurement c. eotirlirn', both
and equipment, 1,,athlocally
locally and
and
overseas, the
overseas, the - relea=ei ro
management has been released
mc. to oancentrate
concentrate onon the
the
solution
solution of
of prc: sud maintenance problems.
tion and

6. THE FUTURE
THE FUTURE

Future plans
Future plans must
must include
include expansion
expansion ofof hardboard
hardboard production
production as
as
demand increasesinin Kenya
demand increases Kenyawith
withthe
the fast-rising
farl-,-ising population.
population. Another
Another major
major
market is for insulation board (softhoard), which is currestl:,
market is for insulation board (softboardl, which is currently imported
and remains a popular ceiling material all Cial-e
and remains a popular ceiling material in all classes of of housing.
housing.
Although less cal
Although less ital intensive
J thlt no hot-pre.-
intensive inr that no hot-press is required,
15 required,
-en-logy ofofa highor
technology a .7'-andard
standard isisnoodoa
needed r..,,cause cergatiadditives,
because certain adlitives, such
such
a- ,.aste paper, iiar
as waste paper, starch and a[d synthetic
synthetic rc
resin,
1.1 , are necessary,
are necessary, together
together with
with
nigl.er quality
a higher quality of
ol ioifined Ttv,. factors
fibre. These
refined fibre. factors are
arebeing
being investigated
investigated
in rder to
un order to formulate an expansion
formulate an expansionplan
planininthis
this field.
field.
 -- 275 --

NIGERIAN-ROMANIAN WOOD
THE NIGERIAN-ROMANIAN WOOD INDUSTRIES
INDUSTRIES (NIROWI)
(NIROWI)
DEGREE OF APPROPRIATENESS

Based
Based on work of

G.O. Igugu*
G.O. Igugu*

CONTENTS
CONTENTS

Page

1. INTRODUCTION 276

2. STRUCTURE OF
OF THE INDUSTRIES
THE NIGERIAN WOOD-BASED INDUSTRIES 277
277

3. RAW MATERIALS 277

4. COMPLEX
INDUSTRIAL COMPLEX 277

5. MANPOWER AND MANAGEMENT

~lANAGEMENT 278

6. TRAINING FACILITIES 278

7. OPERATING STRATEGIES:
STRATEGIES: SOLUTIONS
PROBLEMS AND SOLUTIONS 278

7.1 Raw materials

Materials 278
7.2 Logging ions
Logging Operations 280
7.3 Sawmill 280
7.4 Plymill 280
7.5 Furniture Plant 281
7.6 Particle Board Plant 281
7.7 Sales 281

8• RELEVANCE
RELEVANCE OF A WOOD-BASED
OF NIROWI AS A WOOD-BASED INDUSTRY
INDUSTRY 282

8.1 General
General Comments 282
8.2 Institutional
Institutional Arrangement 282
8.3 Economic and Social Benefits
Economic and Benefits 282
8.4 Potential to National
Potential Contribution to National Income
Income 282

9. MECHANIZATION POLICY 283

10. RECOMMENDATIONS
CONCLUSIONS AND RECOMMENDATIONS 284

* Federal
Federal Department
Department of Lagos, Nigeria.
cf Forestry, Lagos,
 276 --
- 276

1.
1. INTRODUCTION
INTRODUCTIoN

The establishment
establishment ofof the
the integrated
integrated forest
forest industry
industry complex
complex of
N ian-Romanian Wood
Nigerian-Romanian Wood Industries
Industries (N1ROWI)
(NIROWI) was
was based
based on
on findings
findings outlined
outlined
in feasibility
in studies carried
feasibility studies carried out inin 1973.
1973. The complex,
The complex, toto be
be located
located
at Ondo
at Ondo in Oodo State,
in ondo State, would
would produce
produce sawnwood,
sawnwood, plywood,
plywood, sliced
sliced veneer,
veneer,
blockboard, furniture, crates,
blockboard, furniture, crates, pallets
pallets and
and particle
particle board.
board. Raw material
would extracted from
would be extracted from the company's forest
the company's forest concession
concession areas
areas in
in Ondo
State, which
State, which t$the third
the third largest timber-pioducing
timber-p'i'oducing area of Nigeria
m' of available
Nigeria with
available timber.
with
an resource of 26
estimated / resource
an estimated 26 million
million m' timber. The
original
original intention
intention was to utilize
was to utilize and
and process
process most
most of the
the abundant
abundant
secondary species from
from the
the concession areas~
concession areas.

company is
The company is jointly
jointly owned
owned by:
by:

The Federal Government of

The Federal of Nigeria
Nigeria 25
25 %
% share

The
The Odua
odua Investment Co.
Co. Ltd.
Ltd. 30 %
% share

FOREXIM of Romania
Romania 30 % share
%

Development Bank
Nigerian Industrial Development Bank
(NIDB) 3.7
3.7 %
% share

Bank for
Nigerian Bank for Commerce and
and Industry
Industry
(NBCI)
(NBCI) 3.5
3.5 %
% share

17
17 local
local government councils in
government councils in ondo
Ondo
state
State 7.8 %
7.8 % share

100.0 %%

The Odua
Odua Investment
Investment Co.
Co. is jointly
is jointly owned
owned by Ondo, Ogun
by Ondo, Ogun and
and Oyo
Oyo
States.

Ondo State
State has
has aa population
population of of approximately
approximately 4 4 million,
million, isis
located at
located at about
about 300
300 km
km from
from Lagos.
Lagos. It
It shares
shares aa common
common border
border with
with
Bendel
Bendel State,
State, which has the
the largest
largest forest
forest industry
industry complex
complex and
and also
also the
the
board mills
only two particle board mills operating
operating in
in Nigeria.
Nigeria.

The positive findings of of the feasibility studies and the

agreements which resulted
agreements resulted in the establishment of
the establishment of NIROWI
NIROWI were
were based
based on
on
the assumption
the assumption that as much
that as much asas 45
45 percent
pe<cent of the
the sawnwood
sawnwood and 70 percent
and 70 percent
of
of the
the plywood and veneer
plywood and veneer toto be
be produced
produced would
would be
be destined
destined for
for export
export
markets. In order
In order to protect
protect the interests
interests of the approximately 270
approximately 270
sawmills
sawmills operating in in Ondo
Ondo State,
State, itit was
was decided,
decided, as aa matter
matter of
of policy,
policy,
that sawnwood
that sawnwood produced
produced by NIROWI would
by OIROWI would initially
initially not
not be in Ondo
be marketed in Onoo
State.

The initial
initial capital
capital investment
investment was
was N
M 23
23 million,
million, equivalent
equivalent to
to
about US$
about US$ 30 million.
30 million. The delays
delays inin completing
completing the
the installation
installation of the
the
production 1 ines -- except the sawmill - have, however,
production lines however, escalated
escalated the
the
investment costs,
investment costs, due
due to
to inflation,
inflation, toto an
an estimated
estimated N 30 million,
N 30 million,
approximately US$ 39 million.
39 million.

the furniture
The sawmill and the furniture line
line commenced production
production in
in 1978,
1978,
the p lym i 11
the plymill in 1979.
in 1979. The
The particle
particle board
board mill
mill is expected to to be
be
in 1985.
commissioned in 1985.

Project NIR/71/546
Project NIR/71/546 -
- High Forest
Forest Development
Development Nigeria.
Nigeria. FAO Technical
Report. No.
No.11 (1979).
 -- 277
277 --

2. STRUCTURE
STRUCTUREOE THB NIGERIAN
OF THE NIGERIAN WOOD-Bi:;ED
WOOD-BASED INDUSTRIES
INDUSTRIES

An FAO
An of the forest
study
FAO studyl/ :ries in
of the forest industries
ii in Nigeria
Nigeria indicated
indicated the
the
existence in 1981 of 1098 registered n, AIS.
existence in 1981 of 1098 registered sawmills. It was
It was estimated
estimated inin1984
1984
that this
that this number
number hadhad increased
incre-ed toto1300.
1300. host of
Most of these
these sawmills areare only
only
to medium sized an- largel,
small to medium sized and largely unintegrated.
small u, ntegrated. Niaer,a also has 6
N ia also has 6
plywood mills
plywood mills and pa:
d 22 particle le boaru lis, ofofwhich
board mills, whichthe
thelatter
lattercommenced
commenced
-
, :

production in
production in 1978
- and 1980
1 resp(
respectively.

Ondo state.
Ondo with 25
Stat, with 25 oercent
percent ofof the
the country's
coun 's sawmills, liad no
sawmills. had no
large forest
large forest indu-,-
indus -amplexei,
complexesuntil thethe
until establishment
establ ishmentof NIROWI.
of NIROWI. The
largest mills,
largest mills,Afrin Timber
African -aidand
Timber Plywood
Plywood(AT(AT&&P),
P),Piedmont
Piedmont andand Epe
Epe Ply,
Ply.
are located
are located ininneighbouring
neighbouring Pondel
Bendel and
and Ogun States. AT
Ogun States. the largest
P, the
AT s& p, largest
timber company
timber company in in Nigeria, also has
Nigeria, also is timber
timber concessions
concessions in in Ondo State.
Ondo State.
There is no fibregoard mill 'n Ni
There is no fibreboard mill in N aria, la, although
alt.hough there is potential for
there is potential for
its production.
its production. There are
There are hullo=
hund :a of
of furniture
furnituremaking
making establishments,
establishments,
most
most ofof them
them unintegrated oper,g1ng
un integrated operat irg with
with very
very little
1 i ttleequipment,
equipment. though
though
manufacturingfairly
manufacturing fairly good
goodquality
qualit. products.
products.

A number
A numberofofmills
mills and
and furniture
furniture makers
makers produce flush-doors, but
produce flush-doors. but
the demand for flush-doors and plywood, used for the production of
the demand for flush-doors and plywood, used for the production of
flush-doors, cannot be met by local production and has had to be
flush-doors, cannot be met by local production and has had to be
supplemented by
supplemented by imports
imports which, in many
which, in cases,were
many cases, wereofofinferior
inferior quality.
quality.
3. RAW MATERIALS
RAW MATERIALS

The Federal Ministry

The Federal Ministryofof Commerce
cir,rorce and
and Industries
Industries is is responsible
responsible
for the control of -opment in the
industrial development
for the control of industrial the country
country al !lough the
although the
provision of
provision of wood
woodresources
resourcesisisthe
tia responsibility
tisponsibility of of the
the indiv: -gal State
individual State
Forest
Forest Services
Services who are usually
who are usually assisted
Issisted by
by the
the Federal
Federal llover i -nt.
Government.

ndo State is endowed with rich forest,. con

qndo State is endowed with rich forests containing ling about
about 2626
million m
million si utilizable timber. The
of utilizable timber. The forest
forestcunceiaL an in the Oluwa
concession Oluwa
Forest Reserve granted to NIRC,i for initial commen
Forest Reserve granted to NIROWI for initial commencement ent inin 1977
consiaed,
consisted, however,
however. primarily
primarily mF of Brachystagia spp. (40%). Nauelea
Brachystegia spp. Nauol(m
dial,--ichii or opepe (10%), m,mmioml'a nuperba or afara
diderrichii or opepe (10%), Terminalia superba or afara (6%), Kh~
ivo:-ris or or
ivorensis mahogany
mahogany (3-4%),
(3-4%), FN!,
Bombax spr. 'p' ira
spp. t6-10*),
:C (6 10%), Lophira alata or or ekkj
ekki
(0-6'
(5-6%)and alliodora (2%).
nnd Cordia alliodora f: Chlorophota sxcels9. or
Chlorophora e"celsa or iroko
iroko
u,?senii only 1-2 percent.
represented only 1-2 percent. Fntaij(art,agy)
Entandrophragmacylindricum
cvlindricum cmor sapele
sapele and
and
a:,ta were
Afrormosia elata were almost
almost non-exis:ert,
non-existent. having
having been
been creamed
creamed offoff in
in the
the
past.

Logging equipment,principally
Logging equipment, principally vehicles,
vehicles. was
was of
ofRomanian origin.
Romanian origin.

4. INDUSTRIAL COMPLEX
INDUSTRIAL COMPLEX

The industrial complex

The industrial consists of
complex consists of the
the following
following units:
units:

1.
1. Sawmill with two
Sawmill with two production
productionlines
lines each
each containing
containing aa frame
saw,
saw, a
a wide
wide band-saw
band-saw and
and a
a resaw
resaw bench.
bench.

2. Plymill
Plymill with
with a
a f,Dduct' line for
production line forplywood.
plywood. Blackboard is
Blockboard is
also manufactuin,g
also manufactured in t-it. Included
in this unit. Includedinin the
the plant
plant are
are
veneer 1slicers
two veneer ecos fori the production
production of decorative
decorative
veneers.
veneers~

The Sawmilling
The SawmillingIndustry
Industry in
in Nigeria.
Nigeria. FAO,1983,
FAO, 1983,Field
Field Doc.
Doc. No.
No. 17.
17.
 -- 278 --

3. Furnitmo
Furniture olant,
plant, which
which consists
consists of
of two
two prodittloh
production lines;
lines;
one fornrurc
furnitureline
lineininwhich
whichgeneral
generalar,".ue,
office, scnoou
school and
houl-
household furniture
rA.ture and
and door-frames
door-frames are
are produced;
produced; one
one line
for the
for the manufacture
. of flush-doors.
,tnre of flush-doors. The ftreltere
The furniture pl.nt is
also cnnu
capable ofn producing
';roducing crates
crates and pallets.
and paluets.

4.
4 Power plant
j. Y which, through
.hrough utilization
utilization of residues
of wood residues
from the vvarious production
from the r uction units, supplies 80
units, supplies 80 percent
percent of
of
the power consumed by the
the industrial complex. The
remaining
remaining 2020 percent is obtained
,,ent is from the
obtained from the public
public supply.
supply.
NIROWI does not provide electric power for domestic
consumption.
consumpt ion.

5. MANAGEMENT
MANPOWER AND MANAGEMENT
At present
present the
the company
company employs
employs approximately
approximately 1000
1000 people,
people, who
as follows;
are distributed as follows:

((a)
a) Forest operations 80

(b)
(0) Industrial operations
Sawmill 100
100
Plymill 350
350
Furniture 160
160
Others 310 920

(a) and
Total (a) and (b)
(b) 11 000

Skilled and
Skilled and semi-skilled
semi-skilled workers
workers were
were recruited
recruited from
from local
local and
and
sources.
neighbouring sources.

The company is
is managed by a a Board
Board of Directors consisting
uf Directors consisting ofof ten
directors, seven
directors, seven of which
which are
are Nigerians
N rians and
and three
three Romanians.
Romanians. The
manag ing director,
managing director, the
the technical
techn ieal management
management director
director and
and key
key technical
technical
management personnel are appointed by FOREXIM under aa technical
management agreement signed
management agreement signed inin 1976
1976 by NIROWI and
by NIROWI and FOREXIM.
FOREXIM. There are
There are
employed in
about twenty Nigerians employed in the
the senior
senior cadre
cadre of
of the
the company.
company.

Another fifteen Romanians

Another fifteen Romanians are
are employed
employed in the establishment,
responsible for
responsible for installations
installations and
and maintenance
maintenance uf
of equipment
equipment and
and machines,
machines,
as
as well
well as indigenous staff.
as training of indigenous staff.

All live in
All staff live in Ondo township,
township, about
about one
one km
km away
away from
from the
the
factory site.
site.

6. TRAINING
TRA FACILITIES
ES

The company
,ompany operates
operates a training school for
training school for its technicians to
its technicians to
teach them machine
teach ttem mach ine operations,
operations I maintenance
maintenance and
and sawdoctoring.
sawdoctoring. Training
is,
is, however,
howevar, mostly on-the-job. Five
rourly an-the-job. Five Nigerian have so far
Nigerian engineers have far been
been
in Fomonia
trained in Romania by
by the
the company.
company.

7. OPERATING STRATEGIES: PROBLEMS AND SOLUTIONS

7.1 ials
Raw Materials

The
The initial
initial problem
problem of
of poor
poor species
species composition,
composition, mentioned
mentioned
earlier, has
earlier, has been
been virtually
virtually overcome
overcome by
by the
the granting
granting in 1979 of aa new
1979 of
 -- 279 -
-

conce in the Idanre

ss ion in
concession Forest Reserve
Idanre Forest Reserve where
where the
the primary
primary species
species are
are
mora abundant. The
more abundant. is black ataca.
The predominant species is afara.

The company's
company's concession
concession ccv.-
coverss 600 km 2 divided
600 km2 divided into
into four
four
felling
felling blocks
blocks each ofof aa 10-year
10-year fell,.
felling cycle. problem now
The problem now is
is that
that
logged-over areas
logged-ow,c areas are
are not
not given
given suft...
suff icient chance regenera te before
chance to regenerate before
reallocation by the
reallocati,n by the State
State Govel,
Government.
nt. In
In addition,
addition, there isis large
large scale
scale
illegal felling
illegal felling in
in the
the concessions.
concessic.
In this new
In spite of this new cor
concession,
_ssion, there is serious
there is that the
serious doubt that the
available
ilable redwoods
redw,ols will
will last formore
1t foc more than
than the
the next
next five
five years.
years. The
The best
ogany, principally
mahogany, pr,n-ipally Khava
Khaya ivorensis,
ivorensis, is being retained
is being retained for peeling into
for peeling into
ve
ve neers al though the
eers althok.gh the 1lirritec
imi ted local
local market
market for
for face veneers has
face veneers has reduced
reduced
the
the level of vencen
level of veneer produ,_tioh
production to to about 25 percent of installed
about 25 installed capacity.
capacity.

The preponderance
preponderance ofof medium-high
medium-high density
density species
species in
in the
the forests
forests
Ondo requires
of Onda requires investigation
investigation into
into the
the utilization
utilization ofof these
these species
species for
for
such
such products
products as
as railway
railway sleepers,, beams
beams and
and columns
columns for
for factories
factories and
and
at present
workshops which at present are
are mainly
mainly manufactured
manufactured from
from steel.
steel.

though there
Even though there is
is no
no rescarch
research unit,
unit, the
the desire
desire toto put more
into use
species into use isis yielding
yieldingresult:,,
results: more secondary species are
more secondary are being
being
for core
peeled for core veneers,
veneers, andand at
at lc,3st
least fifteen species are
fifteen species are being sawnsawn or
or
peeled on aa regular
peeled regular basis.
basis. The company utilizes
The company utilizes twenty-two
twenty-two outout of the
the
fifty-six
fifty-six tree species available
tree species available inin its
its forests.
forests. Difficulties
Diffi lties with the the
use Brachystegia spp,
use of B,-achytegia spp. have been overcome
have not been overcome but
but inllestigations
,cigations are
being ma-de
being made to improve its
to improve its peeling
peeling qualities
qualities inin order
order to
to make
,e the
the veneer
suitable a:,
suitable ,ore material for
as core for plywood production.
oroduction. There areare bright
bright
prospects for the the useuse of
of Mansonia altissima
.:sima for veneer and furniture
making.

Since thethe extent

extent of of the
the future
future log
log supply
supply from
from the
the natural
natural
forests
forests is
is not too clear at present,
not too present, NIROWI has
has had
had to
to beginin look'ng
looking for
for
raw materials from
from old
old Gmelina
'melina plantations. The two production lines
The two lines of
of
frame saws
frame saws would
would be be used forr the
the conversion ofof small
small size
size Gmelin
Gmelina 'cos.
logs.
The extent to
The extent to which l
whir,. the company is
company in prepared
prepared to
to adjust producion will
adjust production will
depend on the
the response
response cl of management
,nac,ment to
to the conditions.
the changing conditions.

Because of
Because of aa short-
shortage- of logs
logs -- input is only
input is only 5050 percent of the
the
originally anned quantit
originally planned quantities -- the
the sawmill operates at 40-5040-50 percent of
its
its instal
installed capacity
capacity and the plymill
ana tne plyrnill at 8080 percent.
percent. Fifty of
Fifty percent of
the log input
the input goes to
to the
the sawmill
sawmill and
and the
the other
other half
half to
to the
the plymill.
plymill.

An even
even more serious
serious constraint
constraint inin :.vwood
plywood production
production is is an
Aequate
inadequa te supply
supply of
of adhesives.
adhesives. The importaron
The importat ion of
of adhesive
adhes i lie has
has been
been
adversely affected
affe,ted by the general
by the general import
import cettlations
restrictions imposed
imposed early
early in
in
1984.
1981. The company produces
The oom¡any It.a own
produces its own plywoH
plywood door-skins,
door-skins, for
for which
which large
large
quantities ot
quantities of adhesive and
and reelable
peelable logs
logs are
are needed.
needed.

major imports
The major imports of
of the company
c ,,nnanyare
areurea-based
urea-based glue
glue (Aerolite)
from the U.K.
U.K. and Gascamite
Cascamite from
from the Fed.
",ed. Rep.
Rep. of
of Germany.

Bulk purchases
purchases anl. made to
are made to cover
COVer requirements
requirements forfor at
at least
least two
two
there are
years but there are prol
problems with import licences
wth import licences and
and banker's
banker's guarantees
guarantees
for
for letters
letters of of credit.
credit. Th's situation
This situation has
has delayed
delayed importation
importation of of spare
spare
parts and
parts and equipment
equipment since
since 1979.
i979. The company has,
The company has, however,
however, ber.efitted
benefitted
from the general import restrictions because
import restrictions because it it is
is still cheaper for
chearei
NIHOWI to
NIROWI to import raw materials than to to purchase them
them locally.
locally. The-Inc import
import
restrictions are
restrictions chiefly responsible
are chiefly responsible for
for the
the astronomical
astronomical rise
rise in
in costs
costs
for all raw
for all raw m;,6-.7ials,
materials, which
which now
now range
range between
betwv,,n 100
100 and
and 400
400 percent over
over
their 1983
1983 levels.
-
 -- 280
280 --

Glue manufactured
Glue manufactured in
in Nigeria
Nigeria from
from the
the bark
barkofofmangrove
mangrove by
by AT
AT & P
has not
has not been
been commercialized as yet.
commercialized as

7.22
7. Logging Operat
Lggging Operations
ions

Logging
Logg trucks were
ing trucks were of of Romanian origin.
Romanian or in. In Nigeria there is
In Nigeria there is a
long-standing tradition of
long-standing tradition of timber
timber harvesting.
harvesting. Loggingvehicles
Logging vehicles and
and spare
parto should
parts should ordinarily
ordinarily have
have been available without
been available without too
too many difficulties
many difficulties
from the
from the major
major traditional
traditional importers/dealers
importers/dealers which,
which, however, do not
however, do not carry
carry
this
this Romanian Spares for
line. Spares
Romanian line. for these
these Romanian trucks were,
Romanian trucks were, therefore,
therefore,
difficult to procure.
difficult to procure.

The
The import restrictions and
import restrictions and the
the difficulties
difficultiessurrounding
surrounding import
import
lO !noes and
licences and banker's
banker's guarantees
guarantees necessitated
necessitated thethe retention
retentionofofmany
many
:nns to
Romanians to cope
cope with
wi th the increased maintenance
the increased and the
maintenance and the manufcture
rnanufcture uf
of
spare parts.
parts. The
The company
company is the view
is of the view that the presence
that the presence of the
of the
Romanians, 7,,nt':pned
mentioned under (4) above,
above, operations
has enhanced operations
'd have
si maintenance, which would
icularly of been impossible
have been impossible in
in the
the face
face
scarcity in the c
spare parts scarcity in the country.

7.3 ill

There was
There was obviously
obviously too toomuch
much emphasis
emphasis on on sawnwood production for
sawnwood production for
its own
its own sake
sake and
and too
too much reliance on
much reliance on expe s-s from
ions from sawnwood eynnr-n.
sawnwood exports~
The ban
The ban on
on the
the export
export of of sawnwood
sawnwood inin1 1976 literally dealt
76 literally dealt aa severe
severe tni-w
blow
to
to the
the earnings
earnings of ofthe
thecompany.
company. In
In the
theabs.a.ice
absence ofofincome
incomefrott
fromeawr,%wod,
sawnwood,
large stocks
large stocks of3
oS unsold
unsold sawnwood
sawnwood were wereutilized
utilizec for
for furniture
furnitureprodn,-..lon.
production.
About 3 750 m rn of sawnwood
of sawnwood is is consumed annually in
consumed annually the incnituie
in the furniture
production unit. An
production unit. An equal
equal amount is sold as boards in
amount is sold as boards in various various' sizes.
nizet.
Withthe
With the recent
recent increase
increase inin orders
orders forfor school
school furniture,
furniture, in in addition
addition toto
demands for
demands for framing
framing of of flush-doors,
flush-doors ~ the theunsold
unsoldsawnwood
sawnwood stock
stock ,has
3has
diminished significantly from
diminished significantly from 1717 000
000 m' 1979toto less
m in 1979 less than
than 22 000
000 m'
m in in
November 1964.
November 1984.

7.4
7.4 Plymill
~11.

The plywood
The co.d.A-tldn
plywood product line is
ion line is hampered mainlyby
hampered mainly byaa shortage
shortage of
of
adhesives and
adhesives and uf
of peelanit.. mat,-r,als. The
peelable materials. The steaming
steamingpits
pits are
are lying idle
lying idle
andmost
and mostofofthe
the time
timethe
the huge
hkgelog 10Q yailisisnot
yard noteven
evenhalf
halffilled
filled with
with logs.
logs.
The short
The short supply
supplycfof MJN1,1Jr6
ma epe.Aes has
any species limiting effect on the
has a limiting effect on the
Production
production ofof furnitnre
furniture drpde
g blywpoi.
plywood. NIROWI
NIROWI hashas largestocks
large stocks of
of unsold
unsold
sliced face veneer wn,cd the ronnnany would be eager to export, even
sliced face veneer which the company would be eager to export, even
thoughNigeria
though Nigeriaimports
import,large
laioe quantities
quaatities of It, therefore,
of face
face veneers.
veneers. It, therefore,
appears reasonable
appears reasonable to HIROWI
that NIROWI would
would be be bettn/off
better nffdiverting
lo'crt rnj
someof
Some of the
the unused 3FJ1unsold
unused and wIno;dfaceflceveneers
'eneers for
for door-skios
door-skins pro'iw-t'or
production JE,as
there is
there is aa demand
demand forfor flush-doors
flusa-doc:e faced
faced with
with decorative
decorative acraa,ic.
veneers. Cf
Of twc
two
installed Cremona slicers only one is producing at per,-nt
installed Cremona slicers only one is producing at below 30 percent
capacity, although there is a large surplus of decoratl-e aedeers.
capacity, although there is a large surplus of decorative veneers. rni=
This
stock pile of sliced veneers is a result of
stock pile of sliced veneers is a result of the the accumulaai
accumulationn ot narr:-t,
of narrow
sheets in
sheets in excess
excess ofofwhat
whatthethecompany
company requires
requires forforplywood
plywood Lacing
fae and
and for-
for
which there is
which there is very
very 1little
it tIedemand.
demand. Narrow veneer sheets
Narrow veneer sheets require
require more
more
splicing
splicing work
work and
and most
most other
othermedium
medium scale
scale plywood producers are
plywood producers are not
not
equipped or are not willing to incur the additional costs of splicing.
equipped or are not willing to incur the additional costs of icing.

The company
The company usesallall the
uses the door-skins,
door-skins, which
which itit produces
produces in
in 4 mm
rom
plywood,for
plywood, for the
the manufacture
manufacture of of flush-doors
flush-doors in its furniture
in its furniture plant.
plant.

There is
There is aa largee demand
demand for for plywood and for
plywood and for door-skins
door-skins in the
in the
country. Shortage ofof door-skins
Shortage skins and glue has
and glue has been
been the
the major
major limiting
limiting
factor inin plywood
factor and flush-door
plywood and flush-door production
production in
in Nigeria
N eria as
as aa whole.
whole.
 281 --
- 281

7.5
7.5 Furniture
Furniture Plant
Plant

As much
As much as
as 5050 percent
percent of
of the
the sawnwood producedisisutilized
sawnwood produced utilized inin
the
the production
production ofof furniture,
furniture, the
themajor
majorpartpartofof
w-hich
which is
is consumed
consumed inin the
the
school furn!
school furniture,
ture, panel
panel door
door and flush----.'nor production lines.
flush-door production lines. There is is
evidence of
evidence of over-emphasis
over-emphasis on onthe
the use
use of
ot dolid
solid wood for furniture
wood for furniture which,
which,
therpfore,
therefore, limits
limitsthetheranc.i, designs irrr
range of designs for household This is
furniture. This
household furniture. is
perhons oneway
per waythethecompany
one cos(:..,is
is atte:J.,iing
attempting toto reduce its
reduce its stock
stock of
of
sa%rwor,d.
sawnwood*

Although
Al though the importation of wooden furniture furniture has been
prohibited, large
prohibited, scale importation
large scale metal-frn,J
importation of of metal-framed furniture furo::,,: has
has
replaced imports
replaced imports of of wooden
wooden furniture.
furn! turs. Crates
Crates are
are no
rin_, longer in demand
longer
because of substitutes (plastic crates), and pallets
because of substitutes (plastic crates), and pallets are produced ri7oduced by thethe
numerous
numerous small scale entrepreneurs.
small scale entrepreneurs,. The
The main
main emphasisI, is now is i.. on
flush-door and
flush-door and school
school furniture
furniture production
production in in response
response to to the
the increased
increased
demand. There is very little
is very little demapd
demand forfor houselo-Ad furniture, but
household furniture, but the
the
companyisis currently
company currently benet
E, fi!oi, State
i tting from Gr., erumentpatronage
State Government patronageinin thethe
supply of
supply of school furniii' ,e, aa situat_on
school furniture, situation which
which has
has completely
completely reversed
reversed thethe
misfortunes
misfortunes of of the
the company
company ininthe the last
last year.
year.

7.6 Parti0l Board

Particle noard Plant
Plant

The ins:allation of the particle board mill is planned for 1985,

The installation of the particle board mill is planned for 1985,
the compary
and the company is saLisfied that
is satisfied t1::t the residues gemerated
i.v! residues generated by by the
the other
other
production units,
production un:4, supplenon'ed
supplemented byby residues from from the
ti-wforests,
forests, will
will provide
provide
sufficient mater1,3.
sufficient raw materials. -:!Llay in the
The delay th, particle
particle board mill mill
installation has mainly teen due to the poor financial
installation has mainly been due to the poor financial !position of the sition of the
company. The demand
The for particle
demand for part icleboard
board has
hasgrown tr, iously in the
grown tremendously
last few years as substitute for
last few years as a substitute for plywood
plywood and because its
and because i,s application
application
methods haveimproved
methods have improved through
through thethe useofofappropriate
use appropriatefittings.
fit!ir-is. Furniture
Furniture
fittings are
fittings are imported.
imported.

7.7
7.7 Sales
The establishment
The establishment of NIROWI was
NIROWI was based
based on on theassumption
the e,,aoption that
that 45
45
percrnt
percent rf
ofthethesawnwood
sawnwood and and 70
70 percent
percent of of the
the veneer
veneer products
products toto be
be
manufc red would
manufactured would bebe destined
destined for
for export
export markets.
markets. Sa,,iwund produced
Sawnwood produced by
by
iuld initially
NIROWI would
! initially not
notbebemarketed
marketed in Ondo State no
inOnda so asas tn
to pn tect the
protect the
interests of
interests the approximately
of the approximately 270 sawmills operating
270 sawmills oper.!.'.rg in
in the
the State. In
the face
the face of total ban
of the total ban on
onsales
salesof of
szwnwood
sawnwood by the :se company in Ondo
compan,! in Ondo
State,
State, there
there were
were difficulties
difficultiesininthe sale
the of of
sale sawnwood
sawnwood in
in the
the early
early
stages of
stages of the
thecompany.
company. ThisThis was further aggravated
was further aggravated by by the
the ban
ban on
on exports
exports
of sawnwood
of in 1976, when adjustments
sawnwood in 1976, when adjustments in in management
management and and financial
financial
decisions should
decisions should have
have been
been made rather more
made rather more quickly.
quickly. The position
The position has
has
improved
improved and and sawnwood
sawnwoodproduced
producedbybyNIROWI
NIROWI is no,,
is now !!eelysold
freely sold in Ondo State
Ondo State
as well.
WE 1. There has also
There has also been
been aachange in er7i,
change in emphasis on on production.
production. The
has also
!,!!, has
company also been
been favoured
favoured byby incroasrd
increasedpatronage
patronagefromfromthetheGovernment
Government
in supply of
in the supply of school
school furniture.
furniture. SalesSa_es figures
figures for ir 1984 indicate that
1984 indicate that
'i-Joors and
flush-doors school furniture
and school furniture each constitute 42
each constitute 42 percent
percent of of sales
sales and
and
hoi i-hold furniture
household furniture only
only 1616 percent.
percent.

Timeabsence
The absenceofofananeffective
effective sales
salesdepartment
departmentandandamo:oessive
aggressive
sales Fromulion activities had led to poor turnovers.
sales promotion activities had led to poor turnovers~ However,, in the
HowevE the
last rs.o }ears there has been a remarkably increased
last two years there has been a remarkably increased awarene'
awareness; of thethe
existence of
existence the company but the positive effects have been d!
of the company but the positive effects have been drowned i!ried by
the current
the current economic recession.
economic recession~

Faced with
Faced with an
an increasing
increas number
number ofofcompetitors, NIROWI
competitors, NIROWI cannot
cannot
afford to relent in its efforts to step up sales promotion, product
afford to relent in its efforts to step up sales promotion, product
developmentand
development andproduction
production adjustment.
 -- 282
282 --

Blackboard is produced
Blockboard is byaa few
produced by few plymills,
plymills, including
includingMIAOW',
NIROWI, but
but
local demand
local is very limited.
demand is very limited. Its potential for use in flush-door
Its potential for use in flush-door
manufactureand
manufacture andformwork
formworkhas
hasnot
notbeen
beenfully
fully explored.
e.Hlored.
Initially
Initiallythere
there were difficulties
Were difficulties th the quality ot finished
with the quality of finished
products, especially furniture,
products, especially furniture, but
but thes,
these have beenbeen overcome
overcomethrough
through the
the
training ofofoperators
training operatorsand and their
theiracquired
acquiredexp,-,ience.
experience.

It
It isis ofofutmost
utmostimportance
importance that
thatnew
new products
products such ,, moulded
such as moulded
panelling strips, ceiling
panelling strips, ceiling strips,
strips,decorative
decorativedoordoor and
and window :n,s and
window frames and
shutters are
shutters are included
includedatat an anearly
early date
dateinin the
the list
list ofofproduc:
products utilizing
solid wood.
solid wood.

8. RELEVANCE OF
RELEVANCE ï!')WI AS
OF NIROWI ASA WOOD-BASED
A WOOD-BASED INDUSTRY
INDUSTRY

8.1
8.1 -
G~'~e'rnl,e'r~all~~~~~
Genera"

The appicpriateness
iateness of
of NIROWI
NIROIH can
Can be viewed from two
from
perspectives; f_r_t
perspectives; rst from thetc,, Nigerian
Nigerian situation
situation and,and, secondly, from a
point of view oft the
of view pcp1., of
-he people of Ondo
Ondo State
State with
with regard to the overall
regard to the overall
contribution itithas
contribution hasmade
made Qt
or 1.-a makingtoto the
is making the development
development of of the
theeconomy.
economy.

NIROWI is the first lar;

is the first large scale
scale integrated
integratedwoodworking
woodworking complex
complex
stablished in
established in Ondo
Ondo State.
State. ]Its existence is
existence is in fulfilment of the
in fulfilment of the
irations of the people
of the people to t' ,_41f-sufficient in
t be self-sufficient in manufactured
manufactured wood
ucts and to effect a full utAiization of their forests.
effect a full utilization of their forests.
wood

Veneer production
Veneer production simply
simply for
for meeting
meeting expirt
exportdemands,
demands, though
though
desH,ble, does nor Aappear justifiable in a sitoition where r!Igeria
desirable, does not fPpear justifiable in a situation where Nigeria
ime 6 000 m
imports some 7 of u,er,
veneer ..nnually.
annually. The rn:1:0ning
The reasoning isi that the
d=c.r.
desire sc.satisfy
to satisfy ,?.]:_rt
export deman:::
demands wr,id
wouldencon!'::::e
encourageincreased
increasedCO31Sum; 1:::k of
consumption of
mahou Ay logs
mahogany logs and thcr_eof
and those first clas,;
of oth. ._;es. These
other first class species. speoies are
These species are
already in short supply for uormal plyw(,.
already in short supply for normal plywood manufacture nufacture and
andsawnwood
sawnwood
production.
production. .

8.2 Institdt r.,r7rnement

Institutional1 Arrangement

Partici
Participation of Go-c-r-nmunt
of Government and ,a1 ,lovernment
and local government in in NIROWI
NIROWI was
was
seen by
seen obserw! and economi,
by observers )uolysts as
economic analysts 1,le ininthe
as the bane
, thedevelopment
development of of
the company
the company in the sense that it
7 tt,it it was
was r , arded as yet another
as yAt another =eni
semi-
governmental enterpr, which us'ally regis protcct,,n in the ,ari}
governmental enterprise which usually requ res protection in the early
years and
years and which
which is
is oft - over-pro-_ected.
often over-protected. Thee
There are
are merits
merits and demerit-
and demerits.
Firstly, it
Firstly, it wa,; i, that the social and political interest., ct
was advantageous that the social and political interests of
the Jo'
the '1 communit-,
local sustained by
communities were sustained by the
the presence
presence of of Federal
Federal and
and State
State
go--:nments
governments in project. Secondly,
in the project. financial constraints
Secondly, financial constraintswouldwould have
have
c:
crippled in the e,ily years of operation
the company in the early years of operation if the if the Government
Government
not fartic
had not fj'rt ic
h ted. Ope; e.
Opera ng losses
t i :::i losses upup to
to 1980
1980 were
were quoted
quoted asas N
N 3.8
3.8
million, or
million, approximately US$ 55 million.
or approximately million.
The demerit
The demerit referred
r-Pfrred toto above
above concerns the influences
concerns the influencesof.f mixed
participation and multiplicity of interests and
participation and multiplicity of interests and objectives.
objectives. In NIROWr
In
this weakness
this was promptly
weakness was promptly el
eliminated
iminated before it could
before it couldbecome serious
become a ser iou;;
problem.
em9

JV
1/ Forestry subsector
Forestry subsector review
review by
by the
theWorld
World Bank,
Bank, Federal
Federal Dep
Department of it of
-- Forestry. 1983.
Forestry. 1983.
 -- 283
283 --

8.3 Economic a:1d

Econoe Social Benefits
and Social Benefits

The establishment
The establishment of ofNIROWI has been
NIROWI has been an
an economic
economic and
and social
social boon
boon
to the people of Ondo State in particular and
to the people of Ondo State in particular and to to Nigerians
Nigerians inin general.
general.
It has
It has brought
brought employment
employment totothe the rural
rural and
and urban population and
urban population and itit has
has
improvedtheir
improved their economic
econc-ic st.atus
status asas well.
The state is benefitting from
well. The state is benefitting from
the sale
the saleofofwood
wood products
, o-ts through
through appointed agentsoror distributors.
appointed agents distributors. The
c,mcany pays forest
company fm.,o 'charges eemneratpn fees
?arges and regenerat~on fees to the the State
state
Gmvernment, amountiroto'o about NN 70
Government, amounting Clli on,
70 000 per kmIt also
km of of concession.
concession. It also
pays excise duties. There is evieenfe of its contribution to the
pays excise duties. There is evidence of its contribut.ion to the
development of skills
development of skills in in the State, judging by the
in woodworking
woodworking in the State, judging by the
improvementin inqual
improvement quality of furniture
i ty of furni ture produced
produced byby the
the company's artisans.
company's art isans.
As many
As manyasas 1000
1000 workers
workersare are inin regular
regularemployment
employment and and are
are enjoying
enjoying
improved standards of living as well as social security.
improved standards of living as well as social security. Smaller and
Smaller and
firms look up to
younger firms tor leadership and
to NIROWI technical support
NIROWI for leadership and technical support
which it
which it sometimes
sometimes renders.
renders~

national level,
At the rs..tional level. however,
however.NIROWI's
NIROWI' s development
development has has not
teen
been witho2t diilicilties ininthe
without difficulties theWitical, technological,
political, technological, economic
economic and
and
oreas. Although
administrative areas. AlthoughNIP.04,1 is not
NIROWI is not. aa major
r' industry --
L >resi industry
forest
m'
tnere are
there are o neo 7rore
other technicallyadvanced
more technically ad-ancedforest
forestindustries
irduatres in in Nigeria
Nigeria --
its decis:cmir
its decisions on
on whicn products t.O
which products ti manufacture,
manufacture. which
which ta:lanologies
technologies to to use
use
and
and which maikelirmskills
which marketing skills to
to emplot,
employ, isIs influenced
influenced by by aacomplex
complex mixture
mixture
of objectives
of objectives ut the Federal
of the Federal and
and ftatm
StateGovernments,
Governments, 17 17 local
localgovernment
government
as well as the banks which have pooled resources for the
councils, as well as the banks which have pooled resources for the
councils.
Eachunit
investment. Each unit is
is an
an interested
interested party
party and
and has
has its
itsown
own objectives.
objectives.
Happily however, economic political
considerations now outweigh political
aspirations and
aspirations it
and it in
is this
thischenge
change which
which has
has reversed
reversed the
the misfortunes
misfortunes of
of
the
the company.
company.

The economic
The economicproblems
problems willwillbe bepartially
partiallysolved
solvedifif the
the original
original
objectives such
objectives such as
as exportation
exportationofofsawnwood
sawnwood and and veneers
veneers can
can be
be changed
changed forfor
improveddomest
improved domestic production
ic product ion ofofplywood
plywood andand other panels,
other e.g. part
, e.g. particle
i cle
board.
board.

8.4
8.4 Potential Contribution to National Income
NIROWI
NIROWI at atthe
the moment
momentearns
earnsno no foreign
foreign exchange
exchange as it does
as it does not
not
yet export
yet export itsits products,
products, but it naves
but it saves foreign
foreign exchange
exchange through
through import
import
substitution, the
substitution, the amount
amount ofof which
which is is offset
offset. by by the value ot
the value of imported
glues
glues and
and spare parts.
parts. Exportofofdecorative
Export decorativeveneerveneerisisfeasible
feasiblebut
butitit is
is
not
not likely
likely Lo meetmeet acceptance
acceptance forfor some
some time.
t.ime. The
The domestic
domestic demand
demand forfor
lanels, principally
wood-baseo panels,
wood-based princ:.nally plywood, is is so enormous that that an
export-oil,nted colicy
export-oriented policy is is not justifiable.
justifiable. Export furniture,
Export of furniture,
especially at
especially :-i7eeofcl cac,
at a time recession, would
economic recession, would greatly
greatly supplement
supplement thethe
company's
company's earnih.:,s.
earnings. ,_,J,rot, however,
?hi! cannot,
This however, be be considered
considered until
until the
the
quality has
qualit.y hasidaproved
improved and the production costs costs have
have been
been reduced
reduced to
to such
such aa
level
level as
as totomake
make the
the furni'-ure
furniturecompetitive
competitive on on overseas
overseas markets.
markets. At the
At the
momentthe
moment the cost
cost of
of houset, furniture is
household furniture is so
so high
high that
that only
only the
the top
top
segment
segment ofofsociety
society cancanafford it. This
afford it. This is,
is, however,
however, thethe general
general trend
trend in
in
the
the furniture
furniture industry
industry where the cost
where the cost of
of raw
raW materials,
materials, principally
princi ally
imported fabrics and
imported fabrics and glues,
glues, constitutes
constitutes as
as much
much as
as 50-70 percent
50-70 percent of the
the
cost of
cost of production.
production.

9.
9. MECHANIZATION POLICY
MECHANIZATION
One of the aspirations
aspirations of Go
Government
' involvement is
Le the
provision
provision ofof employment
employment forfor its
its people.
people. NIROWI has
has not
not automated
automated
production anddoes
product ion and doesnot
not intend
intend to
to do
do so
so in the nearar future,
future, inin"10W
v iew of
its
its obligation its workers
retain its
obligation to retain workers until
until L..cy
they become
become uneconomi
uneconomic to to
 - 284
- 284 --

maintain.
maintain. The currer. level of
current level vf mechanization therefore, appears
mechaniziltion,r therefore,
..(cpropriate for
appropriate for the needs of the" pwple
)-economic needs
the socia-economic people and
and perhaps
perhaps also
also
for the
the present
present level developmentof
level of development of the company.
Ay.

10. ANDRECOMMENDATIONS
CONCLUSIONS AND RECOMMENDATIONS
The question
The question whether
whether NIROWI
NIROWI has hasbeen
beenanunappropriate
appr,;iriate forest
forest
industry
industry or
or not
not cannot be o.lswered
cannot .... answered withwitha a simple
simpleyes
yes or
or ro.
no. It has
It has been
been
..rved that
observed thatthe
theaojo.; [ves of
objectives of the industrial complex,
cn.,, industrial ).',1:nded to
complex, intended to put
available foresz
available forest resources
resources totooptime-
optimum use,
use, arearegradually
graduallybeing
being achieved.
achieved.
As
As an
an sconomic
economic ve: ore the
venture the establishment hashad
establishment has hadlittle
little to
to show
show in
in the
the
econom
form of economic returns until
returns until recently,
recently, resulting
resultingfromfrom changes
changes in
in
managementt and
malv and rpolitical decisions.
: decisions.
With r,pect to the transfer of technology, little new has been
With respect to the transfer of technology, little new has been
learnt at the national level but perhaps the local population has
learnt at the national level but perhaps the local population has
accomplished aa great
great deal
deal as
as far
farasasthetheimprovement
improvement of of indigenous skills
indigenous skills
is ce.e-rned.
is concerned. Fromthe
From the point
point ofof view
view ofofthetheForestry
ForestryDepartme.::
Department, , the
compey
company has completely accomplished
has not completely its expectations
accompl ished its expectat ions in terms
t-.7 s ofof
comVeL- forest utilization
complete forest utilizationand andproduct
productdevelopment.
development. The com[,,
The company , has
also
also not
not met
met its
itsobjective
objectiveofofdeveloping
developing export
export products.
products. But the future
But the future
of
of NIROWI willbebedetermined
NIRO~II will determined by by
thethe degree
degree of of flexibility it
flexibility it is
is sh..:wing
showing
or
or will
will show
show inin adaptrnu its operations
adapting its ions totomeet
meet the
thechanging
changing Nig,eian
Nigerian
market and in develop1no substitutes for simple but imported raw
developing substitutes
materials such as splicing threads for splicing veneers, fittings and
materials such as splicing threads for splicing veneers, fittings and
perhaps glues.
perhaps glues.

following recommendations
The following recommend at ions may
may enhance
enhance NIROWI's operations
NIROWI' s operations
and
and create aahealthier
healthiereconomic
economicenvironment
environment for
forthe company(
the company:
(a) ImprovedGovernment
Improved Government control
control of of forestallocation
forest allocationSo
so as
as to
to
unlicensed sawrnillers
eliminate unlicensed
eliminate licencees without
sawmillers and licencees
resources.
resourceS6
(b) Assisting
Assisting the
theGovernment
Government of
of Ondo
Ondo State
State ininpolicing NIROWI's
policing NIROWI's
forest concession in
forest concession in order
order to reduce large
to reduce scale illegal
large scale illegal
felling.
felling.
(c) Improvementinin the
Improvement the forestry
forestry department
department ofofthethecompany
company
th -.A.:elanan adequate
through ade,., staffiv ,:Admotivation
staffing and motivation to
to achieve
achieve more
more
e01-, 1.1,e fore-1
effective forest operations -i forest
.-ration and forest regeneration./
regeneration.'
(d) Intensification of
Intensification of reseJrch
research on finding uses
on finding usesfor
for the
the thirty-
thirty-
four
four species
species available
available in its forest
in its forestconcession,
concession, which
which are
are
not being
not being used
used at
at the
themodent.
moment.
(e) Urgentcompletion
Urgent completionofofthe theinstallation
inctdllation ofof the
the particle
particle board
board
mill
mill and
and increased utilizati,n ofofwood
increased utilization wood residues
residues as
as well
well as
as
the numerous secondary speciesspeoles forfor the production
production of
particle board
particle board and
and the
the generation
generation ofofpower.
power.

(fl Changes in operational policies

in operational policies with respect
respect toto the
intensification ofofproduction
intensification productionofofdoor-skins
door-skinsandandplywood
plywood for
for
the domestic
the market and
domestic market andpossibly
possibly for
for export.
export.

(g 1 Improved furniture designs

Improved furniture de ns and
and the incorporation
incorporation of the
of the
manufacture of low-cost furniture for the lower income
manufacture of low-cost furniture for the lower income
groups, in addition to the school furniture, currently
groups, in addition to the school furniture, currently
being produced.
being produced.
 - 285
- 285 --

(h) in the
Improvements in the training
training schual
school to
to include
include training
training in
in
the manufacture
the manufacture of
of spare
spare parts
parts as
as well
well as
as routine
routine courses
courses
in
in sawGoctoring
sawdoctoring and
and maintenance, in which indigenous
should participate.
supervisors should participate.

(i) A
A more efficient
efficient sales promotion aimed at securing
Government patronage.
additional Government patronage.

(j) A change
change in
in Government
Government policy
policy with
with regard
regard to
to the
the export
export of
of
veneers *
veneers.
 - 287
- 287 --

DEVELOPMENT IMPACT
Il1PACT OF AN INTEGRATED
INTEGR-Zl,TED
FOREST
FOREST INDUSTRY ININ CHILE
CHILE
by

Hernan Cortés
Hernán Cortes

CONTBNTS
CONTENTS

Page

l1.. INTRODUCTION 288

2.
2, THE CHILEAN ECONOMY
ECONOMY AND
AND THE
THE FORESTRY
FORESTRY SECTOR
SECTOR 288

2.1 General Economic

Economic Background 288
2.2 Economic Policy
Recent Economic policy 289
2.3 The Forestry Sector
Sector 289

3. THE CHOLGUAN COMPANIES

COMPANIES 292

3.1 of the
Description of the Area
Area in
in which
which CholquAn
Cholguan
operates
opera tes 292
3.2 of the
Description of the CholguAn
Cholguan Companies
Companies 292

3.2.1 General
General 292
3.2.2 Growth over the
the years
years 293
3.2.3 Products, volume of
Products, volume of sales
sales and
and markets
markets 295
3.2.4 Cholguan's planning
CholguAn's planning and organization system 297

4. CHOLGUAN'S
CHOLGUAN'S IMPACT ON DEVELOPMENT 297

4.1 of Employment
Provision of Employment and
and Income
Income 298
4.2 Transfer of Technology 299
4.3 the Environment
Impact on the Environment 300
4.4
4.4 Impact on the Foreign Exchange supply
Impact Supply 300
300
4.5
4.5 Government Revenue
Revenue 300
300
4.6
4.6 Social Regional Development
Social and Regional Development 301

5. CONCLUSIONS 301

ANNEX i1
ANNEX Map of agricultural areas
areas 304

ANNEX 22 Chile: Basic indicators

Basic indicators 305

ANNEX 33 Contribution of the

the forestry sector to
to the
the
gross domestic product
product 307

ANNEX
ANNEX 44 Chile: International trade of forest
International trade forest
products 308
308

ANNEX
ANNEX 55 Operating area of
of CholquAn
Cholguan 309
309

ANNEX 66
ANNEX Cholguan
CholguAn -- use
use of Pinus radiate
radiata
antations
plantations 310
 -- 288
288 --

L INTRODUCTION

This paper
This paper descritci
describesThe
the establishment
establishment andand de ;.lopment of
development of a
forestry enterprise, tic rn;,,InvAn conglomerate of
forestry enterprise, the CholguAn conglomerate of companies c--;;.:;:ries in the in the
certral-so;._n region
central-south Jf Mil, which started
region of Chile which started off J uycompany
off as ad family company
involved ir planting
ir7o1 ;ao in pinus adi,ta.
planting eu1,,e It grew
It grew steadily
steadily -Bd
and later
laterexpanded
expanded
irt.
into aa nozter
number _A industrial proauction units.
of industrial units.
It began its industrial activities
It began its industrial activities in in 1959
1959 when fibreboard
when a fibreboard
with aa production
plant with
plant production capacity
capacity of 000 t/a
of 9 000 t/a was
was put
put into
into operation.
operation.
The chief
The chief aim of setting
aim of up this plant was to make industrial use of
setting up this plant was to make industrial use of
99 000 ha of
000 ha of Pinus radiata plantations
Pinus radiata plantations that
thatthe
thecompany
company had planted in
had planted in the
the
CholguAnarea
CholguAn area between
between 1936
1936 and
and 1959.
1959.

Throughperiodical
Through periodical expansion
expansion the
the production
production capacity
caFai.Ity of
of the
the
plant was raised to its present level of 30 000 t/a.
plant was raised to its present level of 30 000 t/a. Thrui, surcessive
Through successive
purcha,ing and
purchasing and planting
planting cf lards, the
of lands, the oonpany
company now
now owns
owns 36 ,nJ ha,
16 500 -la, of
200 ha
which 299 200 ha are
are covered with tinw- radiata.
covered with radiate. The cLrrert indu4trial
The current industrial
tte ChOguA:-
comp:nx of the
complex Ch~lguan congcr,r'olomerito a)s: includes
includes aa sas.7111 de,gned to
sawmill designed to
prodi.-;e 45 000
produce 101- m ye,r in two
si w. wood ;,er year
of sawnwood two sh
shifts;
ifts; ad pauKing
packing case
manufact,.rirvi r:a;:L
manufacturing 4.5 7,.11.on cases in one shift and a
pro.i..w,.rg .5 million cases in one shift and a
plant produc
finger--,01r1lng line.
finger-jointing line.
The pi :_cr is
,e paper is divided
divided into
into four,
four, chapters.
chapters. The first describes
The first describes
the ecro,
the economic 'c cli,,ate
climate that
that has
haspredominated
predominated in in Chile
Chile in
in recent
recent years
years and
and
focuses ro the c'verall growth of the economy in general and of the
focuses on the overall growth of the economy in general and of the
forestry sector
forestry '.-octor in It also gives a brief outline
H; particular.
particular. It also gives a brief outline of the
major government
major governmentpoliciespolicies affecting
affecting Chiles
Chile's overall
overalleconomIc
economic conditions
conditions
as well
as well asas forestry
forestrydevelopment
development pol poli,lea.
icies. The second
The second chapter
chapter describes
describes
the company
the company and andoutlines
outlinesitsits main
maintechnical
to,hni,a1 and
andeconomic
economic ct,:acteristics.
characteristics.
The th
The third
i rd chapter
chapter attempts
at tempts toto analy-e
analyze th-the impact
impact the
the ente has had
i has had
on development
on development at local and
at both local neti..9a1 levels.
ani national levels. the last
Finally,, the last
chapter gives
chapter gives thethe conclusions
conclusions of of the
the sturl},

2. THE CHILEAN FCONOMY

THF CBILEAN ECONOMY AND
AND THE
THE FORESTRY SECTOR
~ORESTRY SECTOR

2.1 0er
General Peonomic Background
Economic
1

C,ile isissituated
Chile situatedin in
thethe
extreme suuth-west
extreme south-westofof
South
SouthAmerica,
America,
between 110 and 560 south latitude.
between l~o and 56 0 south latitude. It comprises a total area of
It comprises a total area of
756 847
756 847 km (excludingthe
km (excluding theAntarctic
Antarcticterritory).
territory).
Some 50.3 million ha or 66.4 percent of the total area are
Some 50.3 million ha or 66.4 percent of the total area are
unproductive lands
larW, from 'cm the agricultural
agricultural and forestry standpoint,
consisting of-1
consisting of deserts,ti, mountain peaks, glaciers,
mountain peaks, glaciers, etc.
etc. AA mere
mere 1.B
1.8 million
million
suitable for
ha are suitable cultivation with
intensive crop cultivation
tor intensive with no risk 4
r,E', of
degradation.
degradation. -'e remainder is
The suitable for
is su livestock raisino
for livestock rais andlor
forest cultIveti
forest cultivation. (See Map
(See Map 1, Annex tor a description ot the
Annex 11 for a description of the
agricultura l zones.)
agricultural 7,-,ne.7.)
Chile is
Chile is one
one of
ofthe
themore
moredeveloped
developed countries
countries of
ofLatin
LatinAmerica.
Ame~ica.
It has a population of 11.5 million and a per canut gross national
It has a population of 11.5 million and a caput gross national
product of
product of US$
US$ 2 200. The illiteracy
The illiteracy level
level i5is L percent
percent and
and the
the infant
infant
mortality rate is less than 23 per mil.
mortality rate is less than 23 per mil. AppBoximtely
Approximately 80 80percent
percent of
of the
the
labour force
labour force isis employed the industrial or services sectors.
employed in the industrial or services sectors. More
than 80 percent
than 80 percent of of the
the population
population live in urban
live in in the central-
urban areas
areas in the central-
south zone
south zone and
andmore
morethan
than4040percent
percentlive
live in
in the
the capital
capital Santiago.
Santiago. (See
Annex22for
Annex for development
developmentindicators.)
indicators.)
 -- 299
289 --

2.2 Recen lomic Policy

The policy of marked Government

The Government intervention
intervention inin the
the economy
economy
which pie)alle,:
iled in the fifties
in the fifties and
and sixties
sixties was
was abruptly
abruptly abandoned
abandoned with
with
the
the (hang- of government in
in 1973
1973 a:1d
and replaced by an economic
liberalization policy
liberall7arion based chiefly
policy based chiefly on
on the
the operation
operation of
of market
market forces.
forces.
Restrictions
.itit..tiGhaononcapital
capitalmarkets
marketswere
weregradually
gradually lifted
lifted and
and practically
practically all
controls
o. on foreign
ois on fore n indebtedness
indebtedness were
were abolished.
abolished.

Obstacles toto over5e-0_

overseas trade
trade were
were also and in
siso removed -nd in 1979
1979 there
there
was only one
was one rate
rate of
of ta.at..cn
taxation for
for all
all imports,
ts, egvf-
equivalent to
to 10
10 percent
percent
of their value,
of their value, and
and all
all export
exportsubsidies
subsidieswere
wereabolished.
aboli
In
In the seventies
r ,s the economic liberalization
liberalizati o process produced
process produced
positive results.
results. The
7 domestic production
gross dc--,7:o production increased
increased by
by an
an annual
annual 77
percent and .i-,,rts
and exports by 15 15 percent.
percent. Inflation
Inflation fell to 35
fell to 35 percent,
percent, which
which
was aa vast
vast i-improvement
,.vement On
on previous
previous tyears~
s.

However,
However, the
the economy suff,' a amarked
economy suffered markedo,pr,ssion ion in
in 1982-83.
1982-83.
Unemployment rose
Unemployment rose to
to 25
25 percent,
percent, the gross domestt
ti, lross domestic product
pcoduct declined
declined byby
15 per,ent
15 percent compared
compared toto 1981,
1961, approximately
approximately 50 50 percent
percat ofof the
the banks
banks and
and
50 percent of
50 polcunt of companies
companies inin the faced insolvency.
the productive sector faced insolvency. The
foreign debt
foreign rOse to approximately
debt rose approximately US$
US$ 11 500 caput.
500 per caput.

The reasons for

The reasons for the
the economic
econom ic depression
depress ion were
were many
ma:;y and
and comb
complex
but the main
but the main ones derived fromfrom aa combination
combination of of external
external factors
factors and
and poor
T.acit.
management of the the economy.
economy. Following
Following aa drop
drop in
in c.: .did for
demand for various c,ods,
goods,
due the world
due to the world recession,
recession, the
the terms
terms of
of trade
tradefc.f
for Chile's basic exports,
copper, products ano
copper, forestry products and 'ruit,
fruit, declided
declined sharply.
sharply. This
This problem waswas
further aggravated by the
further the Chilcan
Chilean exchange
exchange ccontrol
trol policy which persisted
in fixing the exchange
in fixiri exchange rate
rate against
agdst the thedol.:
dollar, while leaving
. , leaving the
the capital
capital
account totally ly free
free of
of r,.g7rictions
restrictions. This led to
is led to aa foreign
foreign trade
trade
deficit which,
deficit vlich, in in 1981,
1981, amounted
amounted to to one-tenth
one-tenth of of the
the gross
gross domestic
domestic
product. The difference
The was financed
difference was financed through
through aa huge foreign debt which
foreign debt which
was
was estimated
estimated at some US$ 17 000 000 million
million for
for 1983.
1983.

All this gave

gave rise to to drastic
drastic changes
changes in eco;lOmic policy.
in economic policy. The
national currency
ou)f., iy was devalued, which caused the debt to rise
considerably ini~ terms
terms of
of the
thena7ional
nationalcurrency
currencyandandledled
to to
thethe bankruptcy
ba-7i:ra7,tcy
of aa number
of number ofof firms in both the
in both the productive
productive and and financial
financial sec-sectors.
:

Economic rece~t years has tended

Economic policy in recent I.t.nded to
to be
be dominated by a nt=cer number of
ad hoc measures which have have 1- even grt
led to even greater uncertainty. The
7..he
'..nancial1 set-back
set-back finally for forced the Government to
Lae Goi,. intervene 1:1
to intervene in the
capital
:,[.tal market. The internal baiince
The internal balance was firiily
finally restored
restored in in 1983, but
but
at
it considerable
considerable cost,
cost, since the measureS
since the that had
measures that had to to bebe taken
taken will
will
certainly
certainly retard
retard economic
economic growth
growth inin the coming
coming years.
years.

2.3 Forestry Sector

The Forestry Sector

The forestry resources of Chile consist of approximately

99 million
million Fa ha of natural
natural forests
forests and
and 11 040
040 000
000 ha ha of
of plantations,
plantations, mainly
Monterey p
Monterey pine (Pinus r
,?inus radiata D. Don).
D. Don). At
At present almostalmost the
the entire
entire
forest industry
inri uses
uses the Monterey
terey pine
pine plantations
plantations as as its
its source
source ofof
supply. The natural
aT,e n..zural forests
forests on the th- other hand, because theY
hand, because they ar-
are 70t
not
easily .i,oessible
accessible (the (tirevast
vastmajority
majority are
at- situated
i.tuated in in the
the extreme south of
extr,.ic.,Tth
the cantry where
the country means of
where means of communication
commucLion are are virtually
virtually inexistent),
because
becaua0 of their composition
of their composition (generally
(generally a a mixture
rixhure of of different
differentspecies)
:cies)
and quality (over-mature)
and quality (over-mature) do :;ot justify
do not justify rchting
setting up up aa sizeable
sizeable i-lustry
industry
in that area.
area. Where these these forests
forests areare in it...at, that
in areas that can be reached, theythey
supply
supply only a few few sawmills
sawmills onOn aa seasonal
seasonal ba.71,.
basis.
 -- 290 -

The forest
forest industry
industry of Chile combines
of Chile combines an i~tensive use
an intensive use of
of both
capital and
capital and labour. At one extreme
At one there is sawmilli
extreme there ranging from
sawmill o ranging
simple mobile
simple mobile sawmills high-output mechanized
sa"'TIlills to high-output mechanized facilit.ies.
fac.:iries. At.
At the
other extreme
other extreme there
there is
is the
the pulp
pulp and
and paper
paper industt,'
indust.ry vhich
which requires
requires
considerable capital and
and a
a highly specialized work-force.
work-force.

The installed annual production

installed annual production capacity
capacity of
of the
the forest
forest indur
indutry
for the
for more significant products
the more products is ac present:
is at 3.1 million mm 0of
3.1
1.25 million tt of
sawnwood; 1.25 of pulp
pulp and and 200
and rpaper and 200 000
000 tt of diffe5ent
diffe3'ent
types
types of panels and
and veneer.
veneer. The forest stry consumes 8
forest industry 8 million mm of
logs annual
logs annually.

Less than
than 10
10 percent
percent ofof the
the natural
natural foi9sts
forests areare in
in private
private
hands. The
The plantations, however, which are
plantations, however, are made up
up nearly
nearly exclusively
exclusively of
of
radiata,
rAdiata, are almost entirely
are almost entirely privately
privately owned.
owned. antations
These plantations
a? . inked to the
ked to the processing
processi industry
industry which
which also
also forms
forms part
part of
of the
the
privatee sector.
pri' sector. than
More than percent all Chilean plantations belong
percent of all belong
to the large
to large forest-based
forest-based indJstrial
industrial enterprises
enterprises and
and the
7:1, remainder is in
remainder is
the
the hands
hands of small and
of small and medium size investors.
investors.

The forestry
forestry sector,
sector, like
like the
the rest
rest of
of the
the Chilean
Chilean economy,
economy, has
has
been affected
been by changes in the
iffected 3,%. the economic
econom ic policy.
pol icy. Growth inin forestry
fores try
production was particularly vigorous
ftL.J.n..tion ,igorous between 1979 and
between 1979 and 1981,
19B1, when
when rat
rates5 of
real expansion equivalent to
e(pansif.n .,,uivale,.1 to 10
10 percent per per year
year were
were obtained.
obtained. In
19As-e, production represented
1980-81, rcprosPnted 2.6 percent of the gross domestic (stic
production (see
production An~ex 3).
(see,;,anex 3). w~ile exports
While exports fluctuated
fluctuated sharply in the early
sharply in
seventies, between 1978
seventies, between 1978 and
and 1980
1920 they expanded
expanded atat an annual
annual rat
rate of
of 20
20
percent..
percent. In 1980
In 1980 exports
exorts reached
reached their
their peak
peak at usS 460
at US$ 460 million,
million, which
hich
corresponded to
corresponded to 10
10 percent
percent of thethe country's
country's total
total exports
exports as
as compared
compared toto
only 2 percent in 1973.
in 1973.

The expans ion

expansion of the sector
sector was strongly influenced by
Gover'int policy
Government policy which
which used
used incentives on aa
incentives on scale to
large scale to encourage
encourage
forestry development.
forc,,r1%y Cevelopment.

Incentives
Incentives toto forest owners are
forest owners are set
set out
out in Decree No. 701
in Decree 701 on
forestry
forestry development,
development, enacted inin October
October 1974,
1974, which
which will
will remain
remain in
in force
force
for twenty years. Among
for Among the most important
important incentives
incentives are:
are,

subsidizing
subsidizing 75
75 percent
percent of
of afforestation
afforestation and
and management
management coSts
co'sts
on
on plantations
plantations established under this
estalished under this legislation;
legislation;

immunity from
from eti
eXpropriation from the
_-i7tion from the lands
lands used
used to
to establish
est,ablish
plantations;
these plantations;

exemption from
from land
land tax
tax payable
payable on
on '''inc
those landS;
lands;

50 percent
a 50 percent deduction
deduction on
on taxes .e on iDCG:.r
taxes payabler income nenerated
generated
by
by forestry
forestry operations
operations (for
(for both
both individuals
inciv7uals and firms).
Since private
Since private business
business Concerns
concerns cannot
cannot obtain a a plantation
plantation
subsidy beforebPf,re establishing the plantations and having them duly
duLy
certified by t,overmnent
Government experts, the national banking system
the national provides
system prc,:des
spec
special terms to
ial tcrms t.o guarantee cred i ts to
guarantee credits t: these business
bus iness concerns
concernstotoes.:.ole
e:lable
them to 1]
eTe--- finance planting.
once planting. For this
For this purpose, -o Central
purpose, the Central Bank
Bank provides
provides
discou:1t fac-li.ties to
d'sc.)unt facilities to commercial
commercial finks.
banks. The
it, debt cancellation
cancel; Itcri period
varies depending
- depending on the the type
type of
of busines
business concern involved; ranging
c7,7cn invol,,cd from
ranging from
three years for large comp,nlas,
for large companies, to to six for
f small compaile
,mall companies and twelve
a-d twelve
for individual businessmen. Finally,
years:3 for Final-, Supreme Decree NO 249
Den,,e N0 49 of July
1975
1975 lifted
lifted restrictions
restrictions on nn expdrts
exports of of forestry
L:,:estry products,
prnda,ts, thus
thus allowing
roundwood logs,logs, which
which were
were previously
previouslybanned,
banned,totobebe exported.
,,:pf.ited.
 -- 291
291 --

Where imports
Where imports are
are concerned,
concerned, the .calization policy
the :liberalization policy has
has also
also
served to
served to ease
easerestrictions.
restrictions. There
There are
are no :erential agreements
no preferential agreements of
of any
any
sort,
sort, nor
~or are
are C.-,e,e restrictions, such
there restrictions, such as as guotsb
quotas oror import
import licences.
licences~

,:tors thb
The factors -,,re taken
that were taken into into consl,i,,aion
consideration whenwhen drawing
drawing up up
these speci61
these special provisions for forest forest establishmE-a.
establishment a:od and exploitation
exploitation and a:od
which weredesigned
which were designedtotoencourage
encourageanan activity that
activity that isisclearly
clearly advantageous
advantageous
country, included the fast
tile cou"try,
to tje fast growth rate rate of of Monterey pine
(20 mmIhala
(20 /ha/a average),
average), thethe use andprotection
use and protection of of marginal
marginal lands,
lands, for
for which
which
hardly any alternative
hardly alternative use was possible, possible, providing
provid ing employment for for
unqualified workers
unqualified and generating
workers and generating fore foreign currency
currency for for the
the country.
country.

In
In the
the early
early eighties
eightiesthe theState
Statesubsidized
subsidized the the plantation
plantation costs
costs
for nearly
for nearly 80 percent of
80 percent of the
the total
totalplantation
plantatio;]area areaasascompared
compared to to
approxir,,°,-ly 10 percent
approximately prior to
percent prior to 1974.
1974. It is
It is est_maled
estimated that thatbetween
between
1976 an,
1976 and 1983 thethe State
state transferred
transferred approximat,ly
approximately US$ US$ 454nmillion
million to
to the
the
private se-,-or
private sector byby way of plantation
way of plantation subsIdit-o.
subsidies. This pelic'y
This resulted in
policy resulted in
an average
an averageafforestation
afTh,', tation rate
rate of
of more
more thatthan 60 000 hala
60 000 ha/a over
over the
the past
past ten
ten
years, approximately
years, apprcx:,,- ,',1ythree
threetimes
timesthe thecountry's
country'sfelling
felling rate.
rate.

Followi,-] the
Following the period
period ofofexpansion
expansion (1976-80),
(1976-80), worldworld recession
recession andand
over-evaluation
over-evaluation of of the national
national currency
currency led lel to
to aa loss
loss off competiti.n.ness
competitiveness
of ChilPon
of Chilean forestry -ducts on
forestry products on the
the internMional
international mar401
market, , cesultin,
resulting inin aa
signifikant
significant decline
decline in,1 exports
exports and productt,n. The
and production. sltuution was
The situation tnitner
was further
aggr5vated by
aggravated by aa d,,p
drop inin local
localdemand
demand as e consequ,-ne of
a consequence the general
of the general
economic depression.
economic depression.

In1984, foreign
1984, foreign exchange earningsthrough
exchange earnings throuc-,sales
salesofof forest
forest
produc
products on inter:lational markets amounted to US$ 383 million.
international markets million. This
figure represents
figure mentsapproximately
approximately9 9percent
percentofof the
the count,,,' total exports
country's total exports
.

for that
for Imports of
ar. Imports
that year. of forest
forestproducts
productshave
haveamounted
amounted to
to approximately
approximately
US$
US$ 4040million
million per
per annum
annum in in recent
recent years
years and
and consisted
consisted mainly
mainly of
ofpaper
paper

support
'I (see Annex
produots (see
:C services
Annex 4).
services has
4).
has varie,'
_oymentininthe
Employment
varied between
between 45
45 000
the forestry
forestry sector
000 and
and 53 53 000
000 over
over t,
,'-,lated
sector andI related
last ten
the last ten
years. In In 1983,
1983, with
with aa total
total work-force
work-force ofof 5252 000
000 persons,
persons, the
the sector
sector
accounted
accounted forfor1.5
1.5percent
percentofof thethe total
total labour
labour force.
force.

The Chilean
The Chilean forestry
forestry sector
sector in in general
general isis expected
expected totoexpand
expand
ccnsiderably in
considerably in the coming years.years. It
clear that
It is clear that the future
future
devb,,ent of
development of thethe sector
sector will
willdepend
depe:ld onon aa number
number of of factors
factors including
inoluding
ac-4,a,-, development
demand, development of the internaill
of the market,
internatio:1al Government
market, Government policy
policy and
and
availability
availabilityofofresources.
resources. Of all
Of all thti:,.e asats the
these aspects theraw
rawmaterial
material supply
supply
position ii
position is thethe only
only one
One for
woodsupplies,
made, since wood
for w:,fth
supplies, for
which aa reloively
relatively safe
for the next decade or
safe forecast
Or two,
forecast cal
two, basically
can be
basicallyden-',id
on pre,,,nt
on present stocks.

In
In a recent studystud-.- theth,ri Chilean Forestry Institute
Chilean Forestry Instituteexamined
examined the the
o..*3r-1 of
question future roundwood
of future ro,,, ' supplies based
supplies based on rather pessimistic imistic
assui,H.'iions.
assumptions. The study makes an
The an analysis
analysis of of future
future yields
yiel s of of Pinus
radiate
radiata plantatio' ,,ected as
antations projected far as 2003. The
as far results show
The results s a
significant supply
significant supply , us, for
, for the period period stu9ied:
stilied: over over thethe next
next 21
years
years supplies
suppl ies woula
would ,b'Lal
total some 490 490 millio;]
million mm of pine wood. .:),bd. on
On the
the
ot,-'r hand,
other total consumption
hand, total COrl'jumption over over theth, last
lost 2121 y,,,rs
years nas t-
has been in the
rangen. of
of 115
115 million
million mm.. 7'77lies wi:1
Supplies will be mostmost pl
plentiful towardA the,end
the end
ot the century
of century whenwhen the
the H-.!, ial SUpp',
ial supply,,rOws
grows to some 40 million m'/a,
40 m, m3 la
In the best felling
,m.a best felling year so far, rr, 1980,1980, aa little mo,,c
little more than
than 9 million m m'
3
ext,_a,ted. At least, from
were extracted. fro thee point point ofofview
view ofofraw
rawmate
material al stocks,
stocks,
le potenial for
the potential for industrial
, :7ansion is
expansion is very
very promising
promising and will
and will
undoubtoJiy
undoubtedly enhance
enhance the
the economi, ,.tance ofofthe
economic importance the sector,
sector.
 292 --
- 292

3.
3. THE CHOLGUAN COMPANIES
CO!1PANIES
3.1
3.1 Description of the
Description of the Ari.,
Area in
in Which
Which Cholguan Operates
CholguAn Operates

Cholguan is sìti
CholguAn is situated in thee,ertia'
r- central valle,
valley of
of Nuble in
~uble province in
the Nil_
VIII Region of Chile. When o_-,rtat_orm
antations werewere first
first established the
established in the
area
areA tr 192h, the
in 1936, the town
town was ba5icalle
basically a railway station station on on the
the line
b/01,-9411q out
branching from the
eat from the cent,:al
central network
ne1wer1-. in an5r easterly direction
direction toward
toward
Andean Cordillera.
the 7-nde5n ,rdillera. This line wai
This line was originally
originally intended
intended to connect
to connect
Chile
Lnile andand Prgentina
Argentina butbut this
this never
never came
, ,.e about. The
The population
population ofof
Cholguan numbered approximately 40 rh:
eimbered approximately their economic
and their economic activity was was
basical subsistence
5,,hsistence agriculture and a:h: livestock farming, since
took farming, since the
the poor
i
eu,litv land prevented
cL the land prevented itit from
from b,,r,J
being used
used more intensively.
intensively.

The land
land isis flat
flat and
and the
the soil
soil is
is sandy.
sandy. The sand derives
The sand derives from
originating from
materials originating from the
the volcano
volcano -- Antuco
Antuco - in in the
the Cordilleran zone
zone
of the area.
of the area. Eruptions of
Eruptions this volcano
of this volcano filled
filled the
the valley
valley with
with sand,
sand,
first through aa glaciation
first through glaciation process subsequently through
proceso and subsequently through aa fluvial
process. The
The soil isis poor
poor in
in organic
organic content
content andand not
not very
very fertile.
fertile. Its
natural
natural cover
cover is
is scrub,
scrub, notnot exceeding
exceeding 22mm inin height,
height, and
and natural
natural pastures
value for
of low nutritional value for livestock.
livestock.

It has aa !1editerranean-type
It has Mediterranean-type of of climate,
climate, humid
humid andand cold
cold in
0
winter, and dry
winter, hot and dry in
in summer.
summer. exceed 303eC
Temperatures exce,.-2 C in
in summer and
summer and
fall
fall below SoC in
below 5°C in winter.
winter. Annual rainfall.
rainfall, mainly
- .y between
between May
May and
September, is
is 11 300 mm.

At t, the only economic use

At present, use to
to which
which the
the land
land of
of the
the area
area
is p~t
is tilt i5 th, cultivation cf
is of Pinus radiata,
radiata, wh;ch
which develops
develops atat the
the rate
rate of
of
17
17 mm /ha 'a in
Ihala areai where
in the are where the company operates.
the ccmfany This
This rate
. rate of
of growth
is considered
is considered lowl'W in comparison with
19 ommparison with tne,amerade
the average for
for the
the species inin Chile
which isis ectin,ted
estimated at
at appteximately
approximately 20 m3 Iha/a.
20 m'/ha/a.

Although thethe type

type of soil
soil on which the the CholguAn
Cholguan plantations
plantations grow
constitutes a disadvantage with respect to the average rate of
radiata in
development of Pinus radiata in the
the country,
country, it it presents
presents some significant
advantages
advantages inin terms of 0·1' access
access and
and exploitation
exploitation costs.
costs. Because the land
Because the land
is flat the drainage
and the
flat and drainage of of the
the sandy
sandy soils
soils good, heavy vehicles
good, heavy vehicles can
can
operate throughout
operate throughout the year, without
the year, without thethe necessity
necessity of of investing
investing heavily
in transport
in infrastructure. This
transport infrastructure. This means
means that exploitation can can be
be carried
carried
out twelve
out twelve months
months a year,
year, which
which is is not
not possible
possible at at other
other sites,
sites, where
where
work
work of this kind can can only
only be
be carried
carried outout in
in the
the summer months. All this
summer months. this
results in lower UF
in low-h unit costs
-hsts for
for forest
forest exploitation
exioitation and and extraction
extraction and,
and,
finally, low.
lowerr t, costs for
mort costs for the
the procucts
products obtained.
obtained.

3.2 Description of the CholguAn Co7;*rmi

Cholguan Companies
-

3.2.1 General
The Cholguan conglomerate
Tb, cm
r e consists
consists of three independently
operational units:
managed operat: i'

(a) Maderas Prensada

Prensh,.-1 Cholguan,
CholguAn, S.A.
S.A.,, which
which operates an
industrial
h.:ast'ial fibreboard plant, whose current production
capacity is
chnaci:y is 40
40 000
000 t;
t;

(b)
(b) Aserraderos
deros Cholgu!ln,
CholguAn, S.A.
S.A.,,'3 which
which operates
operates a sawmill
designed
demm geed to
to produce
produce 45
45 000
000 mm' of
of sawnwood
sawnwood per
per year in two
year in two
eight-hour shifts; aa packing case manufactirring
eighr-hour manufacturing plant
plant
producing 4.5
producing 4.5 million
million cases
cases in in aa single eight-hour shift
single eight-hour shift
and a
and a line producinging mouldings
mOUldings and
and other
other products;
products;
 -- 293 --

(c)
(c) L'o' !',7 S.A.,
Forestal Cholguan S.A. which is is involved in forest
establ ishment, management
establishme N ,'ment and exploi tat ion •
and exploitation. This company
This company
is responsible l_or
is responsible for supp:;,inq
supplying raw raw material
material to other
to the other
companies and,
companies and, on an independent
on an basis f exports logs to
independent basis,
markets.
foreign markets. It owns
It owns 3636 500
500 ha
ha ofof land,
land, 29
29 200
200 ha
ha of
of
which are
are covered
covered with
i,(th Pinus
Pinus radiata plantations
raoilta plat, itions and the
and the
remainder isis made up of dt industrial sites, access
indus1i:J1 sites, roads,
ess roads,
fire-break
tire-break networks and lands for ttture
lands feu future planting.ng.
'

The reason for this division into operational units is

threefold:

i) to make administration
to administration moremore flexible,
flexible, i.e..
i.e., to
to ease the
the
burden of bureaucratic
bureaucratic procedures
procedures inin decisio--s-;,ing
decision-making forfor the
the
enterprise which,
enterprise which, with
wi th expansion
expans ion and
anddiv,l's
di versificat ion could
Gation could
become extremely
extremely slow;
slow;

ii) to improve
to -iency by
improve efficiency by enabling
enabling each
each of the
the units
units to
to
operate as
as aa profit-making
p] concern~
.t-making concern;

iii I under the tax

under Chilean law the tax system
system for
for forest
forest cultivaticr
cultivation and
and
exploitation differs from that
that for other produeHon
production
activities.
activities. The system
The system provides
provides for for aa substantial
substantial tax
t-ax
reba te on income
re:g.,te income earned from cultivation,
earned from cuI tivation, management
management and
and
exploitation forests.
-:'dtation of forests.

3.2.2 Growth over the years

Industrial operations commenced

Industrial operations commenced inin 1959.
h9. However, the forest
However, the forest
resources, needed
neec,e) to supply the the industry, had been established since
been established since
1936, Pinus radiata
1916, when Pin. gdiata planting
planting began in the area
began in area close
close to
to the
the town
town of
of
Cholguan, situated
Ch-1;uAn, sit, - :
.
in the Central Valley
in the Valley ot ~uble province,
of Nuble province, in
in the
the VIII
VIII
Region of Chile
Regien Chile (see
Jee map, 5).
map, Annex 5).

In
In 1936 the family fiy';'
the tamily firm "Comunidad Irarrazabal-Larrain" began
"Comunidad TrarrAzabal-Larrain" began
planting
planting on anan 800
800 ha
ha farm,
farm, whic:, :6n members of the
which the the firm
firm had
had inher
inherited. lid.
The main reasons
The reasons for
for planting
planting were
were the
the incentives
ineertives that
that thethe law
law at
at the
time offered for
time for forestry
forestry activities.
activities. These
Th,ue were mainly tax tax incentives,
incentives,
the most
the most important
important ofof which
which were
were exemff,dns
exemptions from
from land
land taxes
taxes and
and death
death
duties, which
which at time were
at that time were very
very high.
high. Another reason
Another reason why these
these
businessmen turned to
businessmen turned to man-made forests
forests was
was that
that they
they hadhad previously
previously
suffered losses with crops and
suffered lisias and fruit
fruit cultivation
CUltivation on
on the
the same
Same land.
land.

mear, the
Later, the shortage
shortage of of capital
capital with
with which
which the
the firm
firm was
was faced,
compelled them to to sell
sell the
the plantations
plantations that
that they
they had
had esiablished.
established. To
;:g do
this they divided the
this the farm into
; into 11 ha
ha units which th--,
they offered
offered for
for sale
scle to
to
the public in the major
the public major towns
towns ofof the
the country.
country. Stress
Stress was
was laid onon the
the
.4es the
long-term advantages the investment offered (or as it it was called
"retirement insurance") i.e.,
'retire:., i.e ~ i by means of
by means of aa low monthly ,,ayment,
low monthly payment, they
would c..
would in a sub7l,,,,'
obtain substantial return after
ial return after 25
25 or
Or 30
30 years ich was
yeer. which was also
also
exempt from
lm:t death duties..,3. At that time, the idea idea orof having an asset
asset
exempt from this
exempt from this tax
tax as one
one approached
approached retirement
retirement waswas very
VeLy attractive to to
the general public.
the public.

Some 44 500
500 ha ha of
of these
these plantations
plantations were
were sold
sold in
in this
this way.
way. with
With
the funds obtained
the funds from the
obtained from the sale,
sale, the
the firm
firm continued to acquire
acquire lands and and
to
to plant
plant onon them.
them. Selling "forest plots" became
"forest plots" became aa to.her
rather pro):1
profitable
commercial
commercial acti vi ty for
activity the "Comunidad
for the If Comunidad Irarrazabal-Larrain It,. which
Irarrazabal-Larrgin", was
wnienass
thus encouraged to
thus encouraged to continue
continue expanding.
expanding. The "forest
"forest plots"
r:,,..t.a" were well
Were %,...11
received
received by the public and and this
this gave
gave rise
rise to
to aa demand
demand for
for them,
tt,erh,which
which was
was
reason enough,
reason enough, inin economic terms,
terms, forfor continuing
continuing to to buy
buy lands
lands to
to be
be
planted and subsequently sold.
planted and sold.
 -- 294
294 --

Later, large areas

Later, when large areas had
had been
been planted,
planted, they
they were offered to
the "Cajas
the "Cajas de
de Previsión"
Previsi6n" (Social
(Social Security
Security Funds)
Funds) which
which at
at that time Wi
were
re
administering these
administering social security
these social security funds
funds in Chile. Their
7' reason for
purchasing these
purchasing these lands was to to capitalize
capitalize their
their fuads
funds in an01 activity
jf::5;
(forestry) which
(forestry) that time
which at that time seemed
seemed very
very profitable.
profitable. Thus,
7' in
in 1940
1340 one
of these organizations purchased three
of these three large
large properti
properties in the area where
e ark') where
Cholgu~n
Cholg)Thrtwas
was operating.
operating.

Around 1950 1950 there

there were
were already
already apprc.ximately
approximately 99 000 000 hah, of,f
plantations.
plantations, some 500 ha
some 44 500 ha of
of which
which were
weresold
soldtoto private
privateir.-eftor,-)
investors
through the plot
through plot system,
system, 33 000
000 ha toto the
the Social Security Funds end
:nurity Fund5,. and tne
the
remainder. apprJalmately
reraluder, approximat.ely I1 500 ha, r.»7.,2 lei by the
ha, were retained the Comunidad
C(.1,ir_1.-,d
IrarrAzabal-Larrain.
Itatatal-Larra!n- that time
At that time the
the initia'
initial plantations
plantations were
were al.re,dy
al
14 years
14 ,edr., old
-1,1 and management
and management work
work had
had toto be
be started.
started. It was then
tter that
ronccrn was
concern ua- voiced
vtced regarding
regarding the futurefuture useuse to be macc these
made of these
plantations, th,,e in
plantatl.).1).), those in the hands of third
the hands third parties as as well
well as
as those
those cuaed
owned
ft,e Comunidad IrarrAzabal-Larrain.
by the fr.-rrAzabal-Larrain.

It
It must
wIFt bebe pointed out that
that all
all these events occurred relatively
relatively
, without previous planning.
uithout any previous planning. these
Industrialization of these
piant,-t_or was not
not one
one of
of the
the init.ial of the
initial aims of IIComunidad ll "
the "Comunidad". This
ion arOse
oJostltn ar,,,e later when
when the forest resources had already been
established
estaLli:7n,d and
.1L0 one
one way of using them
them was through an
an industrial
industrial activity.
activity.

studies frousing
focusing onon the establishment of an industrial plant
an industrial plant
were
uere postponed
ro..-.tpuped for approximately four years.
4.c appro,imately Finally, an industrial
comp3n:, (Maderas
(M-ojera Prensadas Cholguàn,S.A.)
Prens,,d,,sCholgu~n, S,A,) was
was set
set up
up and the Comunidad
and the Comunidad
abal-Larraln
IratrAzah.il incorporated its plantations.
farrair, Incorporated At the Same
same time,
other plantation
other owners in
antation owners in the
the area
area were
were given
given thethe opportunity
opportunity to
exchange
exchange their ol,."7).-ions for
their plantations shares in
for shares in the
the new
new industrial
industrial company
company and
and
in this way
in way apr
approximately y 350
350 ha were added
added to
to the
the I1 500 ha belonging
500 ha helonging to
to
'Comunidad tl ~
the IIComunidad

Despite
Despite the lack of interest
tIe lack interest shown by
by the
the landowners
landowners to
to exchange
exchange
their plantations for
their plantations for shares,
shares, the
the owners
owners of the industrial
of the industrial plant
plant always
always
took
took the
the other
other plantations into account
plantations into account when
when planning
planning supplies,
supplies, since
since the
the
location of the
location of the plant
plant. made
made it
it the
the natural
natural market
market for
for wood
wood from
from these
these
plantations.
plantations,

Following an analysis is of
of the
the available
available potential,
potential, the
the amount
amount of
of
required and ,xi,:ting
investment required ex ing forest resources, it was
resources, it was decided
decided to set
up aa fibreboard
up fibreboard plant ant w)th
with anan initial
initial production
production capacity
capacity of 99 000
t/a. The machinery
machinery w.as q,.)hased in
was purchased in t.he
the German
German Federal
Federal Republic andand the
the
investment cost
investment cost was
was approximately
app:oxitely US$ US$ 3.0
3.0 million
million (1959).
(1959). Financing was
was
provided entirely
entirely by private
by privat r sources,
sources, contributions from from partners,
partners, sales
sales
of shares
of shares and
and loans frtmfrom aa private
private bank.
bank. Construction of the the plant
plant
commenced in
in 1956 and it
1956 and it c-ime
came int.o
into operation in in 1959.
1959.

It
It was designed by the
was designed the German
German firmfirm J.M. voit.h G.m.b.H.
J .M. Voith G.m.b.H. and the
the
Chilean
Chilean consultancy fjrmfirm Hernan
Hernan Brioses
Briones y Cia..Tia. The former
former provided
provided
credit for
credit for the purchase of of machinery
mnechsri-.r- totalling
.1n11'.nrUS$
i US$ 0.5
0.5 million
million over four
four
years. Market studies
studies ws,rc
were rirrien
carried oit te ,:onsultancy
out by the consultancy firm
firm of
of
Wal ter Thompson
Walter Thompson y y Cia.
Cia. (Chile)
fitile and ir Ler'ted mainly
centred maitLy on on assessing
assessing the
the
consumers' reaction to
consumers' reaction to the
the frodu,,
product (fibreboard)
ftibt,.boa/d; which was then unknown in in
Chile. Initially, attention
attentior was focused
f,,ur,C On tLe
the domestic market
market
and plant was
and the plant was designed
designed eccordir.ily.
accord ly.

The this corn,

The success of this compl7, tely new
new product
product on
on the
the market was
was due
due
to:

(a) the
the company's , ale advertising
company'.5 large scale advertising efforts
efforts and the
the
campaign designed to
campaign desi,ar.' Lreak into the market
Lo break market and
and replace
substitute product
substitute products
i and,
ad,
 -- 295 --

(b) the earthquake that

the earthquake that struck
struck central-south
central-south Chile
Chile (in 1960)
1960)
following which emergency
emergency housing had to be provided
rapidly
rapidly and
and economically
economically and, for this,
and, for this, intensive use was
intensive USe was
made of
of fibreboai,I.
fibreboard.

In 1966
In 1966 it
it was c.cid.
decided to expand thethe plant's
plant's production
production capacity
capacity
from
from 99 000 to 21
000 to 21 000
000 t/a to
to meet the
the growth in
in domestic
domestic demand
demand and
and to
to try
try
to
to reach
reach international marke.
markets,, particularly inin Latin
Latin Am,rica.
America. Financing
for
for this investment, which
this investment, which totalled
totalled U56
US$ 1.3
1.3 million
million (1966),
(1966), was
waS provided
provided
as follows:
as follows: use 870
, by aa German
870 000 by German private
private bank
bank credit
credit (guaranteed
(guaranteed by by
the Chilean ue'..'er--ent DevelopmentCorporation
Government through its Development Corction - CORFO);
CORFO):
use 125
US$ 125 000
000 inin local
local currency
currency directly
directly by CORE.° and use
CORFO and U4 300
300 000
000 of
of the
the
company's own ca capital~
ital.

The design
design and
and engineering
engineering for
for the
the expansion
expansion was
was undertaken
undertaken by
the Cho1guan engineers themselves.
the CholguAn themselves. External
External consultancies were
were required
only for
only for the
the boilers
boilers and
and for
for strength
strength calculations,
calculations, for
for which
which contracts
contracts
placed with
were placed with local
local engineering
engineering companies.
companies.

Between the
Between the coming
coming into
into operation
operation ofof the
th, plant in 1959 and the
in 1959 the
above described
above described phase
phase of
of expansion
expansion inin 1966,
1966, Cholguan afforested
afforested 735
, 735 ha
ha
and purchased
and purchased 457
457 ha forests from
ha of forests from other
other c.
owners
eta who did not want to
did not to
their plantations
exchange their plantations for
for Cholguan
Cholguan shares.
shares.

In 1978 it
In 1978 it was decided to modernize
was decided modernize thethe plant
plant and
and again
again extend
extend
its production
its producti, capacity to
o capacity to meet
meet the
the growing
growing demand
demand on on the
the international
international
market,
market, mamainly the
tte USA and
and Europe,
Europe, which
which CholguAn
Cholguim had
had entered
entered with
wi th some
some
success. ,iction capacity
Production capacity was
was raised
raised toto 40
40 000 t/atla and
and the
the financing
financing
use 5.5
of US$ 5.5 million
million (1978)
(1978) ccosis!-..d
consisted of of US$
U5S 2.6
2.6 million
million ofof the
the company's
company's
capital and
capital am ani Inter-American De,.,
, Development
opment Bank
Bank (IDB)
(IDS) credit
credit through
through CORFO
amounting to
amounting use 2.9
to JS$ 2.9 million.
million. Dcsga and
Design and engineering
engineering werewere again
again carried
carried
out by CholguAn
Cholguan engineers.
engineers. Some
Some 80
80 percent of the the equipment
equipment were updated
updated
on th is occasion
this occas ion through
through imports from the
imports from German Federal
the German Federal Republic
Republ ic and
and
Sweden.

Between 1966
Between 1966 and 1978
1978 Cholguan
CholguAn continued to increase its
forestry resources
forestry resources and
and by the end
by the end of
of 1978
1978 owned
owned some
some 11
11 000
000 ha
ha of
of
forests.

The following year, they acquired a sawmill situated

sit..ate at
Canteras, 3 some
Canteras'3some 35 35 km
km south
south of
of Cholguan,
CholguAn, wi th
with a
a production
production capaci
capac:,:, of
000 m
45 000
45 m of of sawnwood
sawnwood per
per year
year in
in two
two eight-hour
eight-hour shifts
shifts (see
(see map,
map,
Annex 5).
5).

Finally, in
in 1984
1984 the
the company set up aa packing
packing case
case manufacturing
manufacturing
plant, with
plant, with a produ.tion
production c,pacity
capacity of 4.5
4.5 million
million cases
cases per
per year
year in
in one
one
shift, and aa finger-jointing line.
-jointing line. Total
Total investment cost
c ,st waS US$ 5.5
US$ 5.5
million.
mi ilion. The company r,piided
provided US$
US$ 4.4
4.4 mill
million ;E out Es and
their own resources
ion of their
the 1.1 million)
the remainder (US$ 1.1 was in
million) was in the
the form
form of
of an
an TDB
IDB cr-
credit
lit through
CORFO. Machinso
Machinery was imported
imported from
from Germany
Germany andand Sweden.
Sweden.

The company
The company continued forest possessions
continued to increase its forest possessions and
these amount at
these amoutt (1985) to
at present (1985) 36 500
to 36 500 ha land, some
ha of land, some 29
29 200
200 ha of
of
covered
which are co%, red with
with pi
Pinus radiata
radiata forests age classes.
forests of different age classes.

3.2.3 Products,
p:t., volume
volume of
of sales
sales and
and markets

When CholguAn
Cholguan commenced
commenced its
its activities
activities the
the product
product (fibreboard)
(fibreboard)
was totally
,totally unknown
unknown on the local
on the local market
market and
and an
an enormous
enormous advertising
advertising and
and
marketing
-eting effort had to be
effort had be made
made to
to launch
launch it.
it. A number
number of distributors
distributors
experienced
rienced in the construction material
the construction material market
market (this product is
(this product used
is used
chiefly in
,,iefly in construction work)
work) were chosen forfor this
this purpose.
purpose. In addition,
In
 -- 296
296 -
-

aa carpenters'
rs' club
clubwas
was organized
organized and
and members (totalling more
members (totalling more than
than 55 000)
000)
woce trained in how to use and work with fibreboard.
were trained in how to use and work with fibreboard. All this was
All this was
advertising campaign emphasizing
ac,mpenied by an advertising
accompanied product's
emphasizing the product's
ad-antiges.
advantages.
Cholguhn markets two lines of fibreboard products which are
Cholguan markets two lines of fibreboard ucts which are
building, carpentry,
wid,ly used in building!
widely carpentry, industry, furniture manufacture,
industry, furniture manufacture,
decor,tion,f business
decoration business andand the
thehome. "standard line'l comprises
The "standard
home ~ The comprises smooth,
smooth,
watesirocf, perforated and embossed sheets in wi'ths of 1.51 m and
, perforated and embossed sheets in widths of 1.51 m and
lenc,tTsofof2.44
l.4ì cl
or 4.88 The "special line" nor.-.-. boards that are
4.88 m.
m. The "special line" comprises boards that are
treotog nniality lacquers.
r.ith high quality
treated with lacquers. They consist
They consint ofni several
several types
types and
and
are ssid traer the trade name Durclac. TtRy -re produced in six
are sold under the trade name Durolac. They are produced in six
varieties of
varieties of mat emulsionand
mc:. emulsion andsemi-gloss
semi-glosscolours,
col uis,imitation
id,itationglazed
glazedtile,
tile,
nr Ahte. Secauseofof the
oak or slate. Because the lacquered finish, the surface cf
lacquered t1n1sh, of Pdrolac
Durolac isis
aT.-(lutely waterproof
absolutely $.aterdiof andand more durable lt-Ir
more durable Dttcr type
al) other
than any tipo uf
of finish
finish used
used
LJ1 wood.
for It resi.ts acids, solvents
wod. It resists acids, solvents and Jsed in
commonly used in the
the
ncoe as
home as well
we'l asas ErTir
fruit juices
juicesandand steam.
steam.

Following
Following expansion
expansion in pioluctiuf exceeded
in 1966, production vxceeded local
local.1emand.
demand.
However,when
However, whenthe
thedecision
decision to ei,
to expand hai
had (eer talcen, consideration
been taken, consideration had
had
already been
already been given to theforeignn varkn
given to the fur,. markett as en outlet fr7
ir an outlet for surplus
Initial efforts ii)vi fitreboard we'r
product-ion. Initial efforts toward exporting fibreboard
production. 7»arefore
were therefore '

and directed
launched and
launched directed mainly
mainly atat Litin
LatinAmerica
America (Peru, Ecuador) and the the
Caribbean countries.
Caribbean countries.
The reasons
The reasons forfor choosing
choosing these
these markets
markets werewere toto make
make use
use of
of
Chile's
Chile's relative
relative proximity
proximity to to them
them and to profit
and to it from
from tariff
tariffconcessions
concessions
obtained through negotfations
negotiations in Latin American Free Trade
the Latin
Association (ALALC)
Association (ALALC) andand the
the Andean The intention
Pact. The
Andean Pact. intention waswas also
also to
to gain
gain
experience inin international
experience international trade
trade inin relatively
relativelyundemanding
undemanding markets,
markets, so
so
as to
as to later
laterbe
beable
abletotobreak
breakinto
intoother
othermarkets
markets such
such asas the
the United
United States
States
and Europe,
and Europe, which,
which, although
although much moredifficult
much more difficult totoenter
enterand much
and muchmore
more
demanding,
demanding, are areattractive
attractive from
fromthe the point
point of
of view
view of of stability,
stability, volume
volume of
of
business and
business and prices.
prices.
The breakthrough
The breakthrough intointo these
these markets
markets was
was very
very successful.
successful. In
In
1983, foreign
1983, markets, mainly the United States,
foreign markets, States, U.K. and the
the
Netherlands, accountedfor
Netherlands, accounted for 70
70 percent
percent of
of Cholguhn's In order to
sales. In order to
Cholguan' s sales.
break into
break into these
these markets
markets Cholguhn
Cholguan waswas forced
forced to
to improve, and based
improve, and based its
its
operations
operations on
on a a system of management
system of management that thattakes
takespride
pride in
in high
high quality
quality and
and
a sense of responsibility at all levels. The policy of selling directly
a sense of responsibility at all levels, The policy of selling directly
the user also contributed to this improvement, for it provided
to the user also contributed to this improvement, for it provided
to
feedback as
feedback as to
to the
the impact
impact on
on the
theconsumer
consumer and
and his
his needs.
needs.

frnp large
Cholguan's absence from
Cholgu6n's ratio American
l.rrrje Latin American markets
markets such
such as
Brazil and
Brazil Argentina, which
and Argentina, nich would be
be tne
the most
most obvious
obvious markets
markets because
because of
of
their proximity to chile, rr malni- ice to the fact that they also
their proximity to Chile, is mainly due to the fact that they also
manufacture these
manufacture pro: 'rs.
these which J.losely protected
whicn are closely through high
protected through high
taxes, thus
import taxes, it
thuf making it impossible for for CholguAn
Cholguan to compete
compete with
with
theta.
them.

In
In 1984
1984 Chol uhr
Cholguilm to produce packing cases for fruit for
ann to produce packing cases for fruit for
export, so as to tap th
export, so as to tap this very large frge and
and growing market (because
growing market (because ofof
current demand
current and future
demand and future ,prospects,
' r, in view
in of the
view of the significant
significant increase
increase
in fruit-tree planting the country).
in fruit-tree planting in the country). Current demand
Current demand amoLr.:-;
amounts to
approximately 50
approximately 50 million
million case ...hichby
cases which byfar
far exceeds the country's
exceeds the country's pteier,F
supply which
supply whichisis organized
organizedOnonananalmost
almostartisan's
artisan's level.
level. TheThe cases are
.,Le of
very low
very lowquality,
quality, production
productionisis intermittent
intermittent and prices are
and prices are high.
high.

Cholguhnisisofof the
Cholguan the opinion
opinion that
that by
by producing
producing aa high quality, low
high quality, low
oust product
cost product at at the
the opportune
opportune time,
time, they
they can
can easily
easily capture
capture the
thepacking
packing
case market. They
case market. are depending
They are on the
depending on the use
use of
of appropriate
appropriatetechnology
technology and
and
very low production costs, to achieve their aim, since an important
very low production costs, to achieve their aim, since an important
input, the wood,
input, the wood, is completly utilized in the Cholguhn industrial
is complet1y utilized in the Cholguan industrial
complex, as
complex, as shown
shown in Annex
Annex 6.
 - 297
297 --

Dueto
Due to market
marketconditions,
conditions, which have been
which have beenparticularly
particularly depressed
ressed
in recent
in recent years,
years, the
thesawmill
sawmillhashasconsistently
consistently been
beenproducing I, JW its
producing below 'tS
installed capacity.
installed capacity~ On numerous
On numerous occasions it it has
hasbeen
been more
more convenient
convenient
for Cholguan
for to export
Cholguan to export roundwood directly.
rcundwood directly.
Forestal CholguAn
Through Forestal S.A., the company markets Pinus
Cholguan S.A.,
abroad, mainly
radiata jPgs abroad, mainly to
to the
theKorean
Korean and
and Chinese
Chinese markets.
markets. In 1983,
In 1983,
were exported
590 mmL'pgs
48 590 were giving aa return
exported giving return of
of US$ 2.0 million.
US$ 2.0 million. Cholguan
CholguAn
entered
entered this
this market
market because
because there
there was demandfor
was a demand for the
the product
product at
at
reasonable prices.
reasonable prices.
3.2.4
3.2.4 CholguAn' and organization system
The companyisisrun
The company runby by the
the Board
Boardof of Directors,
Directors, headed
headed by by the
the
Chairman. The General
The GeneralManager
Manager reportstotothis
reports this Board
Boardof of Directors andand the
the
Production, Administrative
Administrative and and Sales Unit
Sales units t
reportt toto him.
him. All three
All three
operational units
operational units are
are organized
organized in in this
thisway.
way. i
However, some departments,
some departments,
such as the
such as the Sales
Sales and
andAdministration
PdripistrationDepartments
Departms are are shared
shared by by all
all the
the
firms so
firms as to
so as to prp.ent
prevent duplication
duplication of of effort
effort andand staff
staffandand so
so as
as not
not toto
unduly increaseadministrative
unduly increase adrinistrative costs.
costs.
Four trade
Four trade unions
unionsexist
exist (one in Santiago,
(one in Santiago one oneatat the
the industrial
industrial
plant
plant and twodealing
and two dealingwith
withforest-related
forest-relatedactivit
activities). They have
). They have no
no say
say
in
in managing
managing thethe company
company and
and theirwork
their workconsists
consistsinin negotiating
negotiating salaries
salaries
and social
and social benefits (every two
benefits (every two years
yearsasas provided
providedfor for in
in Chile's
Chile's labour
labour
legislation) participating in
legislation),, participating in work safety and social
safety social welfare
welfare
commissions.
commissions.

There is is no offical planning

no offical planning unit
unitatatCholguAn.
Cholguiltl. The group of
The group of
ve informally
executive
executi informally plan
plan the firm's
firm' s future
futuredevelopment.
development. Ideas
Ideas also
also
orippiPate in
originate oth,,
in other infr-mal planning groups within
informal within the company.
Gene-ily speakinC,
Generally speaking, planniug
planning at Cholguan
Cholguan is is an
an internal process;
process; outside
outside
consufl.ants are
consultants taken on
are tic, only when
on only this is
when this is strictly
strictlynecessary.
necessary. Approval
or refusal
or refusal of
of inv( ,tment projects
investment projects lies
lieswith
withthe
theBoard
Board of
of Directors.
Directors.

Targets
Targets are are set
set on
on the
the basis
basis ofof an "operational activities
an "operational activities
annual budget".
annual budget". Every year,
Every year, each
each production
production unitunitsubmits
submits aa monthly
monthly
expenditure
expend and production
i ture and production plan.
plan. this
In th is way,
way. production,
product ion. sales,
sales. raw
material consumption
consumption and and labour
labour targets
targets can
can bebeknown
known ininadvance.
advance. The
The
programmeisis monitored
programme monitored on on aa monthly
monthly basis.
basis. Any deviation
Any deviation from
from the
the
original plan
original plan must
must bebe explained
explained by by the
the persons responsibletoto their
persons responsible their
superiors. This is
..,:uperiors. This is aa way
way ofof obtaining
obtaining advance
advance information
information on on the
,-T,erationalbalance
operational balancesheet,
sheet,ofof keeping
kaepingthetheresults
results ofof the
the operation
operation up up to
to
date and t.oto make
make evPryone
everyone aware of of expenditure,
expend i ture, how
how ititarose
arose and
and how
how to
to
it.
control it. These
control Theseare irp also
also i,sed
based onon a
a single
single year
year without
without reference
reference toto
previous years'
previous years' budgvto.
budgets.

4.
4• CHOLGUAN'S IMPACT ON
CHOLGUAN'S IMPACT ON DEVELOPMENT
DEVELOPMENT

This chapter
This chapter analyzes
analyzes the
theconglomerate's
conglomerate's impact
impactonondevelopment.
development.
The duvelopment
The componentsare
development components are many
many andand varied.
varied. insofar as
Insofar asa acompany
company
coni'iisiites to the
contributes the expansion
expansion of of the
thedevelopment
development components,
components, it ir may
may be
be
said Cmat,
said that, atat 'Past
least in this r'-spect,
in this respect, the thecompany
company isis "appropriate".
"appropriate". A
A
effects which are considered to
number of effects closely related to
to be closely
,elopment have
development have been
been examined
examined underunder the
the above
above heading.
heading. These are
These
-cts on
effects on income and employment, transfer ofoftechnology,
,Alt, transfer technology,environment,
environment,
aT.'ility :1
availability of 'foreign
foreign exexchange,e, government
government revenue
revenue and, finally, on
and, finally. on
social and
social and regzonal
regional developm,ii.
development.
 -
- 298 --

4.1
4.1 Provision of Employment
Employment and Incore
Income

The
The ckrkrny
company employes
employes 655
655 pvrseks,
persons, ing from execut i ves3 to
wo~kers,
unskilled wot5r firms. Thi
a, in its three firma- these are fniu ionals
:dais
:kersity education
who have had a university education (mainly
fmanly mechanical
mecin5cal and
and el
electrical
engineers and
3'7, foresters);
nrers); 30 are professronals
30 are professionals,,,ko
who have had technical
lank le nical
training;
training; 190 sa, are skilled
iiied workers
workers and
and 400
400 unskilled workers.

~laderas
mFirtioa Prensadas
krei,sadas Cholguan Employs 372
S .A. -- Employs
CholguAn S.A. 372 persons, 23 of
persons, 23
whom are
are-piofessionals
professionals with
with university training, 25
university training, 25 are
are professionals
professionals who
who
have had technical training, 76 are
have had are skilled
skilled workers
workers and
and 248
248 unskilled
unskilled
workers~
workers.

Aserraderos Choigaan
Aserradere- CholguAn S.A. - Employs a total
iaploys a total of 99
99 workers, two ,

of which have
have unikoreity
university training, three technical traint
Lhree technical
, training, 44
44 are
ate ,

skilled
1 workers and
d workers and 50
50 knskili,
unskilled workers.

E'orestal
Forek Cholguan S.A. - Employs aa total
chh1fsAn S.A. total of 184 workers,
of 184 workers, five
five
proressTonals u;th
are professlcu with aa university
univerdity education,
education, 7 have
have had
had technical
training,
training, 70 are skilled workers and 102
70 are 102 are
are unskilled
unskilled workers.
workers.

Out
Out of ten jobs
of every ten jobs dirvctly
directly provided
provided by by the company, rich,
the company, seven
involve industrial processing
involve industrial processing act,
activities
ities and three, forestry actrvrties.
and three, activities.
Thi-
This contradicts the often-expressed bel ief that the
oelief the major
major inij''ton on
employment
em[l iment inin industrial
industrial forestry
forestry romr.anies
companies lies
lies inin activities re
activities relaael to
t,
the resource
ane and not
resource and not to
to the
the processing operations.
operations. This can be explained
to rrye extent
tk some extent inin terms
terms ofof the
the tr:nnriogy
technology used
used and
and by
by the
the fact
fact that
that for
1,,t
certain operations in
certoin in the
the forest
forest external
external help
help isis required.
required. Furthermore,
Furthrrmiare,
it
it is
is worth
worth noting
noting that there is
that there is little difference between
between the
the numbers
numbers of
of
skilled
skilled workers
workers involved
involved inin operations
operations inin the
the forest and those
forest and those involved
involved
in industrial
in industrial operations,
operations, which,
which, once
once again,
again, contradicts
contradicts popular
popular belief
belief
the subject.
on the subject.

It
It must
must bebe stressed
stressed that that inin practice
practice Cholguan
Cholgu6n is is the
the only
only source
source
of stable
of stable work
work in the area, the the only
only alternative
alternative being being temporary
tempora
agricul tural work
lnri(ul:oral which can
work which can in no case case absorb
absorb suchsuch aa large
large number
number of
WOLL,E4.
workers. Furthermore, Chilean
Furthermore, law requires
Chilean lawworkers to be protected
requires workers by ato be protected by a
social security
social security andand health
health insurance
insurance systemsystem benefitting
benefitting the the entire
entire
fami
family. with temporary
Workers with temporary jobs jobs dodo not
not usually
usually havehave these
these benefits.
benefits.

The company is
The is also
also an
an indirect
indirect source of emiloyment,
employment, which
amounts to 40 percent
to 40 percent of
of the
the direct
direct employment
employment andand includes
incl.., 'nsextraction
extraction
operations
operations carried out on a contract
carried out contract basis
basis, the contra.--k-5
contrac of transport
transport
for products
yuiducts and inputs and, fina lly, the mul
finally, t ipl ier
multiplinr °H 55 on local
trade.
trads. The multiplier effect is
multiplier effect is rel.Ar,ely
relatively slight
slight ag as compa-ed
compared toto other
other
projects.
r.rojek., One
One possible reason
reason for
for thia 1. that
this is that aa large proportion of
large prLpertion of the
the
product
prodmcr is exported,
exported, which
which means
means that further processing,
that further processing, whichwhich generates
generates
jobs,
jobs, takes
takes place in the
place in the importing
importing country.

1983 Cholgu6n
In 1983 Cholguan paid
paid some
some US$
US$ 2.2
2.2 million in wages and
in wages and
salaries. The
The earnings ofof the
the workers
workers inin the
the company
company substantiklly
substantially
exceed 1.1,-
incomee possibilities
possibilities from
from other jobs
jobs and,
and, as
as aa result, the aim
result, the a r of
r5
the
the work-force
work - in
in the
the area is to
area is to work fOr
for the
the company.
company. The chief
chief re,
reasonss
for
for the
the better
bet-er wages are

(a) the
the company's to avoid
company's policy to avoid worker
worker turnover;
turnover; and
and

(b) trade unions

the trade unions which
which make
make it
it possible
possible for
for the
the workers
workers to
to
negotiate collectively.
 -- 299 -
-

The company's
The growth has
company's growth has meant
meant that
that itit now
now operates
operates on aa
capital-intensive,
capital-intensive, rather
rather than on
on aa labour
labour intensive
intensive basis.
basis. While
production capacity has increased more than fourfold
fourfold between
between the
launching
launching of the company and the present day,
of the day, not
not even
even twice
twice as
as many jobs
jobs
as those
as those available
available initially
initially have
have been
been created.
created. The reason for
The reason for this
this is
is
that technology has
that technology has improved
improved considerably
considerably and
and there
there is
is increasing
increasing market
market
demand for products
demand for products requiring
requiring more
more advanced
advanced production
production techniques,
techniques. which
which
are more capital intensive.
are intensive.

If we
If we analyze expenditure in in wages
wages and
and salaries,
salaries, we
we find
find that
that in
in
real terms
real terms this
this has
has increased
increased substantially
substantially over
over the
the years.
years. The reason
The reason
for this
for this is
is that more highly
highly qualified
qualified staff are
are required
required as
as a
a result
result of
the use
the use of
of more
more advanced
advanced technology.
technology. This is the
This is case both as
the case as regards
regards
industrial
industrial operations
operations and
and planting,
planting, management and forest
forest exploitation.

with higher
Workers with higher qualifications earn more andand are
are also
also better
better
placed to choose
placed to choose other
other jobs
jobs in
in other forestry companies,
other forestry companies, both in forest
both in forest
activities as in
activities as well as in industrial
industrial production.
production.

Chile's isolated geographical

Chiles isolated geographical location
location andand the
the relative
relative lack
lack of
mobility of
mobility Chilean workers
of Chilean workers mean
mean that
that there
there are
are nono workers
workers from
from other
other
regions neighbouring countries.
regions or neighbouring countries. There
There isis little worker mobility
within the country
within the country itself.
itself. The company, therefore,
The company, therefore, employs
employs local
local
workers. Moreover, natives
Moreover, natives of the area
of the area are
are familiar
familiar withwith the local way
the local way
of life
of life and
and have
have family
family ties
ties there,
there, soso there
there isis every
every likelihood
likelihood that
that a
a
locally
locally recruited
recruited worker
worker will
will stay with the
stay with the company
company forfor aa long
long time.
time.
This
This allows the company
allows the company to
to invest
invest inin training,
training. to to have
have aa stable
stable labour
labour
force
force and to reap the benefits of this
and to this training
training over
over aa long
long period.
period.

4.2
4.2 of Technology
Transfer of Technology

The company's efforts

The company's efforts have
have focused
focused onon improving
improving industrial
industrial
productivity
productivity andand forestry
forestry operations.
operations. Production
Production in in the
the fibreboard
fibreboard
plant, for
for example,
example, has
has always
always exceeded
exceeded itsits planned
planned capacity.
capacity. This
This isis
basically because
basically because the
the workers
workers have
have been
been provided
provided with
with adequate
adequate ongoing
ongoing
training, in
in line
line with
with the
the improved
improved technology
technology used.
used. Because Chile's
Because of Chile's
lack
lack of
of technological
technological development,
development, thethe greater
greater part
part of the technology
of the technology had
had
to imported.
to be imported. This situation is
This situation is not
not peculiar
peculiar toto the
the forest
forest industry;
industry;
it exists
it exists throughout
throughout the the country and and isis the
the reason
reason whywhy most
most ofof the
the
equipment and machinery are are imported
imported from
from abroad.
abroad.

At
At present a a genetic improvement
improvement programme
programme geared
geared toto forest
forest
activities, for which considerable
for which considerable funds
funds have
have been
been spent
spent over
over the
the last
last
eight years,
eight years, isis under way.
under way. Forestry research
Forestry research activities
activities are
are focused
focused
mainly
mainly onon improving
improving forest productivity and
forest productivity and preventing
preventing disease.
disease. This
This
research
research work is being
work is being conducted
conducted jointly with
with other forestry enterprises.
other forestry enterprises,
with the
with the National
National Forestry
Forestry Corporation
Corporation (State
(State Forestry
Forestry Services)
Services) and
and the
the
universities. The The same
same applies for the genetic improvement
applies for improvement programme
programme and
and
plant
plant health research.
research. The company is is also
also carrying
carrying out research
research studies
studies
on its own.
on its own. These include
These include fertilization
fertilization trials
trials and
and the
the adaptation
adaptation ofof
species soils.
species to sandy soils.
Cholguan does
CholguAn does not
not conduct aa programme
programme specifically geared to to the
the
transfer technology.
transfer of technology. The transfer occurs indirectly through
The transfer occurs indirectly through the the
company's
company's workers
workers who have been
who have been trained
trained and who are
and who are usually
usually inin close
contact
contact with the landowners
with the landowners of the
the area
area and
and also
also through
through trained
trained workers
workers
moving to other forest
forest producers.
producers.

The company's
The company's training
training programme
programme benefits
benefits from
from the
the advantages
advantages
provided
provided byby the law through
the law through thethe Servicio
Servicio Nacional
Nacional dede Capacitacibn
Capacitaci6n
Nacional y
Nacional y Empleo
Erupleo (SENCE)
(SENCE) (National
(National Training and Employment
Training and Employment Service).
Service).
This law allows
This law allows companies
companies toto spend
spend 1 percent of their
their taxable
taxable earnings
earnings on
on
worker training.
worker training. This
This sum
sum isis later
later deducted
deducted from
from the
the company's
company's annual
annual
tax.
income tax.
 -- 300
300 --

The training
The training prc ramme is is drawn
drawn upup onon anan annual
annual basis
basis inin
accordance with
accordance with the
theneeda
needs each ofof the
the company's
company's production
. units and
production units and
dependingononthe
depending the economic
economicresources
ro«, !sac available
available totothe
theprogramme. Training
programme. Training
services are
services are provided
provided on e(.rtract basis
on aa contract basis by
by the
the national
national universities
universities
and the Centro
and Centro Nacional
Nacional de
deCapecitaciOn
taci6nForestal
Forestal(CENACAF).
(CENACAF). On-the-job
On-the-job
training is also carried out and, to a lesser extent, trainees are
training is also carried ou and, to a lesser extent, trainees are
granted fellowships
granted fellowahips and
and given
given aid
aid to
to attend
attend seminars
seminars bothboth in
in the
the country
country
and abroad.
and

4.3 Impact on, the

T- the Environment
Environment

Generally speaking, the company's company'sactivities

activities do do not
not have
have any
any
significa t
significant I Live
ive effects
effects on er-Aronment., Since
on the environment.
1 Sinceitit isis located
located in in
an
an open
open vavalley, thethe negativ, e:
negative effects cts of of the
thegases
gases produced
produced are are not
not
important.
important. iaithermore, the
Furthermore, ti/..5,-.t.y. of
the toxicity of these gasesisis relatively
these gases relatively low.
low.
Waterpollution
Water pollution is is notnot very
very sig, .icant either,
significant either,since
sincethethecompany
company uses
uses
relatively little
relatively littlewaterwaterandandthethepollution
pollutionthat does
that doesoccur
occur isisnotnotcawied
caused
by
by chemicals.
chemicals. One problemgiving
One problem giving cause
causefor for concern
concernwiwith regards t.o
t.h regards to the
t.he
environment is is thethe fact
fact thatthat the company's operations ions are based
exclusively
exclusively on on pine
pine plantations,
plantations, with with allallthe theproblems
prob and risks that
and risks that a
monoculture involves.
monoculture involves. However, lattempts mpts are are being
being made
made tot, overcome
overcome these
difficulties through research and the
difficulties through introductioa of
'te introduction of new species
species
compatible
compatible withwith the
the soil
80i 1andand clcl imatic ic conditions
cond i tions ci the area.
of the area. On the
On
hand, aa positive
other hand,
other positive effect
effect of of thee company's activities is
company's activities is the
the use
use ofof
sandy soils
sandy soils (no
(no other
other useuse isismade
made of ofthem)
them) for for establishing
establishing plantations.
plantations.
It
It must
must bebe borne
borne in in mind
mind that
that when when they they were
were used
used forfor subsistence
subsistence
agriculture they
agriculture they were deteriorating. The
were deteriorating. The company
companyhas, has,therefore,
therefore, helped
helped
to
to upgrade
upgrade Oneoneaspect
aspectofof thethe environment
environmentinin which which itit operates.
operates.

4.4 Impact
Impact on the
the Foreign
ForeignExchange
Exchange Supply
Supply

At
At the
the moment the foreign
moment the foreign debt is aa cause
debt is for much
cause for much concern
concern 'nin
Chile
Chile and,
and, while this company
while this cannotsolve
company cannot solve the
the country's
cour(.(,ts foreign
foreign debt
problem, it
rt01,71C.M, it at least makes
at least makes a re: rwiitive
a net positive contri1s;ion
contribution in in foreigs
foreign
(-./(tnge by
exchange by exporti :ts products
its products (10
(70 (ercent
percent ofof its at,Hion
ion in
in 1983)
1983)
lad economizes
and Cr, fcreign
econo7-'7,7s on eXChange hf
ign exchangc by produciag which would
prOducing goods which would
otner,ise have
otherwise have to
tobe
beimported
imported to
tomeet
meet local
localdemand.
demand.

The company'sexports
The company's exportsinin 1983 provided the
1983 provided the count.y
country with
with US$
US$ 7.9
7.9
million ininforeign
million foreignexchange.
exchange. Sales on
Sales on the
the local
local market
market aiounted
amounted toto the
the
equivalent
equivalent of of US$ 2.6 million,
US$ 2.6 million, which
which represented
represented aa (saving :.C1 for the for the
country,
country, since
since imports
imports had
had been
been avoided.
avoided. The
The company's ,_ts, mainly
company's imports, mainly
inputs and
input.s and spare parts which
spare parts are not
which are not produced
produced inin the
the coun
cc totalled
, ry,,totalled
approximately
approximately US$US$ 800
800 000.
000.

4.5
4.5 Government Rev lue
Revenue

The
The compc- considerable revenue
company has provided cor...1,«attle through taxes.
revenue through taxes.
Throughouttheir
Throughout their 27
25 years.ia of
of operation, :hei.o direct
operation, these direct contributions
contributions have
have
amounted to to approximate
approximately/ US$ 10.5 10.5 million
miliion (as
(as at
at December
December 1983).
1983). In
In
addition,
add it ion, Cholquán
Cholguim contributes
contr ibu tes indirectly
i nd irectly through taxes pa paid
id by
contractors
contractors and suppliers
and suppl inputs (such as
iers of inputs as wood,
wood, paints, etc.) and
paints, etc.)
incometaxes
income taxespaid
paid into
into the
the national
nationalTreasury
Treasuryby bythe
thecompany's
company's workers.
workers.

the other
On
the other hand,
hand, Cholgu6n hasreceived
Cholgu6n has receiveddirect
direct i.ubsidies
subsidies for
for
afforestation
afforestation totalling
tot.allingUS$
US$ 0.25
0.25 million
millionand it has
and it has been
h deducting
deducting
land-tax on
land-tax on land
land given
givenover
overtoto forest
forest cultivation
cultivationsince
since19'.4.
1974.
 -- 301
301 --

4.6 social and

Social andI,'enionJ1
Regional Develabment
Development.
Cholguan has e:ontributed
CholguAn contributed in many ways
in many ways to social
social development.
development.
One, whichhas
One, which has been
beenvery
veryssignificant
ificant for
for Chile,
Chile, is that is
is that has helped
in has he
stemmigration
stem migrationfrom
fromthe
the rural areas
areds to
to the large towns.
the large towns. CholguAn
CholguAn has
been aa pole
been pole of
of attraction
attraction for
for the
thepeople
people of
of the
thearea
areabyby offering
offering hopes
hopes of
of
employment and steady
employment and steady income.
income.

As explained in
As explained in Section
Section4.1,
4.1,thethecompany
companyemploys
employs 655
655 persons
persons andand
has created
has created indirect
indirect employment
employment for for approximately
approximately 270 270 persons.
persons. If we
If
assume that these jobs are or the
assume that these jobs are for the mn.-7t rart located in or around
most part located in or around
CholguAnand
CholguAn andthat
that aa cone,erv5tive ,-rtiszatu of
conservative estimate fl,etdeefamily
ef average familysize
size is
is four
four
company provides a;liver1
pc,- )ns, the company
persons, I fe.,t 1_,Lt.brimately 33 700
for approximately 700 persons.
persons.
e'ompanyriot
Had the company not existed,
e..,Isted, it is 1..rely
_t is Ii that
that aa n_gh
high percentage
percentage of of this
this
..d have migrated to the cities, so that, although its impact is
group would have migrated to the cities, so that, although its impact is
not particularly remarkable at national level, it is clearly very
not particularly remarkable at national level, it is clearly very
cL-i1ricant atat local
significant local level.
level.

CholguAn
Cholgu.'m has also contributed
also contributed through providing
provid ing schools,
schools,
gymnasiums andhouses
iums and housesfor
for approximately
approximately150
150ofof its
its workers,
workers, which
which have
have
the standard
t_lised the standard of
of living
living of
of the
thelatter andandof of
latter thethe
community
community as
as a
whole.

In 1962
In 1962 thethe company
companybuilt
builta aschool
schoolfor
for 250
250children
childrenentirely
entirely at
at
its own expense and
its Own in 1971 donated land and equipment for for the
construction of
construction of aa school
school for
for 500
500 children.
children. In In 1973,
1973, it
itbuilt
builta gymnasium
a gymnasium
for the benefit of workers and their families as well, as for the
for the benefit of workers and their families as well, as for the
communityasas aa whole.
community

Staff education
Staff education and
and training is another
training is another way of contributing
way of contributing toto
social development.
social development. It enables staff to imre-,ve their standing on the
It enables staff to improve their standing on the
labour market
labour market and gives them
and gives them an
an opportunity
opportunity to
t Senprovetheir
improve ehe:rstandard
standard of
of
living. Cholguan
living. CholguAnhas hasalways
alwayslaid special st.ress on improving-1 the
laid special the level
level
of
of its
itsworkers
workers and
and has
has financed
financed literacy
literacy programmes and providedled courses
courses
dealing
dealing wi,b
with various
various aspects
aspects of
of production.
production.

n. -eally speaking,
Generally speaking, it
ithas
hasprovided es for
provided aa number of services for the
the
area in
area in chic it operates.
which it The most
operates. The most important
important iis the electricity
e %et7icity network
network
for ti.
for the of CholguAn,
, area, of CholguAn, which
which was instal. A l99 when their
was installed in 1959 when their
operat
operationss conmenced.
commenced.

(151guAnbegan
When Cholguan beganoperating
operatinginin1959,
1959,the
the local
local school
school provided
provided
only tn rs1 two
only the first two years
years ofof basic
bas ic schooling.
school ing • it provides full
Today, it prov ides full
,termediate schooling.
basic and intermediate schooling. CholguAnhashascontributed
Cholguan contributedtoto this
this both
both
d 1,7 and
and indirectly:
indirectly. directly,
directly, through
through constructing
constructing and
and furnishing
furnishing
schoolsl indire,tly, through the arrival of professionals.
nools: indirectly, through the arrival of professionals. The prates-
The profes-
onals themselves,
sionals
: themselves, or or their
their wives,
wives, have
have been
been volunteer
volunteer teachers
teachers inin the
the
scnools and
schools and this
thi, has
has helped
helped improve
improve thethe area's
area's cultural
culturaland
and educational
educational
level.
level.

It has
It has almo
also financed
financed the
the setting
setting upup and
and running
running of
of health
health and
and
dental services,
dental services, tire,
fire brigades, recreational centres
brigades, recreational centres with gymnasiums,
gymnasiums,
swimming
swimming pools,tennis
pools, tenniscourts
courtsand,
and,finally,
finally, improved the public
improved the public transport
transport
service to
service to the
the various
various towns in the
towns in the area.
area.

5.
5. CONCLUSIONS

The
The CholguAn companiesare
Cholguan companies areananexample
exampleofof an entero ..e that
an enterprise that has
has
grown froma asmall
grown from small scale
scale and
and fairly
fairly modest
modest operation
operation to a sizeable
sizeable
industrial group
industrial making aa remarkable
groupmaking contribution to
remarkable contribution to local
local and
and national
national
 -- 302
302 --

development. It
It is
is an
an undertaking
undertaking that
that has
has not
not only
only been
been very
very successful
successful
economically
economically but
but which has contributed
which has contributed to
to other
other aspects
aspects of
of development,
development,
such as
as those dealt with
with in
in Chapter
Chapter 3.
3. It
It would
would therefore be
be interesting
to
to consider in greater
consider in greater detail
detail some the factors
some of the factors which have
have determined
determined
or influenced
influenced the
the development of
of Cholgubn
Cholguan since
since it
it commenced
commenced operations.
operations.

Mention must first

first be he made of of the
the firm's
firm's system
system of of planning.
planning. It
will be recalled that
will that Cholguan has has no
no formal
formal planning
planning structure.
structure. Indeed,
the growth ofofthe
the gradual gr'..wth thefirm
firmwaswas not
not based
based on on systematic
systematic and forma I
and formal
long-term planning,
riarning, t. butt occurred spontaneously, as the
c,c,rred spontaneously, the opportunities
opportunities
arose"
arose. For
For example "Comunidad Irarrazabal-Larrai
example,I "Com....-:A Irarrazabal-Larrain's" n 'SI/ initial
initial short- term
short-term
aim in
in planting their lands
planting their la;.,:s was to utilize lands
to utilize lands for which there was
which there was
little
little oror nO
no alternative
alternative use use and to take
and to take advantage
advantage of the tax
of the tax incentives
incentives
offered at
offered at the
the time.
t fme. There
There was was nono clear
clear idea
idea of how how the
the wood
wood should
should be
used
used when the trees
when the trees reached
reached maturity.
maturity. Subsequent plantations
Subsequent plantations andand their
their
sale inin small individual plotsplots were
were also
also carried
carried out out with
with co
no overall
long-term
long-term planplan in in mind.
mind. It was
It was only when the
only when the plantations rcrhed
plantations reached
economic maturity
economic maturity that that attempts
attempts werewere made
made to
to find
find different
different industrial
ind,,,trial
for the
uses for the wood.
wood.
The company's decision-making and general
general plannrg
anning therefore
occurred on
occurred on aa step-by-step basis.
basis. is contrary
This is contrary to to the
the normal
normal
recommended procedure which
recommended procedure which isis that all planning
that all planning sho.
should be based
based on a
on a
systematic analysis and
systematic and should
should include
include Jong
.long-term
tetr objectives
obje,,,tir- and
and clearly
defined for reaching these
defined steps for these objectives.
objectives.

Cholguan's experience is
Cholgun's experience is aa clear
clear illustration
illustration of of the
the frequently
frequently
expressed opinion
opinion that analytical planning systems are somewhat
irrelevant
irrelevant andand that
that what what is essential in
is essential in the final analysis
the final analysis are are sound
sound
managemen t capabilities
manacnm,:nt i l i t ies able
able to detect and
to detect and make good use
make geed use ofof the
the more
advan tageous inves
advantaneous nvestment opportunities.
opportuni ties. The step-by-step
The step-by approach which
,tep approach which
takes account of
takes account of ,-'circumstances existing at
cumstces existing at aa particuiar
particular time
time probably
probably
works
wor.,s more
more effiCiently
efficiently when the economic and
the economic and Tciitical
political climate
climate is very
is very
ccgeable. At
changeable. such t:,:es,
At such times, the he dedree
degree ofof o',,
uncertainty
,,irtaintytends
tends to
to be
r(euively
relatively high
high and
and long-erm
long-term plannind
planning is is likely
liko,c toto depend
depend on on factors
factors
which are so uncertain
uncertain as as to
to be
be irrelev-nnt.
irrelevant. It It would
would seem therefore that,
insofar as as management capability was concei-ned, concerned, Cholguan
Choli '. possessed
suitable resources which it
suitable resources it used effectively
effectively over the years, working
through an
through informal but
an informal but effective
effective step-by-step
step-by-step planning
planning system.
syrtL.
Secondly, Cholguan has been
Secondly, Cholgu6n been able
able toto rely
rely on
on aa strong
strong technical
technical
base.
i. - Ou tside consultante
Outside consul tants have been required
have been requ ired only
only for
for specific
spec i f ic tasks
tasks
and, generally speaking,
speaking, thethe plans
plans for
for the
the company's
company's innnstrial
industrial and and
forest
foreL': operations development have
oerations developm,i.nt havebeen
been drawn
drawn up
up by the company's
by the company's ownown
professionals
,nals and
and technicians. situation is
Chile's situation is ratt
rather unique when
compared to
compared to other
other developing
developing countries which
which have
have to
to ddependId On
on fewer
trained techniciansand
trained technicians andur.:.:,ssionc.:
professionals.

It is usually au:Pied
is usually argued that
tt:J1 importing
importing equipment
equipment designed
designed in in the
developed countries has
developed has a a dampening
dampening effect
effect on the the impact
impact that
that aa ccmpany
company
could have
could have cn
on the
the overall
overall employment
employment level,
level, since
since imported
imported technology
technology is is
capital inter,
intensive.
'_Ne. It is
is true that employment
true that employment is is (losely
closely related
related toto the
the
of tec_nnology.
choice of technology. However, oneone does
does not
not alw.,;
always ha've
have the choice of of
using labour
using labour intensive
intensive technologies.
technologies. Reasons
Reasons forfor this arenot
i.s are nota. always
.....'s of
a technical
a technical nature,
nature, they can also also be be economic.
economic. The company's
company's incustrial
industrial
processes are
processes are usually
usually not
not flexible
flexible in in the
the technological
technological sense.sense. In
addition, the
addition, the strong tendency
tendency to to turn
turn to to international
international markets
markets which
which are
are
highly competitive implies'mplies the use of capital-intensive production
pt
systems and high productivity
, !ivity onon the part of the labour labour force.
force. Choice of of
technology
technology isis therefore
tht:',,,re largely
largely determined
determined by the market.
by the market. the same
At the same
time it is
time it is possible
possible that
that abnormal
abnormal exchange
exchange rates
rates have
have prompted
prompted companies
companies
 303 --
- 303

to
to choose more highly
highly capital-
capital-intensive technologies
technologies than they would
the they would have
have
done if the Chilean currency
if the currency had not been
:ieen over-valued.
over-val,.ed. We
rfe do
do not
not have
sufficient information to
ff:ciert information to Le
be able
c to estimate the
ro the s'r4ritioanoe
significance of these
of these
factors
tarirnrs with any accuracy, but they
w!th any they have
have certainLy
certainly toto some extent
extent
influenced
influeroed decisions asas regaids t ,:hcclogy.
regards technology.

One problem related

related to to the
the utilization
utilization of of capital-intensive
capital-intensive
technology
te, analogy isis that
that the
the industry
industry cancan become isolated in
become isolated in the
the area
area in
in which
which
it
it operates, i.e.,i.e., having
having no no significant
significant effect on on the
the rest
rest ofof the
the
community
ree,. lity oror society
society inin general.
general. This type of technology
This type technology also
also requires
requires
h lc
1
trained staff
trained staff and cannot be transferred
transferred efficiently
efficiently when such
when such
staif isis not available.
not available. In the case of
the case of the Cholgutm companies
the Cholgubn companies it it is
is
unclear
unc1f. r toto what
what extent
extent there
there has
has been
been transfer
transfer ofof technology.
technology. A more
mOre
detailed study
detailed study must be carried
must be carried outout on
On this aspect of
this aspect of the
the matter.
matter. AS
stated inin Chapter 4, there
there has
has been
been some
some informal
informal dissemination
dissemination of of a
certain t.ype of
certain type of information
information chiefly
chiefly regardinging forest
forest operations.
operations. In the
In the
case
case of fibreboard production technology,
of fibreboard technology, there
there has
has been
been nonO transfer,
transfer, for
for
the simple
the simple reason thatthat this
this is
is the
the only
only company
company producing
producing this
this product
product in in
Chile.

Cholguan enjoys aa monopoly

CholguAn enjoys mnrinpnlv in
in Chile. However, this
this does not
does not
explain its
exp'a-n its success
success asas aa company
compark since
sInc, the
the greater part of
greter part of its
its output
output is
is
placed on
p:acec On the
ti e highly competitivee international
finhly competit1 Intern. ienc: markets.
m,irkets. At the local
the local
level, the company
LLmi_any has had
Lad to
tc break into aa market dominated
dominated by
traditional competitive products
tr:di-lonal coll.pe-.1:ive productsininwhich
whichfibreboard
fibreboard was
was unknown.
unknown.

The breakthrough was carried out

out very efficiently by
establ
establishing direct contact with
with the
the users
users of
of the
the product.
product. Here too, the
Here too, the
,iapted well
well to
Lo prevailing conditions.
conditions.

Production diversification and organization into separate

prof ,temaking concerns
profit-making concerns has
has also
also helped
helped the
the company to
to adapt
adapt to
to the
the
changing economic
changing economic climate.
climate. In this
In this sense, it has has shown
shown considerable
considerable
flexibility in exporting even unprocessed logs,,provided that market
provided that market
cond i tions are su
conditions i table, and exploit
suitable, iog opportunities
exploiting opportuni ties based
based on market
on market
requirements,
requirements, i.e.,
i.e., producing packing cases
producing packing for fruit
cases for fruit export (fruit being
export (fruit being
one
One of
of Chiles
Chile'S chief
chief exports).
exports). This diversification has
This diversification has not been
not yet been
extended to
extended to include
include raw
raw material supplies, for
material supplies, for which the
the company
company still
still
depends on
depends on a a single
single species.
species. However,
However f research
research studies
studies havehave been
been
launched to find possible alternatives. All these factors have
All
contributed to to the
the company's flexibility.
flexibility.

Pi , CholguAn can also be said to

f:nclly, to have
have etotributed
contributed to
to social
communi ty
and co- It
It has impr,,.,.d 0,n1.r.,rs
improved cond i t ions for the local
for the
community, which
commun: -h was
m.i very
vet-, small
small when Cholguan r(mprr,0-
when CholguAn commenced operations. The
growth of the local al communi ty has
,.r.,mmunity hasgone
gone hand In hand
hand in with the
hcno with the growth
growth of
of
company.
the co;a:,-. This situation differs from
Thin from those
those inin which
which the
the industry
industry is
is
located in an
located in an area
area ,,here
where aa social and structure
social nucleus and structure already
already existed.
existed.
As know, when a major external
As we know, external force
force is
is introduced
introduced into
into aa traditional
traditional
social
social system the
the results can
can be
be traumatic.
traumatic.

Most ofof the

the conditions
conditions mentioned
mentioned here
here probably
probably dodo not
not exist
exist in
in
developing countries and
other developing and it
it will
will therefore
therefore not
not be
be easy
easy to
to transfer
transfer
this
this experience to other situations.
to other situations. However, the case
case study
study clearly
clearly
illustrates
illustrates some
some of the factors
of the factors which
which determine
determine the
the extent
extent to
to which
which an
an
industrial
industrial en ise can
enterprise can adapt toto local
local conditions.
conditions.
 304 --
- 304

ANNEX 1I
Kep of Agricultural Areas
Chile

.S PAAAIAAA ,1
ii'SiHl "P'H<Jv1
Agriedt.Wal ZOIC PePpaprore t..;,*0. Cr.
pi'~dpit"t:<!')1)
pcdLprion 35 10°
"
A

offer
ri'''~g4t~s; O~"tS
:p. _20' 15.3 25

and ri ~el' pe
118 IJ
1.3 1 L2
volleys Depert
4..exCeACA,

Ifrigatrld riper
ll'rigah:tl r i vtr
pallPyr
vallt'ys ard
"d ,1
puff, , itir erar t
itin~n;x,t
Qi)t-!!:;,
12t!
125 144 i13.1
3,:
p,rfp and
$http and goat,'
g(la~~ Aridd
Atl

3::1 •
,
1 ~ ,4
14
, II
35°- P (P. frPrOfl

ff'"i!:s, 'Hg~- ,
::L9 359,
t"bltj,
IIheat,
IiI
63
,S4,91,0,40
'"
s(lnflOI;{W,
c1!ttl( , lI'i Ik,
fifer:P.11par " ll5a
Z158 !051.S
1051.8 ba,;

1
$.'j('('[!, sugar '~~et\
11
; !1'30
319
.1AA1,12,
C1!ttle, :ni lk,
$hl.'tp, ;oorestr)', 114TIC
1a-h)" oats,
IV
ifrì
lOl 2392
2992 171.8
\7' .8
40'
40
,
~Jtatot$, t"h}41' 4C° 11.8 Z3li
251k
1lempf rote
ei!lp~~at"
~f t-
r t'i>, in;} ts, o
PJ:s~$
e

S0r0P, ell
$.1tl.'p, cftPle,
t:!e, ,
foPcstry
("rgstr't H\lltid 2ldj
248 143 G.5
G VSEN

1I 8.
U 206~
2865

,
::;0

2'!;lj
2P54
6.15 0

Perprpt pf
gCf'<:::ert nf rofal
~ol'lll popfla
}lopda:iM
c:
(....ttp, over 50
tits over 000 if1hz~it3(its
50 000 iphz5itapts
0 MP • 4 •
~J;~;' (
4LC ASAS
337/A A
Illmllllllii 11111111111" 504100 300
5.0'100 )00 100-300
lOv-JOOCOO
CC0 ~;0 r~~;
300
ür rOrk
0.19
O.)g (O~39
Zn2-39 40.59
4{}-S9 60~71j
 -- 305 -
-

ANNEX 22

Chile - Basic Indicators

a) (1982)
Population (1982) - total
- total 11.5 million
million
- rate
- rate of growth (1970-82)
(1970-82) 1.7/year
1.7/year

b) GNP
GNP pet ==-'" (1982)
per caput (1982) US$ 22 210
210

cJ Average per caput

Average growth of per
(1960-1982)
GNP (1960-1982) 0.6%
0.6%

d) Average rate of inflation

inflation
(1970-1982) 144.3 year
144.3 per year

e) Life
Life expectancy at birth 70 years
70

f) GDP growth (1960-1970)

(1960-1970) 4.4%
4.4% per year
(1970-1982 )
(1970-1982) 1.9% per year

g) Production structure;
structure,

- Agriculture
(1960) 9% of GDP
(1982) 6% of GDP

Industry
(1960) 35% " "
(1982)
(1982) 34% "
" •"

goods
Manufactured goods
(1960) 21% " "
(1982)
(1962) 20% " "
Serv ices
Servio
(1960) 56% " •
(1982
(1982)) 60% " "
h) consumption (1981)
Per caput energy consumption 754 kg
(1981) 754 kg petroleum equivalent
petroleum equivalent

i) Energy imports
imports as
as aa percentage
(1981)
of exports (1981) 20%

j) Balance of payments and

Balance of reserves (1982)
and reserves (1982)

Current account balance

balance US$ mill ion
US$ 2 382 million
Net
Net direct investment
direct private investment US$
LiS$ 365
365 million
Gross
Gross international reserves us$
US$ 22 597
597 mill ion
million

k)
k) Active population (15
(15 to
to 64
64
years) as a percentage of
years) as of total
total
population (1982)
(1982) 62%

1)
1) Percentage of labour
labour force
force
employed in 1980,
in 1980:

Agriculture 19%
Indus
Industry 19%
19%
Services 62%
 - 306 --
-

m) annual growth
Average annual growth of
of
labour force 2.1%
n) population (1982)
Urban population (1982) 82%
82%

0) Percentage of
of population
population living
living
in the capital (largest
in the (largest city)
city) 44%
p) Calorie supplies as aa percentage
percentage
of requirements
requirements (1981)
(1981) 114%
q) inhabitants per
Number of inhabitants per
doctor (1980)
(1980) 11 930
r) Income distribuiton (1968):
(1968):
lowest 20%
lnwert 20% 4.4%
highest 20%
ilt(jhet 51.4%
51.4%
highest 10%
LigheiA 10% 39.8
39.8%%
 -- 307 --

ANNEX 33

of the
Contribution of the forestry
forestry sector
sector to
to the
the gross
gross domestic
domestic product
product
(millions
(millions of pesos 1977)
1977)

Year GDP GDP Forestry Sector Percentage

1974
1974 290
290 554 005
7 005 2.4

1975 253
253 043 55 392 2.1

1976 261
261 945 452
6 452 2.5

1977 287
287 770 66 940 2.4

1978 417
311 417
311 891
6 891 2.2
2.2

1979 208
337 208 8 111
8 111 2.4

1980 363
363 446 420
9 420 2.6
2.6

1981 332
384 332 994
9 994 2.6

1982 329 155 309

7 309 2.2
2.2

1983
1983 323 889 879
7 879 2.4

Source,
Source: Instituto Forestal.
Forestal. Forestryy Statistics 1983.
1983. Santiago, April
1984.
 - 308 -

ANNEX 44

Chile,
Chile: International Trade of Forestry
Forestry Products
products
Lthousands of (358)
(thousands of US$)

Year Exports Imports

1972 29
29 833 88 456

1973 161
40 161 11 295
11 295

1974 131
131 210 605

1975 128 312

128 312 44 970

1976
1976 134 384
134 384 10
10 150

1977
1977 170
170 932 24
24 750

1978 221
221 425 350
25 350

1979
1979 341 320
320 300
43 300

1980
1980 761
458 761 100
45 100

1981
1981 597
368 597 3()O
43 300

1982 320
320 900 43
43 300

1983
1983 108
312 108 43 300
43

Source,
Source: FAO
FAO Yearbook Forest Products 1982-1983,
Yearbook of Forest 1982-1983, Rome,
Rome, 1985.
1985.
 - 309
- 309 --

ANNEX 55

operating Cholguan
Operating Area of Cholguhn

CHOLGUAN'S
CHOLGUAN'S AREA OF OPERATION

~
E0 Cholguan
Cholguhn plantations
Jf
4- Fibreboard
Fibreboard plant,
plante finger-jointing line packing-case plant
finger-jointing line plant
6.
A Sawrni 11
Sawmill
 - 310 -

ANNEX 66

CHOLGUAN

Use pinus radiata

Use of Pinus radiata plantations
plantations

40%
40% WOOD FOR PULP Fibreboard plant
(0 17 cm)
(I'I em)

PINUS RAD1ATA
PLANTATION

(Exploi tation
(Exploitation
25 years)
25 to 30 years) - Sawnwood

- Packing-case plant
plant

- Mouldings, etc.
etc,

50
50 %% to Sawmill
sawmill -- Fibreboard
(¢
(0 18 cm)
em) - Residues
-- Energy

60%
60% WOOD SUITABLE
FOR
FOR SAWING
(iZ!
(0 18 em)
18 cm)

50%
50% exported as
as logs
logs
(iZ! 20 cm)
(0 em)
 -- 311
311 --

A REVIEW OF METHODOLOGY FOR

FOR
EVALUATION OF APPROPRIATENESS

by
by

Kari J.
Kari J. Mustanoja*

CONTENTS

PP_Re

l. INTRODUCTION 312

2• THE
THE CONCEPT OF APPROPRIATENESS 313
3. TH~
THE CONCEPT OF EVALUATION
EVALUATION 313
4. TECHNIQUES THE EVALUATION OF
TECHNIQUES FOR THE OF APPROPRIATENESS
APPROPRIATENESS 314

4.1
4.1 Toward
Toward aa Better Definition
Definition ofof Impacts
ts 315
4.2 State
State of the Art 316
316
4.3 Development
Development Ti,Trends
nds 316
4.4 social impact
Social Impact 7s,-ssment
Assessment 317
4.5 Economic
ECOnOmic Impact
;,,, , Analysis
;
319
4.6 Employment
EmploymeI_: :Impacts
,cts
._ 319
4.7 Specific Techniques
Specific Te,,' tides 319
319
4.8 Data
Data for Social Impact Assessment
for Socia. Assessment 320
4.9 Changes Impacts Rnd
Chsrges in Impacto and Content with Time 320
4.10 Definition
D,iloition ofof Sc. 321

5. INSTITUTIONAL DfVELOPMENT
DEVELOPMENT POSSIBILITIES
POSSIBILITIES 321

REFERENCES 323

*
* EKONO Oy, Finland.
Oy, Helsinki, Finland.
 -- 31.2
312 --

1.
1. INTRODUCTION

Concern about the

Concern about the effectiveness,
effectiveness, efficiency
efficiency andand appropriateness
appropriateness
of
of development cooperation efforts
development cooperation efforts has
has caused
caused international
international organizations
organizations
both toto set
set upup evaluation
evaluation units
units and
and to
to engage
engage external
external teams
teams for
for
evaluation. SomeSOMe of the pressure has come
of the come from
from the
the bodies
bodies toto which
which these
these
organizations
o,uarazations are accountable. Evaluation systems,, methods and
techniques
Lechnigoes have
have developed rapidly, but
developed rapidly, but are
are still
still far from
from satisfactory.
satisfactory.
The
-he results
re.=ults of evaluations have also
of evaluations also been
been worrying:
worry even in aa sector
such as torest
sucn as forest industries,
industries, some projects
projects seem
seem toto have created
created situations
situations
which socially and
whicn are socially and economically
economically worse
worse than
than what they
they were
were when
when the
the
p/L-gect conceived~
ect was conceived.

Not only international organizations,

organizlii,,e, but also financing
agencies, recipients, and
e:.cic, recipients, and the
thegeneral
generalpor,lie
public he"-
haveter,L,me
become alarmed
alarmed of thethe
high incidence
,. .-.idence of non-success.
of non-success, The iel,iteg ta_ptes
fai luresr,a.may have resulted
have resulted
from
om project
aject expectations growing at
expectations growing at aa rate
rate faster
raster than that at which
tren that which
solutions
1utiors are foundfound to
to the
the problens
problems e-nne-ted
connected with
with them.
them. There are are often
discrepancies
,ncies between
between what thethe pr
projects were intended to achieve and what
their
ttL::: actual
actual impacts
impacts were, i.e. tL,_
were, i.e. the planning
pl,anirg deficiencies. Organizations
are today more
are today more willing
willing and
and able
able to
t, identi and analyze
identify and analyze thethe problems
problems
encountered,
encountered, theirtheir impacts
impacts and
and the
the significance
significance of of the
the impacts.
impacts.

The content
The content of evaluation
evaluation has
has been
been broadening
broadening over
over the
the years.
years.
The partners
The partners inin development
development cooperation
cooperation are are slowly
slowly moving from merely
moving from
pointing out the positive impacts of projects to improving the
performance
performance ofof future
future programmes
programmes oror projects.
ects. Nevertheless,
Nevertheless, evaluation
is
is still largely unsystematic -
still largely - except
ex t with
with regard
regard toto financial
financial andand
certain economic and physical issues
certain economic issues and impacts
impacts - - and
and the
the evaluators
evaluators oror
evaluation units
evaluation units are
are sometimes
sometimes specialists
speCialists in in name
name only.
only. The situation
The situation
is just unsatisfactory
is just unsatisfactory inin the ivate sector,
the private sector, where the projects
where the projects are
are
often simple,
simple, and in the pub c sector
the public sector supported
supported by by international
international
organizations
organizations...

The evaluation
The evaluation systems,
systems, tools and institutions in the forest
industries
industries sector
sector rest
rest partly
partly on issues
issues and
and impacts
impacts identified,
identified, studied
studied
and debated during well over
over aa hundred
hundred years.
years. Unfortunately,
Unfortunately, a consensus
has reached in
has been reached in very
very few
few subject
subject areas.
areas. is probably
What is probably the
the least
least
understood aspect is
understood aspect is that
that of iateness -
of appropriateness - the
the suitability of certain
forest industrial activities
forest industrial activities and processing
processing units,
units, for
for aa given social and
given social and
setting~
economic setting.

A large
large number of evaluations carried out
evaluations carried out bilateral and
by bilateral and
international organizations
r, were screened,
creened, in
e. order
in order to determine tv.w
to determinr how
forest industrial
inclustr: 1 appropriateness was evaluated by these agencies.
Mr. Jorma
Mr. Jorma Paukku
Paukku of FINNIDA has provided
provided much the
much of the material used
material used in
in
this
this exercise.

It that international
It seems that organizations have
ernational organizations not been able %o
have not to
fully utilize
fully utilize thethe results
reits ofofdevelopment
development in in evaluati:e, LC,:t"Pel
evaluation, technology
transfer,
transfer, appropriateness
appropriatene=s assessment,
a=ses=ment, or even even communications
communications methodo'
for forest
for forest industrial
industrial dryelopment
development projects.
projects. Keeping pace
rar,.e with
with new
technology
technology is is of also one
of course pl=c, one of
of the
the major
major problems
problems of
of private
prl- sector
ter
managers and
managers and managem,nt
management traTg.
teams. Often the effectiveness of
the effectiveness of evaluation
has, therefore, depended on
has, therefore, on the
the ability
ability to to assign experienced oLt:
assign experienced outsiders,:s,
often commerr.i=11
often commercial ronrulting
consulting units,
units, to to do
do the
the job.
job. In these cases,
In these
additional prvblem-,
additional problems have
evaluation, Of
corne up:
have come
or feedback
up: effective response
response to
the evaluators on their
to the
the fin
their assumptions.
as
-.6s
findings
ions, Las
has
from evaluation, feedback to the
been deficient.
deficient. ThisThis has made itit hard forfor the
the evaluators toto know
know whether
they have
they have identified
identified the correct issues,
issues, struck
struck the
the right
right chords,
chords, or or even
even
used the correct social and economic objective
used the objective hierarchy against
against which to to
project impacts.
measure project impacts.
 -- 313 --

2. THE CONCEPT OF APPROPRIATENESS

Appropriateness
.7opriateness can
can be
be understood
understood as the measure
as the measure ofof how
how well_
well aa
forest industrial
i trial
. activity fits into itsits technological.
technological, physical.
phy;7;ce.1,
economic, legal. political,
economic, liai, political, cultural
cultural and
and social
social environment.
enviconment. It
It isis one
of the
of the dimensions
dimensions for
for measuring
measuring thethe consequences
consequences ofof action:
action: the sum Im of
its social
its soc ial impacts
impacts in
in each
each of
of these spheres.
these spheres. The other
The other dimensions
d imens ions are
are
economic (including financial) and developmental (e.g., institution
building) •
building).

Conventional
Convent' 1 project implementability
,roject implen,antability assessment (feasibility
studies, most appraisals)
Tp ,.sals) is biased
H.ased toward quantifiable and
technological/economic Ceatures.
features. Typical
-, cal conventional traits of suitable
conventional traits
projects are
ace wood
wood availabili
availabilityty aho
and sui tabili ty; technology in
tability;
- hannony
in harmony
the raw
with the
with raw material resources,
resources, mazt:et requirements for
market requirements for products,
products,
service infrastructure and
service infrastructure and the physical environment; and
Orv ical environment; the financial
and the financial
profitabili
profitability of of the
the venture.
venture. Sje of
Some of these traits are
these traits are covenants to
covenants to
operation;
operation; others can vary
others can vary along
along a continuum
continuum over time
time and
and over changing
changing
conditions. The conventional measures
The conventional measures of of implementability
implementability are usually
are usually
during project
well estimated during project planning.
planning.

Appropriateness, i.e.
Appropriateness. the degree
Le. the degree of
of social
social desirability oror
acceptability, in the forest industry
industry sector
sector can
can only be assessed by
only be by
measuring impacts in
measuring explicitly impacts in all
all of
of the
the following
following categories:
categories,

(a) financial,
financial: monetary cash
monetary cash flow,
flow, net
net present
present value
value and
and
itability;
profitability;

(b) economic,
economic: economic cost
cost and
and benefit
benefit streams;
streams;

(c) social: institutional, political, legal,

institutional, political, legal, distributional,
distributionaL
cultural, impacts; and
cultural, and welfare impacts; and

(dl physical:
physical: inflows
intlows of physical resources
of physical resources and
and outflows
outflows of
and impacts,
products and in relation
pacts, in relation to
to the
the physical
physical needs
needs of
of
society and its physical environment, and social
objectives.

3. THE CONCEPT OF EVALUATION

is part
Evaluation is part of
of the
the project
project cycle.
cycle. typical project
A typical project
consists of:
cycle consists of:

(a)
(a) identification;

(b)
(h) preparation;

(c) appraisal, called ex-ante

appraisal, sometimes called ex-ante evaluation;
evaluation;

(d) implementation: during implementation,

implementation, projects are
frequently reviewed
reviewed at
at leriet
least once, in order to
once, in to ensure
ensure that
that
the project
the project document
document c.:ntinues
continues to be a a valid guide forfor
implementation
implementation and
and that implementation has
that LTlementation has satisfactorily
satisfactorily
followed the
followed the plan ofof work
work and
and target
target structure
structure ofof the
the
project
project document; and
document; and
(e) terminal
terminal evaluation: at end of
at the end of the
the 7,-,,jcct,
ect, evaluation
evaluation
often determines
often determines the
the effectiveness
effectiveness andand etriciency
iciency of
of the
project as designed and as implemented,
implementad, and measures
impacts against
project impacts against the
the goals
goals and
and objectives
objectives set.
set.
 -- 314
314 --

Three
Three of of these
these activities
activitiesare commonly
are commonly regarded as as evaluation;
evaluation:
appraisal or ex-ante
the appraisal ex-ante evaluation;
evaluation: the implementation
implementation review or or
mid-term evaluation,
mid-term evaluation, which
which contains
contains elements of both
elements of hoth ex-ante
ex-ante and
and ex-post
ex-post
evaluation; and
evaluation; the terminal
and the terminal evaluation,
evaluation, which
which typifies
typifies the
the ex-post
ex-post type,
type,
i.e. studies
i.e. studieswhat
whathashashappened
happened and
and why,
why, and
and what should have
what should have taken
taken place.
place.
This
This paper will concentrate
paper will concentrate onon ex-post
ex-post evaluation,
evaluation, whether
whet.her carried
carried out
out
during or
during or after
after project
projectimplementation.
implementation.

Evaluation is
Evaluation is done for for improving future work,
improving future work, or or for
for
accountability. Depending
accountability. Dependingonuntheir
their purn,4,e, evaluation exercises
purpose, evaluation exercises cancan be
be
carried out either by the implementing gioup ore group of external
carried out either by the implementing group or a group of external
sraa'ialists. The
specialists. internal evaluation
The internal evaluation pc.,,e-S 5S enSUreS
ensures thatthatthe
theresults
results of
of
imn'ementation are
implementation are directly
directly made
made use
use ot by
by management
management inin the
the continuation
continuation
tFe project.
of the External evaluat.ion
rroject. External evilu-ti-a teams are usod for two
used for two reasons:
reasons:
accultahility -
accountability - only only an
an eYteircl
externalin.iependera
i ouditc,r can
auditor can bebe considered
considered
,o be
to he ci,biased - and
unbiased speciillit
ist krowlolc, whichwhlch the internal
internal
i^r,_e-pi,trion team
implementation rarely aiirouiruli
team rarely 't TS common
It is commonthat that both
tpes rs
types of evaluation
evaluation are systems in
used as icmulu,entary if:itemz
are u=t'l in international
international
aid projects.
aid project.s.

Typical internal evaluation

Typical internal e c,r.siritn of
consists periodic reviews,
of periodic
supervision missions,
supervision missions f or i.oitems of
or built-in systems mi measurement
measurement andand evaluation
evaluation
of project
of project results
resultsagainst objectives, Laliels ind
against objec. and values.
values, The internal
The internal
evaluation process
evaluation functions more
process functions mor, or
Or less
less liro
ikea acybernetic
cyberneticsystem.
system6 The
measurement of project impacts is
of project 12 fruguer.tly
frequently duty of
the duty
the of the
the
implementation team
implementation teameven
evenwhere
whereevaluation
evaluationisis done
done byby out.siders
outsiders...
evaluation is
In summary, evaluation is the measurement project impacts
measurement of project impacts
against project
against project goals.
goals, Appropriateness normally
Ar>Dl:oIDriateness relates to
normally relates external,
to external,
usually social, goals
usually social, goals or
or policies. Evaluating appropriateness
Evaluating appropriateness therefore
therefore
studies external
studies external project
project impacts.

In order
In order to
to fulfil
fulfiltheir rolerole
their in promoting economic,
in promoting economic, social
socialand
and
political goal
political goalachievement, forest industries
achievement, forest industries need
need to
to be
be evaluated for
evaluated for
appropriateness. This
appropriateness, This exercise
exercise could also be
could also helpful to
be helpful to the
the entrepreneur
entrepreneur
since it
since it has
has aa longer
longer time
time horizon
horizon than
than entrepreneurial
entrepreneurial decision-making,
decision-making,
the
the latter
latterfocusing
focusingsharply
sharplyon onthe
theimmediate.
immediate,

Specifying impacts
Specifying impactsand
andtheir
their hierarchical
hierarchical relationships
relationships isis the
the
core (or
core (or precedent)
precedent) of %"!tiati,,.. Many
a, evaluation. technological and
Many technological and economic
economic
impacts can
impacts can be quanti:
be quant.ified, study is
Addit.ional study is needed especially for
needed especially for
manyofofthe
many thelegal,
legal. in onal, social
institutional,
1
social or
orpsychological
psychological impacts
impacts which,
which,
although non-quantifiable,
although non-quantiTi ult.. must
must nevertheless
nevertheless bebe given
given importance equal to
importance equal to
that of
that of the
the quantifiable
quantifiable categories.
categories.

Impact mea.oiemen'isisbeing
Jmpact measurement beingincreasingly
iacreasingly carried
carried outout during
duri
implementation
implementation and ahi operations,
mr,raions, as as an an early
oally warning
warning system
system defignod
design
separately for
separately for each
each prs_y_t or afsIgiment.
ect or assignment. NOminally, charecioriatic, of
Nominally, characteristics ,f
appropriateness ace studied together wi,n
aTPL-7'rr.stoness are with other
other impacts
impacts of Ind ,-Yria
of industrial
activitins, su'
activities, sn.dal )dltes
but social values ar-are7-'111
still mratly
mostlyassigned
assigned on
on 'inc
the ha'-'r
basis mi
of
prefessidna-
professional ciirrier,c,
nce, J,,111
skill as')
and knowledge, with ea degrno of
hovledge, with if
subjectivity alwas
subjectivity always remaining
remaining in in tLf
the evaluation.
evaluation.

4. TECHNIQUES "'OR
TECHNIQUES PORTHE:
THE EVALUATION
EVALUATIONOF
OF APPROPRIATENESS
APPROP-
The following steps are t.aken
following taken by a tE evalL
team evaluat the
e
appropriateness
appropriateness ofof forest
forest industry:
industry:

(a) Specify the theproblems,

problems, assumptions
assumptions and
and appr ac of the
approach
evaluation sponsors:
sponsors: objectives/policy goals
objectives/policy goals of each party
for the
for the industry
industry ororactivity
activityanalyzed;
analyzed:assumpt
assumptions and
evaluation techniques; exercise
evaluation exercise timing;
timing; fihauci
financingi and
communications.
comrnunications~
 -- 315
315 --

(b) I'-nt'fy relevant

relevant areas at
impact areas at the level
level of the
unit oi project, the
al ullit or project, sector, the region, and
the sector,
possicly
possibly the
the ndt.roal
nationaleconomy
economy and
and socie-y. Synthesize the
society. Synthesize
impact/goal/acti,ity
impact/goal/activitysystem,
system,showing
showing i!o,,A.Tendencies
interdependencies and
and
their form, isolating the
their form, and isolating the me=surae
measurable 7arameters
parameters and
and
target groups,
target groups, and
anddescribing
describingthe decis,jort-o-7:
the system.
decision-making system.

(e)Determineavailability
availability andand value
value ofof impact Lr.k the
impact data, the need
need
forr new measur.,ments,
new measurements, and and
the the precision/r,li,,Liy of
precision/reliability of the
the
data
data base,
base, comraring
comparing withwith and
andwithout
withoutindustry
i-.'.istry situations.
situations,
(d) Evaluate
Evaluate appropriateness
appropriateness of indu
of the industrial unit,
unit, activity
activity
or
or project,
project, through
through anan impact
impacttreetree or
or system
sem model.
model.

(e) Synthesize alternative

alternative courses
courses ofof action
action forfor optimizing
imizing thethe
impacts ofthe t.!'aindustrial
industrialunit,
unit, activity
activity or or pr,-,ict,
project, on on the
the
target are:, sectors
target areas, sectors and populations.
popUlations. Evaluotr the
Evaluate
expected imr:,otsofof following
expected impacts followingthese
thesecourses
coursesand andthe .'ects
a, ,.effects
of
of the
the changes.

Impact variables can be selected selected from e.g. e.g. the following
following
checklist:
checklist!

Appropriateness category
Appropriateness cateoory Main impactt areas
areas

SOCIAL AND
AND PERSONAL
PERSONAL VALUES
VALUES Realth/safety/life
Health/safety/life s-,tn/infant mortality,
span/infant mortality,
skill levels and
skill levels and di''ribution, education,
distribution, education,
welfare
welfare and level living, including
level of living, including
distribution
distributionamong
among social
social groups
groups

ECONOMIC Production
Production inin relation
relationtoto supply and
supply anddemand
demand
levels, synergy/conpet,tO,n with
levelS, synergy/competition with .-xisting
existing
production, income
income and Its distribution,
ar.d its di!,-:oution,
employment
employment andandits
its dii.tri._ution
distribution

INSTITUTIONAL Policies and

Policies and laws,
laws, traditions
traditionsand
andcustoms,
customs,
organizations, administration
organizations, administration
PHYSICAL
PRYSICAL Pollution/noise/landscape/conservation,
Pollution/noise/landscape/conservation,
serviceability
serv iceabil i ty of
of technology/natural
technology/natural
resources
resources

4.1 Towarda aBetter

Toward BetterDefinition
Defis-ion of
of Impacts

The broad
The broad imnact
impact areas outlined are translated into very
outlinud above are translated into very
specific changes
specific changes in plans: reduce
in project plans: destitution in
reduce destitution in the
the target
target area
area
and target population
and target ':.elowone
population to below oneper
percent
cent by
by the
the year
year 1987,
1987, etc.
etc. The
impact areas and
imp3,7,t areas the characteristic traits
and the characteristic traits of appropriate development
of appropriate development
eff,its vary
efforts varymuch
much from
from one environment- -ohysical,
one environment physical, social,
social, cultural
cultural and
and
ecor,oric- - to
economic to another,
another, and
and from one project
from one project toto another.
another.

In determining
In whichimpacts
determining which impactsarearetoto be
be considered
considered in
in eval,:ation,
evaluation,
it
it has
has been
been found
found helpful to systematically identify the
helpful to systematically ident fiz'fit-
the first-order,
secondaryand
secondary andpossibly
possiblyhigher
higherorder
ordereffects/impacts,
effects/impacts,andandthen
thensynthesize
syntsize
them into an
them into an operational
operational model of strategic
model of strategicdecision-making
decision-making variables.
variables.

Evaluation has
Evaluation has tended
tended to
to concentrate
concentrate on
ontechnical
technicaland
andeconomic
economic
impacts, but it is increasingly
impacts, but it is increasingly emphasized that impact
emphasized that impact specification
specification and
and
evaluation must be able to handle both quantitative and qualitative
evaluation must be able to handle both quantitative and qualitative
information.
information.
 - 316
- 316 --

number of
A number of numerical
numerical assessment
assessment techniques
techniques have
have been
been devised.
devised ..
Straightforward economic and financial analysis is conventionally
accepted
accepted and the understanding
and the understanding of, e.g., opportunity
of, e.g., opportunity costs is improving.
costs is improving.
Quantification in in commensurate
commensurate terms still difficult
terms is still difficult and
and it is
therefore
therefore very important that
very important that all
all assumptions
assumptions underlying
underlying assessments
assessments are
are
clearly stated.

Qualitative evaluation techniques are less well developed.

Qualitative
These include i.a. pairwise ranking; the Delphi method and other
consensus processes;~
processes dimensionless
dimensionless scaling of impacts
impacts [beneficial,
neutral, undesirable;
neutral, undesirable; oror none,
none, minor,
minor, significant,
significant, large;
large; values
values (+ 0 -
(+ 0 -
or 0,1,2,4
0,1,2,4 etc.)],
etc.)], possibly weighted; the
possibly weighted; the decision-activity
decision-activity framework
framework
(decision etc.), which
trees, etc.),
(decision trees, is aa mathematical
which is model of
mathematical model of the
the decision
decision
process; and
processi and policy capture
capture (weight
(weight factors
factors considered
considered inin decision-
decision-
making).

4.2 the Art

State of the

In both quantitative and qualitative evaluation

evaluation work, the
evaluators'
evaluators' judgements
judgements are
are still
still considered
considered to
to be
be the
the best
best way
way to
to value
value
impacts, because of insufficient agreement about objective values.
However, the values of the
However, the the evaluation
evaluation team
team and
and those
those of
of the
the sponsors
sponsors must
must
be
be compatible.

The evaluator often has to

The to decide
decide how
how much isis to
to be
be covered
covered and
and
in
in what
what depth and to
depth and to assign
assign weights
weights to
to the
the target
target impacts.
impacts. Ideally,
Ideally, the
first
first phase should consist
phase should consist of aa thorough
thorough clarification
clarification of of these
these issues
issues
with the sponsoring
with the agency and
sponsoring agency and other
other parties,
parties, but
but an "organic" system
an "organic" system has
has
seldom been devised in practice,
in describing potential or existing
relationships
relationships among thethe variables
variables and
and parameters.
parameters. Often eveneven the
the evalua-
evalua-
tion framework, the logic underlying the
tion framework, the study,
study, is
is not
not made
made explicit.
explicit.

The result is
is less fortunate. Because aid agencies or
international
international organizations
organizations areare all
all short of staff and and funds,
funds, in
in relation
relation
to what
to what they are expected to to do,
do, evaluations
evaluations are
are judged
judged more
more on
on the
the basis
basis
of "adequate
of "adequate but
but not excessive
excessive length
length ofof text,
text, sufficient
sufficient number
number ofof
issues
issues touched
touched upon,
upon, and
and acceptable
acceptable style,"
style," andand "sufficient
"sufficient butbut not
not
excessive
excessive criticism of of the
the various
various project
project actors."
actors." In
In order
order toto cope
cope
with accountability for
with accountability for problems
problems turning
turning up in in evaluations,
evaluations, escape
escape ways
ways
are identified:
are identified: deficiencies in
deficiencies in the
the evaluation
evaluation methods,
methods, the
the evaluators
evaluators
or the evaluation data are
or the are not
not hard
hard to
to find.
find.

The evaluation system

The current evaluation system is
is partly
partly inin numerical
numerical form
form -- the
the
financial
financial analysis
analysis and
and its
its periphery,
periphery, certain economic and
certain economic and even
even social
social
analyses
analyses can derived from
can be derived from its
its modifications;
modifications; partly
partly inin logical
logical form,
form,
such as
such as time
time and
and locational
locational considerations;
considerations; partly
partly inin judgement
judgement form
form --
this
this is good, that
is good, that is
is unfortunate;
unfortunate; and
and part
part is
is left
left for
for built-in
built-in escape
escape
avenues.

4.3 Trends
Development Trends
will consist
Development will consist of
of at
at least
least the
the following
following parts:
parts:

aa professional evaluators will

professional breed of evaluators will develop,
develop, equivalent
equivalent
in specialization toto economists,
economists, sociologists
sociologists or
or social
anthropologists, financial analysts,
anthropologists, financial analysts, etc.;
etc.;

cooperating and recipient

cooperating donor and recipient governments,
governments, international
international
organizations, banks,
organizations, banks, consulting
consulting and
and research
research agencies
agencies and
and
information
information services
services will develop
develop their
their own
own evaluation
evaluation
systems, which
which will
will provide
provide the
the feedback
feedback they
they need
need in
in the
the
form; the
right form; the development
development of
of methods
methods and
and techniques
techniques will
will
 -- 317 --

be coordinated
be coordinated by international bodies
by international bodies such
such as the Expert
as the Expert
Group on
on Aid
Aid Evaluation
Evaluation of
of the
the Development
Development Assistance
Assistance
Committee of the
the Organization
Organization for
for Economic
Economic Cooperation
Cooperation and
and
(OECD/DAC);
Development (OECD/DAC);
international aid projects
international aid projects will
will come
come under
under aa monitoring,
monitoring,
review and
and evaluation system, which is
evaluation system, is much
much more intricate
more intricate
than the
the present
present very
very (general
(general and)
and) informal
informal one; this is
one; this is
made possible
made possible byby the
the ease
ease of
of following
following results
results through
through
quantitative electronic monitoring and communication
systems.

How quickly this development proceeds

proceeds and
and how
how it
it is
is carried
carried out,
out,
is not easy to
is not to predict.
predict. What is clear
What is clear is
is that
that the
the past
past provides
provides us
us with
with
only part of the
only part the material
material for
for moulding
moulding project
project evaluation.
evaluation. A A large
large part
part
of this comes
of this comes from
from theory,
theory, which we yet have
we yet have to
to fully
fully understand
understand (in
order to accept,
order to accept, use or reject
reject it)
it) and
and only
only aa small
small part of which we have
part of have
been able to
been to put
put into
into practice.
practice.

The development of evaluation techniques has

The followed two rather
has followed rather
separate paths:
paths:

(a) Evaluators have

Evaluators have been
been busy
busy accumulating/compiling
accumulating/compiling data
data and
and
synthesizing them to
synthesizing to fit
fit the
the decision-making
decision-making framework
framework of
of
project
project actors
actors, I including international organizations.~
organizations
not generally had
They have not had the
the means
means to
to utilize
utilize adequately
adequately
the theoretical basis
the theoretical basis developed,
developed, or adapt
adapt the
the formal
formal tools
tools
for their
available for their analysis.
analysis.

(b) Development research institutions

institutions and
and consultants
consultants have have been
been
employed by international organizations to create
evaluation systems,
evaluation systems, methods and
and techniques
techniques (the
(the evaluation
evaluation
framework and
framework tools) for
and tools) for aa more Ilrational 'i , formalized
more "rational", formalized
process. This work
This work has
has often
often been
been financed
financed by by bilateral
bilateral
development agencies or
cooperation agencies
development cooperation or byby research
research funding
entities.

The
The interaction
interaction between
between these
these two
two processes
processes has
has been
been slight,
sl ight,
in the
especially in the evaluation
evaluation of
of social
social impacts.
impacts.

4.4 Impact Assessment

Social Impact

The social
social appropriateness
appropriateness evaluation
evaluation of forest
forest industries
industries can
can
draw
draw much
much on
on experience
experience from
from social
social impact
impact analysis
analysis (SIA).
(SIA). This has
This has
developed in
developed in the
the industrialized
industrialized countries
countries in
in the
the last
last ten/fifteen
ten/fifteen years
years
largely as
largely as a complement
complement to
to environmental
environmental impact
impact assessment.
assessment. In its
In its
current
current form its preparation
form its requires a
preparation requires a lot
lot of primary
primary data.
data. SIA can
can be
be
understood
understood as
as aa study of social
social impacts
impacts inin the
the broad
broad sense,
sense, covering
covering the
the
non-monetary economic impacts (eguity,
(equity, employment), legal/political,
employment),
institutional,
institutional, and psychological impacts, and possible impacts on
individual and social
individual social value
value systems.
systems. A set of
A of typical
typical impact
impact categories
categories
for industrial evaluations is
for industrial is shown
shown in
in Table
Table 1.1.

Impacts
Impacts can be be identified
identified by tracing them through
tracing them through chains or or
networks of logical causal relationships, or directly either from
priority lists
priority lists of of the sponsors, or
the sponsors, systematic checklists.
or systematic checklists. It is
considered important to
considered important to place the impacts
place the impacts in a structural
structural framework,
framework, even
even
if these are directly identified.
if The selection of impacts for
evaluation is
is aa process
process which needs
needs good
good judgement andand anan analysis of
of the
the
impact structure
impact structure, I but also interaction
but also interaction between
between the
the evaluation
evaluation team
team and
and
the users
the users of the
the results.
results. Excessive will easily
Excessive categories will easily confound
confound the
the
issues; the
issues; process should,
the process should, however,
however, ensure
ensure that
that all
all significant
significant impacts
impacts
are
are evaluated. The impacts
impacts selected have
have to
to be
be assessable
assessable in in meaningful
meaningful
 -
- 318 -

Table 1

Social impact categories

Social impact categories

1. on population
Effects on population structure
structure and
and geographic
geographic
distribution: growth (movement birth/-
(movement and net birth/-
death), age, cultural and/or
death), age, and/or ethnic
ethnic group,
group, family
family
(single males or females only, or complete
families), seasonality
families), seasonality
2. Accommodation: new construction growth
new construction rates and
growth rates and
its distribution by types, persons per room,
rates, prices/costs, rental
vacancy rates, rental
3. Displacement
D-splacement of people and social economic
activities: reallocation' of land,
reallocation'of land, changing job
and
at kill
skill structur,-,
ns,
structure, legal
legal and consi-
and economic consi-
derations,
de,, employment
employ-rent and income level and
distribution impocts,
impacts, changes
changes inin the
the level
level and
and
distribution
d,',ribution of well-being

4.
4, Transport: communications infrastructure
infrastructure and
and rate
rate
of
of use

5. Community growth,
growth, structure and institutional
development, including
including informal, statutory and
community-cohesion effects
6~ Community services:
services: health, schools,
health, schools, power, water
and sewerage,
and sewerage, social services,
services, recreation,
recreation, culture
culture

7~
7, Noise,
Noise, air,
air, aesthetic and
and water degradation

8.
8. Regional and local
Regional and local balance
balance
 - 319
319 --

quantitative or qualitative terms - magnitude,

quantitative or qualitative terms magnitude, timing,
timing, groups
groups or
or regions
regions
affected, etc.
affected, etc.

4.5
4.5 Fronomic impact
Economic Impact Anplv
AnalysisS

e inomic
The economic iro
impacts of a change depend heavi helv, /on jts
on its
proEitabi'ity
profitability f:oir the
from 'inancial
the financial and economic point pcin: of view.view.
Exterrol'' i'
External i ties may
mehaie st-Tred ,heroe, but they hco.
ha'18 stopped a change, but they have seldom ---1dom been
instriment,: 16 csosng it. It h,, U,come clear that quantitative
instrumental in causing it. It has become clear that quantitative
financial enl eu1e.sl1y economic ab,i),,es have been ba,ied
financial and especially economic ana have been based on numerous
assumptions aboutthe
assumptions about thesocial
social input,
input, output
output and
and institutional
institutionalenvironment,
environment,
which may
which maynotnot hold. Now techniques are
Now techniques are improving.
improving. Manyevaluations
Many evaluations are
are
also attempting at least a rough estimation of who will pay and who will
also attempting at least a rough estimation of who will pay and who will
benefit from
benefit from the
the changes.
changes.

Economic analyses estimate the values and weights of ,n6t and

Economic analyses estimate the values and weights of cost and
to society
benefit impacts to society by e.g.
benefit pricing, using opportunity
e,g, shadow pricing, opp-rtinity
costs to reflect the value of unpriced impacts,
costs to reflect the value of certain unpriced impacts, ani
and adjusting the
discount rata to reflect the
discount rate to reflect the time value of certain rn,t an, benefit
-f a certain cost and benefit
stream to socieiy. In prie,i[le,
stream to societ In principle, the tocial discoenh iat, ,an be
I,n social discount rate can be
different for r1iffer,-nt
different for diE items. In
rent items. it should cefie(t the rate
Ir any case, it should reflect the rate
of return to sniirtv from the cest alternítive use of the re:,oJc..c: tied
of return to society from the best alternative use of the resourCes tied
to the activiti, ev,10ated. Other economic impacts include product
to the activity evaluated. Other economic impacts include product
prices, which ace ilFely to decrease if larger quantities enter the
prices, which are likely to decrease if larger quantities enter the
market.
market.

4.6
4.6 Employment Impacts
multipliers, input-output tables
Employment and income mul tipl iers, input-output tables and
price/demand ana1y-'s, if available, should be used for estimating
price/demand analyses, if available, should be used for estimating
effects
effects of these society; the
rs on society;
these factors direct are not
the direct impacts are
--fficient.
sufficient.

Projects in-,
Projects involvingvir: expansion
expansion usual_}
usual employ additional persons.
employ additional persons.
if the
:ver, if
However, the new .1ury is competii,161,
new industry is competitive, persons in other
persons employed
employed in other
it industrial un lz iy lose their 1Lb, es result.
forest industrial units may lose their jobs as a result. Because of the
Because of the
ci trality of th, oropi. :It issue tc
centrality impact of forest industry, it
of the employment issue to the impact of forest industry, it
canA be
be studied
studieduncle,: .7.ate "employment
under aii separate "employmentaudit".
audit".
4,7
4.7 Specific Techni;,.es
The use of structural models for forrst industrial activities,
The uSe of structural models for forest industrial activities,
including simulation
including models (environmental
simulation····models (environmental imh..di studies are typically
studies are typical
based on
based on accepted
acceptedmodels)
models)helps
helpstotoidentify
identify the
t.i, impacts
Hri-ots by
by major
major activity
activity
categories - forestry, industrial processing, d: trinution.
categories - forestry, industrial processing, distribution.

Time series analysis

series analysis enables
enables trend identification, and
trend identification,
edi(ting
icting the
the likely and
and thea:
their 3_onif
significance in in the
the social
social and
and
economic environment aperatihg industry
operating 16,in't,% with and without without
TrsnJ ge,lree, even even ifif corrected
c,-rreitud by relationships
relationships with
with
6ariable=,
vari hhct,trends
trendswill
will continue
oontinu, on au the
the basis
basis of
of past
past
1,1,ti,nsihips In
relationships in one
one fnir,
form or au,ther.
another. To aa lesser
To lesser extent,
extent, expert
expert opinion
opinion
techniques such
techniques such as the Delphi
as the method,are
Delphi method, aretied
tied toto past
past experience,
experience, but
but
they
they can
can handle
handle andand weight
weight farfar more
more complex structures. Tools
complex structures. Tools also
also
include impact
include relevance trees,
impact relevance trees, cross-impact
cross-impact matrices,
matrices, and and decision
decision
analysis, checklists, published
analysis, based on checklists, published or communicated policy
or cormnunicated policy
objectives, and
objectives, and strategy
strategy expressions
expressions by by the
the sponsors
sponsors of of the
the exercise.
exercise.

Scenarios ofof the

Scenarios the r- tits are
results are helpful:
helpful: iinputs,, outp_ts,
outputs, impacts
impacts
and the
and thr sensitivity
srnsitivity of impacts to Lo changes
changes in in the i,.T.at,outpit levels
the input/output levels and
and
!crest industri,:i
th, forest
the industrial environment.
v Scenarios can
Scenarios :onmibe aa very
very useful
useful
cona;:renhof
component nf evaluating aising the social ani ii,titnional impact
evaluatihg or appraising the social and institutional impact
 -- 320
320 --

of
of forest
forest industrial
industrial projects. Scenarios can
projects. Scenarios canbebepresented
presentedinin the
the form
form of
of
descriptions of
descriptions future or
of aa future or alternative
alternative state
state of
of the
the industrial
industrial sector
sector
environment, or
environment, or chains
chains of
of events.
events~

Expert judeements
Expert areoften
jUdgements are often the
the most practical way
most practical way of
of assessing
assessing
tec101,gical eppro:rateness,
technological appropriateness,but
butcame
care must
must be
be taken that they
taken that they are
are
eice ed in
expressed in tetminc,, understamdabletotothe
terminology understandable theusers
usersofof the
the evaluation.
evaluation.

4.8 Data for

Data for Social Impact Assessment
Assessment

In the
In the measurement
measurement ofofsocial
social impacts,
impacts, population
population trends
trends and
and
those of
those of the
the gross
gross domestic
domestic product
product and
and the
the economic structure are
economic structure are
obtained from
gene, mfly obtained
generally from secondary sources; primary
secondary sources; data collection
primary data is
collection is
based on
often based
cee on surveys.
surveys.
Survey results can
Survey results can often
often be
be improved
improved by
by b-,iing
basing the
the work
work on
on
ethnogt.-
ethnographic
c studies, entii/ the
studies, which identify the social gro r. impacted by a
lal groups
forest 1, Arial activity
forest industrial
; fze h ).
activity in a similar fashion. Differences
Differences in
in impact
impact
maybebeconnected
may connectedwith withcultural
cultural tree:itions .g. religion),
traditions (e.g. reI ion), social
social class,
class,
economic
economic aetiviactivity (basis
(basisofof livelihood),
livelihood), etc.
etc. Data on
Data on the
the responses of
responses of
each groupare
each group arecollected,
collected, studied
studied to to identify
identifyany any patterns,
patterns, andand the
the
exis:lence
existence and andnature
natureofof such
such patterns,
patterns, and
and interpre ;ions of their
interpretations of their
sionificance,
significance, discussed
discussed with withmembers
members ofof the
the groups,
groups, and compared to
fi compared
e!ished information,
. published theoretical em-Aions.
infotmation, experience, and theoretical expectations. The
study often proceeds
study often pro-r'ds in in an iterative manner;
an iterative manner, after ti:' prl
after the el-v impacts
primary impacts
.rr level.
and ttheir levelshave
havethusthusbeen
been assessed,
assessed, aa model
modelofof their
their i,e.;:factions
interactions
is
is -tructed, and this
constructed, this is commonly also discussed with the
repre' :-.:ativesofof the
representatives tt groups.
groups.

Seoendarydata
Secondary ci,h1from
from statistical publi
statistical ions, newspapers,
publications, newspapers, maps,
maps,
research . edeetsand
reports, budgets
research reports, and regional
regional andand se1 planning
sectoral planning efforts
efforts are
are
an
an indisp-,Nsable
indispensable complement
complement toto the
the study.
study. Whate,er
Whatever the
the manner,
manner, framework
framework
and assumptions
and assumptionsare ae for
for the
the SIA
SIA data
data collection,
collection,they must
they mustbebemade
made
explicit, ininorder
explicit, orderfor
forthetheresults
resultsto to
bebemeaningful.
meaningful.

In thorough
In thorough evaluations,
evaluations, thet're ff, .pthof
depth of the
the data
data base is often
base is often
developedparallel
developed parallel to
to evaluation
evaluation fra ow rk development,
framework development, in an an iterative
iterative
This phased
fashion. This
fashion. stepwiseapproach
phased stepwise approa,hisisoften
often more
morecost-efficient
cost-efficient than
than
trying to do the whole thing
trying to do the whole thing in in oneone go,
go, but it requireslonger
but it requires aa longer
involvementofofall
involvement all parties
parties ininthe
theexeecise.
exercise.

4.9
4.9 Changesinin Impacts
Changes Impacts and
and Content
Content with
with Time
Time

The aims, goals, objectives

The aims I objectives and
and targets
targets set
set by
by the
the society
societyand
and
the forest
forest industrialist,
indus and often
often the impacts pursued,
impacts pursued, change with
change with
time.
One
One of of the
the reasons
reasons for for large
large diffotences
differences in in impacts
impacts and and project
project
values
values isis the
the amount
amount of of time
time involved ,-e:ng aa project
involved in seeing project through.
through. FromFrom
the time
the time that
thata amechanical
mechanical forestforestindurmm project is
es project
industries' is first
firstheard
heard ofof
in anan iutein9tional organization, it
international organization, it takes
takes at least three
at least three years,
years, but
often betkee,
often between fivefive and
and tenten years,
years, before
before itithas
has resulted
resulted ininan anoperating
operating
mill. For
mill. For pulp
Luip and paper projects,
and paper projects, the the time
time period
period tends
tends to to be
be several
several
J .nger. Some
years longer. Some ofofthe theprojects
projectsplanned
plannedbefore
beforethetheoiloil crisis,
crisis, before
before
the mini andand micro-comph,ers
micro-computers and and in a c',1etely different
a completely different geopolital
geopolitical
or W(FIC
or world employment
employment situation,
- etion, have
have yet reach their
yet to reach their target
target leve
level of
activities.
activities. Not
Not On],
only does
' es the
the world e, Bic, political,
world economic,
r political,technolce
technological
and
and social environment cha-re
social environmE, change rapidly,
rapidly, butbutmajor
majorstrides
strideshavehavebeenbeen taken
taken
the forest
in the
in I'd., ',ial sectorr as
forest industrial as well.
well. In these
In these conditions,
conditions, aa majormajor
element plened forest
in planned
in for r industries projects is flexibility.
industries projects flexibility.
Fortunately
Fortunately the expensive ingredients
the most expensive ingredients -- thethelarge
largemachines
machines and and most
most
of the
of the structure'
structures- -can canbe beused
used ininwidely
widelychanging
changing conditions.
conditions.
 - 321 --

The value relationships

The value relationships among
among impacts
impacts can
can change
change markedly
markedly asas aa
result of
result of forest
forest industrial
industrial development.
development. availability of power
New availability power and
and
lower
lower power
power costs in a
costs in a community
community with
with a a new
new industrial
industrial plan and improved
plan and improved
roads
roads or services, will change
or services, change the
the importance
importance of of otner
other aims.
aims. Changes inin
the relationship between
the relationship between monetary
monetary andand subsistence
subsistence income
income may also have
may also have
drastic consequences in
drastic consequencos in t.i
the target
target impjct
impact system
syste: and the values
ard the values ofof its
its
parts. Pitsawyers
Pltsawyers enter ing newly
r newly Petahlished
establ ished industrial sawmills will
,'rlal sawmills will
See
see aa new distiac
distinction between worki
-ern working hours ara
Lours and leisure, aa new work
situation,
situation, where :p personal independence
ierrapendence in n determining
deterrCsc. the and time
he pace and time
of work is
of work is replaced ../by decisions of a,
islons of management
nagk.mentor the working
oro.: working community.
community.
Social and educational
Social and educational urels
goals are
are likely
likely to to change
change markedly,
markedly, since status
status
is
is no longer aa direct result of
direct rosult the personal
of the personal physical
physical production,
production, butbut
also
also depends vocational and
depends on specialized vocational and organizational
organizational skills.
skills.

4.10 Definition of Scope

Evaluations
Evaluations have to be
:.ve to be very clParly
clearly identifi,d
identified in in scope,
scope, in
order to PrsuiP
order ensure thai
that the
the coverage
coverage inin rir-t
depth isis ade
adeg ate
,te for
for a pronsr
a proper
evaluati.sr....d
evaluation of the issues the detail
and the detail is nst
not excess,-(
i excess or the
or the prob1,-m,
problems
too broad tnr
too for definitivo
definitive results
results -- and
and action.
action. The srotAr
scope needs
needs accurate
definition
definition of the local,
of the local, regional
regional and
and national
national level
level balance,
balance, thethe time,
time,
resource allocation and possible phasing, the first and and higher
higher order
order
impact categories and their interrelationships, and the technological
impact categories
systems studied.
studied. The quality
The quality and
and quantity
Quant of data
of data available
available have
have toto be
be
known
known inin -rder
order to
to determine
determine the
the additional information
information needed
needed andand the
the
skill resources
skill resc a. :asand
andtime
timerequired
required for
for its
its compilation
compilation and synthesis.

The assumptions
.rumptiona defining
defining the
the limits
limits of the problem and
of the and the
the
manner of
of data compilation,
compilation, analysis andand synthesis
synthesis have
have to
to be
be explicit.
explicit.
The result
results of
of the
the eval.,,!ion
evaluation will
will have
have to
to be categorized so
be categorized so that
that they
they
are in harmony
are in harmony with
with tire
the requirements
iuguirements and
and categories
categories of the sponsors,
of the sponsors, ifif
they
they are
are to be meaningful. The process of ensuring this this harmony
harmony includes
includes
agreeing
agreeing explicitly the forest
explicitly on tta forest industrial
industrial system
system studied,
studied. the
the impacts
impacts
of the
of the forest
forest industries,
industries, the
the groups institutions imricrad,
groups and institutions impacted. andand the
the
procedures and values
values used
used for
for analysis,
analysis, synthesis,
synthesis, evalu,tirr.
evaluation.

5. INSTITUTIONAL
INSTITUTIONAL DEVELOPMENT POSSIBILITIES
POSSIBILITIES

The form
form ofof impact
impact studies
studies and
and evaluation,
evaluation, andand their
their function,
function,
will need
will need much further improvement
much further improvement in in order
order to
to make
make them
them usable
usable for for
assessing
assessing the the appropriatens,2,
appropriateness of of forest industries.
forest industries. Developing
Developing t'sp the
social impact
impact framework roaoly the
framework is probably the highest
highest priority
priority task
task in in this
field. The
The OECDjDAC
OFCD/DAC Expert
Expe: Group _p on
on Aid
Aid Evaluation is is moving uliwly
slowly Lit but
steadily
steadily inin this
this area.
area. It does not, however,
.s not, however, cover the the need,
needs ofc..f forest
industries
industries directly,
direct_y, annand aa -:'ate effort
effort may
may be required by
be required nv e.g. the
FAO Department to
FAO Forestry uttaitment t adapt the framework for
the framework for sectoral
sectoral use.
UL.C. After
the impact frimework
the impact framework hashas bebeen
en adequately developed -
,,gately developed - conceived and and tested
tested
-- it
it should
should bebe usable
usable as the the core
core for
for evaluating
evaluating many
many international
international aid aid
projects. The evaluation process
The evaluation process will,
will, however,
however, continue
continue to to depend
depend on on
the
the combined
combined expertise
expertise of of various
various institutions,
institutions, specialized
specialized in in the
inputs required.
component inputs required.

It
It is possible that the
is possible the cross-sectional
cross-sectional expertise
expertise needed
needed for
sPcsoral evaluation
sectoral evaluation cannot
cannot be
be developed
developed to an acceptable
to an acceptable level
level of
of
sophistication
ph stication by any of these organizations individually.
Inter-organizational
Inter-organizational cooperation
cooperation will be required
will be required at
at least
least in the
the early
stages.

Some form
fnim of impact data collection and measurement will
probably
probably bebe incorporated lnto the
incciporated into the implementat ion of forest
implementation forest industries'
industries'
projects. wnil is
This work is analogous to that
analogous to that of
of keepingg project
project accounts.
I accounts.
 -- 322
322 --

will still
F di JatiDn will still be the task of
Evaluation of indrpendent
independent teams, conceptually
teams, conceptually
anac:eus to
analogous the risr
to tne task er
of auditors.
auditors. Once tir
impact ac,cnnting
llnco the impact accounting systems
systems
na-c beel
have been devele;-eJ, coroinedsystem
developed, a combined systeuofif mariaement e sIiation (internal
management evaluation (internal
and accountability
apOltirg) and
auditing) acco.nta.ility evaluation
evaluation (e)-ernal
(externalaudit.Jc:
auditing), can
can provide
provide
the prolect
the project parties
partieswith
witha asound
sound basis
basis tcr
forsuosecuent acticr.
subsequent action.

The utilization
u til ization of appropriateness evaluation
of appropriateness evaluation resul
results
ts in
in the
the
forest
forest industries'
industries' sector
sector hashas toto be
be carried
carried out
out atat several
several levels:
levels, the
bodies responsible for
responsible for managing the forest forest industrial
industrial activities
activities
evaluated, those
evaluated, those planning
planning new newactivities,
activities, such
such as as projects,
projects, and and the
the
holies responsible
bodies responsible for the politi-al
for the politicalguidance
guidance of these organizations,
of these organizations.
wurther work
Further work al-Tear:,
ars toto bebeneeded
neededfortorensuring
ensuringthat that the
the results
results are
are
etrrctivelv Jt1,:r
effectively uti zed.. OneOnewaywayisis to t. .mprn,e
improve the
the format7
formats and and contents
contents ofof
atstracts .nd
abstracts or telorts on
and/or tl,e, htighlinhl.s
on the hI hts of of the
the findinpu.
find s. The use
The use of
of
the evaluation
the evaluation re-i]tats is
is often
often pli Jed already
planned already inin the vroect ectdocument.
document.

It is apparent
It is apparent from
from disci .th biThrsud international
discussions ,with bilateral and interrc.rlr
organizationsthat
organizations thattwo
twodepth
depth cats.. of
categories of evaluat:o1r
evaluationsore
areneeded:
needed: one,
which isis rapidly
rapidlydone,
done, concentrat,
concentrates on on simple
. simple but
but well
well thought-out
thought-out
indicators of appropriateness and
indicators and c:her
other dimensions of worth,
dimensions of worth, and the the
other, which
other, which isis broad
broad and deep, and
and deep, and thoroughly analyzes and
thoroughly ana and reliably
reliably
ea,aluates project
evaluates relation to
characteristics in relation
project impacts and characteristics to the
the
objectives sc
objectives and effects
set and effects desired.
desired. There can,
There can, and
and should,
should, be
be many
many ofof
the former
the type, and
former type, relatively few
and relatively few of the latter.
of the latter. The in-depth
The in-depth
evaluations should
evaluations sDeld concentrate
concentrateonon typesofofprojects
projectsororforest
forest industrial
industrial
activitie, which frequently
activities reguently recur.
 -- 323 -
-

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World Bank, Washington, D.C. p.
25 p.
 -- 325 --

RURAL DENDRO-ENERGY PROJECTS

PROJECTS

by

Oy
EKONO Oy

CONTENTS

Page

1. INTRODUCTION 326

2. NEED OE ENERGY
OF ENERGY 326

3. ALTERNATIVE SOURCES
SOURCES OF
OF ELECTRICITY
ELECTRICITY 327

4. LOCAL
LOCAL NEED
NEED OF CASH INCOME AND THE NATIONAL
NATIONAL
ECONOMY 327

5. PREREQUISITES FOR DENDRO-THERMAL ENERGY 328

5.1 Forest
Forest Residues and Non-merchantable
Wood
Wood Waste 328
5.2 Sustained Supply of Wood
Wood Fuel 328

5.2.J
5.2.1 Availability of
of land
land 328
5.2.2 conditions
Climatic conditions 329
5.2.3 Infrastructure 329
5.2.4 Human resources 330
5.2.5
5.2.5 Availability of funds
Availability of funds 330

6. TECHNOLOGICAL
TECHNOLOCICAL FEATURES OF FUELWOOD PRODUCTION 331

6.1 Tree
Tree Species 331
6.2 seedling and Plantation
Seedling Production and
Establishment 331
6.3 plantation Management
Plantation Management 332
6.4 Fuelwood
Fuelwood Harvesting and Transport
Harvesting and 332

7. CONVERSION OF WOOD TO STEAM OR ELECTRICITY

ELECTRICITY 333
333

7.1 Wood Fuel

Fuel Processing and
and Storage
Storage 333
7.2 Steam Boilers 333
333
7.3 Wood
Wood Gasifiers 335
335
7.4 Economic Comparison of
of Dendro-thermal,
Dendra-thermal, Coal
Coal
and
and Oil-Fueled
Oil-Fueled Power Plants 336
336
7.5 Concluding Remarks
Remarks on
on Planning
Planning Dendro-thermal
Dendro-thermal
Power
Power Plants 336
336

8. EXPERIENCE FROM DENDRO-ENERGY

EXPERIENCE OBTAINED FROM DENDRO-ENERGY PROJECTS
PROJECTS 336
336

8.1 Philippines 336

336
8.2 Tanzania 337
337
 -- 326
326 --

l. INTRODUCTION

Dundro-energy mainliterally
Dendro-energy means literelly aa source
SOurCe of
of energy
energy which
which is
is based
based
on
on the
the ,c-,Lie,tIon,
comhustion, in
in one
one form mi another,
;..7,11; or ardtner, of
of wood-fibres,
wood-fibres, possibly
possibly man's
man's
oldest
oldest enern,'
energy source bc=ide, solar
source besides ,nlir neat.
heat. Still today,
Still today, roughly
roughly half
half of
of
the wood
the harvested is
wood harvested used to
is used to cook
cook food,
food, heat
heat houses
houses andand to
to produce
produce
energy
energy for
for manufacturing.
manufacturing. Whenmodern
When modern ways
ways of of life, with
life, with their
their advanced
advanced
energy
ene requirements, enter
requirements, enter even
even the
the remotest
remotest villages
villages of ofdeveloping
developing
countries,
countr new
new approaches to utilize
approaches to utilize the
theavailable wood
available wood energy
energy resources
resources
are called for. Dendro-energy
called for. has the tremendous advantage
Dendro-energy has advantage ofof being
being
renewable. A sustained
A sustained energy source can
energy source can be
be provided
provided for
for almost any
village
village ififthe wood
the wood resources
resourcesare
areproperly
properlymanaged.
managed.

2. NEED
NEED OF ENERGY
OF ENERGY

Cooking
Cook of food
of food is thlth3most
mostcommon,
common, andand the
the emut
most important
important need
need
fnr energy.
for energy. On an
On an average 22 mm of of wood are annually
wood are annually required
required ~ per caput.
caput.
In many
In areas, charcoal
many areas, charcoal is is used
used instead
instead of
ofwood
wood bioalun
because it is easier to
It is easier to
control its heat release rate.
control its heat release rate. In
In addition
addition charcoal
charcoal isid ,onsidered
considered toto be
be
aa "clean" fuel', when
"clean H fuel', when compared with direct
compared with direct wood
wood burning,
burning I and it does not
and it does not
deteriorate easily in storage.
deteriorate easily in storage. The The disadvantage
disadvantageofof charcoal,
charcoal, however,
however, isis
efficiency from wood to charcoal.
conversion efficiency
the poor conversion charcoal. Primitive
Primitive
charcoaling
charcoaling methods generally yield
methods generally yield only
only 55 toto 10
10 percent
percent ofof the
the weight
weight of
of
woodinincharcoal,
wood charcoal,oror1010toto 1515 percentofofthe the original
original calorific
calorific value
value of
of
wood. This results
This results ininananextremely
extremely high
high pressure
pressure onon wood
wood resources
resources inin
many areas.
many areas.
Electric power
Electric powerconsumptimn
consumption grows in step with
In step , arrival
with the arrival of of
modernamenities
modern a'enItIeq into
inta rural
rural .11Inges, iin the
villages, and tne gradual
gradual i7t -,tion of the
integration of the
isolatec faoi:v illage-basec CrnCiR wit.h the
isolated family village-based economy with the rest of the nation. 'ce nation.
Electrin_tv
Electricity demanc, can be
demands can be locked
looked at in more
at in detail, in order to better
more detail, to better
understood In, issues.
understand the 1,emes. It can he classified
It Can be classified into into thrE, categories -
three categories
industrial demand
In,t1totional and industrial
household, institutional demand - which
which have
have different
different
load characteristics
load charocter.m.-tici.andandfinancial
financialcapabilities
capabilities to
to cover
cover costs.
costs.

Households traditionallystart
Households traditionally start using
using electricity
electricity by by acquiring
acquiring aa
few light
few light bulbs,
bulbs, which
which areare lit
lit durIng
during ti.'
theevening
evening hours. For the
hours. Por the rest
rest ofof
the day, the load is zero.
the day, the load is zero. The nixt steps would be to purchase
The next steps would be to rchase a
refrigerator, a TV
refrigerator, TV set tio,ical
set and, in in tropical cl climates,
imates, cooling fans. The
refrigerator and
refrigerator and the
the fans
fans will
willload
loadthe
thep-wer
power distribution
distributionnetwork
network evenly
evenly
throughout
throughout the the day.
day.The TV set double, tle evening load.
The TV set doubles the evening load. As th
As this
is
electrification of h.Aiseholdsgets
electrification of households gets off
off the
the ground, increases
00.-ound, the load increases
very rapidly, part ..c Early in the first
very rapidly, particularly in the first five years. This fact
This fact has
has to
to be
be
kept ininmind
mind whes --:iblishing the
when establishing the distribution
distributionnetwork.
network.

Institul,nal use
Institutional useofofpower
power isis most
most commonly tied to
commonly tied to schoolS,
schools,
hospitals
hospitals and governmentsupported
nth,. government
and other supportedentities.
entities. Irrigation
Irrigation schemes
schemes
mayalso
may also constitute
constitute aa substantial
substantial baseload
baseload for
for the
the system.
system. These loads
These
distributed over
are more evenly distributed OVer the day. There are alsoalso some
possibilities for
possibilities forload
loadshedding
sheddingduring
duringpeak
peakdemand hours, such
demand hours, such as
as cutting
cutting
off
off the
the irrigation
irrigationpumps.
pumps. An advantageofof these
An advantage these types
types of
of consumers
consumers in aa
rural electricity
rural electricitysystem
system is isthat
thatthey
theybring
bringrevenues
revenueswhich
which are
are not
not
entirely
entirely paid
paid for
for by
by the
the ho ehold.
household.

Industrial users of
Industrial ,f electricity
electricity are are desired
desired sinsince they v can
can
create aa substanti,
create substantial baseload for -dr the system. They
thesy,7-teo,. can adjust
They can adiust their load
to certain exte
to a certain o_ding to the needs
extent according ueeds of the power
of the disii..,ution
power distribution
system, if
system, if proper ir,
proper incentives are structured
'Yes are into the
structuted into tariffs. These
the tariffs.
 -- 327
327 -

users -- sawmills floi.r mills,

sawmill.,t flour mills f cold
cold stores, etc.~ -- normally
stores I etc normally generate
generate
revenues from
revenues from exooiting their services
ng their services or products; and
or products, fact bring
and in fact bring
fresh money
fresh into the
money into the tommunity,
community.

To summarize
To summarize thedesign
the design features
features of ofelectricity
electricity ssupply in in rural
rural
it
areas, it is essential to
is essential to have
have the
theconsumers
consumers which
which wo'L :rantee an
would guarantee an
evenly distributed
evenly distributed baseload for the
base load for the local
local power
power generating
generating and arz.distribu-
distribu-
tion system
tion system which
which is to to be
be established.
established. Regardless of the
Regardless t baseload,
thvie will
there willbebe quite
quitea ahigh
highpeak
peak after
aftersunset.
sunset. The Theother
other fact
fac, 1.to remember
1, that
is that demand
demand willwill grow
growrapidly
rapidly after
aftEr the
L- system has has been corr.t_.cted.
been constructed.
totaomic development
Economic development of of the
the area,
area, however,
1- :or, will affect thE
will affect the r.Jte rate of
of
at ,.th.
grcwth.

3. ALTERNATIVE
ALTERNATIV8 SOURCES OF ELECTRICITY
SOURCES OF 8LECTRICITY

The most
The mostusual
usualpower
powersources
sources
forforrural
rural villages
villages are
are small
small
hydropower plants, diesel
hydropower plants, diesel generation
generation sets,
sets, ororsteam
steam engines
engines at local
at a local
industrial enterprise.
industrial enterprise. Hydropowerplants
Hydropower plants produce
produce cheap
cheap energy, after
energy, after
their hiah
their high initial
initial cost hashas
cost been beenovercome.
overcome. They are
They are however often
however often
vulnerable toto low
vulnerable low rainfall
rainfall and and its
itsseasonal
seasonal variation. Normally they can
variation. Normally can
adjust well
adjust well to
to the lc .1 provided
the load vided that
that there
there I,
is e.c.Jgh
enough reset-oit
reservoir Jj_city
ity
upstream. Man-made
Man-made civil tructures are
c'vil structures are tFe expenstA'. part. Qi the
the most expensive the
plant and0
hydropower plant iculd be
should be kept
kept tc -111-aum, but
to aa minimum, htr not ,mall
oct too small
so that
CC they limit
7,1-at they limit thet. rJCility ofoftne
operability
. thep_0aT.
plant. A long
A long transmission
transmission
line
11- In often
is often require:,
required, which 'h isis also
also aa Oraoaef.
drawback.

Diesel generator
Diesel sets are
generator sets are very
very well
well suited
suited to to these
these varying
varying
levels. Many
levels. Many types and and sizes
sizes areare available,
available, fromfrom 55 KWKWsetssets to 10 MW
10 MW
large
large units.
units. The prices vary
The prices vary from
from US$
US$ 300
300 to to600
600 per
perKW.
KW. Small
Small engines
engines
use light fuel oil.
use light fuel oil. Starting with
Starting with 500
500 KW units, heavy
KW units, residual oil
heavy residual oil
models are
models available. These diesel
are available. diesel engines
engines are are quite
quite reliable.
reliable. The
after sales
after sales service
service is relatively well
is relatively well established,
established, as tt, -e are
there arr many
many
units in
units in operation.
operation. The maindrawback
The main drawback is isthe
thecost
costofcf fuel,
fuel, sincee inn many
many
cases fuel
cases fuel has
has to be z,d,
be imported.

,ieam engines used

Stearn hi ,rdustry
industryare
areoften
oftenfueled
fueledbybywood
wood waste.
waste.
A final s,_ution
A final solution in in rural
: lect.rification
ification would
would be the integration
be the integration ofof the
the
local di,tiibution
local distributionne- vork with
network national
tire nati
with the onal transmission
transmiss ion system
system as
as the
the
loads grow.
loads grow. The national
The natior sy-,t,mmay
system maybe be ableto toutilize
able utilize local
local fuel
fuel or
or
hydro reSources
hydro resourcesand
andtransfer
transter this
this power to remote
power to villages.
remote villages.

4. LOCAL NEED
LOCAL NEED OF
OF CASH
CASH INCOME
INCOME AND
AND THE
THENATIONAL
NATIONALECONOMY
ECONOMY

There
There is an acute
is an acu-e need
needofofcash
cashearning
caminopossibilities
pca:_hilitiesinin rural
tui,1
villages.
villages. A dendro-enetav
A dendro-energy project 'oject could
could bebe -d
an .,,s',ument
instrument to to cre,tte
create
employment opportunities
employment opportunities and, through gh these,
these, casa rotor t:tolarge
cash income largenumcct7g
numbers
of
of the
the rural
rural population. '1,
population. Savings in expenditure
in amp_rtedfuel
expenditure on imported fuel oil
oilmay
may
be rea-re-t,,d to
be redirected to local
local pr. ..,rn of
production of fuelwood.
fuelwood. This WW.11,1 reduceforeign
would reduce foreign
curreacy pv,mentsand
currency payments and directthe
direct tn, money
moneytotothe therural
ruril poor.
poor. TheseThese benefits
benefits
of
of dendr:-",i'-iry
dendro-energy would
would bebe enj,-,nd
enjoyed nation-wide
nation-wide in rural villages
in rural villages as as well
well
as inin crowded oi cities.
ties. The
The additional
addi tional rural
ruralemployment
employment opportunities
opportunities
wouldtend
would tendtoto reduce
reducemigration
migrationfrom fromrural
rural areas
areastoto large
large cities.
cities. The The
reduction in the
reduction the fuel oil import bill
fuel oil import bill could could make it possible to
make it possible
reallocate foreign currency
reallocate foreign currency for for development
development projects,
projects, or cr to to keep the
keep the
country's debt
country's debt at
at aa reasonable level.
reasonable level.
 328 --
- 328

5. PRBRBQUISITBS
PREREQUISITES FFOR DENDRO-THERMAL
lHERMAL ENERGY

The mos t critical

The most cr i tical niredient in dendro-energy projects
in dendro-energy projects is en
an
uninterrupted fuel
uninterrupted fuel supply.
supply. .Uis can
can come
corne from
from various
various sources:
sources: forest
fores t
residues or wood
residues wood waste
waste from
from an existing forestry
an existing forestry operation,
operation, or
or from
from a
exclusively established
plantation exclusively established for
for this
this purpose.
purpose.

5.1 Forest
Forest Resid
Residues and Non-merchantable Wood Waste

A natural
natural source
source ofof wood
wood fuel
fuel is is the
the residues
residues fromfrom an
an industrial
industrial
operation such
operation such asas sawmilling,
sawmilling, or or veneer
veneer and plyw.-d manufacturing. The
and plywood
wood has
wood has already
already been
been transported
transported to to the
the plant,
plant,;,-are
where itit Can be
can easily be
used as fuel
used as fuel since
since itit has
has to
to be
be disiosed
disposed of of anyway.
ar r. The elart
Tic plant operator
"owns" that
"owns" that waste
waste and
and he
he would
would nflrmall,
normally use use e,as much of it it as possible to
a, yc.ssible
reduce his liel
fuel bill.
bill. The rest is is normally
rrtally for for sale. Part cf of that wood
fuel is nuite
fuel is quite difficult
difficult to to Lartile,
handle, asar. it in
it is dry and and nowlec,:
powdery: sawdust,
sawdust, or
dust.
sander dast. Another
P.rother difficult
difficult part is is bark,
bark, which
whi,h can be excessively
can be excessively
wet, conta
wet, containn sand
,,aad and
and clay,
clay, oror be hardhard toto reduce
reduce into
into small
small pieces
(eucalyptus). These
Ihcf:.eshould
shouldbebeused
used directly
directly at plant. Slabs,
at the plant. Slabs, veneer
trimmings, lily
trimmings, Ii pads,
pads, etc.,
etc., would be be much more ideal ideal to
to sell.
sell.

Huch
Much wood
wood isis left inin the
the forest
forest in
in commercial
commercial harvcsting.
harvesting. Often
only aa quarter
quarter or less
less of
of the
the stemwood
stemwood volume
volume inin humid
humid trapi.-al
tropical forests
forests
is merchantable,
is merchantable, andand even
even in
in plantations
plantations some
some residual
residual stOCking of trees
trees
is left after commercial
left after commercial harveetiro,
harvesting. The residual
Tt, residual statd
stand can often be
.

for fuel.
used for fuel. If
If other
other parts
parts of
of tic
the h:nm,ur,,
biomass, especially
epecially thethe ccrowns,
,, were
were
recovered, the
recovered, the amount
amount ofof resid,e1
residual wood
eurd forr fuel
fuel would be be considerable.
.nable.

Harvested areas
liar:e.s.t,d of of
areas natural forests
natural ruts are productive after
are seldom produ(tive
the best
the best trcen
trees have removed.
hive been removed. This removal process cons iderably
procese cohaiderably
damages the
damages the remolning
remaining stand.
stand. The trees
.r,rr. left
1,,Et are not merchantable
are not merchantable for
for
veneer er
sawmilling, veneei or plywood manufactur
manUfacturing.uy. The areas should
The areas should be
be cleared
for
for planting and this process will
planting and will yield
yield aa lot
lot of
of wood
wood fuel.
fuel.

Plantations differ from natural

Plantations natural foresta
forests in
in that
that no complete
left. only
trees are left, tops. branches and
only topa, and twisted
twisted pieces
pieces which
which are not
are not
for indust,ial
acceptable for industrial use.
use.

In ex
In excea' onal cases, clear-
: clear-cutting of an
, area for
an area for farmland
farmland or
or
other purpose,
some other ;.:.r; such as for a awater -tn.
as for reservoir,
sir, can yield wood
can yield wood fuel
fuel
for
for aa certain
certain Fa period time~
.i. of time,

5.2 Fuel
Sustained Supply of Wood Fuel

Special
Special plantations to produce
plaulations to produce wood
wood exclusively
exclusively as aa permanent
permanent
SOUrce for fuel
source fuel can guarantee a continuous,
continuous, uninterrupted supply close to
the consumers. Some fundamental prerequiSites
S.,:me prerequisites must be known for
establishing successful
establishing successful wood
wood fuel
fuel plantations
plantations and
and these
these include
include the
the
following:

5.2.1
5.2.1 Availability of land
Sufficient
Sufficient and suitable land
and tuitatle land must be be available
available for
for plan:
plantations
:ons
at aa reasonable
reasonable distJnee
distancefr.in,
from thethe point ofof itili7ation.
utilization. The following
isons illustrate
crmyarisons illustrate the net land
ihe net land area
area recilie,euts
requirements toto producr
produce a unit
of incl or
cl or electrical energy,
ener,,,y, based on the the assumption that wood,,,od
production varies
prcd:,ction from $5 to 25
varies from 25 pone
bone dry
dry tons
tons :1101)
(BDTl per
per hectare per yoar:
year:

(a)
(a) the amount
the amount of
of power
power generated
generated by
by one
one metric
metric ton
ton of
of fuel
fuel
oil per year can also
oil per also be
be generated
generated by wood from
by wood from 0.1-0.5
0.1-0.5 ha
ha
plantations:
of plantations:
 -- 329
329 -
-

(b) in
in order
order to
to produce
produce I1 000
000 kWh
kWhofofelectric
electric energy per year
energy per year
0.05-0.3 ha
0.05-0.3 ha of tions isisneeded;
of plantations needed:
(c) in order to co one ton of steam per hour at
in order to generate one ton of steam per hour at an
efficienc.
efficiency ofof75 , for
for eight
eight hours
hours aa day,
day, 15-80
15-80 hh a
cf fr,t.'t.
of forest are
are For the
ry. for
necessary. the minimum practical bas
minimum practical ba see--
(4 t/n),
load (4
1.-ad t/h),50-300
60-300 ha
ha are
areneeded;
needed,

(d) aa wood supplyfrom

wood supply from15-80
15-80hahaofofplantations
plantations is
is needed
needed at
at a
40 percent
40 percent load
load factor,
factor, and
and from
from 30-160
30-160 ha
ha at
at an
an 80
80 percent
percent
baseload to satisfy the requirements for 100 kWpower
base load to satisfy the requi rements for 100 kW p o w e r
generation.
generation.
The 1-Ami
The ari requireTectc
land area requirements ,:npend
depend on f-:tors which
on many factors which will
will be
be
discussed lacel
discussed later in thi, paper
is this paper in 19,16.detail.
IN more The most
detail. The ocst important
important issue
issue
the mean
is the
is mean annua_
annual Licrement
increment of rl W7J31, i.e.
annoot growth
wood, i.e. annual growth rate
rate per
per
hectare.
hectare.
It
It is important that
is that there is is no conflict
conflict between food
production and
production and fuel
fuel plantations.
plantations. Food production
Food :3 e top priority
production is a top priority for
all prime
all prime land.
land. Grazing of
Grazing of cattle
cattle may
may also
also compote for the
compete for the same
same area-.
areas.
If intensive wood
If intensive production is
wood fuel production envisage thatt area
1.7 envisaged rea would
would not be
available for
available for grazing. Grazing would
grazing. Grazing destroy th6
would destroy seedlings in the
o r seedlings
the young
beginning, and
beginning, andlater
later the
the growing tr6o)swould
growing trees wouldsuppress
supp--:all
all grass.
grass.

It is
It is also
also i,:,,,rtant
important that
thatthethearea
areafor wood
for wood fuel
fuel plantations
plantations be
be
available atatminimum
available minimum Or no no cost.
cost. Fuelwoodplantations
r'uelwood plantations cannot
cannot support
support
major
major compensation
compensation for Land.
for land. In
In many cases, the
many cases, the existing
existing forest
forest stand
stand
has been
has been cut,
cut, and the land
and the land is
is not
not used
used for
for any
any other
other purpose. Such areas
purpose. Such
wouldbebe ideal.
would ideal.
Topographyisis important
Topography important especially
iallywhere
where mechani7ed
mechanized harvesting
harvesting
is
is desired:
desired: steep ravines
steep t:avines or
or slopess would
would bebe aa ma'c problem for
major problem for
operating and
operating and transport,
transpctt, which
which are of course
course easiest flat unbroken
easiest in flat unbroken
areas. Modern
areas. machint,' can operate on
Modern machi on slopes
slopes of u- to 25-30
of up -30 percent.
, percent.
Ravincs and
Ravines and strea-c
streamsw-.,uld
wou split the
split the area
area into
intocompai,,o ..--, more
compartments, more roads
roads
Navetoto be
woul I have
would be built
built per
pernet
nethectare and
hectare more
and morework
work woui-
would be
be needed
needed for
for
transporting
transporting products
products and machinery. In
and machinery. In some actual cas,
some actual ;, 50
cases, 50 percent
percent of
of
the
the area
area has
has been
been us..: 1,,t- mechanized
used for mechanizedwoodwoodfuel
fuel production,
production, and
and manual,
manual,
labour
labour intensive
intensive methods havebeen
methods have beenutilized
utilized on
on the
the steep
steep slopes.
slopes.
5.2.2
5.2.2 Climatic
The degree
The degree of y ess of an nnorg/ planta'.
of success of an energy plantation project :.;oject depends
depends
greatly on
greatly on climatic
climaticcoo.,,i6ions.
conditions. Tier, ,:hould be o,o4,gh rainfall in
There should be enough rainfall in
relation to
relation evaporation.
to evaporation. If aro a' precipitation
If annual orecipitat.....l is less than
is less
11 000-1
000-1500
500rom,
mm, thethe iiells will
yields will not
not oe
be au
as large
large asas with
with ample rainfall
rainfall of
of
sav 22 000 rom.
say mm. The annual
The annuJ1 distribution
distribution of rainfall
,f rainfall in is also
a so important.
important.
Thelength
The lengthofof the
the dry
dry season,
season, the
the severity
severity of
of rains,
rains, and
and the
the incidence
incidence of
of
frosty mornings
frosty mornings andand gale
gale winds, are all factors totobebeconsidered
winds, are all factors consideredwhen
when
planning
planning an
an energy
energy farm.
farm.

5.2.3
5.2,3 Infrastructure
Infrastructure

The infrastructure of the energy farm area has to te ready or

T e infrastructure of the energy farm area has to be ready or
close to r
close to readinesss for
for the
thenew
newdevelopment.
development, The items
The items to be
be considered
considered
include, mg others,
include, among the road network, bridges and their bearing
others, the road network, bridges and their bearing
existing fuel supply and distribution systems - power
capacity, ther existing fuel supply and distribution systems - power
capacity,
aeneration tystems and power lines repair shops and spare parts
generation systems and power 1 ines - repair shops and s re parts
suppl iers , s,hools,
suppliers, school s 1med i cal services,
medical banks, Government
serv ices, banks Government
f offices, etc.
ces, etc.
together form the particular
All these factors together particular environment which
determines the
determines the nature
nature of
of investment.
investment.
 -- 330 -
-

5.2.4 Human resources

Employment
Emp, nt is
is one
one of the key
of the key elements in
in wood
wood energy
energy projects.
projects.
be new
There will be new possibilities
, ossibilities for
for work close to rural
ose to rural villages.
villages. Part
of is for
of the work is for the
the entire
entire year,
year, in hai'
harvesting
,,ing or in the
or in the management of
of
plantations. Other employment consists
Other employment consists of part-time jobs, e.g.
art-time jobs,
, e.g. in
in the
establishment
establishment of
of the
the plantations
plantations or
or s-metimes
sometimes in
in harvesting,
harvesting, often
often
dovetailed with
dovetailed with local
local agricul tural work.
agricultural work. normally has
Harvesting normally has no
fixed seasonal
fixed seasonal timetable,
timetable, butbut planting
planting isis more
more related
related to to seasonal
seasonal
variations of
varf,ations of local
local weather. The need
The need of
of labour will vary
labour will vary from
from one
another, but problems in
project to another, in getting the
the required
required unskilled
unskilled labour
force
for.-o are
are infrequent;
infrequent; it
it is
is often
citen more
more difficult
difficult to
to find
find the
the key
key persons
persons
the required
wi th the required education
education or or skills
skills to manage tire
to manage the programme and to
programme and
and maintain
operate and maintain the
the equipment.
equipment.

Table 11

:imate manpower reguirements for wood supply in largely manual,

in mechanized operations, under typical tropical conditions

Operation Manual Mechanized

,J-years/1 000 HL::'

Production of
of planting stock 10 5
5

Plantation establishment 10 3
3

Plantation management 10 55

Harvesting and transport

Harvesting and 6
6 33

Other 2
2 1

Total 38 17

** wood
Bone Dry Ton of wood

The organization
The organization or financial entity
or financial entity which
which will
will carry
carry out
out the
the
project could have
have many forms:
forms: if
if people in the
people in the area
area like to to use
use and are
familiar with cooperatives,
familiar cooperatives, these
these should
should be
be supported
supported byby aa strong
strong higher
i

level
level organization
0 anization to to provide
provide the the local
local cooperative
cooperative withwith technical,
technical,
manager and financial
managerial and back~up.
financial back-up. institutional solution is
Another institutional is that
the government or
the national government or aa national
national non-profit
non-profitorg,.
organization
Tz-,tion implements
implements
project.
the project. This
This should
should be be considered
considered when
when the
the 1-
local people
people lack
lack the
the
necessary capability
necessary capability to to organize
organize the the project.
projg.t. ItILls is still
still ofof utmost
utmost
importance to get the local peoplepeople involved
invol ed in
in the
the energy farm
activities,
activities, to see
see it
it as aa way to to raise their
their level oi living.
level of

5.2.5 Availability of
of funds
funds

The investment
investment in
in new
new energy
energy farms
farms and wood~fired boiler
and wood-fired boiler plants
plants
or
or power
!r plants is
is substantial,
substantial, from the beginning
from the beginning of the
the project,
project, and
and
inancing alternatives
the financing
th- alternatives have
have toto be
be studied
studied inin detail. They may
in lude low
include low interest
interest loans
loans from
from international
international development
development banks
banks oror
 - 331
331 --

L,..naldevelopment
national developmentfunds,
funds,channelled
channelled through
through the
the national
nationalgL-Prnment
government Of
or
o-',er
other national
national agencies
agencies inin a mannerwhich
manner w':ichtakes
takesinto
into consideration
consideration the
the
high initial con
high initial n, the
costs, the giow'rld
growing demand electricity, the
demand for electricit.y, the possible
IiL1e lowlow
returns
returns during first yeatY,
during the first years ofof oper n, etc.
operation, et.c. The finam,ial
The financial scheme
scheme
should
should bebe adequat.e
adegue,eforfor overcoming
overcomingt.hetheinitial
initial high
high interest
interestand
and operating
operating
costs.
costs.

6. TECNNOLO'ICAL FEATURES
TECHNOLOGICAL FEATURES OF
OFFUELWOOD
FOELWOOD PRODUCTION
PRODUCTION

6.1 Tree Species

Tree

There ai'eare many promising

promis i ng tree 77--les
tree su', :.le
ies sui t.able for t.he
for the
production ion of which will
,,,od fuel,, and which
of wood will yyi, high (it, ,,-ities of dry
high quant.ities of dry
fliass per
biomass per hectare.
hectare. The erPrgy content
The energy content per dry di ....1ogram
kilogram of of wood
wood does
does
not v:7r-v
vary muchmuchamong
among specie. Normally
thespecies.
the Normally thetheheating
heting value
value is isaround
around 16
16
to lE
to 18 MJ (MegaJoule)
Vl (Mega Joule)per
per kilogram
ki'r,ram of of bone dry
dry wood, deducting the
wood, deducting the heat
heat
needed tota evaporate
needed evaporate thethe moinrure
moisture in in green
green wood (50%moisture).
wood (50% :c:' .:e). In In the
the
selection of species frr
selection of species for an energy it
energy farm,
farm, it is not ar,vi-lble to have
is not advisable to have
species which accumulate silica, or are of
,.es which accumulate silica, Or are of low low dens:
densi making the
making
processing
, expensive. EvenEven though
though maximum
maximum mass
mass productiorper
production perhectare
hectare is
is
air,A at,
aimed at, the the trees
trees woula
would need
need to
to have
have relatively
relatively::,11
welldeveloped
developed stems,
stems,
and the
and the stems
stems should
should bebe straL;:,
stra . Currently some
Currently some of the most
- the most promising
promising
tropical species
tropical species are the gi vt ipil-ipil
are the giant~ ipil-ipil (Leure 71.1cocephala), and
(Leucaena leucocephala),
various Acacia
various Acacia andEucaly.p.t
and Eucalyptus s species.
There has been
There has been aa lot
lot of over ipil-ipil.
of enthusiasm over ipil-ipil. It does
It does well
well
at low elevations
at low elevations (under
(under 500
500 m sea level),
m above non-acidic, deeP
at.v. sea level), on non-acidic, deep
soils, and on sites where its poor resIstance against heavy winds is not
soils, and on sites where its poor resistance against heavy winds is not
a prol31,-1.
pro~lem. The giant ipil-ipil's benefits are high growth rates - up to
The giant ipil-ipil's benefits are high growth rates - up to
100 mm /ha/a; (50
100 (50 bine
bone dry - ability to fix nitrogen, produce leaf
dry tons)
tons) - ability to fix nitrogen, produce leaf
used as
meal to be used as fodder
todder for
for cattle
catt~le and
and ability
abilitytotoregenerate
regeneratecoppicing.
coppic

Acacias and
Acacias eucalypts often
and eucalypts often grow well on
grow well on poor
poor soils,
soils, and
and much
much
experimental work
experimental is being done to find th- best species and their seed
work is being done to find the best species and their seed
It is important to get the best r-
sources. It is important to get the best seeds
sources. n5 from
from thethe best
best sources
SOurces in
in
order
order to
to guarantee
guaranteegood
good growth.
growth. --nty or so different clones
There ar,
There are twenty Or so different clones
of giant ipil-ipil and only a
of giant ipil-ipil and only a few few of are really
of those are reallygood
good performers.
performers.
The seeds
The seeds will
will have
have to
to come
come from
from aa source
source w'thin
within the
the same
same climatic
climatic zone.
zone.

6.2 Seedling
Seedling 7roduction
Production and
and Plantation
PlantationEs,,ablishment
Establishment

After
After the
the s,-c?,
seeds are
are procured,
procured, can be used for Aling
they can be used for seedling
production in
product~ion in a nursery or or for
for direct
direct sowing, distributed to
.. distribut~ed to inc.vidual
individual
farmers. Planting
farmers. Planting seedlings
f.. -21ings is
is often
often prd::.ted
preferredoveroversowing
sowing inin order
order toto
ensure a fast
ensure start. Strong
fast start. Strong nursery-producA plants can
nursery-produced plants can mor easily
more easily
ccr:r.,etewith
compete withthe theexisting
existing grassgrass and other vegetation
and other vegetation thanthan the
the seedlings
seedlings
:,-.:wrtfrom
grown fromseedseedononsite.
site. Only Only in in those
those cases,
cases, where the soil
where the soil can
can be
be well
well
p,opred and/or
prepared and/or competition
competit.ion from from other
other -,,ietation
vegetation can can otherwise
otherwise be be
minimizedor
minimized or eliminated,
eliminated, sowing sowing cancan be
be coe .!.'.,red. Sowing
considered. Sowingisis cheaper
cheaper inin
-he
the beginning,
beginning, but butmuch
much workwork isis needed :nr;,:after to
needed thereafter to convert
convert thethe site
site
into
into aa fast-growing
fast-growing high high yield
yield energy
energy plant:,tion.
plantation.

A
A ce; nursery can
central nursery
' 1 can provide
provide good
goodseedlings
seedlingsatat the
the right
right time,
time,
which means t',
which means that inIn seasonal
seasonal tropical
tropical climates,
climates, seedling
seedling production
production often
often
takes
takes place
place during
during thethe dry dry and
and hot
hot season.
season. Thebest
The best time
t:-.e to
ro plant
plant isis at
at
the
the start
startofofthe therainy
rainy season,
season,which
whichwould
would guarantee moisture
guarantee sufficient moisture
for
for the
the young
young seedlings.
seedlings. The The nursery
nursery period
period requires
requires artificial
r.rtizicial watering
watering
as well
as well as
as shading.
shading.
 - 332 --
-

In the tropics,
In the tropics, the
the use
use of
of barerooted
barerooted seedlings
seedlings for
for wood
wood fuel
fuel
plantations
plantations hashas gradually been
been replaced
replaced byby the
the use
use of
of potted
potted stock.
stock.
Potted seedlings
Potted seedlings are
are generally
generally stronger
stronger and
and easier
easier to
to handle,
handle, although
although
the weight
the weight per
per plant
plant is higher than
is higher than for
for barerooted
barerooted stock.
stock. There are
various pot systems
various systems starting
starting from
from plastic
plastic bags
bags or
or tubes
tubes to
to complete
complete
potted seedling
potted seedling production
product.ion systems.
systems. The potted
The potted seedlings
seedlings often survive
survive
better in
in the hands of inexperienced
hands of planters, as they
inexperienced planters, can withstand
they can withstand
longer exposures to
longer to the
the sun.
sun.

In the preparation
In the preparation of
of plantation
plantation areas,
areas, the existing
the existing brush
brush or
or
grass can be
grass be used for
for energy
energy generation,
generation, or it
it can
can be
be slashed
slashed and
and burned
the site
on the site prior
prior to
to planting.
planting. strong grasses
Strong grasses can even be be suppressed by by
a crusher mounted onon aa farm tractor~
farm tractor. If the soil
If the is compact,
soil is compact, it
it may have
have
to be
to be cultivated
cultivated in
in order
order toto get air
air to
to penetrate
penetrate toto the
the rooting
rooting zone.
zone.
For acidic
For acidic soils, liming is
soils, liming is recommended
recommended toto adjust
adjust the
the pH
pH values
values closer
closer to
to
the optimum for
the for high
high yields.
yields. The applies for
The same applies for fertilizing:
fertilizing: aa small
amount of fertilizer
amount fertilizer during
during planting
planting can
can increase
increase the
the growth rate
rate during
during
the critical first
the first months.
months.

Wood fuel
fuel plantations
plantations are
are normally
normally dense,
dense, 55 000000 to
to 20
20 000
000
seedlings hectare, which
seedlings per hectare, which means
means aa spacing
spacing of
of 1x2
lx2 to
to 0.5x1
O.Sxl m;
m; usually
the best
the best results
results are
are achieved
achieved by
by planting
planting 55 000
000 to 10 000 000 seedlings
seedlings per
per
hectare. Harvest.ing
Harvesting technology should also be considered when
determining spacing, especially if
determining spacing, a mechanized system
if a system isis envisaged.
envisaged5

6.3 Plantation Management

After establishment,
establishment, the energy plantation
the energy plantation needs
needs tending and
guarding. The growth
The growth ofof the
the grass
grass has
has to
to be
be suppressed
suppressed by by weeding.
weeding.
Especially during the
Especially during the dry
dry season,
season, fires
fires areare frequent,
frequent, and they can
and they can be
be
reduced or
reduced or eliminated
eliminated by by fire-breaks
fire-breaks between
between blocks,
blocks, or
or by
by organized
organized fire
fire
control with manned
control with manned watch-towers
watch-towers and
and fire-fighting
fire-fighting crews.
crews. Fire-breaks
can either be
can either be open spaces
spaces with roads oror dense,
dense, 10
10 to
to 15
15 mm wide
wide bush-like
bush-like
rows of
rows of fast-growing hardwoods.
hardwoods.

monocultures require
Fuelwood monocultures require the
the control
control of
of diseases
diseases or
or pests.
pests.
be required
Immediate action may be required to
to limit
limit damage
damage to
to aa minimum.
minimum. This work
needs support
needs support from anan organization
organization which
which has
has the
the necessary
necessary know-how
know-how in
in
this particular
this particular field.
field.

6~4
6.4 Fuelwood Harvesting and
and Transport

The
The time from plantation establishment fuelwood harvesting
establishment to fuelwood harvesting isis
four to
often only four to seven
seven years.
years. methods for
Harvesting methods for energy crops
crops are
those
those suitable
suitable for
for material
material which
which isis small
small in
in diameter
diameter and even-sized~
and even-sized.
Manual systems or light
Manual systems light harvesting
harvesting machinery
machinery can
can be
be used.
used. The degree ofof
mechanization depends on on the
the volume of production and on local conditions
such as
as topography,
topography, need
need for
for employment
employment opportunities,
opportunities, etc.etc. The
The wood can
be harvested
be harvested and t.ransported to
and transported to the
the utilization point
point inin many forms, from
many forms, from
whole trees to
whole trees to chips made in in the
the woods
woods or
or at
at the
the roadside,
roadside, inin short
short logs,
logs,
etc.

For
For small
small volumes,
volumes, farmers
farmers can
can use
use axes
axes or
or saws
saws to
to fell
fell the
the
trees. The delimbed
The del imbed stems
sterns are
are then
then either
either carried
carried to
to roadside
roadside oror hauled
hauled
by animal
by animal power.
power. Large volumes need
Large volumes need more
more mechanization:
mechanization: felling and
felling and
delimbing by chain-saws,
delimbing by chain-saws, andand transport
transport to to roadside
roadside or
or to
to the
the final
final point
point
of utilization by a
of a farm
farm tractor,
tractor, forwarder
forwarder or or skidder.
skiddere In
In extreme
cases, winching
cases, can be
winching can be used
used for
for steep
steep slopes,
slopes, but
but this
this considerably
considerably
increases harvesting costs.
increases costs. Often the
Often the best solution
solution is
is to
to use
use ordinary
ordinary
farm
farm tractors
tractors whenever
whenever possible,
possible, as the the local
local people
people are
are more
more familiar
familiar
 - 333
- 333 --

with operating and

s,th operating and mairi
maintaining
,ng them
ther.than special harvesting
,n special harvesting equipment.
equipment.
Mechanical hoists are
hanical hoists are preferred
pi over hydraulic
rred ove tdraulic ones
ones as they are
as they are simple
simple
and easy to maintain.

Trucks move
Trucks move the wood from
the wood fromroads.,
roadside
le storage to the
storage to the utilization
utilization
point, where the
point, the distance
distance is
is more
more than
than 5 to km.
to 10 km. - A
A farm
Earm tractor-
trailer combination can
trailer combination can bebe used
used effectively
effectively 10r
for short
short distances
distances toto take
take
the wood all
the wood all the way from
the way from the
the stump to the user,
to the user, especially
especially when the the
roads not of
roads are not of the
the best.
best.

For harvesting
harvesting of of residual
residual forest
forest stands,
stands, clear-cutting
clear-cutting of
of
logged-over areas.
areas, equipment is required similar to that
r-'ar to that used in the
original harvesting
harvesting of
of merchantable
merchantablelarge
larged...r.
diameter trees.
ter trees.

The timing
timing of
of harvesting
harvesting and
and the
the need
need f:r
for intermediate
intermediate storage
storage
are
are factors, such
determined by local factors, such as
as the
the sever
severi of the rainy season
of the season
and
and its effect on the
its the wood fuel
fuel supply,
supply, non-availpniiity
non-availab ity of of labour
labour during
during
the
the peak of agricultural activities,
activities, etc.
etc.

7. CONVERSION OF WOOD TO STEAM OR

OR ELECTRICITY
ELECTRICITY

7.1 Wood Fuel Proce-

Processing and St
7 Storage

wood fuel
The w_rd fuel used isis either in
in the form of
of small
small sized
sized lugs
logs for
small, manually infed installations,
installat ons, ch
chips for mechanically fed
facilities,
facilities, or slightly
sligh blocks for
larger blocks for gasifiers
gas iers oror charcoal
charcoal kilns.
kilns.

Logss can
Log can be
be hauled
hauled toto the
the user
user inin the
the final
final form
form from
from the
the
forest. Chips
forest. Chips andand blocks
blocks can
can bebe produced
produced in in stationary
stationary chippers
chippers oror
splitters
splitters atat the plant, in in the plantations or
the plantations or atat the
theroadside,.
roadside. These
stationary facilities
stationary facilities normally
normally have
have a high capacity and
high capacity d low power
lew power
requirement;
requirement7 electricity can
can be
be used
usediteeead
insteadofofclient-,
diesel oil.
i. also
They also
produce aa homogeneous quality
quality fuel
fuel which
which f3
flows
- easily through
easily t,t .n the r,istem.
system.
The use of
The use of mobile
mobile chippers
chippers in
in the
the plantatIt
plantations is justified in
is justrrr, in some
i soma cases
to
to increase the overall recovery
increase the recovery ofof wood
wood fuel.
fuel.

Storage for
for at
at least
least one
one week's requirements has
week'n requirements to be
has to be available
available
at the boiler
at the boiler to guarantee an
to guarantee an uninter,nnted
uninterrupted fuel
fuel supply.
supply. The storage
The storage
volume roughly ten
volume should be roughly ten times
times the
the size
size of
of an
an oil
oil tank
tank with
with the
the same
same
energy content.
content.

There has been a

There has a lot
lot of
of discussion
discussion on on the
the merits
merits ofof drying
drying wood
wood
fuel
fuel prior to feeding
feeding into
into the
the boiler.
boiler. is clclear
It is ,,n that the recoverable
ttat the
energy increases and the
energy increases the combustion
cornbus t ion equipment
equ ipment can ,7:tt bea simplified
s imp I if ied as
as the
moisture content
moisture content is
is reduced.
reduced. However, nature_
However, natural air
air drying,
drying, between
between
felling and delirnbing
felling and elimbiN: or in
in transport
r:-transport and storage,
storage, should
should bebe enough
enough to
to
reduce ch.,
the maximum
-aximum moisture
-tture content
content toto 40
40 percent
percent ofof tto
the green
green weight.
Artificial drying ccombined with aa boiler
Artificin!,.'ing I boiler plant
plant is
is so
so ourrolicated
complicated that
to itit
is not a:3,1:rriple
advisable for
t small
ll installations.
installations. In
In some large installatious
some 15rge installations
be feasible
drying may be ible to and performance.
to increase capacity and performance.

7.2 Steam Boilers

ilers

To raise
raise s!
stearn in
in small amounts, say
small amounts, to 55 t/h
say up to tlh at relatively
relatively
low
low pressure below 15/20
pressure below ID bar, an ordinary fire-tube
bar, fire-tube boiler equipped with
aa prefurnace is
is the beat
best and
and cheapest
cheapest solution.
solution.

If
If manual infeed is
manual infeed is used,
used, the
the prefurnace
prefurnace can be be aa simple
simple Dutch
Dutch
oven type refractory-lined box
oven type box into
into which
which the
the WOUC odl is
wood fuel is delivered. It
It
has to
has to be
be stopped fur ash
stopped for ash removal
removal once
onceorortwice
twicea aweek.
wk. It is easy to
It is to
 -- 334 -
-

operate
operate but its control
but its control characteristics
characteristics are
are not
not the same as
the same as those
those of an
inclined grate ~
inclined grate. In order to
In order to have aa continuous
continuous operation
operation an
an inclined
cooled grate
water cooled grate is recommended.
is recommended. Ash oan be
Ash can be removed
removed manually
manually during
dur ing
ion. The fuel
operation. fuel has
has toto be taken
taken higher
higher up
up to
to aa chute
chute which feeds
feeds the
the
by gravity.
grate by gravity. The boiler load
The boiler load is
is controlled
controlled by induced draft
by induced draft fan
inlet
inlet vanes dampers+
vanes or dampers.
If the capacity
If capacity requirements
requirements become
become more
more sophisticated,
sophisticated, some
some
may be
modifications may be adopted.
adopted.
Power
Power generation requires
requires relatively
relatively highhigh operating
operating pressures
pressures in
the boilers in order to
in order to get good c,(1 ,11 heat
good overall heat rate
rate efficiency.
efficiency. This
means the use of water-tube boiler,
of water-tube boilers instead
, -t--d of fire-tube types. The
combustion equipment
equi can bebe placed dr
placed directly under the
tly under the furnace.
furnace. As the
pressures are raised, the requirements
pressu,i requireri,nts related to the quality quality of
feedwater
feedw,A.:1 become
become more
more stringent. This may
ME affect the overall
-''ect the overall opeiati...,
operation
of the boiler pl,ot
11-1 plant more
more than
than any
any °the,
other factor.or. Poor water
Poor water quality
qual:
results inin undesirable
urdesirable deposits
deposits on on the
the watersides
watersides of of tubes,
tubes, wn..r
which
gradually result
gradually rcsul in in the
the overheating
overheating and and failure
failure ofof that
that tube.
tube. In thit
In that
respect,
respect, aa fire-tube
fire-tube boiler
boiler could
could be be much more risky
much more risky than
than aa water-tube
water-tube
boiler. However, although
However, although thethe pressures
pressures are lower, this
are lower, this does not mean
does not
that an explosion
that an explos ion would
would cause
cause le'-
lessg damage but that
damage but that thethe boiler
boiler accepts
accepts
more readily hard
more readily hard water
water than
than itit does
- 3 higher pressures.
higher pressures. The industrial
T'e industrial
world went through this experimental
exper:,,7m,,: A period
period with boilers about
with boilers 80-90
obout 80-90
years
years ago
ago and,
and f as a
a result strict pressure
result pressure vessel
vessel code,
codes and water
and
treatment rigulationi
regulations were
were a,iipted.
adopted. For rural areas,
For rural areas, the
the pteoaration
preparation of
of
feedwater can be
feedwater ,an using eevaporators,
be donee using instead of
,porators, instead of adopi
adopting processes
.ng processes
require impori,id
which require imported chemin.als.
chemicals.

solve the
This would solve problem of
the problem of operating
-peratii the plant
,.he plant without
without
treatment. Besides
proper water treatment. the feeei,-
Besides the feedwaterier
guality requirement, it
qua!, requirement, it is
is
important toto have
have aa continuous
continuous water-sur':
water-supply in,n the case of
the no:yg of loss
loss of
of power.
Every boiler
Fviry boiler should
should have
have aa feedwater
feedwater tank full
full of
of de-aerated
de-aerated water,
water,
sufficient for 60
e,ufficient for 60 minutes'
minutes' operation.
operation, and there should
and there should be
be aa feed
feed pump
which draws
draws its
its driving
driving power
power directly
directly from
from the
the boiler
boiler (steam
(steam engine
engine or
turbine)
turbine).•

most acute
The most acute air
air pollution
pollution problem
problem created
created by
by aa wood-fired
boiler plant is is due
due to
to particulate
particulate emissions.
emissions. These can in in most cases
cases be
be
controlled by
controlled by aa multi-cyclone arrangement.
arrangement. Sulphur is not released,
released,
since wood
since wood does notnot contain
contain significant
significant quantities
quantities ofof that
that element.
element.
NO efcy
NO -formation
,tion is reasonable, as the
is reosonable, combustion temperatures
the combustion temperatures are
are relati-
relati-
vely J,i low (1 000-1 200
(1 000-1 :00 °Cl
°C) due to the
due ro the inherent
inherent process
process moisture,
moisture, and
and the
the
high availability
ilabilit of excess air.
of excess Carbon
Carbon monoxide
monoxide can
can bebe emitted
emitted
occasionally
(pc( n- i :dly if
if the
the air
air flow
flow to the combustion zonezone is
is not
not sufficient.
sufficient.
The should basically
The boilers should bas ically only use
use wood
wood as
as fuel.
fuel. It has to
It has to
be carefully studied whether supplementary oil-firing equipmente-r:---t isis
needed. The
The combined firing
firing of
of oil
oil and
and wood
wood results
results in
in re-idio ri ld-up
residue build-up
on the
the boiler
boiler surfaces,
surfaces, especially
especially superheaters
superheaters or
Or the
the tui
tubesn. in
in the
the
Or third
second or third pass of aa fire-tube
fire-tube boiler.
boiler.
using aa steam
Generating power by usMig steam turbine
turbine or aa steam
steam engine is is a
safe
safe way of converting
converting woc
wood energy
ep,irgy into
into electricity. However, the
However, the
overall efficiency is
overall is poor for
for i-all
small units
units of
of say
say 100-1
100-1 000
000 kW. 7' :1 is
kW. This is
attributable toto the combined if:'ect
the combined effect of factors, for instance
of many factors, inst low
overall system efficiency due to fairly
to steam pressure and
low stgam
temperature,
temperature, and the poor
and the poor expansion
expansion effici,g,cy
efficiency of a iiggle
of a single wheel
wheel turbine
turbine
or a steam
steam engine.
engine. Technically,
Technically, it it is possible to have a a higher
h systems
performance, but
performance, but the
the cost
cost of
ofthethe equi-
equipment would beg excessive. The
ent wou
following
following efficiencies
efficiencies can serve as guidelines:
 -- 335
335 --

Unit Size Efficiency

Efficiency Fuel
~uel Consumption
Consumption
kW kg bone
kg bone dry
drywood/kWh
wood/kWh

500 15 1.5
55 000
000 27 0.9
0.9
10 000
10 000 22 0.8
O. B

The availability of fresh water is a vital prereg

The availability of fresh water is a vital isite for
prereq~isite for
condensing powergeneration
condensing power generation asas it
it isisneeded
neededfor cooy.ng,
for coo~ing,200
200mm/hr/MW
/hr/Mlv for
for
straight
straight cooling;
cooling; aa cooling
cooling tower
tower would
would need
need 5 m /hr/MWasas make-up
m /hr/MI'I make-up toto
cover the evaporation
cover the evaporation losses.
losses.

If there
If there isisa aneed
needfor
forlow
lowpressure
pressuresteam
stearnfor
forthe
thedrying
dryingofof
wood
wood
or any other material, the best alternative
or any other material, the best alternative is is to
to h,ve cogeneration
have a cogeneration
facility.
facility. The efficiency
The efficiency is is over
over 7070 percent,
percent,which
which moons that only
means that only about
about
0.35
0.35 kg of bole
kg of bone cdry wood
w is required
gl is required to to generate
generate ore of electricity.
one kWh of electricity.

7.3
7.3

has been intensively studied dur.lg the last few

Ge,Llicatic has been intensively studied during the last few
Gasification
years. Old
years. Oi. des
du h. !e been
have been dug
dug out
out and new materials
and new material used used to to build
build
fixed bed gasitiers, or totally new circulating flui
fixed bed gasifiers, or totally new circulating fluidized bed 1,.;d technology
has been
has been developed.
developed. Combined
Combined withwitha adiesel
diesel engine
engine ti ,1,,,)¡,,h is
this approach is ideal
ideal
for building a small wc ,1-based power plant.
for building a small wood-based power plant. Woou,
Wood, a 0high nighvolatile
volatile
content fuel, is easy
content fuel, is easy to gasify,,4ify, and
and ititdoes
does not
nothave
have titoo
muchmuchash ashwhich
which
would cause
would cause operating
operating problems. For small installations fixed bed
problems. For small installations fixed bed
gasifiers are cheap
gasifiers are simple to operate,
cheap and
and simple to operate, al although
though they need normal
The infeed of fuel and the removal of ash interfere with gas
tending. The in feed of fuel and the removal of ash in wi th gas
production, but this
production, this cannot be considered
cannot criticol
considered critical in small small
installations.
installations. By using a setof two or three gasiflor
set of two or three gasifiers to to feed
feed one
one
diesel engine,
diesel engine, the
theproblems
problemscancanbe
beovercome.
overcome. The The smallest
smalle,t available
available unit unit
using circulating fluidized bed technology generates around
using circulating fluidized bed technology generates around 22 MW of
MW of
electrical power.
electrical power.

A gasifier itself has very high efficie

A gasifier itself has a very high efficiency of 3.
df around 90
percent. The losses are mainly caused by radiati:n and the dt.,rnt
percent. The losses are caused by radiation and the unbubnt
material in the ash. It produces gas at
material in the ash. It gas at aa high
high te.pe:atute,
temperature,4L0 n00%,
400-800 C,
depending on the
nding on the design.
des n.

This gas can be used directly for example in an oil-fired

This gas can be used directly for example in an oil-fired
boiler, to replace fuel oil. Provided that the wood fuel has
boiler, to replace fuel oil. Provided that the wood fuel has a low
moisture content, the
moisture content, the capacity
capacity of
of the
theboiler
boilerremains
remainsalmost
almost the
thesame.
same.

For use in diesel engines the gas has to be cooled and cleaned
For use in diesel engines the gas has to be cooled and cleaned
of abrasive particles.
of abrasive particles. Small units
Small units up
up to
to50-100
50-100 kW can use
kW can use air-cooled
air-cooled
systems with fabric filters.
systems with fabric filters. Larger units
Larger units have
have toto be
be designed to use
designed to use
water coolers
water coolers and
and aa wet scrubber. About
wet scrubber. one-third Or
About one-third or one-quarter
one-quarter of
of the
the
wood energy has
wood energy has toto be
be dissipated
dissipatedinto
intothethe
atmosphere
atmospheredepending
depending on
on the
actual
actual design.
design. A considerable amount
A considerable amountofoffresh
freshwater
waterisis needed
neededforfor this
this
purpose and
purpose and it
it picks
picks up
up some
some contamination
contamination in in the
the process.
process.

To use
TO use this
this gaseous fuel the
gaseous fuel the air
air intake
intakesystem
system as z,t,
....ill as the
as well
f,wliniection
fuel injection system
system of
of the
the diesel engine will
diesel engine will have
have to be mcdified.
modified.
Inor con
can bebe dual-fuel
dual-fuel operat,d, ,FIcn gives
operated, which gives considerab
considerable flexibil i in
epprarion. When
operation. Whenoperating
operating cOn rucodgnc, about 55 percent
wood gas, V-,:iut percent ci totplmcl1
of the total L
input has
input f.ns to
to come fromfuel
corne from fueloil
nil ici
for qoi1t-19 the gas.
iting the gas.
The overall
The overall thermal
thermal efficiency
effie of
of these
thesegasifier-1.,..eled
gasifier-fueled diesel
diesel
engines
e ines is
is competitive.
competitive. A 500 kW
A 500 kWunit
unit has
has almost
almost the
the same
same thermal
thermal
efficiency
e iciency as ten times
as aa ten times bigger
bigger wood-fired
wood-fired condensing
condensing power plant:
power plant:
about 11 kg bone
bone dry
dry per
perkWh.
kWh. Large uni
units have the
ts have the same
sameheat
heatrate,
rate, or
or
possibly
possibly slightly better, than the
slightly better, the stearn
steam cycle based units.
cycle based units.
 -- 336
336 --

7.4 Cor.d.irison of Dendro-Thermal,

rmal Coal and Oil-Fueled

In order
In order: Loto provide
provide a rough financial and
rough financial and economic
e nic basis for
basis for
ti - suitability
estin,ating the
estimating suitabilityofofwood-based piar
wood-based power plants
i rural areas,
for rural areas,
7

ti'
thedata
datashc,--1
shown inin Table have been
Table 2 have been extrdttr and summarized
extracted and st,,-.r-zed from the
from the
EKONO pow- ,nt cost file.
power plant
. cost file. The figures
The figures are
are of
of course
course only
only indicative,
indicative,
conditions; vary
ce condi
since vary greatly
greatly among regionsand
among regions andlocalities.
localities. TheThe annual
annual
O1 ution ti e at full load has been estimated at five thousand hours.
operation time at full load has been estimated at five thousand hours.
Thecosts
The costs represent
represent the
the 1984
1914fall
fall level.
level.

It can be seen from the table that the costs of generating

It can be seen from the table that the costs of generating
e rricity on the basis of wood fuel is roughly the same as for plants
electricity on the basis of wood fuel is roughly the same as for plants
td,i;.d coal.
using For plants
For plants fueled
fueled with
with heavy
heavyfuel
fueloil,
oil, investmert tosts are
investment costs are
lower, but
lower, but the
the cost
cost of
of the
the pou - produced
power produced isis higher,
higher, at
at the
the J,-..rlied
assumed fuel
fuel
prices. The cost of
prices. of wood industrial residues
wood is lower, if industrial residues are
are uEed.
used. The
cost (1
cost of oother fuels will v _end'ng on
,r.r fuels will vary depending
^ onthe
the country,
country, transport
transport costs,
costs,
etc.
etc.

7.5 Concluding R-ritarks

Concluding Remarks onon Planning
Planning Dendro-T::e
Dendra-Thermal Power Plants

To summer
To the conditions
summarize the conditions required
required for viabilit of
for the viability of these
these
small wood-based
small wood-based p- plants, the
power plants, the following
foll"owing featutes
features should
should qe
be kept
kept in
mind:
(a) There should be enough load to get a baseload
There should be enough load to get a base load type
type of
of
operation.
operation.

(bl Sufficient techni

Sufficient technical1 -.xpertise
expertise must be available
must be available to
to support
introduction c.
the introduction cne relatively
of the relatively advanced technolcy
advanced technology
sur:.;the to
rural areas.
rural areas.

(c) A
A financial supporting
financial supporting activity,
activity,which
which would
would incre,,,e
increase the
attractiveness of
attractiveness of the the venture,
venture, could
could be the putcdase
be the purchase of
excess power
excess power by government-controlled power
by a government-controlled power gcne-ating
generating
authority,
authority, inin case
case the
thesystem
system can
can be
be connected
connected toto aa larger
larger
distribution network.
distribution network.

8.
8. 8XPERIENCE OBTAINED FROM
EXPERIENCE OBTAINED FROM DENDRO-ENERGY
DENDRO-ENERGY PROJECTS
PROJECTS
The following information
The following information is is based
based on
on experience
experience gained
gained from
from two
two
dendro-energyprojects
dendro-energy projectsinin the
the tropics,
tropics, one
one in
in the
the Philippines
Philippines and
and one
one in
in
Tanzania,
Tanzania.

8.1 Philippines
Philippines

Studies were
Studies cartted out
were carried out inin 1980-81, consisting of
1980-81, consisting of evaluating
evaluating
feasibility
the feasibility of of producing silvicultural
producing silvicultural biomass for for energy
e.,:d-gy (power
generation,
aeneration, alcohol Tr7r
alcohol production, or for charco'
for charcoal production
prodi.,l (or. on an
industrial scale). These end-uses
ndustrial scale). dictated that
..es dictated ro-ohano,. harvesting
thal mechanized
systems be
systems be used. The proce;. ng plant
The processing plant was envirdgcl to
was envisaged located on
to be located on the
the
coast of
coast of the
theSouth
South China
China Sea,
Sea, about
about25 25kmkm from
from thv .ir-'n. The
the plantation. The plan
called for
called for tractor
tractorororforwatdet
forwarderhaulage
haulage ofofwood to the
wood to the roadside, and and then
truck transportation
truck transportation to the plant.
to the plant. In order to increa
In order to increase the land area
ad land area
available for
available for wood
wood fuel
fuel production
production some
some winching
winching ftrdn
from steep
steep slopes
slopes was
was
found to
found to be
be viable.
viable. TheThe cable
cable winching
winching distance
distance was
was limited to to50-100
50-100 m.
m.

A 6
A 6 000
000 ha
ha area
area had
had been
been made
made available
available to
to the
theManila
Manila Seedling
Seedling
Bank Foundation,
Bank a non-profit organization
non-profit established to utilize
organization established utilize
advanced nursery technology
advanced nursery technology in the Philippines
in the Phil ippines on the Batean
On the Bataan Peninsula
Peninsula
 - 337 --
-

for the
for the production
production of
of wood
wood fuel.
fuel. The area
The area is
is hilly
hilly with
with deep
deep ravines,
ravines,
and at
and at the
the time
time it
it was
was covered
covered with
with grass.
grass. methods to
Various methods to suppress
suppress
the
the grass
grass were
were experimented with, as well
experimented with, well as
as cultivation methods.
methods* Mainly
giant ipil-ipil
giant ipil-ipil was
was planted
planted at
at various
various spacings.
spacings. The many
The many ipil-ipil
ipil-ipil
plantations around
plantations around the
the Philippines
Philippines were
were also
also visited
visited and
and measured,
measured, In
in
order to establish
order establish predictable
predictable growth
growth figures
figures for
for this
this species.
species. Based on
these measurements,
these measurements, 25
25 bone
bone dry
dry tons
tons of
of wood
wood fuel per hectare
fuel per hectare aa year was
year was
considered
considered to
to be
be aa realistic
realistic growth
growth rate
rate for
for the
the area.
area.Systems for
for
harvesting the
the wood crop
crop were
were studied.
studied. The could,
The area with deep ravines could,
however, viable fast-growing
however, not be used for economically viable fast-growing trees, and only
treeS r and only
about half
about half of the
the area
area was
was found
found suitable
suitable for
for mechanized
mechanized short
short rotation
rotation
production&
wood production. The inaccessible
The inaccessible slopes
slopes were planted
planted with
with slow-growing,
slow-growing,
high
high value mahoganies.

Conceptual
conceptual engineering for the
eng ineering for the processing
processing plants
plants was
was carried
carried
out, in
out, in order to
to establish
establish their
their operating
operating and
and capital
capital costs.
costs~

financial and
The overall financial and economic
economic viability
viability was
was calculated
calculated with
with
a view
a view to
to obtain
obtain an
an idea
idea of
of the
thecompetitiveness
competitiveness of
of wood-based
wood-based energy.
energy.
The internal
The internal rates
rates of
of return listed below
below show how wood-based
wood-based energy from
energy from
the project compared with other possible sources of those energy
products:

Product TAR %/a

IRR %/a Compared with

Electricity 10 %% Oil- based condensing

Oil-based condens ing
(99 %)
Alcohol (99 %) 10-20 %% Oil-based ethanol
(metallurgical)
Charcoal (metallurgical) 14
14 %% Export
Export price

industrial development
No industrial development has
has so
so far
far taken
taken place but the
place but the area
area
has been planted and
has and the
the first
first plantations
plantations are
are ready
ready for
for harvesting.
harvesting. The
wood is sold to
wood is to nearby
nearby industrial
industrial plants
plants as
as fuel
fuel to
to replace
replace oil
oil inin their
their
boilers. The
The project in
in that
that respect
respect has
has proven
proven toto be
be aa success.
success.

In the
In the Philippines,
Philippines, thethe National
National Electrification
Electrification Administration
Administration
(NE?.) has
(NEA) has an
an ambitious
ambitious plan
plan to
to construct
construct 7070 dendro-thermal
dendro-thermal installations
installations
from 33 toto 55 MW each in in rural
rural areas
areas byby 1987.
1987. However, it
However, it has soso far
far
ground to aa halt,
ground halt, after
after encountering
encountering difficulties
difficulties in in obtaining
obtaining wood
wood for
for
the few
the few completed
completed facilities.
facilities. The wood
The is supposed
wood is supposed to to be supplied
supplied by
by
cooperatives
cooperatives and and private
private farmers
farmers from
from 11 100 ha of
100 ha of which
which 11 000
000 ha
ha are
are
managed by by private
private farmers
farmers and and the
the rest taken care
rest is taken care ofof by
by the
the
cooperative. Sowing isis the
the method
method mainly used used toto establish those
those
plantations. Recently new efforts by
Recently by the
the Government
Government andand the
the U.S.
U.S. Agency
Agency
for International Development have
for International have been
been announced
announced toto reforest
reforest wasteland,
wasteland,
in order
in order to make thethe plants
plants operational.
operational.

8.2 Tanzania

Southern Paper
Southern Paper Mills
Mills Inc.
Inc. has
has constructed
constructed a a pulp and paper mill mill in
in
Mufindi which
Mufindi which is expected to
is expected commence operating
to commence operating in the second
in the second half
half of
of
1984. ,wood supply
The ,wood supply ofof thethe mill based on
mill is based on pine
pine plantations
plantations
established
established inin the
the late
late sixties.
sixties. The mill
The mill assumed
assumed that
that itit had
had secured
secured
the
the supply ofof balancing
balancing fuel from local coal
from local coal mines.
mines. The original
The original mill
mill
had been
had been designed
des igned accordingly.
accord ing ly. Gradually, it it became
became evident,
ev iden t, however,
however,
that local coal
that local coal would not be
would not be available
available byby the
the time
time the
the mill
mill would
would start
start
operating. Investigations were carried out to modify the
Investigations the existing 60 60 t/h
tlh
coal-fired boiler for
coal-fired for wood firing, and explore the
wood firing, the potential of utilizing
utilizing
either forest residues as fuel, or establishing
establishing fast-growing tree
plantations
plantations forfor fuel production. It was
It was found that the
found that the boiler
boiler could
could
 -- 338 -
-

be converted to
be to wood
wood firing
firing at
at marginal cost~
marginal cost. The
The construction
construction ofof wood
fuel
fuel receiving
receiving facilities
facilities would
would also
also be
be needed.
needed. The wood
The wood supply
supply
alternatives were
alternatives were explored and it became
explored and became clear
clear that
that starting
starting fuelwood
fuelwood
plantations
p/antations from
from scratch
scratch at the mill's
at the mill' 8 back
back door
door would
would be more
more costly
costly
than utilizing
than utilizing logging residues
logging residues. a A system
system was, therefore, devised
was, therefore, devised for
collecting the tops,
collecting the tops, branches,
branches, cones
cones and
and other
other logging
logging residues,
residues, chipping
the plantations,
them in the plantations, and then
then hauling
hauling the
the chips
chips to
to the
the pulp
pulp mill.
mill.
 Table 2

Typical invesbnent and electricity generating costs and manpower needs,

of plants of various types and sizes, and using different fuels

Condensing Power Plants Diesel Power Plants

10 - 15 MW 20 - 30 KW 5 - 10 KW 25 - 35 MW
1)
Coal Oil %bod Coal Oil wood Oil Wood Oil

Investment Costs
US$ Killion/Kw

Plant 0.58 0.55 0.45 0.50 0.48 0.40 0.43 0.34 0.38 0.33

Civil Wbrks 0.15 0.13 0.10 0.13 0.12 0.09 0.20 0.10 0.10 0.07

Project Costs 0.08 0.07 0.05 0.07 0.07 0.05 0.07 0.04 0.05 0.03

Total 0.85 0.79 0.63 0.74 0.70 0.57 0.74 0.50 0.56 0.46

Power Costs2)
US$/KWh 41 40 67 39 37 66 45 56 37 55

C.
c. Number of
Personne13)
personne1 3 ) 44
44 40
40 30 48
48 44
44 32
32 30 6 30
30 8

1) Heavy fuel
Heavy fuel oil
oil

2) Includes investment
investment and
and operating costs.
costs. The cost of oil is US$ 215/t,
is estimated at US:;: US$ 54/t and
2l5/t, of coal at US$ of
and of
wood
woa:l at
at US:;: 30/Dr.
US$ 30/Bm:.

3) Personnel requirements are

are estimated
estimated for developing countries
for developing coillltries during
during normal
normal plant operation.
 -- 341 --

A CASE HISTORY OF
A OF THE
THE ARACRUZ
ARACRUZ
PULP MILL
MILL PROJECT IN
IN BRAZIL
BRAZIL

by

Pl\yry Oy
Jaakko Pöyry Oy

CONTENTS

Page

1. INTRODUCTION 342

2• FACTORS THAT
BACKGROUND AND FACTORS THAT LED
LED TO
TO THE
THE DECISION
DECISION TO
TO
ESTABLISH THE
THE MILL
MILL 343

2.1 Incentives
Tax Incentives 343
2.2 Man
Man with a Vision
with a 344
2.3 Concept Definition 344

3. ESTABLISHMENT OF
01" FIBROUS
I"IBROUS RESOURCES
RESOURCES 346

3.1
3.1 Scientific Base
Base 347
3.2 Harvesting Pulpwood
Pulpwood 347
3.3 and Fuelwood
Energy and Fuelwood 348
346
3.4 Institutional Facilities and
Institutional Support Facilities and
Incentives
Incentives Provided by the
the Government
Government 348

4. CONSTRUCTION,
CONSTRUCTION. TRAINING
TRAINING AND
AND START-UP
START-UP 346
348

4.1 Management
Project Management 348
4.2 Eng ineering
Engineering 348
4.3 Equipment Manufacture 349
4.4 Construction and Time Schedule 349
4.5 Programmes
Training Programmes 350
4.6 Start-up
Start-up 350

5. OPERATIONS. MARKETING AND FINANCIAL RESULT

OPERATION , 350

51
5.1 Product 350
5.2 Operations
Operations 350
5.3 Marketing 351
5.4
5.4 Financial Results
Results 351
5.5 from Aracruz
Later Comments from Aracruz S.A.
S.A. 351

6. PLANS FUTURE
PLANS FOR THE FUTURE 352

7. IS AN APPROPRIATE
REASONS WHY THIS PULP MILL IS APPROPRIATE
INDUSTRY
INDUSTRY 352

Figure 1
1 Location of the Aracruz Project
Project 354

Figure 22 Development of the

the Investment
Investment Estimate
Estimate 356

Figure 33 of Loans
Amortization of Loans 357
 - 342
- 342 --

1. INTRODUCTION

In order
In order to
to put
put this
this case
case history
history into
into perspective
perspective and
and to
to give
give
an
an understanding
understanding of
of what
what was
was involved,
involved, we
we will
will begin
begin with
with aa brief
description of the Aracruz Pulp Mill Proiect
description of Project as
as it
it stands
stands today,
today, followed
followed
by aa short introduction to the
short introduction economy of
the economy of Brazil in the
Brazil in mid and
the mid and late
late
seventies.

its sixth
Now, in its sixth year
year of operation, Aracruz Celulose
operation, Aracruz Celulose has
has an
an
annual output
annual output of 460
460 000 of bleached
000 tt of bleached eucalyptus pulp,
pulp, mainly for
for
export. In 1983,
In 1983, around
around 83
83 percent
percent of
of the
the mill's
mill's output
output was
was sold
sold to
to
foreign exchange
foreign in excess
exchange in usS 130
excess of US$ 130 million.
million. Located on the
Located the coast
coast of
of
the state
the Espirito Santo
state of Espirito santo in
in south-east
south-east Brazil
Brazil (Figure
(Figure 1), the
enterprise is an integrated
integrated project
project with pulp mill,
with forest, pulp mill f chemical
plants,
plants, port, and residential
port, and residential community
community where part of the
where part the 6100
6100 employees
employees
live~
live.

The
The total
total investment
investment outlay
outlay to
to the
the project
project at
at the
the time
time of
of
start-up in
in 1978 was
was some
some US$
US$ 616
616 million:
million:

US$
US$ mill ion
million

pulp mill 397

chemical plants 35
forest plantations 65
port (participation)
(participation) 5
5
residential community
residential 12
other infrastructure
infrastructure 32
and
administration and 70
financial
financial costs

616

Aracruz Project
The Aracruz Project is
is basically
basically aa private
private enterprise
enterprise operating
operating
mainly with
mainly with Brazilian
Brazilian capital.
capital. Of the
Of the equity,
equity, 6565 percent
percent comes
comes from
from
Brazilian sources and
and the
the remainder
remainder from
from foreign investors~
foreign investors. capital
Loan capital
amounted to
amounted to over 60
60 percent
percent of
of the
the total
total investment
investment outlay.
outlay. Apart from
Apart from
the
the private shareholders, the
private shareholders, the leading
leading institutional
institutional partner
partner and
and investor
investor
in the project
in the project is
is the
the National
National Bank
Bank for
for Economic
Economic Development
Development (BNDE)
(BNDE)
together its affiliate
together with its affiliate FIBASE.
FrBASE.

the enterprise
Organizationally, the enterprise is
is grouped into
into four
four un
units,
s,
each of
each of which has a
which has a clear-cut area of responsibility
responsibility in
in the
the management
management of
of
their
their respective functional field:
respective functional field:

Celulose S.A.
Aracruz Celulose S.A. is the leading
is the leading company of the
the group,
group,
and operates the pulp mill and the chemical plants,
provides central administration,
provides central administration, and is
is responsible
responsible for
for the
the
of the
marketing of the mill's
mill's output.
output. chemical plants
The chemical plants make
make
Aracruz
Aracruz self-sufficient
self-sufficient in
in all
all basic
basic pulping
pulping chemicals
chemicals
except sulphuric acid.
acid.

Aracruz Florestal is responsible for the plantations,

forestry research, and logging operations.
forestry research, Altogether,
Aracruz owns
Aracruz owns 98
98 000
000 ha
ha of
of land,
land, of
of which
which 72
72 000
000 ha are
are
planted
planted with eucalyptus and native trees
trees and
and 13 000
000 ha have
have
been set
been set aside
aside as
as aa preservation
preservation area
area for
for natural
natural flora.
flora.
The plantations
plantations make
make Aracruz
Aracruz also
also self-sufficient
self-sufficient inin wood
wood
raw material
raw material. e Through improvements, better
Through genetic improvements, better soil
soil
nutrition, and control of
effective control
and effective of plant
plant diseases,
diseases, the
obtainable
obtainable yield
yield levels
levels are
are now
now sufficient
sufficient toto operate
operate at
at
the
the mill
mill capacity.
 - 343 --
-

Santa Cruz Urbanizadora,

rbanizadora, another subsidiary,
subsidiary, runs the
runs
residential
residentiz inity built
community built by
by the
the seaside 17 km
seaside 17 km from
from the
the
mill.
mill. mmunity houses
The community houses some
some 4000
4000 people
people and has
has two
two
schools, aa sho
shopping
ing centre,
centre, medical facilities,
facilities, clubs,
clubs, etc.
etc.

port of
The port of Barra
Barra do
do Riacho,
Riacho, located
located 1.5
1.5 km
km from
from the
the mill
mill
and
and specially designed to to handle
handle pulp,
pulp, was
was built
built and
and is
is now
now
operated by Portocel.
,parated by Portocel. Aracruz is shareholder
a majority shareholder
is a
() in
(51%) in this company, with Celulose Hipo Brasileira Brasileira
CENIBRA
:..NiBRA having
having 4949 percent
percent of the the shares.
shares. The
The port cancan
berth ships
ships of
of up
up to
to 27
27 000 TDW.
000 TDW.

2.
2. BACKGROUND
BACKGROUND AND FACTORS THAT LED
LED TO
TO THE
THE DECISION
DECISION TO
TO ESTABLISH
ESTABLISH THE
THE
MILL

Brazil is by
Brazil is by far the largest
far the largest country
country inin Latin
Latin America,
America, taking
taking up
up
almost half
almost half the continent.
the continent. Brazil's population
Brzil's population of of 125 million people
125 million people
(1982) is richly el-W.,ed
is richly with products from
endowed with from the
the soil
soil and
and subsoil
subsoil needed
needed
by industry
industry and
and people at horneho.i.,» and abroad.
,nd abroad. critical weakness in
One cril.-"al
Brazil's
Brazil's economic base is ;5 the
the relative
reitive scarcity
scarcity ofof fossil
fossil fuels.
fuels. Another
problem is that regional
is that regiooal income
income differences
differences areare pronounLed,
pronounced, asas is income
is income
d ty. Nearly all
Nearly all industry
industry is is located
located inin the
the south-central portion
portion
of country.

The Brazilian approach

The Brazilian approach toto development
development hashas been
been pragmatic.
pragmatic. To
cope with
cope with the
the huge
huge import bill and to to reduce dependence on capital
capital inflow
inflow
in the long term,
term, the Government has been stressing exports exports and
development
develoment of of .nital
capitalequipment
equipmentindustries
industriesaimed
aimedat
atimport
import substitution.
substitution.
Subsequently the nation's total
r total external
external debt
debt s,-::ed
soared from US$ 17
from US$ 17 200
million in 19'A
miili,n in 1974 Ito US$ 500 million
43 500
US$ 43 million by by year-
year-end 1978,
-078, aa period that
period that
coincided wit'
with thethe construction
construction and and start-up
start-up ufof the
the Aracruz mill.
mill.
Inflation
Inflation also
als.) accelerated
accelerated from
from aa relatively
relatively stable
stable 41 average
41 percent average
rate in
growth rate in 1975-78
1975-78 to
to 77
77 percent
percent inin 1979.
1979.

By and large, Brazilian governments

and large, governments through
through the
the years
years have
have
believed in
in the
the efficiency of free
free enterprise as
as aa dynamo
dynamo of
of :conomic
economic and
and
sooial
social progress. And yet, the
And yet, the economy
economy of
of Brazil
Brazil is
is essenti,1
essentially aa mixture
mixture
of state and
of state and privately
privately owned
owned enterprises
enterprises -- both local ar,ijor
both local and/or foreign -
foreign -
often
often occurring within aa single
single industry.
industry.

Institutions controlled by state and federal governments

predominate in
in banking
banking and
and credit.
credit. The Government
The Government supplies
supplies about 60
about 60
percent of
percent of all
all investment
investment inin Brazil
Brazil but,
but, as
as aa matter
matter of
of policy,
policy, the
the
Government to enlist private
Government often seeks to private capital,
capital, both
both local
local and
and foreign,
foreign,
in
in joint
joint undertakings
undertakings requiring aa heavy
heavy investment
investment outlay.
outlay.

Brazil's natural forest

reserves of natural
Brazil's reserves forest cover
cover are
are still immense,
despite centuries
despite centuries uf
of cutting.
cutting. In addition, programmes
In addition, programmes of reforestation
reforestation
with fast-growing
fast-growing pine and
and eucalyptus forfor pulp
pulp and
and paper
paper making have
have been
been
under
under way
way since 1967 with the
the aid
aid ofof tax
tax incentives
incentives toto private
private investors.
investors.

2~1
2.1 Tax Incentives
Incentives

It can be
It can be argued,
argued, successfully, that aa starting
se,...-ssfully, that starting point
point for
for the
the
investment idea in
investment idea the case
in the case of
of Aracruz
Aracruz was
was provided
provided by
by Government
Government tax
tax
incentive laws. In 1967 the
In 1967 the Brazilian Government passed
Brazilian Guvernment passed a a bill
bill which
which
prov
p. ided
, 'ad favourable tax iocen ti ves to encourage
incentives prt va te investors to
encourage private to
establish
es' 1. forest
forest plantations.
 -- 344 --

Export incentives
uxport incentives were
were also
also available.
available. Companies are
Companies able to
are able to
obtain income tax
obtain incory, tax exemption
exemption on
on profits
profits resulting operations.
resulting from export operations,
Other such tax
Other su.); tax breaks include deduction
breaks include deduction of expenditures for
of expenditures for promotion of
of
sales ab;oad,
abroad, etc.
etc.

2.2 Man with a Vision

Tax incentives alone

Tax incentives alone would
would certainly
certainly not not have
have been
been sufficient;
sufficient,
the prime
the prime force
force behind
behind the
the project
project was was a a man of of vision
vision andand entrepre-
entrepre-
neurial spirit.
spirit. This man was Dr. Dr. Leopoldo
Leopoldo Brandao.
Brandao. In
In his
his mind's
mind's eye he
eye he
saw that the
saw that the key element in the forest
key element forest products
products industry
industry in in Brazil would
always
always be low-cost wood;
be low-cost wood; and the
the key
key toto that
that isis sun,
sun, rain
rain and
and land,
land, all
all
abundan
abundantly available
available in in the
the country,
country, coupled
coupled with
wi th new
new technology.
technology. Evln
Even
today
today inin 1984,
984, the
the cost of wood at
cost of at the
the mill gate is is still
still US$ 10 per m ,
aa figure
figure which
which was used
used back
back in
in 1974
1974 in the assessment
le the assessment of of the
the econm,
economic
feasibility
feasibility of the the project.
project. Dr. Brandao
Dr. Br-rdao alsoalso saw tnat that the ove overall
11
project concept should
should aim at total integration
at total integration fromfrom tree
,ron nursery
nursery toto
(market).

A great
great deal
deal ofof spadework,
spadework, an an enthusiastic
enthusiastic entrepreneurial
entrepreneurial
spirit
spirit and skills
skills were reguired before
were required before potential investors were
potential investors were convinced
convinced
of the viability of
the viability of the
the scheme,
scheme, and
and joined
joined in. First among
First among them
them was
was
Mr.
Mr, Erling S.
S. Lorentzen, aa leading Brazilian businessman and
and
industrialist, who
industrialist, who believed in in the
the ;oncept.
concept. With his
with his support
support andand
leadership, the vision was gradually
leadership, the gradually transformed into
:,;-;;:tormed a viable
into a viable investment
investment
project.

first tasks
The first tasks were
were to
to formulate
formulate aa sound project concept,
sound project concept, to
find suitable land
find suitable land for
for forest
forest plantations,
plantations, aa mill site which
mill site which would
would have
have
access to an ocean rort,
access to port, and an
an ample
ample source
SOUrce of
of fresh
fresh water
water for
for aa future
future
mill.

2.3 Corcect.

- While thet.!;o new forest

new forest waswas being
being established,
established, the whee;
wheels began
turn i ng
turning on mill des ign,
-, sign, ffinancing,
inane! ng, marketi ng,
marketing, and infrastructure
infrasi; :-e
planning. This
This was
was thethe critical
critical step toward
toward success.
success. The effort that
went into the
went into the formulation
formulation of of aa conceptual framework for for the
the p ;',ect
ct
amounted to approximately 100 100 man-m
man-months.
Iths. Aracruz was aided
aided inin this
this task
task
by Billerud
by Billerud and and Jaakko
Jaakko P5yr-y
PByry Oy;OY1 the
the former
former became
became eventually
eventually thethe
know-how, marketing and management
1i. partner, and the latter the
engineering and construction manag management ,t consultant.
consultant.

The main
main tasks
t ;ks which were tarkled
tackled atat this
t stage wer;
were: the
overall project concept,
overall project t, market
marke._ and
Jgd product,
rrodact, mill cconcept, equipment ,-;nd
eot, eon and
engineering, implementation
-,,ation arrangements, financing
finan: and financial
financ; plan,
and human
human resouLm-,..
resources. The underlying themes
The undellylng themes in
in lh__
this exercise
exercise o. and in the .

engineering phase
subsequent enginecring phase were:
were: each link in
each and every link in projec-
project design
;,!sign
must be
must strong, and
be strong, and each
each link inin the
the chain must be thoroughly che,ked and
checked and
proven ahead of time,
time, before it it is
is implemented.
implemented.

overall Project.',)ncept
Overall Project Concept

From the
the proj;=
project sponsor'sr's point
point ofof view,
view, the
the overall
overall
ect concn-Tt
project forp-atd as
concept uwas formulated as follows:
follows:

n"... to
to create a Brazilian private enterprise
create a enterprise which
can grow
grow and
and remain
remain economically
economically profitable.
itable. Based
on
on wholly-owned planted
planted forests
forests the enterprise
enterprise shall
shall
as far as possible be independent of outside
supplies,
supplies, be served by
be served by aa proper
proper harbour
harbour for
for eNport.
export
of the products and be supported adevate
supmorted by adequate
infrastructure improve the
infrastructure and improve the s:
standard of liv
of li,leg in
in
the area.,"
the area."
 - 345
- 345 --

Market and Product

After analyzing
After analyzing the markets and
the markets and eliminating
eliminating aa number of
number of
alternatives, it
product alternatives, it was
was decided
decided that
that the
the Aracruz
Aracruz mill
would produce high quality, bleached eucalyptus kraft
grade pulp,
paper grade pulp, mainly
mainly for
for export
export to
to Western
Western Europe
Europe and
and
Far East.
the Far East.

Mill Concept
Mill
From the outset the
the consultant's and
and the
the know-how
know-how partner's
partner's
work aimed
aimed at
at designing
designing a mill
mill with
with aa capacity
capacity as
as high
high as
as
technically possible, while still consistent with
operational reliability,
reliability, considering
considering proven
proven techniques,
techniques, and
and
using commercially tested
tested equipment.
equipment.

The consultant asserted in the

consultant asserted the final
final feasibility
feasibility study,
study,
prepared
prepared asas a basis for
for the
the final
final go-ahead,
go-ahead, that
that it
it was
was his
his
"firm belief that
"tirm that new
new projects toto be
be implemented
implemented in
in an
an area
area
such as Aracruz
such as Aracruz should
should be
be sized
sized in
in this
this way.
way. This is due
This is due
to the high
to the high costs
costs of
of infrastructure
infrastructure development,
development, the
the high
high
cost
cost of and training,
of staffing and training, and
and the
the economy
economy of
of scale
scale for
for
the
the mill asas such."
such."

and Engineering
Equipment and Engineering

The chosen
chosen pulping
pulping process
process was
was the
the conventional
conventional Kraft
kraft
process, which
which is
is preferred
preferred for
for high
high quality
quality hardwood
hardwood pulp
pulp
and
and particularly well suited
suited for
for eucalyptus.
eucalyptus.

Implementation Arrangements

Aracruz was
As Aracruz was aa new
new company
company with
with limited
limited technical
technical staff,
staff,
was decided
it was decided that
that aa joint
joint management
management organization
organization bebe setset
up between the
up between the sponsor,
sponsor, the
the consultant,
consultant, andand the
the technical
technical
know-how partner.
know-how partner. Furthermore,
Furthermore, civil
ci vi 1 works
works were
were divided
d i v ided
into four
four separate
separate contracts
contracts due
due to
to timing
timing considerations,
considerations,
the
the nature
nature ot
of the
the work,
work, and in order
and in order to
to minimize
minimize the
the
risk involved
potential risk involved in
in one
one large contract~
large contract.

Financing and Financial Plan

Although
Although as as aa project
project Aracruz
Aracruz hadhad been
been in
in the
the planning
planning
stage for
stage for some
some years
years prior
prior toto 1974,
1974, access
access to
to Government
Government
financing waswas made
made easier
easier when
when aa new
new national
national plan
plan was
was
established by
formally established by the
the Government
Government inin that
that year.
year. The
plan called
called for
for aa build-up
build-up ofof the
the domestic
domestic pulp
pulp and
and paper
paper
industry to
industry to make
make Brazil
Brazil more
more selt-sutficient
self-sufficient andand able
able to
begin
begin exporting to to conserve
conserve foreign
foreign exchange.
exchange. The National
Bank for
for Economic
Economic Development
Development (BNDE)
(BNDE) was
was put
put in
in charge
charge ot
of
providing financing;
providing financing; at at the
the time,
time, the
the BNDE
BNDE had
had some
some 14
14
projects
projects under consideration,
consideration, of which only only two
two others
others
besides Aracruz
Aracruz havehave so
so far
far materialized
materialized (Cenibra
(Cenibra andand
Jan.•
Jari)

BNDE and
and FINAME
FINAME provided
provided the
the project
project with
with US$
US$ 215
215 million
million
in the
in the form of long-term
long-term loans
loans and
and guarantees.
guarantees.

capital, invested
The equity capital, invested by
by more than
than 200
200 Brazilian
Brazilian and
and
foreign
foreign shareholders,
shareholders, amounted
amounted to
to approximately
approximately US$
US$ 70
70
 - 346
- 346 -
-

million plus
plus the
theplanne!l'
planned increase of US$ M 160160 million.
million. This This
provided t.he
provided the basic
basic fuy. r ii, ed for
funds required
! fcr the
t.he realization
realizat.ion of of
the project,
the project, involviug
involving a t.otal total invest.ment
inveetment of of US$
US$ 569 569
million
million (December
(December 1975).
1975).

A sound
A sound financial
financial plan
plan was (1975) to
!i,,,ned (1975)
055 established
i to cover
cover thethe
total.
total investmeg-
investment. ,t.t1,y; and oil
outlay; all infrcstrurtural
lnfrastructural
requirements, including
requirements, inciid_t,a ao special
special_ export harbour hirbohr in ir the
vicinity of
vicinity of the
the r.111,
mill. t.ot, n, urdei the
be built under It, control of t.he the
Federal Port
Federal Port Aut't-ril-7,
Authority, werewerecarefully
raret.,a,y pragrated. It it was
was
by no
by no means
means an an easy task to lq draw
iT2W rlo't in
a plan i an;r1
environment of or lapirent lcmerlIc
rampant domestic n and frpi lent,
er r freguent,
intricate
intricatemcaetary
monetary corrections
corrections ((rlgurc 2). ,). The init-il
Tht initial
budget, pr..,7a-.,!
budget, prepared in in 1973, !,r,1 to US$
1973. amounted 30 ^30,rr
tl,; 339 million, of nf
which the share
which the mill ,Lelf war, el rercwtt. bit as
:!!!!i, :! of the mill itself was 65 t. But as
detailed platrinq
detailed r'l irciv cf the belget was
planning ptcceed,d,, the accuracy the budget was
increased
increased to 0.Nt0rt that tte firia qr anead tgdret at
to r.hethe extent that the final budget at
the end
the end of
of 1975 porrent ct tne areiel rost
1:3T5 icrrurrnt,,d 92a percent of the aotual cost
of the project at start-up,
of the project at start-up. It was on the
It wae the Infr-,serureure
infrastructure
side where
side where cost
cost increases
increases were
were h,qhest
h to tne
a, compared
as c6,71;are1 to the
established budget.
established budget.

Human Resources
Human Resources

The philosophy
The philosophy in in human resources deployment
human resources was basically
deployment was basically
that the use of expaetiates should be kept to
that the use of iates should be kept to a minimum
minimum
without
wi thout unduly
undu endatoAeling the managerial,
ing the technical and
managerial, technical and
operational capability cl
operat.ional c iIi of the
the project
project organization.
organization. As a
result,
resul t, only
onlysome
some 1515 tzpatriates were
iates wereemployed
employed by
by Aracruz
Aracruz
Celulose S.A. itself.
Celulose S.A. itself. also led to an extensive training
It
11 also led to an extensive training
effort
effort on all shall
all st,aff levels,
levels, and a larae number of
large
Brazilians received
Brazilians received intensive
intensive on-the-job
on-the-job training,
training, varying
varying
from 66 to
from to 12
12 months.
months. At present
At present only
only two expatriates are
two expatriates are
employed by
employed by the
the company.
company.

3.
3. ESTABLISHMENT OF FIBROUS
ESTABLISHMENT OF FIBROUS RESOURCES
RESOURCES

Aracruz began
Aracruz an toto look
look for
for land
land in A suitable site with a
in 1967.
1967. A suitable site with a
subtropical climate
subtropical climate was foundabout
was found about60600 kmkmnorth
northofofVitoria
Vitoriainin the
the state
state
of Espirito Santo, at latitude of 20° south of the equator.
of Espirito Santo, at aa latitude of 20 south of the equator. Rainfall
is good throu%houtthe
good throulbhout year (1 300
the ye,e mm/a), and
300 mm/a). and the
the average
average temperature
temperature
ranges
ranges from
from 20
20 CC to
to 30°C. The coastal
30 0 C. The coastal site
site hashas an
an altitude
altitudeofof5050mmabove
above
sea level;
sea level; and
and the
the toronre.pnv
topography is is good,
good, aa flat
flat landscape
landscape being
being well
well suited
suited
for mechanical wood 1,ar!,,ting. The soils are deep and permeable,
for mechanical wood harvesting. The soils are deep and permeable,
ranging
ranging from sandy to
from sandy to clove. loam, with
clayed loam, with aa sandstone
sandstone baserock.
baserock. But when
But when
acquired by Aracruz,
acquired by Aracruz, the area had been repeatedly logged over by
the area had been repeatedly logged over by
centuries, and the
centuries, the 5011
soil waSWdSdeficient
deficientinin various
various nutrients.
nutrients.
PI ,! ir7 commenced
Planting commenced in In eight years, the planted area
in 1967.
1967. In eight years, the planted area
grew frcm
grew ,itial 1000 ha to 43 500 ha at the time of the final
from thee initial 1000 ha to 43 500 ha at the time of the final
!

go-ahr-el in 1975, with annual increases ranging from 35 to 75 percent

! !! ,, with annual increases ranging from 35 to 75 percent
(Yet- the ious vest.
the o:r"iaro. year. The planted
The planted area
area in
in 1975
1975 was
was equivalent
equivalent to
to 75
75
perrent (f trIal area of plantations required to sustain the mill
IhP total area of pI an tat ions regu ired to sustai n the mill
t,he
ful) ,lracity, based on conservative increment
1ng at- full capacity, based on a conservative
ok"-at,trcJ increment estimate
estimate
C't ir or bark/hal
oVer ha/-0.
a) •

Aracruz now
Aracruz nowhashas9898000
COOha ha
of of land,
land, allalllocated
locatedininthe
the state
state of
of
un o Santo.
to Of this,
Santo. Of this, 72
72 000
000 ha
ha are
are planted:
planted: 42 42 000
000 ha
ha adjoining
adjoining the
the
nd 30
, and 30 000 ha in
000 ha in another
another location
locationabout
about150
150km kmaway.
away.
 -- 347
347 --

3.1
3.1 Scientific Base
Scientific Base

It was
It waS apparent
apparent from
from thr t
the beginning :,ining that a solid scientific base
that a solid scientific base
was required in the key area
was to plantation forestry.
ired in the key areas related to plantation forestry. In the
case of Aracruz
case Aracruz this
this meant
meant an
an c. on soil chemistry, genetics, and
is on soil chemistry, genetics, and
entomology.

1973, Aracruz
In 1973, Aracruz staff
staff members,
members, assisted
assisted by byananFAO
FAO expert in
forest ecology, visited
forest ecology, areas with
visited areas similar climatic
with similar climatic conditions;
conditions; they
vvisited Australia, Indonesia,
(ited Australia, Indonesia, Zimbabwe, Timor, Timor, and several other
and several other
c, itries, in
countries, in search
search of
of strains
strainsofofseeds mainly
seeds mainlyfromfromEucalyptus grandis
2!andis
F. urophylla,
and J!L,
I urophylla, which
which so
so far
farhad
hadproven
provenmost
most promising.
promising. Seed selection
selection
was -101lowed
followed by an intensive testing
intensive testing programme to find suitable
find suitable
ivenanceswith
provenances
/ withdesired
desired properties
roparties in in terms
terms of of disease
disease and
and insect
insect
-as t.nce, yield,
resistance, yield, physical
phys properties (fibre ratio,
properties (fibre ratio, density, and
density,
bleached pulp yield),
.ed pulp and botanical
yield), and aspects (form,
botanical aspects (form, bark, leaves, and
bark, leaves,
,$).
branches) •

Todaythe
Today thevery
verybest
best natural
nl' Ira' individuals
individuals of of hybrids
hybrids an:1of
and of
hybrids
hybrids produced
produced by bycontrolled
controlled pollination
rr..11inationare arebeing
beirqmultiplied
rultiplied by by
vegetative
vegetati ve propagation.
propagation. res,ltt ofofintensive
As a resul
a intensivereseaioh
researcb and eve/.. -
and develop-
ment efforts, the
ment efforts, the plantationa
plantations showshow very
very high
high growth ratea- fg:
growth rates; for example,
the first
the firstgeneration
generation of of en-alyptus
eucalyptus (E. (E. saligna
salignaandand E.E. granilic), ), planted
in the
in the early
early seventiei, p duces an
seventies, produces average of
an average of about
about35 m' ,f wa,:d wood per
per
hectare
hectare perper year,
year, with
with aa rotation
rotation of of seven
seven years.
years. This
This generation
generation is is
still marked
still marked byby very great variations
very great variations in in yield.
yield. More re,-ent, improved,
(+Vice recent, improved,
younger stands3ofofselected
younger stand~ selectedhybrid
hybridclones
clonesareare expected
expectedtotn reach
rgach aa yield
yield ofof
at
at least
least60 60 mm /ha/a.
/ha/a. By using
By using clones
clones of of the
the best
best treoii,
trees.the thecompany
company is is
not
not only improving the
only improving the yield
yield per
per hectare,
hectare, butbutalso
alsodP,eloping
developingwood wood ofof
much greater uniformity,
much greater uniformity, with with higher
higher specific
specific gravity
gravity and and higher
higher pulp
pulp
yield
yield per
per unit
unitof ofdry
dryweight
weightthan
thanthat
thatofofwood
wood from
from normal
normal forests.
forests. For
this relevant
this relevant contribution
contribution to to science
science the theAracruz
Aracruz teamteam responsible
responsible for for
the work
the work was
was awarded
awarded the Marcus
Marcus Wallenberg
Wallenberg price,
price,Sweden
Sweden 1984.
1984.

Genet:
Genetic avementisis only
improvement only one
oneofof the
the benefits
benefits .Ioived
derived from
from the
the
research plogJ
research programme. has also been possible tr-ioce the
It has also been possible to reduce
11, hazards
the hazards
connected iwith
connected .L. la --nocultures (such as insects,
, monocultures (such as insects, fungi,r.;ii, erosion, erosion,
forest fires and compaction).
forest fires and u: compaction).

the poor soils of Aracruz, soil

In the poor soi Is of Aracruz, soil improvement
f a high
is a high
is
priority matter and an integral part of efforts ro a- ieve and sustain
priority matter and an integral part of efforts to achieve and sustain
very high wood yields. Commercial fertilizers ar,i used only during
very high wood yields. Commercial fertilizers are used only during
planting.
planting. In addition, ash from the mill's residual v,od-fired auxiliary
In addition, ash from the mill's residual wood-fired auxiliary
power boiler is taken to the plantations and spread with tractors.
power boiler is taken to the plantations and spread with tractors. This
returns part of the mineral content of the wood to the soil.
returns part of the mineral content of the wood to the soil. The trees
The trees
themselves drop
themselves drop some t/ha/a of
some 6 t/ha/a of leaves,
leaves, which
which decompose quickly into
decompose quickly into
nutrients.
nutrients. The
The humus layer is
humus layer is growing: and as the years go by,
and as the years go by,
eucalyptus actually
eucalyptus actually improves the soil.
improves the soil.
3.2
3.2 Harvesting Pulpwood
Felling, deimbing and cuttina to 6 m lengths is done with
felling, delimbing and cutting to 6 m lengths is done with
on harvestir- is mechanized to take the best
chain-saws; but from then on harvesting is mechanized to take the best
chain-saws!
advantage of
advantage , the topography. Speci,lly d,Fioned, Brazilian-made
Specially designed,
move wood to the
forwarders mov
forwarders the roadside,
roads ide, where ,re uranole 000m units load the
boom uni ts load the
logs on
logs on to
to tru,,-1-:. units for haul,
truck-trailer units for bauling'; t,
to the
them 11.
mill.

annua
The annual requirellient
require~ent t.. mill
of the mill at full capacity
at full capacity is is
approximately 2.0
approximately 2.0 million
million m All this
All
i l l ..thiswood is supplied
wood is supplied within
within an an
average distance
average distance of
of 30-35
30-35 km
km from
from the
the Ararinz
Aracruz orea
areaand
and170
170kmkm from
from the
the
northern
northern area.
area. Suchaa concentration
Such concentration ofof the
the w,,o1 supply is
wood supply is unique
unique inin the
the
 -- 348 -
348 -

3
world. Productivity in logging is est.imated at
is estimated at. 22 m peir person
m3 P'T person per
per
shift, which
shift, better, for
is better,
which is for example,
example, than
than the
the average
average 1212 m m inin Finland.
This is mainly due
This is due to
to the
the more
more favourable
favourable conditions
condit.ions atat. Aracruz
AraCruz such as
such as
good terrain, dense stands,
good terrain, stands, and
and fewer
fewer branches;
branches; but
but it
it is
is also
also due
due to
Lo the
intensive training of
intensive training of the loggers,
loggers, and t.he fact that
the fact that their
their tools
tools and
equipment, tested and developed
equipment, tested developed for
for Brazilian
Brazilian conditions,
conditions, are comparable
in
in this
this respect to to the
the standard
standard in
in Sweden
Sweden and
and Finland.
Finland.

3.3 Energy and Fuelwood

After pulpwood
pulpwood harvesting,
harvesting, thethe Crews
crews go go back
back for
for residual
residual or
energy wood harvesting.
harvesting. The residual wood
The residual is chipped
wood is chipped in the
the plantations
and delivered as
and as fua;.
tufty. to
to the
the mill's power boiler.
mill's p)wer boiler. The
The mill received in
mill received
1983
1983 Some 485 000
some 485 000 m m of chips for
of chips for energy
energy uses,
uses. In 1984,
In 1984, the bark from
the bark
mechanical barking
mechanical barking practically
i c a l l '21a
1 y f o rLorest
.
e s t residues,
residues, and,
and, therefore,
therefore,
tops and
tops and branches were u,vd used very
very 11ittle.. Biomass, in
Biomasa, in fact,
fact, accounts
accounts for
percent of
87 percent
87 of the energy
ener,,ay supply of Aracruz,
aacruz, and imported
imported fuel
fuel oil
oil for
only 1.4
only 1.4 percent,
percent, the
ther'-'t
rest t,e(ng
being cov,
coveredd by
by purchased
purchased electric
electric power
power and
natural gas.

3.4 Instiu 'a 1. Support Facilities and Incentives Provided by the

As noted
note in
in the beginning, ional anJand sectoral
oectoral incentives
played
played aa major
,:ar role
role inin financing
fi, the tial
.1,(1 plantation
plaLtatior, activities,
activities, not
only inin the case
( me of Aracruz but also elsewhere
bewhere inin Brazi:.
Brazil. For example,
example.
between l'r7
1967 and 1973,
1973, almost
a. 5 000 reforestation
iatorestatiol projects one
prbjscts covering one
million .:'acta:-es
million hectares were
were authorized by thehe U;r,;E,li
Mini of 1-jiiculture,
Agriculture, calling
calling
for an
an investment
:1..ent of US$ 257 million.

As the
the scheme of income
,r, tax credits for investments in
developing
developing regions
regions and and sectors
srtois waswas s.
so successful, the Government decided
si,....essfol, the decided
to revise the percentage
percentage of
o, credits
cte':its granted
,,tartee1 for investment in
reforestation; they were were trir,vod
trimmed in 1975 to
in 1971 t-p 20 percent
prrcent from the original
from the
25 and further
25 percent, and further toto l'.5
12.5 perro,it
percent in In 1978. Reforestation projects
projects
also be approved
must also approved by thc the Brozilian
Brazilian Insallutc
Institute for for Forestry
Forestry Development
Development
(IBDF).

4.
4. CONSTRUCTION,
CONSTRUCTION, TRAINING AND START-UP
START-UP

4.1 Project Management

A joint
joint project
project organization
organization was
was established
established inin 1973,
1973, two
two years
years
before the firm investment decision
firm investment decision was actually made, involving the
actually made,
proiect sponsor (Aracruz),
project (Aracruz), thethe market process know-how
market and process know-how partner
partner
(Billerud), and the engineering
and the engineering and
and construction
construction management
management consultant
consultant
(P5yry).
(P6yry). Essentially
Essentially thet.he three
three parties
parties made
made the
the critical
critical decisions
decisions
affecting the project.
affecting the project. the decision-making
This made the decision-making process
process relatively
relat.ively
quick
quick as,
as, for
for example, institutional investors
example, no external institutional investors were
were involved.
involved.

4.2
4,2 Engineering

It
It was agreed from the
was agreed the outset
outset that
that the
the process
process technology
technology should
should
be
be proven and yet advanced.
advanced.

The strategic and

The and by far
far the
the most
most expensive
expensive item
item in
in the
the process
design was the
design was the recovery
recovery boiler,
boiler, which is one
which is of the
one of world's largest,,
the world's
built for
built. for aa capacity
capacity of
of 1 800
800 tt of
of dry
dry solids
solids aa day.
day. The starting point
point
 -
- 349 --

for dimensioning the

for dimensioning the boiler
boiler was
was the
the question:
question: "Do we
nDo we have enough
enough wood
wood
and land
and land to
to sustain
sustain continuous
continuous operation?"
operation?" The answer was negative
The negative and
and
more land
land had
had to
to be
be secured.
secured.
The
The mill is is basically
basically built
built inin one
one line;
line: but,
but, for
for equipment
equipment
reasons, bleaching and
reasons, and drying
drying are
are carried
carried out
out in
in two
two parallel
parallel lines.
lines. The
wood was
wood was originally
inally chipped
chipped and
and pulped
pulped unbarked,
unbarked, but
but two
two barking
barking lines
lines
have
have now
now been
been installed as part of of aa programme
prcoramme to increase
increase pulp
production. The chips are fed
fed toto aa Kamyr
Kamyr dige,,,r,
digester, giving
giving Aracruz
Aracruz one
one of
of
the largest single-line, continuous-cooking
continuous-cookina capacities
c:,pacities inin the
the world.
From the
From the digester,
digester, the the pulp
pulp isis divided
divided into
into two lines for
two lines for washing
washing and
and
screening. Bleaching is is done
done in
in two
two parallel
parallel pli.ats,
plants, whose
whose equipment
equipment was
was
made in Brazil.
madr in Braz i L
The power
power boiler
boiler is
is fired
fired with
with wood
wood waste,
waste, bark
bark and
and fuel
fuel oil.
oil.
-titution of
The substitution
' of imported
imported fuel
fuel has
has been
been aa spec: concern of the
special conCern the
management
it of Aracruz.
Aracruz. In fact, their
In fact, their success
success has
has b,,n
been remarkable:
remarkable: in
in
1979 the mill
1979 the consumed 144
mill consumed 144 kg
kg of
of fuel
fuel oil
oil per
per ton
ton of
of pu:p,
pulp, while
while in
in 1984
1984
the
the corresponding figure
figure was only
only 99 kg.
kg.

4.3 I':g"ipment Manufacture

Equipment Manufacture

Government policies relating to the financial terms of

Government
Government loans and the ir
their impl ied
implied preference for domestically
domestically
manufactured equipment had a a major impact
impact on equipment manufacture and on
and on
the choice
the choice of suppliers
suppliers of of the
the main
main equipment.
equipment. After rigorous financing
financing
negotiations, the the obligation
obligation was was setset atat having
having 60 60 percent
percent of of the
equipment
equipment toto bebe installed
installed in in the mill of
the mill of Brazilian
Brazilian origin.
origin. Achieving
,ch,-v4ng
this high
this high level
level presented
presented aa formidable challenge both
formidable challenge both to the project
organization
organization andand thethe potential
potential suppliers.
suppliers. In
In the
the engineering ;ha phase of
the project it
the project it required
required an an extensive
extensive amount
amount of of study,
study, adaptation,
adaptation, and
i.nd
collaboration with
collaboration with the the key
key suppliers,
suppliers, whichwhich werewere basically
basically foreign
foreign
companies, Some
some of of them having only
them having only recently
recently established
established manufacturing
manufacturing
subsidiaries in
in Brazil.
Brazil. The capabiltv
capability of these affiliates to
manufacture specialized equipment
manufacture the specialized equipment had had to be
) ascertained, as
be ascertained, as well
well asas
their parent
parent companies'
companies' willingness
willingnessto to transfer their technical
trans.:::: technical know-how.
know-how.
To cite just
just one
one example:
example: Kamyr do do Brasil,
Brasil. the supplier of
the supplier of the huge
the huge
continuous
continuous digester for for Aracruz,
Aracruz, was was established
established only only aa few
few years before
the final
the final go-ahead
go-ahead for for the
the project
project was was given.
given. The company
The company had
had first
first
established
established only
only an an engineering
engineering unit unit but,
but, due
due to the lack
to the lack of
of reliable
reliable
subcontractors,
subcontract-7-a, the unit unit was
was enlarged into into a manufacturing outfit.outfit.
4.4 Construction
nact Sr'? Time Schedule
a and achedule

Constun
Construction and erection
tion were
were performed by Brazilian
contractors. A peak
peak work-force ce ofof 12
12 000
000 construction
construction and and forestry
forestry
workers with past experience
workers with expe: in
Ln similar projects
similar projects was
was employed
employed during
during
construct ion.
construction. The
The mill wasI,' bui
bull'I t in 36 months,
ia 36 months, which
wh ich is
is a a remarkable
remarkable
achievement under any
achievement any circa, !:,
circumstances, and
and even more so
.
so onon aa site
site located
located
far from any major
far from major urban
urban areas.
areas. 21 August
On 21 August 1975,
1975. the
the go-ahead
go-ahead signal
signal
was given
was given for
for the
the mill
mill project;
project: and and the
the first
first pulp
pulp was produced
produced onon
44 September 1978, on
September 1976, on schedule.
schedule.

Implementation was so
scheduled that it it enabled
enabled a staged
a
check-out
check-out and
and testing
testing sequence.
sequence. This permitted testing
This permitted testing and
and actual
actual
operation
operation of
of most of the hilL
of the mill systems departments with proper
systems and departments proper media
media
and processes
and processes during
during the
the last
la7t few
few months prior to
months prior to the
the actual
actual start
start of
of
cooking.
pulp cooking.

The start
start of
of auxiliary
auxiliary systems
systems (water
(water and
and steam)
stearn) were
were scheduled
scheduled
very
ver' early in the sequence of activities,
early in activities, followed
followed by
by chipping,
chipping, and
and then
then
testing
''ing the
the drying machine using purchased
purchased pulp.
pulp.
 -- 350 -
-

4.5 Training Programmes

It realized that
It was realized that the
the recruittaent
recruitment and and training
triiing of of personnel
personnel
would
would be one of
be one of the
the most
most importalt
important iitems
terns inin the implementa
imi 1 t ion of
?.ntation the
of the
project. Remuneration
Remuneration and and socia:
social fringe
fringe benefits,
bdneflts, suchsu as as housing
housing and
and
recreational facilities,
facilities, were wereadapted
adaptedaccordingl-,-,
accordingly, taking into into account
the distance from
the distance from population
population centres.
centres. Billerud u. undertook
.took to to select
select and
train the mill
train the personnel and
mill personnel and manage thethe start-up.
start-up. Already
:Hready early in in 1974
- four
four years be,fore start-up
years before start-up -- aa mill manager was
mill manager was onon the
the payroll
payroll and
and
working,
working, devoting
devoting a a large
large part of of his
his time
time t,to recruiting
recruiting mill
mill personnel
personnel
and organizing
and organizing their
their training
training as as well
well as as ¡-te:ring
preparing the the start-up
start-up and
operation phases.
operation phases. Engineers were hired
Engineers were hired st.,rt:nn
starting in in late
late 1974,
1974, andand all
all
skilled
skilled staff
staff completed their 6-12 months'
months training
training before the the start-up.
start-up.
Detailed job
job descriptions
descriptions and
and instruction
instruction manuals were prepared
E .ed
for
for every
every operator in
in the
the mill,
mill, covering
covering instrumentation,
instrumentation, electr
electrical and
technical data, operations procedures
procedures prior to start-up, start-up
start-up
sequence, normal
sequence, normal operations,
operations, and
and shut-downs.
shut-downs~ Workers were selected
Workers
through
through careful testing and
careful testing and interviewing.
interviewing. All received
All received three
three months of
basic training in
basic training in the training
training school
school at Aracruz, while
at Aracruz, the mill
while the mill was
was
under
under construction. MostMost operators
operators also
also worked
worked in
in other
other mills
mills in
in Brazil
77'7_
and were
and were on duty
duty atat Aracruz
Aracruz during
during the
the final
final installation
installation st stages.
s.
Bmphasis was also
Emphasis also placed
placed on
on emergency
emergency procedures,
procedures, soso that
that each
eachempi
employee
.%ee
would precisely how to recognize,
would know precisely recognize, and react
react to,
to, any
any disturbances
disturbances inin
operations~
process operations.

4.6 Start-up
A problem-free
problem-free start-up
start-up took
took place
place on
on 44 September
September 1978
1978 and
and by
the
the end that year,
end of that year, i.e.
i.e. within
within only
only four months of
mur months of production,
production, the
the
mill had
mill had manufactured
manufactured aa quantity
quantity of pulp which
which corresp(nded
corresponded to about
about 40
percent
percent of rated full
uf the rated full capacity.
capacity. The reasons
reasons for
for this
this success lie in
a number of factors: operational procedures
factors; operational procedures had beenbc,n very
-ery thoroughly
rehearsed, the equipment had
the equipment had been
been inspected
inspected before
before delivery
delivery to the site
tu the site
and
and during etc.
during installation, etc.

5.
S. OPERATIONS, MARKBTING AND FINANCIAL
OPERATIONS, nARRETING FINANCIAL RESULT
5.1 Product

The use
use and
and production
production ofof bleached
bleached hardwood
hardwood market pulp
pulp in
in the
the
western
western world
world has
has grown
grownconsiderably
consit)ly ininrecent
recent years.
years. By farfar the biggest
share
share of that growth has
of that has come
come from eucalyptus pulp.
7..0M bleached eucalyptus pulp. Its
Its main
use
use has
has been
been in
in making fine pa:ers
making fine papers both for printing and and writing;
writing; but it
is also used
is also used in tissue papers,
in tissue papers, where absorption and
where high water absorption and softness
softness
is important and
is important and thethe quality
quality advantage
advantage of of eucalyptus
eucalyptus pu-pulp has
has been
particularly rocc-.gnized.
recognized. And in the case
in the case of
of Aracruz,
Aracruz, because
be of its
of
specially
specially selected trees and
selccted trees and its
its cooking
cooking and bleaching
bleaching proces,,
process, the
the pulp
has aa very
very low
low content
content of of extractives,
extractives, providing
providing an
an extra
extra bbonus
-WS to the
to the
paper
paper millers in a better operation
millers in operation of of their
their machinas.
machines.

5.2 Operations
Production and sales
Production and sales figures
figures are
are impressive.
impressive. The has
The mill has
operated
operated continuously near full
continuously at near full capacity,
capacity, and
and the
the sales
sales record
record proves
proves
that
that the
the or inal market
original concept was
market and product concept was valid.
valid.
 -- 351 --

Bleached pulp:
pulp:

1979
1979 1980
1980 1981
1981 1982
1982 1983 198
1984
-- '000 metric tons
000 metric tons-----
-

- Production 291
291 361
361 401 413 430
430 456

- Sales 286
286 371
371 394 421
421 438
438 438
438

of
of which exports
exports 66% 78% 72% 74%
74% 83% 77%

5.3 Marketin\l
Marketing

Arrangements for
for marketing
marketing the
the mill's
mill's output
output were
were made
made well
well
before
before the
the scheduled
scheduled start-up.
start-up. By an agreement signed with
agreement signed with Aracruz,
Aracruz,
Billerud of
Billerud of Sweden,
Sweden, with its
its efficient
efficient marketing
marketing organization
organization inin Europe,
Europe,
committed itself t,
amitted itself to sell
sellon
on aa best-effort
best-effort basis
basis up to
to 50
50 percent
percent of
of the
the
output.
,F.3t. In marketi
market:rg, Aracruz has not relied
has not solely on its
relied solely its know-how
partner, but has
a.. wgr)ed toward
toward building up its
building ui its own sales network;
,wn sales network: in 1982
in 1982
Aracruz opened
Ar,:::oz opened aa marketing subsidiary in
Tareting subsidiary land.
i,, T-191ag. Domestic
Domestic markets
markets were
covered
)-ered by Aracruz itself, and throuln
through a a cinsistent
consistent marketing
marketing effort
effort
Aracruz
ruz has a substantial new
has built up a 1,,iiket in
new market ir the
the U.S.A.

Pulp prices
prices have
have not
not necessarily
necessarily favoured
favoured Aracruz
Aracruz onon the
the world
world
market. From the last
From the last quarter
quarter ofof 1979 to the
1979 to the end
end of
of 1981, pulp prices
1981, pulp prices
remained basically stable,
remained stable, around
around US$
US$ 520/ti
520/t: but
but during
during 1982 they dropped
1982 they dropped
considerably, to as low
to as low as
as US$ 360, and have
360, and have after
after that
that again
again exceeded
exceeded
US$ 500/t.
US$ 500/t. Nevertheless, the the company
company has
has been
been able
able to capture a
to capture a 7-8
percent share of
percent share of the world's short-fibre
the world's short-fibre bleached
bleached pulppulp market.
market. It is
It is
interesting to
interesting to note
note in this connection
in this connection thatthat the
the project's
project's original
original
economic feasibility
economic feasibility waswas based
based onon aa sales
sales price of of US$
US$ 255
255 (c.i.f.
Rotterdam), resulting
Rotterdam), result in an
in an internal
internal rate
rate of
of return
return ofof 15
15 percent.
percent.

5.4 Financial Results

The financial results indicate

indical, that sales revenues have
roles revenues been
have been
commensurate with the liabilities that tt
commensurate with the company
i.....apany has toward various
has toward various
interest groups. Aracruz has been able abie to reduce its financial
liabilities
liabilities significantly (Figure 3),
significantly (Figure 3), froP
from US$
US$ 425
425 million
million in in April
April 1979
1979
to US$
to US$ 80 in 1984,
80 million in 1984, record
record aa net profit
profit each
each year
year since
since the
the mill
ruill
came
came on
on stream,
stream, and
and more
more recently propose to
(1983) propose
recently (1983) to pay
pay aa dividend to its
dividend to its
shareholders. This
This was
was after
after only
only three
three years
years of of industrial
industrial andand
commercial operations,
commercial operations, and
and fifteen
fifteen years
years since
since the the beginning
beginning of of its
its
afforestation
afforestat ion activities.
activities.

1980 1981
1981 1982 1983
mill ion US$
million US$

-- Gross sales revenue 130.7

130.7 136.5 124.8 96.4
-- Net income
income (profit)
(profit) 34.7 41.7 24.3 17.8
17.8

net profit has varied

The net varied between
between 19
19 percent
percent and
and 30
30 percent of
the gross
the revenue. operating
gross sales revenue. expenses per
Operating expenses per ton
ton of
of pulp
pulp sold
sold have
have
been
been around
around US$
US$ ISO,
150, and
and sales costs per ton have been pushed
sales costs pushed down to
around
around US$ the initial
US$ 35 from the initial level
level of
of close
close to
to US$
US$ 50.
50.

5.5 Later Comments from

from Arc
Aracruz S.A.
.uz S.A.
Gross sales
sales revenue
revenue and
2 netI- income
income have been calculated using
using
the US
the US dollar exchange
eXChange rates
rates of the lastst day of
'of each fiscal
fiscal year,
year, which
 - 352 --
-

inates strong
originates strong distortions.
distortions. Using
Using the
the average
average US
US dollar
dollar exchange rate
the the following:
the results are the following:

1980 1981
1981 1982 1983 1984
US$
million US$

- sales revenue
- Gross sales revenue 162.4
162.4 187.6
187.6 175.8 164.6 196.7
(profit)
income (profit)
-- Net income 43.2 57.1 34.2 30.5 131.
131.22
- %
- 26.0 30.0 19.0 18.0 66.7

We underline
We underline that
that the
the translation
translation forfor netnet income
income was
was literal.
literal.
The FASB 52
The FASB 52 procedures were not
not used.
used. If more
If figures are
more exact figures are needed,
needed,
the
the effective value of gross
effective value gross sales
sales inin US dollars should
US dollars should bebe asked
asked from
from
Directoria Comercial. In
In 1984
1984 operating
operating expenses
expenses were
were around US$
US$ 121 per
ton
ton of
of pulp sold, while commercial
pulp sold, commercial expenses,
expenses, including
including departmental
departmental
expenses US$ 53 in the
expenses reached US$ same year (literal
the same (1 i teral translation,
translat ion, average
average
annual rate).
rate).

6• PLANS FOR THE

THE FUTURE
FUTURE

Having established its competitive pOSition

position in
in the export
markets, thanks
markets, thanks to
to its
its high
high quality
quality product
product and
and efficient
efficient mill,
mill, Aracruz
Aracruz
has
has expanded its yearly pulping capacity by
expanded its 000 t.
by 60 000 t. This expansion was
in 1984.
completed in 1984.

Now
Now there
there are
are already
already advanced
advanced plans
plans to
to nearly
nearly double
double the
the
present mill
present capacity by
mill capacity by building
building a
a seCond
second pulping
pulping line
line of
of 300
300 000
000 t/a.
t/a.
The total investment
The total investment cost
cost is
is some
some US$
US$ 400400 million
million (at(at November
November 19831983
prices), including the new line, interest
including the interest during construction, working
during construction, working
capital,
capital, afforestation costs and forest
forest land
land acquisition,
acquisition, asas well
well asas some
some
additional infrastructure.
additional infrastructure. It
It should,
should, however, noted that
however, be noted that there
there will
will
now
now be
be very
very little
little need for investing
need for investing in in the
the latter,
latter, as most of the the mill
mill
infrastructure
infrastructure andand utilities
utilities were originally dimensioned
were originally dimensioned with
with a a view
view to
to
possible
possible doubling
doubling of the capacity of
of the of the
the mill.
mill. time it
This time it is
is expected
expected
that the equipment
that the equipment will
will be 90 percent of of Brazilian
Brazilian origin
origin (vs.
(vs. 60%
60% inin the
the
first phase).
phase).

Integration into
Integration into paper
paper making
making has
has also
also been
been contemplated,
contemplated, but
but
from
from aa strategic
strategic point
point of view there
of view there is
is no
no great
great advantage
advantage inin having
having aa
paper Aracruz other
mill at Aracruz
paper mill other than
than the
the availability
availability of of pulp.
pulp. And
specifically,
specifically, an export-oriented paper mill
an export-oriented mill would have toto compete
compete on
on the
the
same
same basis as paper mills
basis as closer to
mills closer to the
the main markets,
markets, and
and on
on aa much
much less
less
flexible
flexible basis in serving the
basis in the market.
market.

expansion of
Areal expansion of forest
forest holdings
holdings is is not
not required,
required, but
but further
further
investments
investments will
will be
be made the renewal of
made in the of the
the less
less productive
productive and
and poorly
poorly
disease-resistant forests.
disease-resistant forests. Benefi tt ing from
Benefitting from its own research,
its own research, Aracruz
Aracruz
has
has developed for planting
developed technology for planting highly
highly productive
productive forests
forests resistant
resistant
to
to most
most of the known pathological
of the pathological risks.
risks.

REASONS
REASONS WHY THIS
THIS PULP MILL IS
IS AN
AN APPROPRIATE INDUSTRY
INDUSTRY

AS
As could be expected, an an investment
investment of this
this scale
scale also attracted
attracted
harsh
harsh criticism as to to its
its financial
financial viability,
viability, before
before the
the final
final go-ahead.
go-ahead.
Some
Some of the potential financiers
of the financiers were
were concerned
concerned with
with its
its size,
size, i.e. that
i.e. that
it
it would
would be large for
be too large for Brazil
Brazil as
as aa single
single investment
investment item;
item; that
that the
the
project
project would not be manageable under Brazilian
would not Brazilian conditions;
conditions; and that
that its
its
investment
investment cost
cost per
per ton
ton was
was excessive inin aa situation where
where the
the pulp
pulp price
price
was going down and the
going down the market uncertain.
uncertain.
 -- 353 -

in retrospect,
Now in retrospect, there
there are
are several
several things
things that
that stand
stand out
out as
as
factors
factors making
making Aracruz aa successful
successful project.
project.

First all, success was primarily due to

First of all, to the
the notion
notion that
that every
every
link in project design must be
link in be equally
equally strong,
strong, and
and to
to the
the dramatic
dramatic effort
effort
and
and commitment
commitment on the part of the the management and
and other
other interested
interested parties
parties
that
that went into achieving this
went into this objective.
objective. Approximately 75 75 percent
percent of
of the
the
pulpwood
nu), -,(-1 resources
resources required
required had already been
had already planted at
been planted the time of
at the of the
the
final go-ahead
f (1975), and
go-ahead (1975), and the
the minimum
minimum rc
requirement
1,-.iientwas wasexceeded
exceeded with
with aa
considerable
consider. ile margin
margin by
by the
the time ofof the start-up (1978). 3The
sr irt-up (1978). price of
,The price of
wood from own
wood from own forests
forests is
is still low,
low, only
only around US$ 101m
i.iound 135$ 10/m' at mill
at the mill
gate.
Also, figures and
Also, as sales figures and net
net profits
profits testify,
testify, the
the project
project was
indeed able
indhod advantage of
able to take advantage of its
its economies
economies of of scale.
scale. The iroduot
product is is
of high quality,
of quality, competitive
competitive in in price,
price, and
and in
in great
great demand ale,also .J",
on the
domestic market.
market. The start-up wiis
The start-up was fast,
fast, thanks technical
thanks to strong terhrical
backstopping and
backstopping and extensive traininc,
training, and
and well timed
timed toto take
take advantage
adVantage of
the economic
the economic boom
boom and
and the
the better
betterpr).-7-.
prices. Mill efficiency, coupled
Mill eiLiciency, coupled with
with
intensive marketing efforts,
intensive marketing efforts, has carried Aracruz
Araon,... through recessionary
through recessionary
periods and downswings
periods and downswings in prices WHJ'.Jt
in prices without jeopardizing
jeopardizing the the profitability
profitability
of the company.

financial package
The financial package and
and the
the cost
cost estimates
estimates on on which
which itit was
was
based were
based were by
by and
and large
large adequate; for example,
adequa te; for example, no no stoppage
stovaqe dur ing
construction place because
construction took place because of
of lack
lack of
of finance.
finance. Tax incentives, and
Tax inr:i:ii.tives, and
soft loan
soft loan terms
terms helped
helped the
the project
project through
throughitsitsprolonged gestation ,hd
prolongedgo.itation and
investment period.
period.

Major potent
potential1 risks
risks w.
wera thoroughly researched beforehand,
beforehand, and
and
adequate safeguards made.
adequate safeguards E, These
The-i, risks
risks related
related mainly to the domestic
to the domestic
manufacture of
manufacture the specialized
of the recialized equipment,
Eiiiipment; availability, competence and
availability, competence and
skills of
skills of staff
staff and
and operators;
operators; forest biology; marketing;
forest biology; , eting; and,
ii and, on the
on the
financial side,
financial potential cot.
side, to potential cost overruns.
overruns. Also in these areas, one
these areas,
i one of
of
the key
the key links -- good project preparation
preparation -- was
was solid.

Secondly, the
the project complied with Government development
development
objectives and priorities.
objectives and priorities. Thus
Thus it was natural
it was natural that
that it
it enjoyed
enjoyed aa great
great
deal ofof good
good will
will and
and preferential
preferential treatment
treatment on on the part of the
part of
Government. As an ex-post
As an ex-post evaluation,
evaluation, it can can be
be said
said that
that the
the Aracruz
Aracruz
project
project proposal metmet most
most of
of the
the critEi
criteria
la in the Brazilian programme
in the programme of
of
fiscal and other incentives for inv, investment
itmE't in basic and priority
industries (contained in Law and and Decree
Decree 1137, and managed
1137, and managed byby the
the
Development Council):
Industrial Development Council):

(i) The project contributes

contributes tto (sports:
exports: the
the accumulated export
earnings at the
earnings at the end
end of
of 1984
1- 4 were US$ 800
were US$ 800 million,
million, which,
which,
after only six years
years of
of c.:
commercial operations, the
operations, exceeded the
initial
initial investment outlay oiof the project.
( i i) It
It helps toto promote
promote decentralization
decentralization andand reduce regional
reduce regional
imbalances
imbalances,f as it
it is
is located in aa
in thinly settled,
underdeveloped
und, icveloped area in
in south-east Brazil,
Brazil, away from
congestedA industrial
cohi industrial cities such:2ach as Paulo, and
as Sao Paulo, and provides
provides
diii r ployment toto6100
direct employment 6100tie.
people.
pie.

(iii) It mOre intensive

It promoted more intensive use
use of
of local
local in
inputs because as
as
much as
as 60
60 percent
percent of of the
the mill
mill equipment
equipment was
was actually
actually
manufactured in
in Brazil.
Brazil.
 - 354 --

( i v) uses technolc,
It uses technological
ical processes
processes adequate
adequate for regional and
for regional
sectoral development. -it. is
This is particularly true
particularly true in
in the
case ofof forestry
fore;.t:. operations (Le.
(i.e. reforestation and
harvesting technologies).
harvesting techm,

(v) I t has
it has introduced
introduced pror!uction
product ion scales
scales large
large enough to keep
enough to
prices competitive despite
cs.,:pite the considerable investments
investmvnts
that went
that went into
into the
the construction
construction of
of support
support infrastrat'ure
infrastructure
(port, residential community).
(port, community).

(vi) It has
It has recognized
recognized antipollution
antipollution needs:
needs. in the sIsence
in the absence of
of
Brazilian legislation,
legislation, the strict Swedish antipollution
standards
standards were
were applied
applied in emission and effluent treatment.
treatment.

Thirdly.
Thirdly, the project
project was basically aa private
was basically enterprise. but
private enterprise, but
with high
high financial
financial backing
backing provided
provided byby the
the Government.
Government. Success isis also
also
due to
due to the
the conduct
conduct of
of the
the men in charge of
in charge of the
the project,
project, who acted
acted with
integrity in
in the
the utilization
utilization of
of the
the Government
Government funds.
funds.
From thethe above
above it it should
should bebe clear
clear that
that the
the Aracruz
Aracruz Project
Project
proved to
tn be a
a technically feasible, manageable and profitable
undertaking;
underl-,1,,g; but in answering the question as to
but to why it it was an
appropriate forest
approp..--te forest industry
industry project,
project, we
we should
should be
be careful to draw too
careful not to too
simplistic
nimplist:c or straightforward conclusions
or straightforward conclusions for other such
for other such projects
projects from
from
this
th';. experience,
experience, as so many
as 80 many variables were were in
in play.
play. should only
We should only
re-emphasize
re-,mphasize the the criteria that the pio
that made the project successful.
succ--(1, '. There
There was aa
clear
clesr vision of what the the project
project should
should be;
be, menn with entrepreneurship
enl-,:'reneurship and
an ability
an ability to lead; an
to lead; an economically
economically soundsound project
project concept and the
ncept and the
resources
resourias to prepareprepare the project
project thorou4nly
thoroughly before
before the start of of
disbursements; aa competent and able organization and institutional
disburs,.mnnts;
framework to to make
make decisions
decisions and and act
act upon
upon them;
them, an adequate financial
an adequate financial
package to enable making
to enable making the right choices,
the right choices, thus
thus avoiding
avoiding second-best
second-best
solutions, thorough training.
solutions; and thorough training.

In
In the
the end,
end, the
the project also had
project also had aa fair
fair share
share of
of something
something
required in
requi ' all human
in all human endeavours:
endeavours. luck
luck and good timing
and good timing to
to bring
bring the
the
final
finai seal of
of success.
1
 -- 355
355 --

Figure
Figure 11
the Aracruz
Location of the Aracruz Project
Project

o 10 20
20 30 km
I

A0proximate Ilomm
of A racrux foram

FUN IDA0 ext town 0-f

C0quatrel

ATLANTiC OCEAN
AiLANT1C OCEAN

CAPIACIcp,

ITOPIA

Totality of
Totality ofintegration,
integration, forest
forest to
toport
portisiskey
key totoAraeruz,
Arac(uz.
 - 356
356 --

Figure?2
Figure
Development of
Development of the Investment
Investment Estimate
Estimate

USD million
USD million

Final Realized
budget 616
600 564

500
267
213
Preliminary
400 budget
budget

339

344

tm
300

200 220

100

\973
1973 1974
1 974 1975
1 975 1976 1977 1978
1976
 - 357 -

Figure 3
Amortization of
of Loans
Loans

Loans
Outstanding
USD rrmillion
USD Ilion

Financial
400 liabilities

300

200
National
resources

100
100 -~

#10

Foreign
Foreign
resources
resources
~I
I
I
I I , I
I
78 79 80 81 82 83
Positions on December
December 31
31

Source: Annual Reports,

Source : Annual Aracruz 1983
Reports, Aracruz 1983
 - 359
- 359 --

SOCIO-ECONOMIC APPRAISAL OF
ALTERNATIVE TECHNOLOGIES FOR
FOR THE
THE SAWING
SAWING OF
OF SOFTWOOD
SOFTWOOD
AT SAO HILL SAWMILL
SAWMILL IN
IN TANZANIA
TANZANIA

by

Birger Solberg*
Rirger Solberg*

CONTENTS

Page

1
1.• INTRODUCTION 361

2.
2, MAIN ASSUMPTIONS 361

2.1 Assumptions Made

Made in
in the
the Financial
Financial and
and Economic
Economic
Calculations 364

3. CALCULATION OF DIRECT COSTS

COSTS AND INDIRECT
INDIRECT
ECONOMIC EFFECTS 364

3.1 Indirect Effects 365

365

4. CRITERIA
EFFECTS ON CRITERIA 365
365

4.1 Production Efficiency from

from aa National
National Economic
Economic
Point 6f
of View 365

4.1.1 Direct economic effects

effects 365
365
4.1.2 Indirect
Indirect economic effects 366
366

4.2 Production Efficiency

EffiClerlcv from
from aa Business
Business Point
Point of
of
View 366
366
4.3 Employment 367

4.3.1 Direct employment 367

367
4.3.2 Indirect employment effects 367

4.4
4.4 Working Conditions 367
4.5
4.5 Integration 367
4.6
4.6 Independency 368
368
4.7 Ecological Effects
Effects 368
4.8 Distributional Aspects 368
368
4.9 Flex ibil ity
Flexibility 368
4.10 Uncertainty 368
368
4.11 Other Main Factors
Factors 369

5. CONCLUSION 369

* Agricultural
Agricultural University of Norway,
Norway, Department
Department of
of Forest
Forest Economics,
Economics,
As-NLH, Norway.
Norway.
 -- 360 --

lA
APPENDIX lA Investment for
for Alternative
Alternative AA 371

lB
APPENDIX IB Investment for Alternative BB
Investment 372

lC
APPENDIX 1C Investment for
for Alternative
Alternative CC 373

2A
APPENDIX 2A Average annual operating costs
costs for
for
sawmilling alternative AA at
at full
full
production
product ion 375

2B
APPENDIX 2B Average annual
annual operating costs for
ope~ating costs for
sawmilling alternative BB at
at full
full
production 376

2C
APPENDIX 2C Average annual operating
operating costs
costs for
for
sawmilling alternative
alternative CC at
at full
full
production 377

2D
APPENDIX 2D costs of
The costs of the
the three
three sawmill
sawmill alternatives
alternatives
present values
calculated as discounted present values 378

2E
APPENDIX 2E Direct and indirect economic effects of
Direct and of
sawmil~ technologies for
alternative sawmil for
producing 14 000
producing 14 000 m
m of sawnwood 379

REFERENCES 381
 -- 361
361 -
-

1.
1. INTRODUCTION

One important issue

One important issue facing
facing the
the goveinments of of the
the less
lessdeveloped
developed
Countries
countries (LDC's) is that
(LDC's) is that of
oftechnologi,u1
technolog cal choice.
choice. The question of
The question of how
how
existing
existing natural
natural resources, labour, capital
resources, labour, copltal and skills can
and skills can best
best bebe
combinedtoto counteract
combined counteract employment problemsand
employment problems andprovide
providea astable
stable base
base for
for
future increase
a future increase inin the
the standard
standard of of living,
living, is
is aa complex,
complex, but but crucial
crucial
one.
Recently interest has increased in
ecently interest relating to
in matters relating to
technology which, in the context
which, i:1 context of this paper,
of this paper, means the machinery,
means the machinery,
procedures
sk ills and proced ures forfor providing
provid ing goods
goods and
and services.
serv ices. One
One problem,
homr, is
however, is the lack of studies on
the lack of stUdies on the the socio-economic
socio-economic effectseffects of
of
altcrnative
al choices of
ternative choices of technology in actual development projects,
,n a,t,Jal
racticilarly those relating to forontrv and forest industries.
particularly those relating to try and forest industries. The
onin,'t,.e of this r,;er
objective of this paper isç to the effects of alternative
dnalvze the effects of alternative
to analyze
sawrilling techncl
sawmilling tic Sa, Hill
technologies at the Sao Hill Sawmill project in
3awmill (SHS) project in the
Tringa region
Iringa region ofof Tanzania,
7:: ;m et partl}
a financed by
ect partly financed by the
the Norwegian
ian
Pgencyfor
Agency fcr Internatioro:1
International Developer'nt
Development CbjkA;i).
(NORAD).

The
The analysis
analysis was
was made
made taking into consideration
taking into consideration the
the following
following
criteria:
criteria:

production efficiency
production efficiency from
from aa national economic
national economic point of
pOint of
view;
view;

production efficiency
production efficiency from
from a business
business economic
economic point of
view;
view;

direct and
direct and indirect
indirectemployment effects;
employment effects,

working conditions,
working conditions;
integration with
integration withthe
thepresent
presenteconomic
econanic and social structure
and social structure
of Tanzania;
of Ta:1za:1ia~

independency;

ecological effects;
ecological effects;
distributional effects;
distributional effects;

flexibility;
flex ibili ty;

uncertainty;
uncertainty;

other
other factors.
factors.

The choice
The choice ofof the
theappropriate
appropriatetechnology
technology depends on on physical,
phys ical ,
technical,
technical, socio-economic
socia-economic and andpolitical
political factors.
factors. It is,
It is,therefore,
therefore,
necessarytoto scrutinize
necessary scrutinize these
these factors
factors and
and totospecify
specifythe assumptions
the asswnptions onOn
which the analysis
which the analysis is
is based.
based.

2. MAIN ASSUMPTTC-S
ASSUMPTIONS

Three alt.-7- ..tive technologies

alternative technologies - A, B, 6, and
nd C -
C for the
for
production of
production
production up't.F
production
compared,I in
of sawnwood are compared
alternative will
cpits of each alternative
in which
willhave
havean
it
jna annual
asswed that
which it is asswned
.ndal input
that the
input capacity
the
capacity
of 14
of IR one
14 000 In S in onc shift,
shift, for
for wpch
w2ich 11 500 M'S
11 500 In s be supplied
will be suppl ied from
from
softwoodclear-fellings
softwood cleat fellir.,ç and
and 22 500
500 Inm Ss from softwood nings.
softwood thinnings.
 -- 362 --

Al telCnatives A
Alternatives A and
and B lCepresent Luntrally located
B represen. locsted sawmills
sawmills and
each cons ists of
each mill consists of one
one double
double slabuer,
slabbet', one
one ott,..tlar
rcular spl it saw,
split saw, two
circular resaws
resaws and
and one
one circular
circular doublr
double edger. Forroo larger
larger logs there
there isis
an additional
an additional circular
circular saw benchbench which
which can be operated
can be operated asas aa separate
separate
unit, in combination
unit, or in combination with
with the
the resaws.
resaws. Alternative
Plternative C consist:f
consist5 of five
of five
semi-mobile samnills,
semi-mobile sawmills, each with with aa one-shill of 2 800
input of
one-shift input m s/a,
800 lfl s/a, and
consisting
consisting of slabber, one
of one slabber, one resaw
resaw and
and one
one cross-cut
cross-cut saw.
saw. These fivefive
sawmills will have
sawmills have aa common
Common central
central unit
unit fc,r
for sorting,
sorting, drying,
drying, trimming,
tril!uning,
dipping, impregnation,
dipping, impregnation, for for sales
sales of
of sawnwood,
sawnwood, for
for administration
administration and and for
for
repairs
repairs and
and maintenance
maintenance of the logging
of the logging and
and sawing equipment.
equipment.

A is
is identical
identical to
to the existing
existing SHS project, while
SHS project, while alternative
alternative B
is
is aa modified version of alternative A, in which the following
modifications have
have been
been assumed:
assumed:

The location
location of the
the mill
mill will
will be
be on
on site
site B, indicated
indicated on
1, closer
map 1, closer to
to the
the forest
forest resource.
resource.

The main sawmill

The sawmill building
building will
will be
be of
of simpler
simplerlfonstruction
nstruction
and will cost
and will cost 1.2
1.2 million
million Tanzania
Tanzania shillings- instead of
shillings- instead
the
the 2.2
2.2 million T.shs. for
for the
the samnill
sawmill building
building of
of A,
A.

Logging
Logging equipment will be simpler and less expensive.
Only 70
70 houses for
for junior
junior staff will
will have to be
be constructed
instead
instead of 100 as
as for
for A.

social infrastructure costs

Social infrastructure costs (housing, etc.) for
(housing, etc.) alternative A
for alternative
will correspond
will correspond toto the
the actual
actual costs
costs of
of the
the present Sao Hill
present Sao Hill Sawmill
Sawmill
project. For
For alternatives B and CC more
alternatives Band more of
of the
the employees
employees will
will be
be
recruited from the
recruited from the villages around
around the
the sawmills
sawmills and,
and, except
except for
for the
the
personnel, these
skilled personnel, these employees
employees will
will continue to live
continue to in their present
live in present
homes.

A and
and BB are powered
are powered by electricity
electricity from
from installed
installed diesel
diesel
generators, whereas each
generators, sa~nill of
each samnill of CC will
will have
have its
its own
own diesel
diesel engine.
engine.

centralized and
When comparing centralized and decentralized
decentralized sawmill,:,
sawmills, transport
costs,
costs. influenced
influenced by
by the
the location
location of
of the
the forest
forestresour..-
resources. are
are of ,

importance. This
This analysis is
is based
based on
on the
the actual
actual timber
timber si
situation
j;.; at Sao
with annual
Hill with annual sawlog
saw10g quantities
quantities available
availablefor
forthe
thefirst
firstli-.1
10-15 years as
indicated in
in Table
Table 1.
1.

!I January 1977 exchange

exchange rate:
rate: US$ 11 = T.shs. 8.42
8.42
 -- 363 -
-

Table 1

Sources of origin
orIgIn and
and quantities of sawlogs
sawlogs
available annually
annually

quantity
Annual quantity
Forest
Forest reserve logging
Type of logging av~ilable
aviilable
(m
(m u.b.)

~lsiwasi
Msiwasi clear-cut 12
12 300
Irunda
Irunda clear-cut 66 200
200
Mninga clear-cut 6
6 200
Sao Hill thi;mings
thinnings 55 200

Total (rounded off)

Total (rounded off) 30
30 000

is located
A is located at
at the
the present
present SHS
SHS site,
site, point
point AA on
on map
map 17
1; BB would
be
be located
located on
on site BB of
of map 1; the
map 1: the central
central unit
unit of
of CC would
would also
also be
be
situated Site B.
situated at Site The five sawmills
The five sawmills of would be spread
of C would spread out
out as
as
on map
indicated on map 1:
1,

11 samnill (B)
sawmill central unit
unit
2 saWlnill s (C
samnills (C and
and 0)
D) in Msiwasi
in Msiwasi Forest Reserve
1
1 saWlnill (El
samnill (E) in Irunda
in Irunda Forest Reserve
1 saWlnill (F)
sawmill (F) in
in Mninga
Mninga Forest Reserve

Since the sawnwood

since the sawnwood is is loaded
loaded onon tractor
tractor trailers
trailers directly
directly after
after
being sawn, no
being sawn, sheds are
no storage sheds are necessary
necessary except
except atat the
the central
central unit.
unit.
The sawmill buildings
The samnill buildings will be of simple construction with
simple construction with eucalyptus
eucalyptus
poles, aa corrugated
corrugated iron
iron roof
roof and
and aa cement
cement floor.
floor. Investment for
Investment for site
site
preparation
preparation and
and the sawmill building is is estimated
estimated toto be
be T.shs.
T.shs. 70
70 000
000 per
per
saWlnill,
sawmill, of which T.shs.
of which T .shs. 40
40 000
000 represent investments with
represent investments with aa write-off
time of
time three years,
of three years, because
because the mills will
will be
be moved every
every three
three to
to four
four
years ~
years.

Tran;;port
Transport of sawnwood from froln the
the sawmills
saWlnills to
to the
the central
central unit
unit will
will
be carried out by
be carried by agricultural
agricultural tractors
tractors with
with 2-axle
2-axle trailers,,which
trailers'3which cancan
carry aa load
carry load of up to 55 t.
up to t. Each saWlnill produces
Each sawmill produces loout
afout 13
13 mm" (approx.
77 t)
t) of sawnwood
sawnwood perper day.
day. In
In addition,
addition, about 1.3 m
about 1.3 m of thethe best
best slabs
slabs
and off-cuts
and off-cuts will
will bebe taken
taken perper trailer-load
trailer-load to to the
the central
central unit
unit for
for the
the
production of boxboard.
production boxboard. This means that that each
each mill
mill will
will have
have to
to be
be
visited twice a
visited twiCe a day byby aa tractor
tractor for the collection
for the collection of sawnwood,
sawnwood, slabs
and
and off-cuts. To cover the
To cover the requirements
requirements for for transport
transport between
between the
the
saWlnills
samnills and
and the central unit,
the central unit, three tractors
tractors and
and eightht trailers
trailers will
will be
required,
required, which will allow
which will allow forfor an
an overcapacity
overcapacity in in transport.
transport.

B and C will
A, Band will each
each require
requi re aa four-wheel
four-wheel drive vehicle r one
drive vehicle, one
tipper truck
tipper truck and
and one
one stone
stone crusher
crusher for
for road
road construction.
construction. A workshop
workshop
manager,
)nanager, mechanics and tool maintenance
and tool lnaintenance personnel
personnel will
will have
have to
to be
engaged.

The need for access roads is

is the sa,ne
same for all three
alternatives. However, inin alternative
alternative C skidding
skidding will
will mainly
mainly be be done
done
from stump to
directly from to industry
industry and
and less
less feeder
feeder roads
roads will,
will, therefore,
therefore, bebe
required.
required. In all
In all alternatives
alternatives clear-felling
clear-felling operations
operations will
will bebe carried
carried
out utilizing
out utilizing agricultural
agricultural tractors,
tractors, particularly
particularly in in more
more difficult
difficult
terrains from
terrains fro)n which 20
20 percent,
percent, or
Or 66 000
000 mIn ss of
of the
the timber
timber volwne
volume will
will be
be
extracted annually.
annually. In thinning operations, manual skidding
In thinning skidding with
with aa sulky
sulky
assllmed.
is asswned.
 -- 364 --

The analysis
analysis relates
relates to
to the logging and
the logging and 5awmilling
'1'ng activities
actvities
only, Le.
i.e. aning, boxboard production and ivq,,
planing, act7rties,
impregnation activities,
which take
which take place
place in the present SHS
the rresent project, were not
SHS project, tato into
not taken into
because they
consideration because they Involve
involve the
the same
srune additional
additional benefits
nefits and
, ani costs
for
for all alternatives. Full
Foil capacity utilization is
Lapacity utilization is as,imed.
assumed.

The percentages
percentages of sawnwood
sawnwood recovery
recovery have
have been taken
taken to
to be
be the
the
same for
same forall
allalternatives.
alternai. BasedBased on experiences
experiences at
at SHS, the following
SHS, the following
recovery percentages
percentages 1-a,,
have been used:
used:

47 percent for
47 for sawnwood
sa"'"wood production from
from clear-fellings
clear-fellings
44
44 percent for sawnwood
percent for sawnwood production from
from thinnings
thinnings
55 percent for
for boxboard
boxboard production
2.1 Assumptions Made
Assunptions Made in
in the
the Financial
Fina"cial and
and Economic
Economic Calculations
Calculations

All market prices

All prices are
are ,Thoted
quoted in
in Tanzanian
lanzanian shillings
shillings based
based on the
1977 price
-ice levels in Tanzanin.
levels in Tanzania. In
In the +nrmic analysis
the economic analysis shadow
shadow prices
prices
have been for un/semi-s,
in used for -]],d and
un/semi-skilled and skilled
skilled labour
labour and forfor foreign
foreign
exchange
ex (import), which are 0.7, 1.3
je (import), 1.3 and
and 1.6 respectively.
respectively.

It is
It is assumed
asswmed that
that all
all personnel will be employed on a permanent
permanent
basis -- i.e.
basis i.e. casual
casual labourers,
labourers, which are paidpaid about 30 percent less
less than
than
permanent employees, have
permanent employees, have not
not been
been considered.
cons idered. Social
Social benefits for the
benefits for the
workers, paid by the employer. , are 15 percent of gross salary,
corresponding
ccr,,,,-.1ding to
to actual
actual practice
pract, at
at SHS.

In the
the analysis
analysis thethe term "direct
"direct import"
import" refers
refers toto those
those items
items
for which in
for in 1977 there were
1977 there were no no sales agencies in Tanzania and which,
in Tanzania which,
therefore, had to
therefore, had to be imported direct.y
be imported directly h7by the
the project.
project. Stocks
Stocks of spare
spare
ts have been calculated
parts calculated at at 10
10 per_:e:.t
percent ofofthetheinitial
initialinvestment
investmentcosts
coss
if they are sold by by aa Tanzanian
Tanzanian agency
agency and
and at
at 20
20 percent if they
percent if they ha-,
have to
be imported directly.
be imported directly. Working
Working capital has been asswned
capital has assumed to
to be 3030 percent
of recurrent expenditures (i.e.
(i.e. all costs
costs except depreciation and
interest costs).

In financial analysis
In the financial npnrAciation costs
analysis depreciation costs (d)
(d) are calculated
using linear formula
using the linear formula

d =
d = I - A

where: rI is amount
is initial investment amount
A is
A is scrap value
value for
for the
the item
item in
in question
question
n is write-off time
n is time

If
If nothing
nothing else is stated,
else is it is
stated, it is a
asswned that
that A is 10 percent of
of
I, and
I, interest costs of machinery are
and interest are 99 pe
percent per annum
annwn of II + A
A
22

The requirements
requirements in
in machinery equipment, etc.,
machinery and equipment, etc. I for
for each
each of
of
the three
the three alternatives
alternatives are
are presented
presented in lA, IS
in Appendices 1A, and 1C,
19 and IC,
toqether
together with corresponding costs
costs and
and write-off
write-off times.
times.

3.
3. INDIRECT ECONOMIC
CALCULATION OF DIRECT COSTS AND INDIRECT ECONOMIC EFFECTS
Since the produnion
since production output is the same for all three
alternatives, aa comparison
cOlnparison may be made by
,y be by calculating
calculating their
their individual
individual
production costs.
costs. It is
is asswned
as full production
d that full production on one shift
shift will
will
 - 365 -
-

be reached
be reached one
one year
year after
after completion
completion of
of construction
construction of
of the
the samftill
sawmill and
and
that
that the
the quantity
quantity of sawnwood
sawnwood produced
produced during
during the
the first
first year
year is
is 50
50
percent of full
full production.
production.
Based on the
the assumptions
asswoptions indicated
indicated in
in Chapter 2,
2, Appendices
Appendices 2A,
2A,
2B
211 and
and 2C
2C show
show the
the direct
direct annual
annual production
production costs
costs at full production for
at full for
the three alternatives,
the three alternatives, based on 1977 market prices.
Appendix
Appendix 20 indicates the
2D indicates the net
net present
present value
value of
of the
the calculated
calculated
production using the
production costs using the following
following formula:
formula:

n
n m C
C ..5s
(1)
(1) NPC == v.77 t,i
t , i i
L t
t=Q i=l
t=0 i=1 (1+r)
(l+r)

where:

NPC is net
is net present value of of costs
costs
n is length of
is of the
the project
project (years)
(years)
10
117 IS
is the
the number
nwnber of cost components considered
considered
t is years, tt £ (0, n)
is n)
i is co-'
is cost component,
component, i i 1. (1,
(1, m).z
m)
C . is is aamount component ii at
nt of cost component at time tt
t ,1 is
rr"1 is sshadow
)w price
price of
of component-
component i (r (r equals
equals one in
in the
the
financial
fina gial analysis, or or all
all i)

This calculation method takes

This calculation takes care
Care of
of the
the time
time profile
profile of
of the
the
costs, in particular the length
in particular length ofof the running-in period
the running-in period and
and the
the
differences regarding investment
differences regarding investment costs
costs and
and recurrent
recurrent expenditures.
expenditures.

3.1
3.1 Indirect Effects

The indirect
indirect eCOnom ic effects
economic effects ofof the three alternatives
the three a I ternat i ves wete
were
calculated using the
calculated using the input/output
input/output table
table for
for Tanzania
Tanzania presented
presented in DNOP
in UVDP
(1975). The the three
The indirect effects of the three sawmill alternatives have
sa~nill alternatives have hoer
been
estimated
estimated byby adding sector ("sawmilling
adding one sector ("saWlnill Lng sector")
sector") to to the
the original
orig inal
input/output matrix.

Each of
Each of the recurrent expenditures
the recurrent expenditures of
of the three alternatives
three alternatives
were used
used to
to calculate
calculate the
the direct
direct and
and indirect
indirect effects
effects as
as shown
shown in
in
2E.
Appendix 2E.

4.
4. EFFECTS
EFFECTS ON
ON CRITERIA
The following
following treatise
treatise is
is based
based on
on assumptions
asswnptions and
and calculations
calculations
indicated in the preceding
in the preceding chapters.
chapters. It concerns
It concerns the
the appraisal
appraisal of the
the
three
three alternatives in relation to
alternatives in to the
the criteria
criteria mentioned
mentioned in
in Chapter
Chapter 1.
1.

4.1 Efficiency from

Production Efficif-7y frotn aa National
National Economic Point of View

4.1.1 Direct
Direct economic effects

Appendix 20 20 shows that that alternative CC is is significantly more

favourable, from aa national
natic'.., economic
economic point
point of
of view,
view, than B which,
which, in
9. in
turn, again
turn, again isis more favourable
favourable thanthan A.
A. The present values of
The present of costs
costs for
for
the three I'll ternat i ves, using
three alternatives, uS ing a 99 percent
a discount rate
percent discount rate and assuming
constant
constant prices, follows,
prices, are as follows:
 -- 366 -

Alternative A A T.shs. 60.9 million

60.9
Alternative
Alternative B T.shs. 52.6
52.6 million
Al ternat i ve CC
Alternative T .shs •
T.shs. 40.6 million

From
From aa national
national economic
economic point
point of view,
view, alternatives
alternatives A and
and Bare
6 are
50
50 and 30
30 percent
percent more expensive respectively
more expensive respectively than
than CC when based on
when based On the
assumptions.
afore-mentioned asswnptions.
The
The main reason for
main reason for the alternatives AA
the large differences between alternativas
and B on
on the
the one
one hand
hand and C On on the
the other,
other, is thethe relatively
relatively low
investment
investment cost for the latter,
cost for latter, as
as shown
shown in
in Appendix 1.
Appendix 1.

4.1.
4.1.22 Indirect economic ef -

Appendix 2E shows U.,:

2E shows that the indirect use
the indirect USe of economic
economic resources,
resources,
where the
where the marginal
marginal propensity
propensity to to consume is is 0, isis the
the highest
highest for
for
alternative
alternative A and lowest
lowest for
for C.C. The largest
The largest difference
difference relates
relates toto
depreciation; alternative C has
depreciation; alternative has an
an indirect
indirect economic
economic effect
effect which is 27
which is 27
ent lower
percent lower than
than A and
and 24
24 percent
percent lower
lower than
than B. The main reason
reason for
for
this is that alternative C requires less
this is less vehicle
vehicle repairs
repairs and
and maintenance.
maintenance.

When the
the marginal
marginal propensity
propensity to to consume
consume is is changed
changed to to 0.5,
0.5,
alternative
alternative C rates anan indirect
indirect total
total (gross)
(gross) production
production figure
figure which is
which is
approximatel 2 percent
;'.pr.roximately 2 percenthigher
hi,::er than and3 3 percent
thanA Aand percent higher than B.
higher than The
this is
reason for this
main reason is that
t'.-(t alternative CC is is the
the most labour intensive
most labour intensive
alternative.
at. -native.

11 alternatives,
All alternatives, butbut in
in particular C, C, have
have a 'iigh
high indirect
indirect
import
impor: usage
.ge when compared with the
when compared the direct
direct import
import compo9,nt.
component. The
The main
reason for this is is that the agricultural
that the agricultural tractors
tractors cort,,orlated
contemplated for
for all
all
alternatives
alternativo:; are
are assembled
assembled in
in Tanzania,
Tanzania, thus
thus giving
giving aa low
low direct import,
import,
but
but aa high import component,
high indirect import component.

for the
Adjusting for the indirect
indirect operating
operating surplus
surplus ard
and taking into
account the indirect
account the indirectimport
ilnport effects,
,A;(,..;ts, it is fair
it is fair to
to c(inii.Jde
conclude that,
that if
if the
marginal propensitytotoconsu:::u
marginal propensity consume isis about 0.5, the
about 0.5, the 1r-direct
indirect economic
effects
effects of the three alternati,:;
of the alternatives are
are about equal.
about equal.

4.2 Produc.l;ion Fffici

Production Effi"tencyi from
from aa Business
Business Point
Point of View

The first
first line
line of
of LAppendix
pendix 20 indicates that
2D indicates that the
the present
present values
of costs, using
of costs, using shadow prices
prices of 1.0 and
of 1.0 and aa 99 percent discount rate,
percent discount rate, are
the following:
the following;

Alternative AA T.shs. 52.1 million

52.1
Alternative
Alto:.:.:;;tve B T.shs.
T. 47.1 million
47.1
Alternative C C T.shs. 39.6
39.6 million

means that
This means that alternatives A A and
and BBare
are 32 32 and
and 19
19 percent
percent more
more
expensive respectively, from
expensive respectively, from a a business
b..:- point of1 view,
ness poi, ( than alternative
view, than alternative
C. The above cost dl.ferences
The above differences between alternatives
twoen alterr .V':73 AA and
and BB relative
relative to
to CC
correspond
correspond toto an
an averag
averag'] ofof T.sns.
T .shs. 1.951.95 and 1.:,
art 1.17 million
mill ion per
per year,
year, or
or
T.shs. 139 and 84
139 and 84 per
per m'
In of sawnwcod
of sawnwood prodLced.
produced. Appendix
L..:;ndix 2D20 also
also shows
that the cost differences between
that the between alternative
alternative CC and alternatives
.1ternatives AA and
and B
decrease with increased
decrease with increased labour
labour and and energy
energy costs,
costs, but they
r), increase with
they increase
;: with
increased import and
increased import and other costs,
costs, for for reasons
reasons stated
stated :n in Chapter
Chapter 4.1.
4.1.
 -- 367
367 --

4.3 Employment

4. 3.1
4.3.1 Direct employment
employment

Table 22 shows the

shows the direct
direct employment
employment effects
effects of
of the
the three
three
alternatives ..
alternatives.

Table 22

Direct employment effects

effects of
of producing
producing
14
14 000
000 m3 eer year
m3 of sawnwood per year

Direct employment generated (man/year)

generated (man/year)
Type of personnel
employed
employed
Al t. A
Alt. A Alt.
Alt. B Alt. e
Alt. C

Un/semi-skilled 167 171 201

Sk illed
Skilled 57 56 55
55

It
It Can
can be that alternative C
be seen that e has
has aa direct
direct total
total employment
employment
effect which
effect which is
is approximately
approximate 13
13 percent
percent higher
higher than
than the
the other
other two
two
al ternatives.
alternatives. The employment
The of skilled personnel in the three
alternatives isis abcut
about equal,
equal, but
but alternative
alternative Ce employs
employs about
about 20
20 percent
percent
more un/semi-skilled personnel
personnel than
than the
the other
other alternatives.
alternatives.

4.3.2 e
Indirect employment effects

Wages and
Wages and salaries
salaries indicated
indicated in Appendix
in Appendix 2E
2E show
show that
that the
the
indirect employment effects of
indirect of the
the three
three alternatives
alternatives are
are about
about equal.
equal.

4.4 Working Conditions

Conditions

Alternative C will
will probably
probably entail
entail more
more physical
physical strain
strain for
for the
the
employees than for those
employees than of the
those of alternatives in the
the other alternatives the handling
handling of
of
sawlogs at
sawlogs at mill
mill site
site and
and in
in loading
loading sawnwood
sawnwood onon trailers.
trailers. With proper
With proper
planning,
planning, however, it
it should fai
should be fairly easy tc
easy to keep
keep this
this strain
strain below
below aa
harmful level.
harmful level.

As far as
As far as psychological
psychological strain
strain and
and risks
risks of
of personnel
personnel accidents
accidents
is concerned,
is concerned. there is little difference between
little difference between the
the alternatives.
alternatives. It
It
may argued, however,
may be argued, however, that
that alternative
alternative CC has
has an
an advantage
advantage because
because more
more
workers
workers will to live at home
will be able to home in
in already
already existing
existing villages.
villages.

workers' influence
Regarding workers' influence on
on their
their own working
work situation, the
situation, the
three alternatives
three seem to
alternatives seem to be
be about
about equal,
equal, although
although alternative
alternative C C
represents
represents smaller
smaller production
production units,
units, where each worker
where each worker might
might have
have more
more
influence than in
influence in larger
larger production
production units.
units.

4.5 Integration

Al ternatives AA and B
Alternatives B have aa higher import
considerably higher usage
import usage
(particularly direct
(particularly direct import) than C. The latter
The latter is, therefore,
therefore, more
mOre
integrated in
integrated in the
the present economic structure
structure of
of Tanzania.
Tanzania.
 -- 366
368 -
-

ard
12,.gardinointegration
int6grationwith
withthe
thepresent
present social
social structure
structure and the
and the
fut
C is
i L1.nicani
future economic and social
easier to
socio
integrate
int.eqe&tc in
11
development
cevelopment of Tanzania,
the
the existing
Tanzania, it
social
social
it may be argued that
infrastructure
infrastructure than
than A
A
that
and
and
C ti
S,
13, and thus gives a hhigner positive spin-off effect.
4nd ILL:, effect.

4.6
4.6 Independency

Beg9rd1,1q independency
"~'Y'Huing independency onon micro level
level (i.e.
(i.e. project
project level)
level) the
the
c1.1 profitability
financial rtititability is indicator, which
is an indicator, which was
was covered
covered inin Chapter
Chapter
4.2, concluding that alternative
cLnituding tnat alternative CC is the most preferable
is the preferable alternative.
alternative.
This conclusion
cin,ilusion also
also emerges from
from Ap:3endix
Appendix 2E
2.7 regard Ing the
regarding the independency
independency
on
or macro
..iro level
lev,1 indicated as
as direct
direct and
and1.-,direct
indirect import usage.
usage.

4.7 Ecological Effects

Effects

three alternatives
The three alternatives are
are approximately
approximately equal with
with respect
respect to
to
ecological effects, which
which may be
be termed
termed as
as not
not damaging.
damaging.

4.8 Distributional Aspects

The most important distributional effect, effect, except personal
income, is, in this case, regional income..
regional income. Alternatives
Alt-, t-V.5
A and
and BBare
are
about equal, but
about equal, but alternative
alternative C,
C, which
which will
will emplc.-
employ about
at, A 20
20 percent more
un/semi-skilled personnel, is
is likely
likely to
to have
have aa greal
greater indirect
indirect effect in
effect in
Iringa
Iringa region and Mufindi District.
District.

4.9 flexibility
Flexibility
AS alternatives A
As alternatives A and
and BB consist
consist of
of only
only one
one sawmill
sawmill unit,
unit, they
are more
are more vulnerable
vulnerable to
to breakdowns,
breakdowns, changes
changes inin production
production output,
output, etc.,
than alternative C,
than alternative which consists
C, which consists of five
five units.
units. These units
These units might,
In ht,
however, be
however, be more difficult
difficult toto administrate,
administrate, even
even though
though one
one extra
extra person
person
will be
will be employed per
per unit
unit for
for this.
this.

4.10 uncertainty
Uncertainty

The productivity
productivity estimates
estimates assumed
assumed inin the have been
analysis have been
proved
proved to
to be
be realistic at Sao Hill for for alternatives
alternatives A A and B.S. Alternative
C,
C, however,
however, has
has not
not been tried at
been tried at Sao Hill,
Hill, and
and its
its assumed
assumed productivity
productivity
is therefore uncertain. However, WickstJ¢m
Wickst/Om (1984) indicates aa
productivity
productivity for
for one
one mobile
mobile saw bench of 10001000 m
m of sawnwood per year and and
an average recovery
an average recovery percentage
percentage of of 47
47 percinl from softwood thinnings
F/om s,ftwood thinnings in
Tanzania.
Tanzania. The productivity figures
The productivity figures mcnti,n00
mentioned in NTI (1959) imply
in NTT imply that
that
the
the productivity estimates
estimates asswned
assumed inin tht,.
this paper for
f,it alternative
alternative C are onon
the low side.
the side.

of the
Control uf the operations presents another
another uncertainty,
uncertainty, although
the
the SHS
SHS project has proved that
that units
units like
like A
A and
and BB can
can easily
easily bebe managed.
managed.
Five smaller
Five smaller mills
mills spread out in
spread out in the
the forest
forest reserves
reserves may,
.nay, however,
however, be
more
more difficult to to supervise.
supervise. Lack
Lack of control could in in theory
theory imply
imply
either!
either:

(a) decrease in
in production
production uf
of sawnwood;
sawnwood;

(b) no decrease
no decrease in
in production,
production, but an
but an increase in
in production
costs
costs;1

( c) no decrease
decrease in
in producticn,
uetion, but
but aa decrease
decrease in
in official
official
salesi or
sales; ur

(d) aa combination uf
of these
these factors.
 -- 369 --

From aa national
national economic
economic point
point of
of view,
view, situations
situations (a)
(a) and
and (b)
represent the
the worst
worst cases.
cases, However, situation (c)
However, (c) could be
be vital
vital for the
for the
project's existence, as
project's as aa necessary
necessary condition
condition for
for an
an industrial
industrial project
project
in
in most
most LDC's is that it
LDC's is is financially
it is financially self-sufficient.
self-sufficient,

Al ternatives A and B are more

Alternatives mOre vulnerable
vulnerable to
to import
import shortages
shortages and
and
in import
changes in prices than
import prices than C which,
which, on
on the
the other
other hand,
hand, is
is somewhat
more vulnerable to changes in
more in prices
prices for
for oil and
and diesel.
diesel.

If aa profitable
profitable further
further utilization
utilization of of wood
wood residues
residues at at mill
is considered,
site is for example for
considered, for for board
board or pulp
pulp production,
production, itit is
is quite
quite
clear that alternatives A A and
and BB have
have anan advantage
advantage over
over C.
C. In the
In the case of
Hill,
Sao Hill, this consideration was
this consideration in fact
was in fact one argument
argument forfor choosing
choosing its
its
location.
location. However,
However, time
time has
has shown
shown that
that this
this type
type of
of expansion
expansion diddid not
not
at SHS.
materialize at SHS,

In relation to
In to uncertainty, alternatives A and BB are
A and are better
better than
than
C.

4.11 Other Main Factors

Factors

Alternative C will
will give employment toto about
about 30 more persons
30 more persons and
and
will, therefore, create more
will, therefore, lUore skill
skill than
than alternatives
alternatives AA and
a:od B.
B,

5.
5, CONCLUSION

When comparing one centralized

When comparing centralized sawmill
sawmill withwith five
five smaller
slUaller mills
mills
at sao
at Sao Hill, it is not fair to use
not fair alternative A for
use alternative for this
this comparison
comparison
because it has
because it irrelevant to
has features which are irrelevant to thethe sawmilling
sawmilling technology
tech:101ogy
used (e.g. unnecessary high investment
unnecessary high investment costs
costs in in buildings
buildings andand logging
logging
equipment),
equipment). In appraising
appraising the
the two
two types
types of
of technology,
technology, it it is fairer to
is fairer to
make a comparison
comparison between
between alternatives
alternatives B Band C..
and C. From the discussion
From the discussion in in
4, it
Chapter 4, may be concluded
it may concluded that
that alternative
alternative C C was
was superior
superior or or equal
equal
to alternative B in
to alternative in 1977, except for
for the
the uncertainty
uncertainty factors
factors discussed
discussed inin
Chapter 4.10.
4.10,

From 1977
1977 till
till mid-1982
mid-1982 prices
prices in
in Tanzania
Tanzania for
for the
the items
items listed
listed
below increased
increased as
as follows:
follows:

Diesel B9
89 %
% than
higher than in
in 1977
1977
Vehicles 100
100%
% than
higher than in
in 1977
1977
Sawmill machinery
Sawmill 55%
% than
higher than in
in 1977
1977
Spare parts 130
130%
% than
higher than in
in 1977
1977
Tyres 150
150%
% than
higher than in
in 1977
1977
General consumer price index
General index 65%
% than
higher than in
in 1977
1977
Foreign exchange rate
excha"ge rate 0
0%
% higher than
tha" in
in 1977
1977
(T,shs/US$)
(T.shs/US$)
Salaries
Salaries 54
54 % higher than
% higher than in 1977
in 1977

If
If we
we compare
compare these
these increases
increases with the calculation
with the results show"
calculation results shown
Chapter 3,
in Chapter 3, it is evident that the superiority of
it is of alternative
alternative CC is
is even
eve"
higher in 1982
higher in 1982 than itit was in 1977.
was in It
It may
may be
be concluded that,
that, except for
the
the uncertainty
uncertainty factors
factors already
already mentioned,
mentio"ed, the
the technology
tech"ology represented
represented by
alternative
alternative C C would choice both
would have been a better choice both in
in 1977
1977 and 1982.
and 1982.

One should be careful in

in drawing conclusions fromfrom this
this study for
for
proj ects wh
projects ieh have other phys
which ical , techno
physical, log i cal and SOC10-
technological 8conom ic
socio-economic
characteristics. Three factors
factors in
in particular
particular favour
favour alternative
alternative CC at
at Sao
Sao
Hill:
 -- 370 --

(a) The timber

timber supply ouu were
supply areas were relatively
relat-v: widely scattered.
IIf larger timber
f larger timberconc,nrrat2ons
concentrat ions had ex iated, al
ha::: terna ti ve IIA
:i:ternative
,

and B are
(3 are likely
likely to
to have been more
bao buen more attractive than shown
attr(:, o than shown inin
this
this analysis,
analysis, because
becaJse transport
transport costs
costs would
would have
have been less
decisive.

(bl NO electricity is
No electricity is yet
yet available
available at
at Sao Hill,
Hill, which
which means
means
that
that all
all three
three alternatives have to
alternatives have to use
use diesel
diesel or steam
steam for
energy production. If If public
public electricity were at
were available at
prices below
below diesel
diesel or
or steam,
steam, the
the operating
operating costs
costs for
for
alternatives
alt, 7natives A A and B could
13(ruld be lowered to
be lowered to aa larger degree
'egree
than
th-. those for alteraLi,-,
those for alternative C.
C.

(c) Itivt costs

Investment costsforforso..
social infrastructure
infrastructure in in the case of
the case
I ternat i veC Care
aaJ:rL:tve arelowet
lower than
than those
those for
for AII and
and 13,
B / because CC
is
is more
mrre decentralized
decentralized and and more
more of the workers
of the workers will
will be
be able
to live in
to in their
their existing
existing homes.
homes.

Finally,
Finally, the
the study
study shows that in a
shows that a country like
like Tanzania sawmill
technolog ies
technologies ex is t
exist wh ich
which are highly compatible
compatible with more
capital-intensive alternatives.
alternatives.
 -- 371
371 -
-

APPENDIX
APPENDIX lA

INVESTMENT
INVESTMENT FOR
FOR ATA±RE. EA
ALTERNATIVE A

Investment costs
(1000 shs)
(l000 shs) write-o
write-off
Item Direct
Direct time
Total
Total import
imeort (years)
(:tears)
1. Sawmill and administtation
l . Sawmill and administration
Site prepaatuon
Site preparation 520
521/ 20
Main sawmill
Main sawmill building
building 22 480
4BO 20
Workshopbuilding,
Workshop building, one
one
shed for storing,
shed for storing
2 ) , one
sawnwood(l000
sawnwood (1000Inin'), one
shed for
shed for trimming unit,
trimming unit,
petrol station, office
petrol station, office
building
build ing 560
560 20
Sawmill machinery
Sawmill machinery 44 890
890 44 890
890 10
Green
Green chain
chain 450 450 10
Saw-filing equipment
Saw-filing equipment 90 90 10
TrTrimining unit
iHuning unit 370 370 10
Diesel power
Diesel plant
power plant 800 800
BOO 10
Electricity installations
Electricity installations 180 10
22 wheel
wheel loaders
loaders 1 050
1 050 11 050 55
lorry with 2-axle trailer
11 lorry with 2-axle trailer 690
690 5
2 agricultural tractors
2 agricultural tractors
with trailer
with trailer 320 55
1 4-whee1drive
1 4-wheel drive vehicle
vehicle ii
90 5
Misc. Iteras
12 9, 7 650
and road
'.o,.:(.;1nc and
2. L02ging road transEort
transport ofof 1°2s
ywarderswith
2 forwarders withtrailers
trailers 2 200 22 200
200 5
Eqricultural tractor
11 agricultural tractor 230I 5
Logging equipment for
Logging equipment for above
above r
50r 50 5
2 lorries with trailer
2 lorries with trailer 1 490 5
22 hydraulic
hydraulic grapple
grapple loaders
loaders
for above
for above 360 360 5
11 4-wheel drive vehicle
4-wheel drive vehicle 90 5
1 1 tipper
tipper truck
truck 410 5
Roads 560 20
11 stone
s tone crusher
crusher 60 10
items 200 10
TC.,oL 5 650 2 610
3. DL7L.i
3. infrastructure
Social infrastructure
.qior staff houses
20 senior staff houses 1I 400 20
100 junior staff houses
100 junior staff houses 11 500 20
WF».:4,' supply
Water supply 300 20
Misc. items 240 20
Total 3 440
4. Pt,, 7n,s.1 costs 980 20

GRAND TOTAL 23 010 10 260

 -- 372 -
-

IB
APPENDIX 10

INVESTMENT
INVESTMENT FOR
FOR ALTERNATIVE B
B

- - - - - - - -........ ~ ....
Invesbnent
Investment costs Assumed
shs)
(1000 shs) wri te-off
write-off
Type Direct time
Total import (years)
1. sawmil1ing and
l. Sawmilling and admit'
ad.ninist rat ion
Site preparation 520 20
Main sawmill building 17 200 20
Workshop and and other
other buildi(
buildings 560 20
Sawmill
Saw '11 machinery 44 890 44 890 10
Greon chain and
Green and dipping tark
tank 450 450 10
0-0r equipment
Sawdoctor equipment 90 90
90 10
Trimming
".cr ing unit 370 370 10
10
Diesel pDwer
L_ plant
power plant 800 800
800 10
Electricity installation
Ele-tricity installation 180
180 10
2 wheel-loaders
2 eel-loaders 970 55
1 lorry
1 lorry with trailer 690 55
2 tractors
2 agricultural tractors
with trailers
trailers 320 5
5
vehicle
11 4-wheel drive vehicle 90 5
Miscellaneous 450 10
10
Roads 330 20
Total 11 910 6 600

2. Logging and log

2. log transport
transEort
33 agricultural tractors
tractors 650 55
ing equipment for
Logging for 33
units
above units 200 200 5
5
33 trucks 11 100 55
3 piggy-back trailers
3 trailers and
and
hydraulic grapple loaders
loaders
for above 33 lorries
for the above 770 770
770 55
11 tipper truck 400 55
11 4-wheel drive vehicle 90 5
1 stone c0isner
crusher 60 10
10
Access roads
Accei-s ro,,:s 230
230 20
Miscellaneous 200 10
Total 3 700 970

3.
3. Social infrastructure
s
20 senior staff houses 1 400
400 20
20
70 junior staff
70 junior staff houses
houses 11 050 20
20
Water supply 260 20
Mis0ellan0our 240 20
Total 2 950

4. Pre-o(<
4. costs 980 20
20

TOTAL
GRAND TOTAL 19
19 540 77 570
 -- 373
373 --

IC
APPENDIX 10

INVESTMENT FOR ALTERNATIVE CC

nves
Investment costs
(IOOO shsl
(1000 shs) write-off
ite- -f
Type Direct
Direct time
ti
Total import (

1. 7,9%71'1'
ng of site
'-vepar-inq (cement
5:t' 'cement
flor, , tvrter
timber intake,
intake,
building
Uul1ding materials
materia_s which
cannot
c6rr,ot Le be reuserl)
reused) 40 3
BUI1171Q materials
Buildi ot2ch
7ateriDls which
can reused (corrugated
,--111 he veil:7er'; (,7orrugated
sret=,
iron sheets, office
egll
riul(mrnt,, etc.)etc.) 30
30 10
10
Sawmilling machinery
5awm1,,,ng 7Thtlinery 219 214 10
Diesel engine
Diesel (160 he)
engine (16(1 hpj 44 55
Power transmission
Po,,er ttensm!s=icn 13
13 13 55
Misc. Itrmr
Misr. items 35
35 20 10
Total
TctaI - onn mili 381 2477
Total - fivv 1 905 1 235

2.
2. r

5 ag icultural
tural tractors 830 55
22 trailers (for tractors
tr,ilers (for 60 55
skidding
5 sets of skidding
5
equipment for
for tractors
tractors 200 200 55
truck
11 tipper truck 390 5
I1 4-wheel
4-wheel drive vehicle 90 5
9 sulkies,
sulkies, various
equipment, etc.
equipment, etc. 40 55
I stone crusher
1 crusher 60 10
Misc. items 160 ID
Total 1 830 200

3. Road transport of s,rnood to Central Unit

3.
3 agricultural t) ctc 1 55
(for tractors)
88 trailers (for !, o! 240 55
Access roads 20
Total

(cont.
(cont.))
 -- 374 --

APPENDIX IC
Ie (cont.)
(cont.)

Investment costs Assumed

(l000 shs)
(1000 shs) write-off
Type Direct irne
ttime
Total import (years)
4 Central un
unit
Site
Site preparation 200 20
Buildings 600 20
Sorting and dipping
Sorting and
arrangement 150 20
Sawdoctor equipment 90 90 10
10
Trimming unit 370 370
370 10
10
diesel engines
22 diesel engines 60 hp 75 5
5
11 wheel-loader
wheel-loader 485 5
5
22 agricultural tractors
tractors 230 55
( for tractors)
22 trailers (for tractors) 40 5
5
11 4-wheel vehicle
4-wheel drive vehicle 90 5
5
11 lorry
lorry with
with trailer 690 5
5
Roads 330 20
20
Pre-operational costs 980 20
20
Mise
Misc, 360 10
Total 4 690 460

5. Social
5. infrastructure
Social infrastructure
20 senior staff houses
20 houses 1 400 20
20
50 junior staff
50 junior staff houses 750 20
20
Water
Water supply 250
Miscellaneous 240
Total 2 640

GRAND TOTAL (rounded off) 12 240 1 900

 AVERAGE ANNUAL
ANNUAL OPERATING
OPERATING COSTS
COSTS FOR
FOR SAWMILLING
SAWMILLING ALTERNATIVE
ALTERNATIVE AA
AT FULL PRODUCTION
(at 1977 market prices
(at 1977 prices in 1000 T.shs./year)
in 1000 T.shs./year)

Logging and
and Administration SacTal
Social
Type of costs
costs road transport
road Sawmilling*
Sawmilling' and sales**
sales'* infrastructure Total
Direct Direct Direct Direct Direct
Total import Total
Total import Total import Total import Total import
Depreciation 837 416 11 037 769 191 155
155 2 200 11 185
Interest***
On
On machinery/buildings 259 114 591 374 95 170
170 1 115
115 488
On stock of spare
spare parts
parts 63 42 141 136 77 211 178
On
On working capital
capital 43 43 27 22 115
115
Insurance 91
91 60
--------------------------------- 30 10 191
191 1

Fixed machinery/building costs

Fixed machinery/building 1 293 572 11 872 11 279 350 337 3 852
852 1 851
Energy (diesel,
(diesel, oil)
oil) 256 335 76 667
Tyres 261 90 70
70 83 414 90
Spare
Spare parts
parts and consumables
and consUlnables
excl.
exel. tyres
tyres 410 202 320
320 144 110 840 346
Other costs
costs 50 186 22
-----~------
335 50 621 22

Total
Total machinery/building costs
costs 2 270 864 2 783
783 1
I 445 954 387 6 394
394 2 309
Salaries
Un- and semiskilled pers.
Un- pers. 415 432 60 Included in
in saw-
saw- 907
Skilled personnel
2ersonnel 163 181 292 milling && admin. 636
admin6 636

Total shs/yiar
Total shs/y~ar 22 848 864 3 396
396 1 445 11 306 387 7 937 2 309
Total shs/m
shs/m sawnwood 203 62 243
243 103 93 28 567 165

* Including trimaing
trilruning unit
unit and
and loading
loading of
of sawnwood.
sawnwood.
** Including
Including pre-operational
pre-operational costs,
costs, office building,
building, one 4-wheel drive vehicle
vehicle and
and one
one lorry.
lorry.
*** At
At 99 percent per annum
percent per annUl" real
real term rate of interest.
interest.
 AVERAGE
AVERAGE ANNUAL
ANNUALOPERATING
OPERATING COSTS
COS-. FOR SAWMILLING
SAWMT7IIVG ALTERNATIVE
n VS 8B
AT
ATFULL
FV!:PRODUCTION
P
{at
(at 1977
1977 market
market Frinn n 1000
prices in [030 Toshs
T.sh,./yeal
Logging 777? Adminintratiot Social
Type of
of costs road transccrt j* awl sales** infrastructure Total
T:oect Dinect Direct Direct Direct
Total j- Traa7 ìm*ort Total im ort Total im ort Total im..r
iation***
,woin,inn*** 613 7S
175 993 594 191
191 133 11 930 769
Interest*'*
It-tort-
,
On machine on ild ings
: !dings 185 48 542 327 95 146 968 375
On stock spare
sbare parts 37 17 141
141 119
119 7 185
185 136
On working capital
iliti-..1 38 43 27 2
2 110
110
Insurance 75 60
60 30 8 173 w
-J
'INU Aiding costs 948 240 779
11 779 040
11 040 3S0
350 289 366
33 366 280
1I 280 '"
- -
(diesel,, oil)
oil) 235 336 76 647
191 70 83 344
,onts and consUlnables
and conswnables
. nyres 313 148 320 144 110 743 292
costs
Other (dsts 50 186 22 335 50 621
62] 22

Total
Total Iding costs
machinery/building 737
costs 1I 737 388 691
2 691 206
11 206 954
954 339 721
55 721 11 594
Sa es:
Si.ariesi :J>
Un-
Un- and
andsemi-skilled pers.
semi-skil]ed pers. 437 432 60 (incl. in sawmil-
(incl, 929 'U
l'
Skilled personnel 152 181 292 ling anO 625
'"
t<l
Z
\:1
H
Total
Total shs/year 22 326 388 3 304
3 304 11 206 306
11 306 339 275
77 275 ] 594 :x
Total shs/year m's 166 28 236 86 93 24 520 114
114
'"
'"
* Including
Including trimming
trilruning unit
unit and
and loading sawnwood.
loadingofofsawnwood.
** Including
Including pre-operational
pre-operational costs,
costs, office
office building,
building, one
one 4-wheel
4-wheel drive
drive vehicle
vehicle and one
and one lorry.
*** At
At 99 percent per
per annw"
annualreal
realterm
termrate
rateofof interest.
interest.
 AVERAGE
AVERAGE ANNUAL OPF:',
ANNUAL OPERATING
tao COSTS
COS1S MR
FORSAWMILLING ALTERNATIVE C
SAWMILLl!\1(; ALTERNATIVE:
AT FULL PRODUCT1C64
PRODUCTICl'l
(at 1077
1977 market Lices in
at prices in 1000 T.shsJv'Aal'l
1000 T.shs./year)

Road trans- Central

Central Unit
Unit
Logging
I.cgging Sawmilling
Sa"",ill port
pert of sawn-
sawn- exc. admin.
admin. Admili
Adminis. Social infra-
Social infra-
Type of
of costs
costs wood ^ ten-
>KJOd to Cen- and sales and ssales'* structure
structure Total
Tbtal
tral
tral Unit
Direct Direct Direct Direct Direct Direct Direct
Total import Total import. Total import Total import 'Dotal import import Total 'import

Depreciation 310
310 36
36 226
226 117
117 178 274
274 41
41 191 119
119 11 298 194
194
interests**
Interests**
on raohineryi!dings
or machinery/buildings 91
91 10
10 94 61
61 56
56 137
137 23
23 95
95 131
131 604 94
94
on 1,t,.
on stockk of sp-b.- -,arts 18
18 4
4 25 22
22 88 17
17 88 77 75
75 34
34 W
on working cdpical 5 25 27 111 ..J
29 23 5 25 27 2
2 111 ..J
insurance
Insurance 28
28 ii,
15 55 26
26 30
30 7
7 111
11]

Fixed machiner.:.: coats 476 50 383 200 252 479 72 350 259 2 199 322
322
Energy (diesel, all, 231 225 42 129 76 703
Tyres
'ryres 90 29 42
42 83
83 244
Spare parts and co6sumables
consumables
excl. tyres
tyres 169
169 22 150
150 112
112 44
44 162
162 34 110 635 148
148
other
Other costs 30 25 25 163 22 335 48 626 22

Total machinery/building costs 996 52 783 312 392 975 128 954 307 4 407 492
Salaries »
Un- and
and semi-skilled
semi-skilled pers.
pers. 402
402 273 27
27 329
329 60
60 (incl. in
(incl. 1 091
09] 'd
'd
Skilled personnel
personnel 115 145
145 14
14 93 320 Central
Central Unit
Unit costs)
costs) 687
Z
'tl"
H
x
Total
Total -- shs/year 1 513
1513 52 1 201
201 312 433
433 I1 397 128 11 334 307 6 185
185 492
492
N
Total -- shs/m3 108
108 44 86 22
22 31
31 100 9
9 95
95 22
22 442 35
35 ()

Same
Same costs
costs are
are assumed
assumed as in Alt.
as in A/t. AA aid Alt. El,
and A .
B, except
except that
that one
one person
person mere
more is employed for
is employed fOl: supervision
supervision in
in Alt.
Alt. C.
C.
*
** At
At 9 percent per annum real term rate
rate of Himirest.
interest.
 THE
TI' , COSTS OF TdE
THE iPtr
THREE5411'1ILL
SAWMILL AU.ERN:.r1'CS
ALTERNATIVES
1?..:..8LATE0
CALCULATED AS DIS':OTNTEF PRESENT'
AS DISCOUNTED PRESENT VALUES
(1977
'777 prices)

Price
Pr increases (%) Shadow price* Discounted ,..por ,' costs (mill.T.shs)
Un semi-
Un/semi- SFIlled
Skilled At
At 6%/a interes At 9%/a intere2t
Labour Energy Import
Import Other skilled Jabo8r
labour Import
Import
1labour Alt. A Alt. 8 1(t. A Alt. B A t. C
0 0 0 0 1.0 1.0 1.0 55.4 50.2 52.1 47.1
10
10 00 0
0 0
0 1.0 1.0 1.0 56.7 51.5 44.5'. 53.3 48.3 4.8
40.S
30 0 0 0 1.0 1.0 1.0 59.3 54.1 i,3 55.7 50.6 4.4
OJ
O
0 10 00 0
0 1.0
1.0 1.0
1.0 1.0 55.9 50.7 43.5 52.5 47.5 40.0
co
co
'"
0 30 0 0 1.0 1.0 1.0 56.8 51.6 44.5 53.4 48.3 40.9

0
0 00 10
10 00 1.0
1.0 1.0 1.0
1.0 57.0 51.3 43.4
41.1 53.7 48.1 39.9
0 0 30 0 1.0 1.0 1.0 60.2 53.4 44.1 56.9 50.3 40.6
.6

0
0 00 00 10
10 1.0
1.0 1.0
1.0 1.0
1.0 57.5 52.4 4.1
45.1 54.2 49.2 41.5
0 0 0 30 1.0 1.0 1.0 61.8 56.9 49.) 58.3 53.3 45.3
.3

0
0 0
0 00 00 0.7 1.3
1.3 1.6
1.6 64.2 55.8
55.S 44.1
44 .1 60.9 52.6 40.6
0 0
0 0
a 00 0.5 1.3
1.3 1.6
1.6 62.7 54.2 42.3 59.4 51.2 39.0
39.0
0
a a0 0
0 0
0 0.7 1.7
1.7 1.6 66.3 57.8
57.S 46.2 62.7 54.5
54.5 42.5 >
0
0 00 0
a 0
0 0.7 1.3
1.3 2.0 70.7 60.0 45.4 67.2 56.9 41.9 ""
z
'"
t;l
H

* This corresponds to
This to si
si in
in the
the equation
equation mentioned
mentioned in 3.
in Chapter 3. ><
IV
t;l
 DrR~CT AND INDIRECT ECONOMIC EFFESTS OF ALTFPNATIVE
DIRECT AND ALTERNATIVE
SAWMILL TECHNOLOGIES FOR PRODUCING 14 m OF SAWNWOOD
14 000 m SA!VNWOOD (1000
(1000 T.shs/a)
T •• tls!a)

Variables DIrect Indirect IDtal Direct Indirect Total Direct IndirectTotal

1. en to cons moe is 0

Domestic
DOloest ic inputs*
inputs* 2
2 275
275 843 118
33 118 22 214
214 816
B16 030
33 030 2
2 149 820
820 969
22 969
Im ports
Imports 458
458 701 11 159 314 674 988 170 672
672 842
Wages
wages and
and salaries
salaries 11 543 662
6B2 22 225 1
1 554 683 2
2 237 1 778 664
684 2 462
462
2 62
Operating
operating surplus
surplus 0
0 438
438 438 0 420 420 00 416 416
416
Depreciation 2
2 220
220 283 22 503
503 11 930 271
271 22 201
201 11 298
298 207 11 505
505 w
Net value added
added 1
I 121
12l 1
1 543 2
2 663 11 554
554 103
11 103 2
2 657 11 778 1 100
1 100 22 876
878
1
"'"
Gross value
value added
added 3
3 763
763 11 403 166
55 166 3
3 484 I 374 44 858
858 33 076 307
11 307 4 383
Total (gross)
\gross) production
production 66 496 266
33 286 9 782 6
6 012 3 208
3 208 99 220 5
5 395 3 118
3 118 86 35r3
513

2,
2. Marginal propensity to consume is 0.5

Domestic
j)oJnestic inputs*
inputs* 2
2 275
275 22 177 44 452
452 2
2 214 158
22 158 4
4 372 2 149
2 149 2
2 296
296 44 445
Imports 458 911 1
1 369 314
314 884 11 198
198 770
770 904 1 074
Wages
wages and salaries 543
11 543 860 22 403 1
1 554 862
862 22 416
416 11 778 880
880 2 659
1 11 0t.7620
Operating surplus 0 075 1 075 00 1 060 11 060 a 1 120 1 120
2 560 11 930 329
329 22 259
259 1
I 29g
298 1 270
)5
240 11 568
568
Depreciation 2 22g
220 1 340
015 22 560
Net 11 543 11 935
935 33 478 I1 554 11 921 33 475 11 778
778 22 000 3
3 776
778
Net value added '""
added
Gross value added 763
33 763 22 274 66 037 33 484 22 250 55 734 3
3 076
076 2
2 271
271 5 347
822 316 66 012 5
5 757 11
11 769 5
5 395
395 5
5 923
923 115 3167
318
'"'"z
Total (gross)
Total product o
(gross) production 66 496
496 55 822 12 318
H
X
"
N
*
* Excl.
Excl, wages ad salaries
wages a~d salaries and
and operating
operating surplus.
surplus.
'"
lEGtnO.

Ton·Zorn ti ghwoy
Ton Zon, H'Qhw0:f
00'0"''1-1
Cnn3Y.1A(~ Ad.%Veofht, flood".
·W{'o!r',·r 11ood,

- 0Ihyr
Olh('( Groynt Jl()..:l1'i
0rOvcllicy,t1s

Ptontnc1
Ptontt'v Area
Areo by
by)970
)970;n 111 Soo
'Sao h1.11 FO(l'St R,,'$;~{v"
Hdl Fory.st Res,rye

ffiWlUlO
TilliEfl t-{s,wosi. do000
jrunuo on
One Mono
MI".Ir)Qo FOrk,I
For~>! n"j,('fYt''i

c-J tillll;'
L11 11eRuohe
Anoho Floin I';iWOfllpJ
PloinI swamp 1

na.c)
nOAO oisrAricEs HE_ASurOO
(lrSTAIKES "EASUn[1l Ton Zorn
BY DktVIHG
BY CAWING Highwo Imndm
J-hdji'Ch
n0GJ
Cy,te nocyl w
(0
CO
A
A - B8 16 Km
16 Km a
o
Yo, 014yal .1,40 hod es
A·
A CC 19 Km
19 Km 1o. yy.r,n yo, n sin. a
A
A.OD 26Km
26 Km 1 =n1.°?`"A s_2`:21"
A
A· E
E TI Km
11 Km [N/;,w t).(jd
I Ekw 1.111
F
A· F 2M
21\ Km
boyo
G
A. G KA,
12 Km
12
C
O. C \) Km
13 Km
Il.O
B 0 19 :Km
lin
t-11.\wOS'
1. woz
B- EE 6 Km
6 Km FOfl''Sl
uty.1 A?,.,h,>
E(.
B. FF I7 Km
IJ Km
B.
U.' GF., is Km
IS Km
~- ~-=-
I ndo n",,,.
!~IIIIIIW r,unuo
F.essl IlesnrYe

Hningo
Hningu
Formal nr~'rYe
Forrs' Recorre
 - 381
- 381 --

REFERENCES

Bavu, I.
I. et
at al.
al. Evaluation of Sao Hill
Hill Sawmill.
Sawmill. NORAD,
MORAD, Oslo.
1983
1983

Fergus, M. et al.
Fergus, M. al. Report on the evaluation of the
the Sao Hill sawmill
sawmill
1977 project, Tanzania. NORAD,
MORAD, Oslo.

Nagoda, L.
L. communicat ion.
Personal communication. Department of
of wood
Wood Technology,
1983
1983 Agric. University of
Agric. of Norway.
Norway.

NT!
NTI Produktivitetsunders¢kelse innen sagbruksindustrien.
ProduktIvitetsundersOkelse innen sagbruksindustrien. The
1959 Institute of
Norwegian Institute of Wood
WOod Working and Wood Technology, Oslo.
Oslo.
May 1959.
1959.

Roos, K.
K. of electricity
Steam power generation of electricity -- aa cost
cost comparison
comparison
1983 with diesel power.
power. The
The Swedish University
University of
of Agricultural
Agricultural
Sciences,
Sciences, Dept. Forest Products, Uppsala,
Dept. of Forest Uppsala, Research Note
No. 122.
No. 122.

Skj¢nsberg, E.
SkjOnsberg, E. Sao Hill from aa socio-economic and
Hill sawmill from and political
political
~983
1983 point of view.
view. In:
In: al. 1983:
BAVU et al. 1983: Evaluation of
of Sao Hill
Sawmill, MORAD,
NORAD, Oslo.
Oslo. Appendix
Appendix F.
F.

Solberg, B.
B. Choice of technology
technology and
and employment
employment in
in development
development
1981 projects -- some methodological considerations. proceedings
Proceedings
Div. 4,
4, XVII
XVII IUFRO World Congress, Kyoto:237-256.
World Congress,
B.
Solberg, B. Choice
Choice of
of technology in in forestry
forestry development projects
projects
1985 -- some theoretical
theoretical aspects
aspects and
and aa case
case study
study from
from Sao
Sao Hill
Hill
Sawmill, Tanzania.
Sawmill, Tanzania. Report, Forest Economics,
Report, Department of Forest
Agricultural Norway.
Agricultural Unversity of Norway.

UNDP Project findings and reconmendations.

Project findings recommendations. Tanzania.
Tanzania. UNDP Report
1975 DPjUNjURT-68-Q05jl.
DP/UN/URT-68-005/1.

Wicks tr¢m, E.
WickstrOm, E. Personal Communication.
Communica tion. Tanzania Wood
l\'Ood Industries
Indus tries
1984 Cooperation.
Cooperation. Dar
Dar es Salaam.
 -- 383 -

RECENT DEVELOPMENTS IN SAWMILL

RECENT DEVELOPMENTS
IN INDONESIA
AND PLYWOOD INDUSTRIES IN INDONESIA

by

L.W.N.
L.W.M. Meulenhoff*

CONTENTS
CONTENTS

Page

1. INTRODUCTION 384

2. SITUATION
PAST AND PRESENT SITUATION 385

2.1 Forest Area 385

385
2.2 Wood Resources 385

2.2.1 forests
Natural forests 385
365
2.2.2 Plantation forests 386
2.2.3 Logging and
and ini,istrial
industrial residues
residues 386

2.3
2.3 Logging
Logoing Operations 387
2.4 Wood-Based Industries
Mechanical WDod-u,sed Industries 387

2.4.1 Sawmilling industry

Sawmillino indus'.ry 387
2.4.2 Plywood industry
Plywood and veneer industry 389
2.4.3 Other
Other wood-based industries
industries 390
390

2.5 the Mechanical

Economic Importance of the
Industries
Forest Industries 392

3•
3. FOR THE
PROSPECTS FOR THE INDUSTRY:
INDUSTRY: SUGGESTIONS
FOR IMPROVING THE INDUSTRY
FOR INDUSTRY 393
393

3.1 Sawmilling Industries

Industries 393
3.2
3.2 Plywood Industry 393
3.3 Other Wood-Based
\'Iood-Based Industries
Industries 393

APPENDIX 11 sawmilling industries

Present status of sawmillino industries
and planned capacity as
and as at
at December
December 1984
1984 395

APPENDIX 22
APPENDIX industries and
Present status of plywood industries and
as at
planned capacities as at December
December 1984
1984 396

APPENDIX 33 Map of Indonesia

Indonesia 397

Director
Director of Forest Industries,
Industries, Directorate
Directorate General of
of Forest
Forest
Util ion, Department of
Utilization, of Forestry,
Forestry, Jakarta,
Jakarta, Indonesia.
Indonesia.
 -- 384
384 -
-

1. INTRODUCTION

Indonesia is
is aa widespread archipelago consisting
widespread archipelago consisting ofof 13
13 667 JS-
667 (is-
lands of which
lands which 992
992 are
are inhabited.
inhabited. It stretch'bs
It stretches from 95~ EE to
from 95° to 141
141 E
E
(about 55 000
000 km along
along the
the equator)
equator) and
and between
between 60
6 NNand 11 SS (more
and 110 (more than
2 000
2 000 km). The main islands
The islands are
are Sumatra
Sumatra (lying
(lying almost
almost parallel
parallel to
to the
the
west of Peninsular
west Peninsular Malaysia
Malaysia across
across the
the straits
straits of
of Molucca),
Molucca), Java,
Java, Kali-
Kali-
mantan (part of
mantan (part the island
of the island of Borneo
Borneo and
and sharing common
common borders
borders with East
East
Malaysia), Sulawesi and Irian
Malaysia), Irian Jaya,
Jaya, as
as shown
shown in
in Appendix 3.3.

Indonesia hashas aa humid

humid tropical climate
tropical climate with an
with an average
average daily
temperature
temperature of
of 26 0
26°CC in
in the lowlands
lowlands and
and about 22 0 C in
about 22°C in the
the highlands.
highlands. The
annual rainfall
annual rainfall varies
varies from
from island
island to
to island,
island, with
with an average
average of 300 mm
of 3 300
in
in Kalimantan
Kalimantan and
and 22 000
000 10m
mm in the eastern part of Nusa Tenggara.

Java averages
Java averages 2
2 000
000 mm
mm in the mountains.
in the There
There is
is aa pronounced
pronounced
dry
dry season (between April
season (between April and
and October),
October), andand aa wet
wet or
or rainy
rainy season
season (between
(between
November and
November and march)
March) particularly
particularly on Java and
on Java and Nusa
Nusa Tenggara
Tenggara island.
isla:1d. The
natural
natural vegetation
vegetation is evergreen mixed
is an evergreen tropical rain
loixed tropical rain torest
forest abounding
abounding
with
with aa wide variety of tropical
tropical mammals
mammals andand birds.
birds.

Rice,
Rice, maize, tobacco, tea,
maize, tobacco, tea, palm
palm oil,
oil, rubber,
rubber, coffee,
coffee, beetlenut,
beetlenut,
nubneg,
nutmeg, kapok,
kapok, pepper,
pepper, coconut,
coconut, cloves
cloves and
and other
other products
products from
from plantations
plantations
add their share
add their share to
to the resources of
of the
the country.
country. Oil,
Oil, wood
wood and
and wood-based
products 80 to
products comprise approximately 80 to 90
90 percent
percent of
of the
the country's
country's exports.
exports.

population of
The population of Indonesia
Indonesia in in 1980 147.5 million.
1980 was 147.5 million. It is
is
increasing
increasing atat an
an annual
annual growth
growth rate
rate ofof 2.3
2.3 percent.
percent. The bulk of the
The the
population,
population, 91.3
91.3 million
million oror 61.9
61.9 percent,
percent, lives
lives on
on Java,
Java, which
which constitutes
constitutes
only
only 77 percent of the total
of the total land
land area
area ofof the
the country.
country. This concentration
makes Java the
the primary consu/oer of
prilnary consumer of the
the country's
country's production.
production~ However, the
the
natural
natural minerals
minerals and forest resources
and forest resources needed
needed toto provide
provide aa large
large portion
portion of
of
this
this consumption
consumption have to be
have to be obtained fromfrom the
the other islands,
islands, separated byby
large
large expanses from Java.
expanses of water from Java. The capital
The capital city is is Jakarta
Jakarta which
which has
has
aa population of 6.5 million.
million.

Indonesia
Indonesia is pancasila 1/ democracy,
is aa Pancasila1/ democracy, and
and in
in foreign
foreign affairs
affairs aa
non-aligned country.

The gross
The gross domestic product (GDP)
domestic product (GDP) at market prices
prices was US$
US$ 69
69 800
800
million in
million in 1980,
1980, oror US$
US$ 473
473 per
per caput.
caput. The national product
The gross national product (GNP)
(GNP)
is US$
is US$ 430
430 per
per caput,
caput, with
with an
an annual
annual average
average growth
growth rate
rate of
of 44 percent
between 1960 1980.
between 1960-1980. In 1980 industry
In industry contributed
contributed 4242 percent
percent to
to the
the GDP,
GDP,
services 32 percent, and agricul ture and
and agriculture and forestry combined 26
forestry combined 26 percent.
percent.
The econrnny is
The economy is export oriented withwith aa positive
positive trade
trade balance.
balance. Indonesia,
aa member
member of OPEC,
OPEC, isis a Inain oil producer
main oil producer inin South-East
South-East Asia.
Asia~ It is
It is also
also aa
member of thethe Association of South-East
South-East Asian Nations (ASEAN).
(ASEAN).

Light and heavy industries

Light and industries are being developed
are being developed and
and government
government
policy encourages the rapid growth
policy encourages growth otof industrialization, particularly
particularly
since
since Indonesia
Indonesia crnrunenced its tirst
commenced its first Five-Year National Develo~nent
Five-Year National Development Plan in
Plan in
1968/69. In the
In the current
current fourth
fourth Five-Year
Five-Year Development
Development Plan,
Plan, the
the REPELITA
REPEL ITA
IV (1984/85-1988/89), emphasis is
IV (1984/85-1988/89), is placed
placed on
on industrial
industrial expansion.
expansion.

Forest-based is one of the

Forest-based industry is the important
important economic
economic sectors
sectors in
in
Indonesia.

--.ll Pancasila
Pancasila democracy
democracy is the Indonesian
is the system of
Indonesian system of democracy
democracy based
based on
Indonesian value
the Indonesian value system
system and
and way
way of
of life
life as
as expressed
expressed in
in the
the
National Constitution, the
National the Undang-Undang
Undang-Undang Dasar,
Dasar, 1945.
1945.
 -- 385 -

2. PAST AND PRESENT SITUATION

2.1 Forest Area

The present
present land-use
land-use data
data show
show that
that Indonesias
Indonesia's forest
forest land
land
covers 143
covers 143 million
million ha,
ha, which isis about
about 74
74 percent
percent of
of the
the total
total land
land area.
area.
About 113 million ha
About 113 ha are
are classified
classified and
and designated
designated as
as permanent
permanent forests,
forests.
and
and 30
30 million forests.
million ha as non-permanent forests.
Non-permanent
Non- forest 1lands
permanent forest are those
ands are those which
which can
can be
be utilized
util i zed for
for
purposes other than
purposes than forestry,
forestry I such
such as
as resettlement,
resettlement, transmigration,
transmjgratio:J, agri-
agri-
culture, estates. etc., if
culture, estates, if so
so required.
required. Table 11 shows
shows the classification
forest lands,
of designated forest lands, distributed
distributed byby region.
region.

Table 11

Land forest resources in

Land area and forest in Indonesia
(in
(in thousands
thousands of hectares)
hectares)

Permanent Non-
No. Region Land forest permanent Total Percent
area
area land forest forest
land land

A. Java 13 219
13 219 33 013 013
3 013 23

B.
B. Other
Other islands

-- Sumatra 46
46 949 25
25 251 55 049 30
30 300 64
-- Kalimantan 54 825 36
36 674 88 293
293 44
44 967 82
-- Sulawesi 19
19 661
661 11
11 277 11 602 12
12 879 6S
65
-- Nusa
Nusa Te:1ggara
Tenggara 88 778 33 365 33 007 66 372 73
-- Maluku 8 573 55 097 436 55 533 65
-- Irian Jaya 41
41 066 28
28 816 11
11 775 40
40 591 99

Total
Total other islands
islands 179 853
853 481
110 481 30 164
30 164 140
140 645 78

(A ++ B)
Indonesia (A B) 193 072
072 404
113 404 30 164
30 164 143
143 568 74

Source: for Forest

Agency for Forest Inventory
Inventory and
and Land
Land Use,
Use, Department
DeparQnent of
Fores
Forestry,,Bogor
Bogor.•

2.2 Wood Resources

2.2.1 Natural forests

There are
are five
five types
types of natural forests
forests in
in Indonesia:
Indonesia:

1. mangrove forests;
forests;
2~ fresh water swamp
fresh swrunp forests;
forests;
3. tropical rain
lowland tropical rain forests;
forests;
4. hill tropical
hill tropical rain
rain forests;
forests; and
and
5. moist forests.
forests.

The
The bulk
bulk of
of the commercial forests
the commercial forests of Indonesia,
Indonesia, on which
which the
the
wood-based industry
wood-based industry relies
relies for
for its
its raw
raw material
material supply,
supply, are
are lowland
lowland tro-
tro-
pical
pical rain
rain forests and hill tropical
forests and tropical rain
rain forests.
forests.
 -- 386
386 --

Inventories carried out

Inventories carried out since
si~ce the
the sixties
sixtiesupuptoto1912
1982have have covered
covered
92 million
92 million ha. ha. forest potentiel. based on an oyter diameter
The ~atural forest potential, based on an after diameter
breast height
breast height (dbh)
(dbh) of 501 and up,
cm and million mI l l .. Including
i2 about 78 millio~
up, is Including
commercially
CO!Ulflerc apecies, the
lefs accepted species,
ially 17s potential cut
:,nnJa: potential
the annual cut would
would be
be
about 100-150
about 100-150 mmIha,/ha, vanf-ing
vary fromregion
from region to
to rc.lion.
region. The
The known
known commercial
commercial
species which
species are marketed
which are marketedatat present
present includc
include z.eranti
meranti (Shorea spp." spp.), kapur
kapur
(ETyObalanops
(Dryobalanops aromatica),keruing
aromatica', keruing{Dipterocarpus
(Dipter-Latpusspp.)
spp.),, kempas(Koompassia
(Koolr[11-
spp.), mangir
spp.), !nangir(Callophylum)
(Callophylum)merawan (Hopeaspp.),
merawan (Hopea spp.), ramin,
ramin, rengas,
rengas, maloa, matoa,
intsia, and other broadi,ved tropical hardwood species.
intsia, and other broad leaved tropical hardwood species.

2.2.2
2.2.2 Plantation
T's productic,
The production potential per annum is is about
about 1.5
1.5 million
millionm3 m3 from
2.2 ,-1.1ion
the 2.2 million hahamostly
mostlyononthetheisland
'I off Java.
Java.
1 The main
The main species
specie, are
(1]~~~ orandis),
teak (Te
teak QEandis), ,:ne
pine (~~~~~~~=) sii) and and agathis.
agathis.

L,7ge scale plantations,

Large scale plantations, ligtJ
linkedto to
reforestation
reforestation programmes,
programmes, hav,
have
been sta tu recently.
been started Irecently.

2.2.3
2.2.3 Logging andIndustrial
Logging and industrial residues
residues

Loggingresidues
Logging residues are
are estimated
estimated at -,cent ofoftime
:-,br,ut 30-40 percent
at about the logs
logs
felled. Industrial
felled. rcsid.,as are,
Industrial residues rosract.vely, about 50g percent
are, respectively, percent from
from
sawinilling
sawmill and about
ing and about 55
11 percent
rercent from
from plywor,d mills, as
plywood mills, 'wn in
as shown in Table
Table 2.2.

To1':1>

Estimated industrial
Estimated industrial wood
wood residues
residues
from sawmil1
from sawmilling and plywr2.,d
..~l19 and industrio=
pI ywood industr in Indonesia
ieg in I ndones ia

Sa, Austry P ndustry

Type Type .due
Log ends
Log 25.0
25.0 Log
Log ends 11.0
11.0
Sawdust 15.0
15.0 Cores
Cores 13.0
13.0
Others
Others 10.0 Green
Green veneer 13.0
13 .0
Dry veneer
Dry veneer 12.0
12.0
Trimmings 4.5
4.5
from sanders)
Dust (from sanders) 1.5
1.5

Total
Total 50.0
50.0 Total
Total 55.0
55.0

Source:
Source: Agency for
Agency for Research
Research and
and Development,
Development,
Departmentofof Forestry,
Department Forestry, Bogar.
Bogar.

This implior that or of the 55 mi3llian m3 /a of

This im that out of the 55 mY-lion m3 /a of thee log log pro-
pro-
target, tlgrv are
duction target, are about 22 22 millionof potential
million m ig resi-
m of potential 10g:9ing
1 resi-
per year left the fore.tr-. Out of the 13.5 million
dues,i per year left in the forests. 4 the
Out of the 13.5 million m ,la fff the -

sir,,rwoodproduction
sawnwood production capacity,th,r, will be ,about 6.75 million
capacity, there will be 3about 6.75 million mon-1,2a of
la of
p:tential residues.
potential residues.
, Out of
Out of thi:
the 1.0
5.0million
millionm'/a3of
m thethe
30f plywoc,.., industry,
plywood industry,
potential residues
potential residues amount to about
amount to about 2.75
2.75 million
million m /a.
In la.

These woodresidues
These wood residuesare
arenot
notyet
yet utilized,
utilized, except
except for
for the
theproduc-
produc-
tion
tion of
of blockboard cores and
blackboard cores and as
as boiler
boiler fuel
fuel ininthe
theplywood
plywood industry.
industry.
 -- 387 --

2.3
2.3 Logging Operations

forests outside
The natural forests outside Java
Java are
are logged
logged and
and managed
managed by
by apply-
apply-
ing the
the Indonesian
Indonesian Selective Cutting System which defines, among among others, aa
minimum
ill nimum cutting
cutting limit
limit of
of 50
50 cm
em dbh
dbh and
and up,
up, maintaining
maintaining seed
seed trees
trees or
or
nucleus trees
nucleus trees in
in residual
residual stands
stands in
in order
order to
to ensure
ensure natural
natural regeneration.
regeneration.
The teak
teak forests
forests and other man-made forests
forests on Java
Java are
are cut
cut and
and managed
managed by
by
aa clear-cutting system.
system.

Forest logging, processing

Forest utilization consists of logging, processing and
and marketing,
and reforestation after
and reforestation after logging.
logging. The natural forests outside Java are
forests outside are
utilized
utilized by private
private and
and state
state enterprises
enterprises through
thrOugh 20-year
20-year concessions.
concessions.
For small
For small timber lots
lots concessions
concessio:1s of two
two years
years are
are granted.
gra:1ted.

On Java all forest lands

lands are
are managed by a
a State Forest
Corporation.
Logging operations in
Logging operations lowland forest
in lowland forest areas
areas utilize
utilize heavy
heavy equip-
equip-
ment
ment for moving logs from
moving logs from the
the stump
stump toto aa navigable
navigable river
river or
or forest
forest roads.
roads.
The most
The JOost cominon
common method
method used
used for off-road transport
for off-road transport in lowland
lowland and
and hill
hill
tropical rain forest
tropical rain forest isis skidding. Skyline logging and
Skyline logging and highlead
highlead yarding
yarding
are not used inin logging operations in in Indonesia.
Indonesia.

The bigger islands

islands are
are cciss-crossed
criss-crossed by
by large
large rivers
rivers suitable
suitable forfor
log
log transport. The presence
The presence ofof these rivers creates
these rivers access ibil i ty and
creates accessibility and
results in
results in low
low transportation
transportation costs.
costs. However, some rivers
However, rivers cannot
cannot bebe used
used
for
for rafting
rafting during
during long draughts.
long draughts.
Until March
March 1984
1984 there
there were
were 573
573 concessions
concessions in
in operation,
operation, cover-
cover-
ing
ing an
an area
area of
of about 63.5 million ha
ha with
with an
an investment
investment of
of US$
US$ 22 213
213 384.
384.

2.4
2.4 Mechanical Wood-Based Industries
2.4.1
2.4.1 Sawmilling industry
industry

Product ion

Based
Based on
on scale
scale of operation, the sawmilling
operation, the industry in
sawmilling industry i:1 Indonesia
Indonesia
can be divided into
into!

(a) Small scale s'3wmilling with an

9wmilling with an annual
annual production
production capacity
capacity of
under 66 000
000 m
m •
(b) Medium scale sawmill
Medium scale sawmill itldUftries
industries with an annual
with an annual production
productio:1
capacity of 6 000-12 000
000 m
m • .

(c) Large scale sawmill,industries,

Large scale sawmil1 industries, with
with an
an annual
annual production
production
12 000
capacity of 12 m3 and
000 m' and up.
up.

There are
There are oyer
0rer 22 500
500 sawmills
sawwills with
with aa total
total combined
cowbined capacity
capacity ofof
about 14.9
about 14.9 million mm of sawnwood
sawnwood aa year.
year. Of the)e, 700
Of the9e, 700 sawmills,
sawmills, with a a
potential capacity of approximately
potential approximately 12,9
12.9 million
willion mm /a,
la, account
account for
for most
most of
of
the exports.

The structure
structure of
of the
the sawmill
sawwill production
production capacity
capacity as
as of
of December
December
1984 is shown in
1984 is in Table
Table 3.
3.
 - 388 -
-

ible 3

Production capaci tyjo~tl?ut) of the Indos

Indonesian
sawmilling industry as at December
Decembe 1984
_

Type of Production 3
raw material mills
.41_1.1s capacity in
in Percent
......._----

Teak wood U
woodL/ 72 266 455
455 1. 79
1.79

teak wood
Non teak
-- Concessions 294 600
88 723 600 58.48
- Non-concessions
- Non- concess ions 205
2 205 100
5 927 100 39.73

Total 2 571 14
14 917 155
917 155 100.00

out of the
Out of the azive
above 2'0 sawlnills with
294 sawmills with concessions,
concessions, about
about 250,saw-
2503 saw-
mills, with
mills, with aa combined annual production
combirso annual productioncapaf..itl,
capacity of mill ion al'
of 7.4 million ill are
the main potential poLc(..1: of sawnwood for
the for expLit.
export. Mill utili-
Mill capacity utili-
zation during
zation during the
the v=riod
period )920/81-1983/84
1980/81-1983/84 increased
increased irom
from 45 to
to 50
50 percent
percent
for non-teak
non-teakwood
woodai-,d
and from
firm 65 70 percent to
C5 to 70 teal., 35
for teak, as shown
shown in Table 4.

The December
The December 1984
1984 status
status and
and planned
planned capacity
capac! of non-teak
of non-teak saw-
mills
mills with
with concessions,
cot1cess ions, covering the entire country, are indicated in
are indicated
Appendix 1.
1.

Table 44

Sawnwood_production, Indonesia
Sawnwood production, 1980/81-1983/84 -- Indonesia

Production (1000 in3 )

(1000 m3)
Type of
raw material
1980/81
1980/81 1981/82
1981/82 1982/83 1983/84
1983/84

Teak wood 173.2

173.2 181.1
181.1 186.5
186.5 180

Non-teak 55 379.7 55 618.8 55 977.5 66 935

Total 55 552.9 55 799.9 66 164.0 77 115

115

Markets

Traditional
Traditional markets for sawnwood
markets for sawnwood from
from Indonesia
Indonesia are Asian coun-
coun-
tries (65%), EEC and other European
tries (65%), European countries
countries (308),
(30%), and
and others
others (5%).
(5%). The
volume and
volume and value
value of
of sawnwood
sawnwood exports
exports from
from Indonesia
Indonesia are
are as
as shown in
in
Table 5.
5.

1/ Including also other fancy

fancy woods.
woods.
 -- 389 -
-

Table 55

sawnwood exports from

Sawnwood from Indonesia,
Indonesia, 1980/81-1983/84

value
Year (USS)

1980/81
19(10/81 1
1 182 960
960 243
243 900 000
000
1981/82 1
1 302 960
960 209
209 810 000
000
1982/83 11 389 590 201 600 000
000
1983/84 11 424 000
000 222
222 324 420
420

Species
les composition
In the last
last three
three years
years sawnwood
sawnwood species
species exported
exported frote
from Indonesia
were rornia
wc-e ramin (43.4%).
43.4%), meranti (20.6%). keruing
meranti (20.6%), keruing (4.0%),
(4.0%), teak
teak (1.4%),
(1.4%). agathis
agathis
(1.01).
(i.i '), kapur
kapur (0.8%),
(0.8%), pulai (0.5%). Other species
pulai (0.5%). species accounted for
for 28.3
percent
-nt of total export volwnes.
of the total volwnes.

Problems of sawmilling industry

industry

Some of the
tome the predominant problems
problems of
of the
the sawmilling
sawmilling industry
industry in
in
Indonesia are:
are,

production s,rd
low production and productivity;
p-oductivity;
Ti' the
low conversion from the wood raw material (below
' (below 50%);
50%);
processing
processing techniques are inadequate;
techni:s are inadequate,
selection of mach,Lery
machinery and
and equipment
equipment is
is inappropriate;
inappropriate;
scarcity
scarcity of
of skilled employees (mili
(mill operators:
operators, sawdoctors,
sawdoctors,
etc.
etc.))
low quality control.
control.

2.4.2 industry
Plywood and veneer industry

Production and export

eXP9rt

IIndonesia
ndones ia is
is becoming
becoming one
one of thethe world's
world' s largest
largest plywood
plywood pro-
pro-
ducers. There were
There were 28
28 plyrod
y~ood mills
mills inin operation
operation inin 1980/81
1980/81 with
with aa total
total
capacity
capacity of of 1.5
1.5 million
million mIn /a.
/a. In
In 1981/82 this
this number
number iyreased
i'3creased toti' 32
mills with a combined
mills with combined production
production capacty
capacityofof1.8l.8mill
,nillion
ion mm /a.
fa. By AF-(1
Alj'ril
1983, there
1983, were 61
there were 61 mills with a
mills with a col
combined capacity
capacity of of 3.3 million m
3.3 million ,n fa.
the And
By the end of December 1984,
of December 1984, :there
piere were
, 96 mills
96 mills inin production
production withwi th a a
total
tots: capacity
c .icity of
of 4.7
4.7 million
million m m /a.
fa. Production
,'.,,,ductionandandexport
exportofof plywood and
plywood and
veneer from
venc im Indonesia
Indonesia inin 1980-84
1980-84 are as as shown inin Table 6.

Table 66

Production and export

Production and exportofofj21',
plywood and veneer - Indonesia
sia

Export
Production Actual Volwne
Volwoe Value
3)
Year
Year capaci~y
capacily product!on
product4on m3)
(1000 m (million US$)
(mill!on US$)
(1000 m
(1000 m ) ) (1000 m ))
(1000 m Pl~wood
Plv,,-,*1 Veneer
Ver Plywood
n'lywoc. Veneer

1980/81"
1980/81* 1
1 SOD
:.. 11 000 635.8 133.8
133.8 203.9 37.9
1981/82
1981/82 800
11 80,', 11 400 713.7 26.5
226.5 167.9
167.) 31.2
1982/83
1982/93 3 300
3 1
1 900 11 222.3 143.0
143.0 295.4 30.1
1983/84 44 700 22 SOD
500 22 106.1 450.9 785.0 75.8
75,8

•* In
In Indonesia the fiscal
Indonesia the fiscal year runs from
from 1 April to
to 31 March.
March.
 -- 390 -
-

On the
the average
average 60
60 to
to 70
70 percent
percent ofof the
the production
production is
is exported.
exported.
Indonesia's plywood
Indonesia's plywoodindustry
iiy )5 largely
is largelybased
basedononmeranti,
meranti, which
which has
has excel-
excel-
lent properties,
properties, anC
and on
on otherr mixed 1 ight tropical
mixed light tropical hardwoods.
hardwoods.

Most of
the production consists
the 1,'Iiction
Most of consists of
of moisture
moisture resistant
resistant quality.
quality.
Some exterior
Some exteriorgrade
gradeque,Ii=)y
quality is
is manufactured. is mainly urea
Glue is urea formal-
formal-
dehyde; some phenolic/melamine
dehyde; phenolic/melamine glue
glue is
is used
used for
for special
special purpose
purpose plywood.
plywood.

Main plywood
plywood industry
industry regions
regions are:
are: Swnatra (North, Riau, South,
Swnatra (North, south,
Jamb i), Kal
Jambi), imantan (West/Pontianak,
Kalimantan (West/Pontianak, South/Banj armas in, East/samarinda)
South/Banjarmasin, East/Samarinda);;
(Serang, Semarang, Gresik);
Java (Serang, Gresik); and
and Maluku.
Maluku.

1984 status
The December 1984 status and
and planned
planned capacities
capacities of
of plywood
plywood indus-
indus-
the country
tries throughout the country are
are shown
shown in
in Appendix
Appendix 2.
2.

Plywood markets
growing domestic
The growing domestic market
market absorbs
absorbs + 4040 percent
percent of
of the
the total
total
product ion.
production. The rna in size
The main size is
is 4'
II' xx B'
8' (1220 x-2440
(1220 x -2440 mm).
nun). sales are
Sales are exe-
exe-
cuted via sales agents or distributors.

Indonesia exports its

its plywood allover
c the
Ine world, ~nong others to
world, anong to
the
the USA (20%), EEC
EEC countries c
countries (11%), Middle East
:),:st countries (22%), Asian
countries (22%), Asian
countries (43%),
(43%), Australia (1%)
(1%) ar
and o=
others (3%). =

Sliced veneer

Indonesia also produces

Indonesia also produces sliced
sliced veneer.
veneer. Main wood
Main wood species
species are
are
eboy.
teak and eboy.

There are
are still
still many
many more
more species
species in Indonesia which
in Indonesia could be
which could be
sliced into
into attractive
attractive decorative veneers ~
decorative veneers. Most of the
Most of sl iced veneer
the sliced veneer
production is
is sold the local
sold on the local market.

Problems of the
Problems the plywood
plywood industry
industry

The
The main the plywood
main problems of the plywood industry
indus in
in Indonesia
Indonesia are:
are:

Want of infrastructure
Want of fac il i ties,
infrastructure facilities, such
such as
as transportation,
facilities, power
port facilities, power supply.
supply.

Repair and maintenance

Repair and maintenance are often fnpeded
impeded by lack
lack or delay in
in
parts and
delivery of parts and tools.
tools.

Glue is
is still
still mainly
mainly imported.
imported.

Inconsistency of grading and

and quality.
quality.

Tariff
-,rif barriers in
in some importing
importing countries.
countries ..

2.4.3
2.4.3 -hased industries

4Other wood-based
=.-=nd basedindustries
industries produc9
produce blackboard,
blockboard, Ie board,
flcle board,
chipboard, pulp lp andrh: paper and
and rayon.
rayon. The status ol
The of :ha,: e wood-based
industries
indni))::i;, by 1,
the end
the ofofDecember
eno 1984and
Gecember1984 andtheir
theirplanned
planna= capacity
c-a v is shown
in Tab===:
in Table 7.
7. -
 Table 7

Other Wood-Based Industries in Indonesia at December 1984

In production Under construction Approved and

Product Unit
Unit applied for
No. mili Capacity No. mill Capacity No. mill Capacity

Blockboard
Blackboard m3/a
m3 /a 17 223 150
223 150 22 28
28 550
550 53 545 900
545
3 2
2 103 000 11 12 000
000 44 30 200
200
Particle board m3/a
m /a 103 w
4>
I-"
Wood chips
chips t/a 33 474 000
000 - - 11 154 000
154 000

Pulp t/a 11 100 000

100 - - 55 752 500
500

Paper t/a
tla - - 1
1 90 000
90 55 287 200
287 200

Rayon t/a - - - - 22 59 800

59

source:
Source: Directorate of Forest Industries,
Industries, Jakarta
Jakarta 1985.
1985.
 -- 392 --

2.5 the Mechanical Forest

Economic Importance of the Forest Industries
Industries

The ec,s,nomic
economic importance
importance of
of sawmilling
sawmilling

sawmilling is an
Sawmilling is an important
important industry
industry for
for the
the economy
econolny of
of Indonesia,
Indonesia,
as
as can be
be seen from
from Table
Table 8.
8.

Table 88

Economic importance
importance of sawmilling for
for Indonesia
Indonesia
1982/83 1983/84
1982/83-1983/84

National currency US O:o]..irs 3/

(million Rupiah)
1982/83 1983/84 1982/8

( turnover) in
Gross output value (turnover) the
in the 764
801 764 250
928 250 801.8 928.3
sawmilling 1
sawmilling industry 1/
in the
Value added in the sawmilling
sawmilling 462 300
300 750
456 750 462.3 456.8
industry 2/

value
Value of export
exported sawnwood 600
201 600 338 250
338 250 201.6 338.3
338.3

Value of ilnported
Value of importg sawnwood 100
100 0.1

The econc.ri, importanLe of

economic ilnportance of the
the plywood industry
industry

The
ftia economic
economi,. importance
imperta,m,e of
of the
the plywood industry
pl,,..nood industryisis illustrated in
illustrated in
the following table.

Table 99

the plywood industrY..._~~r::Indonesia

Economic importance of the_Elywóad_ingustry for Indonesia
1982/83-1983/84
77;23-1983/84

National currency US dollars

(million Rupiah) (million)
1982/83 19W84 1982/83 1983/84

Gross output value (turnover)

( turnover) in the
in the aoo
825 000 000
807 000 825.0 808.0
plywood
plywood industry

added in
Value added in the
the plywood industry
industry 198 000
000 307
307 000 198.0
198.0 307.0

Value of
of exported y
exported plywood 4/ 325
325 500 495 000
000 325.5 495.0

Value of imported
imported plywood
plywood

.1/ Gross output value:

value: (export
(export of
of sawnwood -reduction
production xx f.o.b. prices)
f.o.b. prices)
+ domestic trade
+ trade xx domestic
domestic price,
ce.

2/ Gross
Gross output
output value -- purchase
purchase of ma
materials.
gr-

-5/
3/ Exchange
Exchangerate:
rate: 11 uS = +
us Dollar - 1000 Rupiah
+ 1000 I
!I
T/ Including veneer products.
Including products.
 - 303

3. FOR THE
PROSPECTS FOR THE INDUSTRY:
INDUSTRY, SUGGESTIONS
FOR
FOR IMPROVING THE INDUSTRY
3.1
3.1 Industries
Sawmilling Industries
for the
Prospects for the sawmilling
sawmilling industry
industry in
in Indonesia
Indonesia remain
remain bright.
bright.
In
In order
order to increase its
to increase its contribution
contribution to
to the
the national
national economy
econany as
as well as
as
to
to meet
meet the increasing sawnwood demand of the
the increasing the world, steps should
should be
be taken
taken
to industry.
to improve the industry.
Sawmilling
Saw," should be
ill i ng should be developed
developed in prov i nces wi
in provinces with
th an adequate
adequate
supply;
raw material supply;

- Improvement of information/inventory
Improvement of data on
infonoation/inventory data on the long-term
supply in
in quality and
and quantity
quantity of
of the
the forests;
forests;

Improvement of existing
Improvement of existi:1g sawmills
sawmills by replacement
replacement of
of obsolete
obsolete
machinery, installation of drying facilities;
machinery; installation facilities;

for managerial and

Training for and operational
operational skills:
skills;

Improveme:1t of
Improvement infrastructure (road
(road network, harbour faci-
lities, etc.);
etc.);

Initiate quality control measures;

measures;

Stimulate research
research and
a:1d development;
development;

Provide market surveys

surveys and
a:1d promote
promote lesser
lesser known
k:1own species.
species.

3.2 Industry
Plywood Industry
doubt the
No doubt the plywood
plywood industry
industry in in Indonesia
Indonesia will
will play
play a
a 8ig:1i-
Signi-
ficant
ficant role inin the
the development
development of of the
the national
national economy.
eco:1omy. plywood
The plywood
industry Indonesia is
in Indonesia
industry in is labour intensive, which is
labour intensive, is the
the main why
main reason why
the
the Goverrunent is encouraging
Government is encourag ing its
its development.
development.

However,
However, there is
is still much to
to be
be done
done to
to improve
improve the
the industry:
industry,

- Development of glue
Developme:1t glue factories
factories in
in major
major plywood
plywood producing
producing
areas;

Establishing train ing

training centres, supported by adequate
facilities;

- Cooperation with plywood importing

importing countries;
countries; elevation of
bilateral and multilateral
bilateral and multilateral cooperation
cooperation in
in market
market intelligence
intelligence
and
and operation
operation of early warning systems;
systems;

and increased
Promotion and increased utilization
utilization of
of lesser
lesser known
known species;
species;

Improving the machinery technology

Improving the technology of the
the industry;
industry;

Integration
Integration of blackboard
blockboard and
and particle
particle board
board production
productio:1 with
with
plywood
plywood loills through the
mills through the utilization
utilization of
of wood
wood residues.
residues.

3.3 Other Wood-Based Industries

other Wood-eased Industries

The prospects
The for the
prospects for the other
other wood-based
wood-based industries
i:1dustries are
are good,
qood, in
view of a growing domestic market and
of a and export
export potentials.
potentials.

ensure development
To ensure development of
of these
these industries,
industries, the following steps
the following steps
should be taken:
taken,
 - 394 --
-

Building and
and working
working conditions
conditions must
must be
be hnproved;
improved1 industrial
estates with
with adequate
adequate facilities
facilities should
should be
be developed;
developedr

Modernization of machinery and

and equipment;
equipnent;

Improvement of furniture
furniture design;
design;

Industrial training;
training;

Expansion of research
research and
and development
development in cooperation
cooperation with
foreign technical centres,
foreign technical centres, bilateral organizations/agencies,
bilateral organizations/agencies,
etc.
etc

Ilnprovement
Improvement of
of marketing and techniques.
marketing studies and technlque's
 ,sen: status of sawmillinq industries and planned capii.' r as at December 1984
(thi6 refers only to sawmills with concessions for specu1 .t.aer than teak)

In prodcticn Under coratiti-tion Apr-, for lotal

No. Province No. mill C:Ip.icity No. mill Capacity B. nd,1 Acity No. mill C7,9Zy
ini'/a) hit" /a) d /a)
1.
1. Aceh 12 3.72 700
338 44 126 000 16
16 464 700
Sumatera
2. S umatera Utara 15 424 000
424 000 - 1 25 000 16 449 000
000
3. Sumatera
S irmatera Barat
Barat 55 112 000
112 000 - 22 '
54 d. -T
000 77 166 000
4. Riau 36 793 000 - 12
12 240 d10
000 48 11 033 000
5.
S. Jambi 21 556
' SOD - 5 107 000 26 663 500
6. Bengkulu 2 36 000 -p 22 84I : 00
000 44 120 000
7,
7. Sumatera
.:dinatera Sel.
Sel. 16
16 JO
540 300 1I .:-.;
25 000 17 565 300
LF-7 IN
6. Lampung
8. 33 84
,lOO000 - 22 33 000 5 117 000
,24 000 - 1 24 000
24 000
9. Jawa Barat
,: ,di Barat 1 - - -
Tengah
10. Jawa Tengah 1
1 12 000
12 000 _ _ - - 11 12 000
000
Timur 54 000
54 000 - 3 54 000
54 000 w
11. Jawa Timur 3 - - v:>
Kalimantan Bar.
12. Kalimantan 40 278 500
11 278 500 5 93 000
93 000 45 11 371 500 en
Kalimantan Teng,
13. Kalimantan 54 1 525
525 000
000 11 15 000
000 11
11 305 000 66 11 845 000
14. Kalimantan Fiel. 22 730 800
730 - 33 96 000 25 826 800
15. Kalimantan TimTim 41 600
11 570 600 6 214 000
214 000 22 661 500
661 500 69 22 446 100
446 100
Ut.
16. Sulawesi :8r. - - - - -
17. Sulawesi
Sulaesi ':e!,:. 8 261 000
261 000 1
1 15 000
15 000 5 93 000
93 000 14 369 000
18. Sulawesi
Sulawesi Se,. 5 107 000
000 _ - 5 .(6)
107 )0)00
000
(0
19. SuI. Tra
Sul. Tra - -, 11 12 000
12 000 - 11 12 000
NTB/NTT
20. NTB/NTI 11 30
30 000
000 - - 11 30 000
21.
2l. Maluku
Naluku 66 168 000
168 1 48 000
000 14 323 000
323 000 21
21 539 00000
5190 0000
Jaya
22. Irian Jaya 2 78
78 000
000 8 270
270 000
000 11 351 000
351 000 21
21 699 000
699 000

294 8 723
723 400
400 18
18 574
574 000
000 100
100 2 616 500
616 500 414 11 100
11 914 100

Directorate of 1985.
»
SOurce,
Source: Directorate of Forest
Forest Industries,
Industries. Jakarta,
Jakarta, 1985. ."
""
t'l
Z
t1
H
X
 Present
Present status of plywood industries and planned capacities as
status of as at
at December
December 1984
1984

In 7i...(uction constructIcn iT.Troved Afplied f,r Toia-

No. Province NO. mill All Cpar..ity No. ,.1 0.picity No. T111 Cdlolty No, mill f..0,aitY
(mC/aJ ,m'/a) (m /a) Br al

1. n--.-a
1. IIceha 22 95 000
000 - - - - - 22 95 000
2. di
2. Sumatera t :ara
Utara 44 86 400 11 24 000 11 40
40 000
000 - - 6
6 150 400
400
3. Su.
3. Sumatera Barat
e.,J Barat 11 35 700
700 - - - - 11 35 700
700
4. Riau
4. Riau 77 337
337 550
550 33 104 000
000 4
4 159 700 - 14
14 250
601 250
5. Jak_i
5. Jambi 77 243 665
243 11 22 000
22 000 - - - 8
8 265 665
665
6. Bengdullu
6. Ilengkulu - - - - - - _ - _
7, Sum
7. Sumatera Selantan
atera Selantan 33 177 000
000 - 1
1 25 700
700 - 4
4 202
202 700
700
8. LarTung
8. Larnpung 11 35
35 700
700 - - - - - 1
1 35 700
9. Jai:.
9. Barat
Jawa Barat 11 71
71 400
400 - - - - 11 71 400
,
10. J- T,(ngall
Jawa Tengah 1
1 186 900 - - - - 11 186 900
900
11. J2.--
11. '
J awa Timur fl.ir 3
3 243
243 507 - - - - - 33 243
243 507
507
KalUnitan Barat
12. Kalimantan
12. Barat 14
14 537 100
100 1
1 40 000
000 2
2 115 000
000 11 80 000
000 18
18 772 100
100 w
13. Kalimzitan
Kal imantan Tengah
Tengah 5 301
301 000
000 22 58 000
000 7
7 315 500
500 - - 14
14 6-4
674 500
500 '"'"
14.
14. Kalimantan Selatan
Selatan 13
13 628
628 450
450 1
1 40 000 2
2 114 820
820 - - 16
16 783 270
'E..? 270
15. Kalimantan
15. wIlim antan 7Timur r 22
22 1 121 783 10
10 476 900
900 10
10 551
551 500
500 11 42 500 43 2
2 192 683
1.,..2683
16.
16. SulaW10si Ut
FAawcsi ut.ara - - - - - - - - -
17. ::-?-- :
SulaW10s i Tengah
17. Sulawnsi - - 44 272 500 - - - - 4
4 272 500
500
18. Sir,-
18. :,),...it; 1
Sulawesi Selatan 2
2 71 050 - 1
1 35
35 700
700 - 33 106 750
106 750
19.
19. Su: Tenggara
Sulawesi1 Tenggara - - - - - - - - -
20. NTB/NIT - _ _ - - - - - -
21.
21. Mal
Malukuu 10
10 542
542 300
300 22 80
80 000
000 22 65 000 11 40 000 15
15 727 300
300
22.
22. Irian
Irian laya - - 22 139 000
139 000 4
4 183 000
0
12 000 - - 66 322
322 000
000

96
96 44 714 505
714 505 27
27 1 256
256 400
400 34
34 1 605
605 920
920 3
3 500
162 500
162 160
160 7 739 325
325

Source:
Source, Directorate
Directorate of
of Forest
Forest Industries,
Industries, Jakarta
Jakarta 1985.
1985.
»

2;
'"'"'"
Cl
H
:><

"
 0 0
10a°
100 110° 120 130°
1 140°

\ ThaiLand ~, ~SJ
SC ALE:
SCALE: 1:25
1:25 COC 000
000 COO
Or
.....: International
~f}; Boundary
"% I
South Cnl na Sea .....
r"""",
'. "
'" .... ., "
'
. c
.: . ~
~~:.'" Pacific Ocean
PacificOcean
10°
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Sulawesi «i /J4'• , '"
." ~. Sea
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~ I,' ,
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' /~. t:J.a '" w
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se~a,.",- Banda
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Nusatenggara ~~
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Map Showing
Map the Country
Showingthe Countryofof Indonesia
Indonesia Consists
Consists of aa Broadly-Spread Archipe
Broadly-Spread Archipelago,
;;;
rs
'"'Zt:Jo"
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'w"
 -- 399
399 --

GUIDING MODERN FOREST-BASED

FOREST-BASED INDUSTRY
INDUSTRY DEVELOPMENT
DEVELOPMENT IMPACTS
IMPACTS

by

the Secretariat
the Secretariat

CONTENTS

Page

1. INTRODUCTION 400

2• A POLICY FRAMEWORK 400

3.
3, FOREIGN EXCHANGE EARNINGS
EARNINGS AND SAVINGS
SAVINGS 402

3.1 Export
Export Expansion 403
3;2 Import
Import Substitution 403
3.3 Foreign Involvement in
Foreign Investor Involvement in MLF's
MLEts 406

4. EMPLOYMENT AND INCOME GENERATION 410

4.1
4.1 Policies to Increase
Increase Government
Government Revenue
Revenue 411
4.2
4.2 Encouraging Looal Workers
Encouraging Hiring of Local 411
4.3
4.3 Polioies
PolL the Expansion
loo for the Expansion of
of Employment
Employment
and Local Value Added
Added 411
4.4
4.4 Regional Distribution
Regiol.al Distribution of Income and
of Income and
Employment Impacts
Impacts 412

5. TECHNOLOGY ACQUISITION AND

AND DEVELOPMENT
DEVELOPMENT 413

6. ENVIRONMENTAL PROTECTION 419

7. CONCLUSIONS
CONCLUSIONS 423

REFERENCES 425
 - 900
- 400 --

1. INTRODUCTION

Fores t-based industriali,tion

Forest-based i ndust!:ial i za t ion will will neces.,r11-
necessar j ly tale
take pI ace in
place
many developing
developing countries.
countries. It It is likely that
is likely that an imb.rtatt nt proportion
propo!:tion of of
industrialization will be basedI on
future indu2.:_iialization on modern,
moderr scale enterprises
lorg, sc,.1e enterprises
(MLBll/.
(MLE11/. Count!:ies
,'.intries may wish h.
may wish to foster ter thethe dedevel t ofbt MLE's
MLE's forfor a
variety
v,rief2 of reasonseasons such such as economic effi
g!:eater economic
as great eni,lony ny and
and the need to
the need
expand
4xpan: export .)1., markets that canr cannotb be be adeguateli
adequately supplied
supplied by smaller,
traditional enterprises.
fradl,icn21 enterprises. Also, it is
Alzo, is often administratively
administratively easier easier to to
implement
implement development
development stre strateile,ies hased
based on on a few MLE's than
a few than onon aa myriad
myriad of
smaller operations.
smaller operations. Final
Finally, y, inin certain
certain cases,cases, technological
technological minimum
sizes which
sizes which are are beyond
beyond the the possibilities
pool:Unties of of small
small enterprises
en ises are
are imposed
imposed
by technology.
by existing technology. Whatever
Whatever the the case
case may
may be,be, there
there are some some
significant
significant issues which arise when large large scale
scale forest-based
forest-based industriali-
industriali-
zation takes
zation takes place.place. Government decision-makers
Government decision-makers and and the
the public
public at at large
may become
may ti-, mi- concerned about
concerned about thethe likely
1 ikely impacts
impacts of MLE' s on
of MLE's on society,
society, the the
economy
eccnrr, and
and the environment.
environment. The,.may ma- become
hecome concerned
concerned with
wi'h aspects
aspects such
as job ,r-otion,
creation, competition
competiti,, th truditional
traditional enterprise,
en'ect.s'u, pollution,
pollution,
government
oc.verrcunt revenues,
revenues, and and foreign
foreln, exchange.
err,auue. This parer paper exul.u.es
explores the the nature
nature
of the lik impacts of
_12ely impacts of mcleii,
modern, largeI t.:e. scale
2.2ale enterprises
enterprdses in _n the forest-
the forest-
based sector.
, Also,
Also, and
and because
be,ause Twerurents rnments havehave opp:stuuities
opportunities to to guide
guide
forest industry
trli.,try development,
development, aa mi.jorpurpose purpase of of this
this p5per is is to analyze
to analyze
the nature
nate,r off these these opportunitieo
opportunitiesLiu:ii aa policy pulicy point of view.

From the
the outset
outset it
it should
should be be emphasized
emphasized that
that this
this document
document is
is
not focused
not focused on the broader
on the poli,y choices
broader policy choices between
between large
large and
and small
small
or the
industry or
industry t.he many hybrid
hybrid combinations
combinations thatthat are
are possible.
possible. The task
The task
undertaken
undertaken here isis more limited,
limited, no.-.1y
namely to to identify
identify policies
policies and
and means
means to
maximize the positive andand minimi2:
minimize thet h. negative impacts
impacts ofof MLE
MLE expansion,
expansion,
once it
once it has
has been accepted
accepted as anan -h1c-tive
objective or aa goal.
goal. In this sense this
this
document is complementary
document is complementary to,to, and
e should
A.'d be
be read in
in c d :u, with the
the
Secretariat
Secretariat document Small -st-based pr
their characteristics and 21

2. A
A POLICY FRAMEWORK
FRAMEWORK

Four main development objectives or or impact

impact areas
areas are
are studied:
studied: i)
i)
employment and income expansion, including government income; ii)
ii)
technology
technology growt.h modern izat ion; iii)
growth and modernization; iii) the
the physical
physical environment;
environment; and
and
iv) foreign
iv) foreign exchange earnings. These obj-ctives
exchange earnings. objectives are
are shown
shown in
in column
column 1I of
Figure 1.
I.

In order
In order to
to productively
productively us expanded
use dirded MLE activity to
MLE activity .1, achieve
objectives without
objectives without major negative
negative impacts,
1- certain actions need to
uirtain actier, be
to be
taken. The one:
ones ,..rrsidered
considered mostmost important are
are shown inIt column
ulurn 22 of
Figure 1.
1. As indicated,
ltd., ,real, aa number
numb.u.i of the action
( areas relate to
.ion areas tr two or
more
more of thethe objectives. This is is ected, given
to be expected, given 'n,
the complex,
nature uf
interactive naiJre 4, economy.
of an

The admin1,trtive
The administrative devices
devices or or policy
policy instruments
instruments thatthat govern-
govern-
ments
ments cancan effectively
effectively nLeuse to
to effect
effect or or encourage
encourage thethe needed
needed actions
actions areare
shown
shown inin columns 33 onJ
and 4.
4. Basically, g(vrrnment
Basically, government cancan regulate
regulate or or it
it can
can
uSe incentives.
use incentives. Of course, aa third
Of course, third op:option isis direct
direct government ,uvest-invest-
ment,
ment, operation and and ownership.
ownership. The present paper deals
roueht. !--.aper dealsmainly withi the
mainly wi
i tuat ion where
ssituation where at
0 t leas t some
least some private i nvol vement exists
pr i va te involvement ex is ts or
or where the
government enterprise acts
government enterprise in aa guasi-rivate
acts in quasi-private form,form, subject
subject to to many of
the
the same incentives and regulations that
same incentives that atfect
affect private
private enterprises.
enterprises.

1/ The "large" and

The terms 'large" "mrd,,i1" are
in-1 hmodern are used
ll
here in
u=c1 her, in aa rather loose sense
and be .-;-r.:1rer
and should be considered in ir the context ot
the corteff of the
the industry
industry in
in a given
country. ThUS,
Thu-, aa MLE
ML, inir one
roe LDC might be ,oni.-dered
might te considered aa small, average
technolog enterprise in,
technology ir,, for
for example,
example, Oar,ada
Canada oror aa Scandinavian
Scandinavn.n
country.
Country.
 (lJiJ:cGTlV[$ ACTIONS
ACTI0'l5NEIEDIED
Nf:l-:Dl':D Ireeatee
FOt.. leY INSTeterreet'S
! NSTRlNENTS
Repel/arsons
.~g:;_~3tions Inccncivl)S
----
«lpital
- capita' ar E
rep,ZII::d;;cton and prof:t
rnd or f'. -- inc{'n~ivr5 fnr
Enrico, t('lnv(:SL:r"y,(
Poi 100:::21 reEceestecri
Reduci'! olJtHows of
Peducs
f0TliCUlnct'
laws
surd pr., (cm.',fer pr icing
I, on Er
-- ccnl.rol$
, EpEnpE
Lxpdnd 'fote-igrl exchdng¢ Eater-- -Ertl
CJP".infcs/s3v1y,gs 01E
- re bul./lti0f15
-r reg.n-ding
i Lit ing oft
ar t.:t.\CS 01\ (':>.,-pzl riates \J';.cd
I '11 proj('clS
proiccr,
E EE
eexpatt'i;\(1">
and Lr,potl
r E
rr Er
ed In, .E
svosidfes fOl
HI 11usc of I tOCd
al1tabour i\nd
lobe'liTErna
ta,
"buy ioc,jJ" [(>guiillions
r t, eLMer i.npucs
Expana IOCd 1
L-.:pt.rd I.,. Jr1
' product Lon
log 1
ir Fxport hnns - rri.nr:endves
c- LEE.
(subsidies)
p fer k<:a;
lhrC1J,gh:
chres.Jgh:
-
- contractll.(!l dBp::eCfr>2nLS fl2g;m::!iilg
_tones regarderg EE.
product ion and v;·e d I;,)('~J
/ J I

- a
Lncn>lsing 1
expm L
loca l processing - DUO] I
lnrr;:structl!rc i"vcstPC;1(
ir --, -.carps trE a.
ent"l,ll)gs
e_ 1115,
-- 1«al l'ut Do
al vJlue added ute
regu!Jlt1011S
-Di ret, -
or, f(n traLntng
t Lc $uppon
- pt;bJ tee ,
subsliulCing 1
r 14.1.1 .13, local
- regulations ,tet a:t;arding
te.stErdirs; hiring ofA. reduce
,olor
lon ofr unn-rta lnt y 1.': [ il publ' k7 t

ptoduc- al I-
-rt i,on for 1.71
irrpotts
I)x}).atYli1tcs
s : re, ,7c use of
and use Er, I
r a~fted p r 08r. , ';1mnPS
ere/
locre;,sing
ot,sttre, efficiency
tt eee ifl)l.lts - export incentives
t! . :::\'P"nd ;'~x>11 :1rpiuY'Th.~m; "..'!"',icn l~ts prier}; nnJ
inpert i125 s"bsldiH:J
and esbsidi 1(>:;'>Jl
ice! lorDI
; '1C(l<V, tine gO\.Ie:TIIT.(mc rewlts in (lxpnnded
reside. A
fore igG t)'0Ytet'sb
- foreign ip reg\ll OJ t ions
searershipgilooioc prices
:,:V0nuCS;
o
consulTptlcn
cons ~

:,,;m::', I)nco, objpn i V(>

Adopt f1Y)r~ {\pprGpr fate ld»ur
is fV::l.lscd on C0ltn~n
: .r I
" .preeng Dee
- regulations n'gan:1ing us<.' or
of Lnceocives .
fer 01'£
es re- rC..J5cd
V1C:ceased
;'lllCn!HVe cechnology
curepctri
:'Tgions
irgicns C"lt;qO :(lch;"ologies
logies ;UOOdl'r '
0: I ;lboor
of
- I
j \'\ sucn a
ti', 1E1,1 I .

Inct'ense sh:n+ of rent frOTi Flit 7,E, wegor 'lined contraC/:,S t.hill {:li2zriy
clearly ~ Ci3Yi3:tcn, {6y.;:dcll:s. cu;.
pllbiic rcsoutc~ US(~ j incr::>8sc pwbhr bsnchts
increase :errs.

techooLogy
eerr ccernotogy ~~ Tn5hn,? effective - cOl"crols en tt'('nnQiogy irrpNts
,gy iM,ICTL 5
,\(}),HII ages
s l I Lt'imsf"r .anD PilCcots

Irroirrpnial
I2nviIo~nldl
"VDld ,r Cu.'1!(i agzin..st
Et .milc:cepu::ble
le pelllltion conn-oi laws
r public support ,115'::(.:, dISCiIS'!,
Q;, i"lgii:S harm tron MLE
r/rrn /
^e2: .;\ctivi(y Rxciu';ion of eccoOO1ic ncr lVlty cer 1D7
for Eneecc. disease.
....._ . _ - - . . . J
foss
fcan c
ce:. UHn fln'as fLl."e procectico
forest ffi9r.ilg€iliiS'lf, reS'llac i.ons
 -- 402
402 --

While in
While in the
the following
f i j,'cy instruments are d'ussed in
pages policy instruments are discussed in
terms of
terms of accomplisfunent
accomplishment of of specific taskss or or obrcctivcs, in reality the
objectives, in reality the
whole system of
whole system of instrwtents
instrumentsanu andnncshisms
mechanismsusedused neeou
needs Loto bn
be ccordinated
coordinated
to avoid
to conflicts, vo:.:s
avoid conflicts, voids and duplic."_:ion
and duplication of of effott. For
efforts. For example,
example, some
some
instruments can
instruments can contcl'uwit.
contribute to accomplishing aa number
to accc..,.plishing number ofotobjectives
obectikcs at at the
the
same
same ttime.
iloe. Thus, subs
Thus, suboloies
id ies forfor local
local labour
labour useuse can
can he .p to
help increase
to increase
labour intensity
labour intensity in in production,
production, but but they
they can also result
can also result inin lower
lower private
private
cost
cost ofof production
production and and thus,
thus, perhaps,
perhaps, lead
lead to toimprovcJ
improved competitive
positions which permit permit expansion of of exports and foreign foic:in exchange
earnings. More
More use useofoflabour
labourcould
couldalso
alsoresult
result in
in savings
savings in in imports
imports oror
machinery,thus
machinery, thusfurther
further helping
helping thethe foreign
foreign exchange situation. Finally,
exchange situation. Finally,
the changes
changes inin processing
process needed
needed to to adapt
adapt toto greater
greater labour
labour useuse might
might
result ininananoverall
result overall lesslessenvironmentally
environmentally damaging
damaging technology,
technology, thus thus
contributing to
contributing to th,
theenvironmental
environmental objectives
objectives of of aa country.
country.

Of course,
Of co..:se, conflicting
conflicting results
results could
could also
also occur.
occur. AA subsidy
subsidy
which contributes
which contrinJtes trward
toward ,neeting
meeting oneoneobjective
objective could
could well
well lead
lead the
the
country away
country fro.r meeting
away from meeting another
another objective.
objective. At At thethe same time, the
same time, the
various policy instrwnents
various policy SerVe different
::.strumerts serve with different
ec't.: 'es with different
different objectives
degrees of
degrees of effe:Aivenoss.
effectiveness. Their application als, ertails different
Their application also entails different
administrative ccsts. Therefore
demand.: and costs.
administrati ve demands Therefore while
while fromfrom the
the analytical
analytical
point of
point of view it
view it is is ,onvenient to discuss
convenient to discuss each
each type of of objective
objective and
and
policy separately,
policy separately, in practice a coordinated
in practice coordinated approaCh
approach to policy
policy
formulation
formulation and
and instrwnent
instrwnent design
design should
should be
be pursued.
pursued.

Most
Most of of the
the policy
policyinstruments
instruments discussed in the following
discussed in the following
sections can
sections can equally
equally as as well
well be
be adapted
adapted for
for promoting
promoting the
the expansion
expansion of of
small scale
small scale processing
processingactivities
activities inin the
the sector.
sector. The main differences
The tnain differences
will often
will often only
only be
be ininimplementation
implementation costcostandanddifficulty
difficulty of
of application.
application.
In general
In it
general it is mOre costly and
more costly moredifficult
and more difficult toto apply
apply aa given
given taxtax
policy, subsidy
policy, subs idy programme
programme or or pollut
pollution
ion abatement regulation to
abatement regulation to 100
100 small
small
mills
mills than
than totoone
oneMLE
NLE producing
producing thethe same output. The
total output.
same total basic policy
The basic policy
instrwnents may
instruments maynot
nct change,
change,butbut the
the form
form of
of implementation
implementation and and its
its cost
cost
will.
will.

In ide
In 1cs, each
what follows, each of
of the
themajcr
majorcbjective
objectiveoror
impact
impactc.-.c.r.e
category
(columnone
(column oc in is discussed
1) is discussed in
inLer:MT,
terms ofof needed actions (.o:1:dn
needed actions (colwnn
and the
two) and the poi instrwnents (columns
policy instrwnents thres and
(columns three and four)
four) which
whichhave
have been
been
and can
and can be
be used
uset tito guide MLE
NLE investment
invesunent and
and development.
development.

3. FOREIGN EXCHANGE EARNINGS

FOREIGN EXCHANGE AND SAVINGS
EARNINGS AND SAVINGS

MLE's are the main earners of foreign exchange in

of foreign in the
forest-based
forest-based sector.
sector. While
While small,
small, traditional
traditionalenterprises
enterprisescan canproduce
produce
someexports
some exportsofof artisan
artisan andand other
other wood
wood products,
products, suchsuch earnings
earnings areare
insignificant in
insignificant in terms
terms of total. Similarly,
of the total. industries that
Similarly, industries that save
save
substantial
subs tantial amounts
amounts ofof foreign
fore 19n exchange through import
exchange through import substi
substitution
tution tend
tend
to be
to be those for which
those for MLEactivity
which NLE activity is
is the
the rule
rule rather
rather than
than the
the exception,
exception,
e.g., paper
e.g., paper and
and paper
paper products.
products.

Thc obiective
The objective of foreign exchange
increasing foreign
of increasing availability and
exchange availabili and
the assorlaved
the :Dolicies for
associated poliCies for export
export expansion and import
expansion and import substitution
substitution are
are
discussed bellow.
discussed below. However,aaword
However, wordofof caution
caution isis necessary. Grcss expout.
necessary. Gross export
earningn and
earnings mm the
the value
value ofof imports
imports substituted
substitutedare areimportant
importantelemcnts
elements 1E
in
..otal foreign
determini:g total
deter.nin foreign exchange availability but
exchange availability but their
theirconsideration
consideration
in isolati,,n can,
in isolat on can, in in many cases, give
many cases, give aa very
very exaggerated vicluee of
exaggerated picture of
foreign
foreign cxchange benefits. Net
exchange benefits. Net benefits
benefits or or "retained
"retained salvalue" 1, what
a' is what
i.e. what
counts, i.e. what isis left
leftafter
aftertransfer
transferofofprofits
profits abroad
abroadand
and allowing
 -- 403
403 --

content of
for the import content
for of production salaries paid
production and salaries paid to expatriate
exp:.1 .te
workers. Thus,
Thus, for
for example, Gillis studying
example, Gillis studying the
theLnpact
ilnpact of
oftr'ansnat:o...al
transnational
corporations operating
corporations operating in sector estimates
in the sector that in the
estimates that early
the early
seventies net export earnings in Ind--sia were probably as low as
seventies net export earnings in Indonesia were probably as low as 25
percent of
percent of the
the gross
gross earnings
earnings (Gillis,
(Gillis,19E3).
1983).

3.1
3.1 Export Expansion
Export Expansion

MLE's, particularly if they have close working relations with

MLE' s, particularly if they have close working relations with
foreign firms or can help
investors, can
foreign firms or investors, help to
to open
open upup export
export markets
Inarkets forfor a
country's forest
country's forest products.
products. Once such markets
Once such markets areare open,
open, smaller
smaller domestic
domestic
firms often find it more feasible to enter them,
firms often find it more feasible to enter the,n, if if quality
quality and
and timing
timing
standards can be met. Thus, the MLE can, indi,:ectly at least, help
standards can be met. Thus, the MLE can, indirectly at least, help
the smaller enterprises
development of the smaller enterprises in
development in a country. Moredirectly,
More directly,
MLE's enter into various types of contractuF, :.rrangements with the
MLE's enter into various types of contractual arrangements with the
smaller finns
smaller producing products for
firms producing e.g.,
export, e.g., "piggybacking"
for export,
arrangements, where
arrangelnents, wherethe
the small
small finn
firm markets
markets its
its oltput
outputthrough
throughthe
theMLE.
MLE.

subsidies can be used to

incentives ororsubs).-1ies
Export incentives to promote
promote forest
forest
prodcts exports. They take many forms in different countries and
products exports. They take many forms in different countries and
include fiscal incentives (tes ev. mptions, export subsidies, export
include fiscal incentives (tax exemptions, export subsidies, export
fncing,
financing, deferments, remissions),
defennents, non-fiscal (subsidized
remis.,ions), non-fiscal
:sion of export marketing expsrtise, price supports, insurance,
provision
(subsidized inputs,
of export marketing expertise, price supports, insurance,
p-
.arformance awards,
export performance awards,multiple
multf:,le exchange
exchangerates,
rates, etc.)
etc.) and
and indirect
ind irect
-gentives through
price incentives
price governmentL training,
through govern training, research,
research,export
exportpromotion
prol"otion
pr..)pr ,des, lnarketing
prograllunes, informa in )rogrames,
marketing information progralrunes, etc. etc. In many cases cases
coL::::es
countries combine
combine export
export ince-,:lves
incent i ves forfor processed
processed products
products with
wi th bans,
bans,
or taxes on log ex
pen,..r'_.1es or taxes on log exports.
penalties rs. In In these
these cases
cases the
thecombination
combination of of
policies isismeant
policies meant totodiscourage
discourageprimary
primary product
product export
export and
and to
toencourage
encourage
prc-assed product
processed product exports
exports with
wi th higher
higher employment and local
elnployment and local value
value added.
added.
still other cases, such as Honduras, all exports of certain forest
In still other cases, such as Honduras, all exports of certain forest
products are
products are directly
directlyadministered
administeredby bythetheGovernment.
Govermnent.

Export development
Export development progrars can
programmes can be
be quite
quite complx,
complex, since
since there
there
are many
are keyrequirements
loany key requirementsfor for success
succel., which
whichhave
havetoto bebe addressed
addressedat at the
the
sane time if tLe effort
same tiloe if the effort is tc be -ccesful.
is to be successful. There There are at least three
ar,., at least three
commonly
cOlrunonly citedcategories
cited categn,lesofof requirements
rec,-: ,ents which
which merit
lnerit ,:i..-sideration:
consideration: i) i)
quality
qual i ty ard
and ddimensl,'..nal
imens ional stand::
standards particularly
- part icularly importers in
hnporters
industriali'-c countries demand un1',rm and high quality in their
industrialized countries demand uniform and high quality in their
ii) timing and
imports; ii) timing and size
size ofof shipments
shiplnents -- most
lnost importers
itnporters want fairly
want fairly
large shipments and they demand punctuality; iii) the price must be
large shipments and they demand punctuality, iii) the price must be
right, i.e. competitive with
right. i.e. competitive with other Aiers.
other potential
potential suppliers.
SG Figure 22 lays
Figure lays
out
out C,e
the requirements,
requirements, the theccunmon deterrents to meeting
comillon deterrents t meeting them them and
and the
the
pc
possible corrective or actions w),ch can be taken in
p-.7oc,
corrective progralolnes or actions which can be taken in a
:,e overall
cOlnprehensive overallsy,3tc,,,:,
systems apf, 'oach to
approach to export
export Expansion.
expansion.

The figure illust:

The figure tes thethecc,:plexity
illustrates complexityofofpolicies
policieswhich
which can
can be
be
adopted to promote
adopted to promote exports.
exports. Deterrents
Deterrents can
can be
be numerous
nwnerous and
and corrective
corrective
actions may
actions be very
illay be very costly. In fact,
costly. In fact, there
therehave
have been
been situations
situations ininwhich
which
the policies have exceeded
the cost of policies exceedgd benefits derived from export
benefits derived
expansion.
3.2
3.2 Import Substitution
Import Substitution
Import substitution can
Import substitution can be
beencouraged
encouraged with
with a
a nunnber of policy
nwnber of policy
instrwnents.
instrwnents. First, there are potentials to subsidize (sport substi-
First, there are potentials to subsidize i,nport substi-
tution industries. Such subsidies can be in the form of bonuses or
tution industries. Such subsidies can be in the form of bonuses or
rebates for
rebates for labour
labour use,
use, across
across the
theboard
board grant
grantsubsidies
subsidiesbased
based on
on output
output
measures, andseveral
measures, and several types
types of
of tax
tax incentives.
incentives.
 - 404 -

Figure 22

Latin
Latin American lumber and board products exports: exports importer requirements, requirements
deterrents
de t err e n t s ____to ~_~__~_t_ ~"n"'g'_"r_=8"q'_u=i_'rc:e::'rn=e"n_'_t=s'___'a:cn=d,--,p"-o=S,,S,-l=-'
tg_____meeting requirements and possible corrective programmes
"b"I"8"--,c"o",r,-"r..:8"c:..t=i"v"8=-k
P"r",o"g"-.:r",a"ID"",rn,,e,,s,,

Type of Requirements Deterrents to

Common Deterrents to Correctivee
Possible Correc
Equipment by importers i~eecing Requirements
Meeting Requ'irE'ments Programmes
Programmes

Guaranteed quality
and dimensions: (1) great variety in
great variety in charac-
charac- (1)
(1) research
research and
and training
teristics for aa given
teristics for given programmes in
programmes in preces-
proces-
- uniformity species from different
ciifferent sing and
and treatment
treatment
species from
r generally
areas.
conforms to
bml_MA rules inadequate treatment
(2) inadequate treatment and (2) cooperative
(2) cooperative treatment
treatment
and seasoning facilities
and seasoning facilities plants
- proven char-
Ogal:ty and for Lumber
for lumber (3) incentive
(3) programmes
incentive programmes
acteristics:
Dimensional light in weight i~adequate information
(3) inadequate 'nfo~mation for quality
for qua l i ty production
product ion
Standards and colour, a~d tests
and tests on species
species units
easily worked, characteristics (l,) establishment of
(4) of unix
uni-
dimensionally few areas
(4) few areas with adequate
with adequate form
form export srandards
export standards
stable, easily concentrations
concentrations of of known
known (5) improvements
(5) improvements in in sort-
sort-
finished species meeting quality
species meeting ing and
ing and grading
grading
and
and physical
physical requiremen!s
requirements (b) research on
(6) research on wood
wood pro-
pro-
(5)
(5) inadequate quaLity
inadequate and
quality and portions
portions and uses
site controls
site controls in
in processing
processing

(7) export
(7) export concentration
concentration
(6) uncertainty
(6) uncertainty in in scheduling yards (associations
yards (associat!ons oror
transport in
ocean transport advance
i~ advance cooperat ives)
cooperatives)
ma~y ports
for many
for (8) integration
(8) integration ofof proces-
proces-
de-
- Guaranteed de- (7) coordinat
(7) coordination ion problems
p~ob~ems sing facilities
facilities
between logging
between logging and
and pro-
pro- (9) research on product
(9) research product (or
(or
Livery dates
livery
(seasonal and
cessing (seasonal and species) groupings and
species) and
Timing generaLLy
- generally commercial
expansion of commercial
distance problems)
distance probLems)
And Size
And Size fairly Large
fairly la~ge (8) lac<- of
(8) lack concentrat ion of
of concentration species
Of Sr1p-
Of Ship- quantities products for
products for export (10) selected
export due (10) conversio~ to
selected conversion to
iF' a to: low
to: com-
Lm.r volumes of com- (species
plantations (species
me"
ments
t s in a
concentration)
sllipmenr
shipment merciaL timber
mercial timber per
per unit
unit concentration)
area, lack
area, lack of renovation of
(11) renovation
of acceptable (11) of transport
transport
species
species groupings,
groupings, ge- facilities and
facilities and methods
me[hods
neralLy small
nerally small sizes
sizes of
of (12) improved
(12) improved market infor-
market infor-
units, poor
production units, poor disse~ination
mation dissemination
storage
~ransport and storage
transport (13) improved
(13) improved storage
fac i lit ies
facilities facilities
facilities

(1l,)
(1 proces-
relocation of proces-
(9) high
(9) high overaLL costs due
overall costs due to
to (export
sing capacity (export
lack of
lack markets for
of markets for Lower
LO\<ler oriented)
quatity ny-products
quality by-products (15)
(15) specialization and
(10) high
(10) l099in9 and tog
high logging ~og longer produc~ion runs,
longer production runs,
transport costs due to
transport costs to larger
Larger units (economies
units (economies
low commerc'aL
low commercial volumes per per scale)
of scale)
ac re, lowlevelof
acre, low leve l of trans-
t rans- (16)(16) innova;: ions in
innovations in logging
logging
port infrastructure
port infrastructure and and and transport (cost
and transport (cost
long hauling
long hauLing distances reduct ions)
reductions)
Competi~ive
- Competitive
Cost/Pnce
Cost/Price (11) h-iQh processing costs
(11) high costs initial export
(17) initial
(17) subsidi-
export subsidi-
del ivered
delivered
Relal ion-
Relation- due to:to: small
smal L average
average za t i on
zation
r ~ ce
pprice size of
size of plants,
pLants, poor
POOt training and
(18) training
(18) and technical
technical
s ~ :p
ship
plant layouts and
plant Layouts and out-
out- (publ ic pro-
extension (public pro-
dated
dated equipment
equipment, ... poor
poo'· grammes)
grammes)
equipment
equipment maintenance, (19) ties
(19) with (U.S.)
ties with (U_S.) com-
com-
lO\<l
low efficiency (conver-
efficiency (conver- panies
panies
sion ratios),
tatios)r etc.
etc. (20) increased production
(20)
(12) high marketing and
(12) and pro-
pro- and
and management reseatch
management research
duct transport costs
ouct transport costs due due (21) market
(21) market research
research and
to
to poor
poor shipping fac~­
shipping faci- education
II ties, inadequate pro-
titles, (22) associations of
(22) of pro-
pro-
motion~ e~istence of
motion, existence of du~ers and
duders and exporters
exporters
outdated trade
trade restric-
restric- (economies
(economies ofof scale)
scale)
tions ano
[ions ane tariffs
tariffs (23) trade
(23) barriers red:Jet
trade barriers reductions
on
(24)
(24) "piggyback ir'g"
"piggybacking"
(25) stimulate
(25) domestic
stimulate domestic
market for by-products
market for by-products

Sourcl.;':
Source: Adapted from
Adapted from Gregersen
Gregerser (1972)
(1972)
 -- 905
405 -
-

Quite often
often subsidies
subsidies may
may be
be complemented
complemented with
with high
high import
import
duties on
duties on the
the product
product being
being substituted
substituted by
by local
local production.
production. In this
In this
it is
respect it is interesting
interesting to note
note that,
that, although
although protectionist
protectionist barriers
barriers
and particularly
and particularly tariff
tariff escalation
escalation policies are usually identified
policies are identified with
industrialized countries, both
industrialized countries, the absolute
both the absolute level
level of
of protectionism
protectionism and
and
the magnitude of
the magnitude of escalation
escalation are usually
usually higher
higher in
in developing
developing countries
countries
(Table 1).
1).

Countries also
countries also make
make use
use of
of several
several non-tariff
non-tariff restrictions
restrictions to to
induce import subs ti tu tion.
import substitution. i ncl ude total proh
These include ib i tions, cond
prohibitions, i-
condi-
tional prohibitions
tional prohibitions which include
include prohibition
prohibition forfor trade
trade as
as well asas other,
e.g.
e.g. health
health and reasons, Quotas
and sanitary reasons, quotas andand discretionary
discretionary licensing,
licensing, and
and
automatic
automatic import authorizations (UNCTAD,
(UNCTAD, 1983).
1983).

Import restrictions
restrictions often
often result
result inin higher
higher prices
prices in
in the
the local
local
market. and therefore
market, and therefore inin incentives
incentives for
for investment
investment in
in local
local production.
production.
Additionally, there
Additionally, there may be be transport
transport cost
cost reduction
reduction advantages.
advantages. To
encourage increased local value added
encourage in such import substitution
activities, "buy
"buy local
local" policies, or
A
or policies
policies which
which restrict imported
imported
inputs
inputs may also be
be used.
used.

Table 1

tariff rates
Average tariff rates facing
facing wood and wood
wood and wood products
products
imports from developina
imports from developing countries

Wood in the
Wood in the Primary
Primary Secondary
rough wood wood
products products

Developed country markets

markets
(Post round)
(Post Tokyo round)

BBe
EEC 0.0 1.9
1.9 1.5
1.5
Japan 0.0 7.4 4.8
USA 0.0 5.6 1.7

Major developing regions

developing regions
Africa 14.4 16.2 24.1
America 26.2
26.2 37.6 52.5
Asia 34.1
34.1 57.8 73.1

Source: UNCTAD (1983).

(1983).

Despite the fact

Despite the fact that
that import
import substitution policies
policies have
have been,
been, and
and
still are, very popular
still are, popular in in many
many developing
developing countries,
countries, available
available evidence
evidence
shows that
shows that they
they may lead lead toto many
many undesirable
undesirable results.
results. These
These include
excessive capital
capital intensity,
intensity, low value added
low value added at at international
international prices
prices and
and
lack of
lack of competition.
compet it ion. Protect ion also
Protection also inhibits
i nh ibi ts exports
exports from
from developing
deve loping
countries, as thethe main
main thrust of protectionist policies
of protectionist policies is is to promote
to promote
import
import substitution
substitution not not export
export expansion.
expansion. This bias
This bias against
against exports
exports is
is
now widely recognized
now widely recognized as as detrimental
detrimental toto economic
economic growth.
growth. In fact,
In fact, there
there
strong evidence
is strong
is evidence that that growth
growth improves
improves where
where aa high
high proportion of of
domestic production is
domestic production is exported (Clausen,
(Clausen, 1984).
1984). Por this reason,
For this reason, import
import
SUbstitution
substitution policies that discriminate against
against exports ara
are being
increasingly attacked.
attacked.
 -- 406
406 --

3.3 Fr7--:7n Investor

Foreign Die,sent in MLE's
Investnr Involvement v'
In many cases foreign investors have been involved
In !flany cases foreign investors have been involved in MLE MLE
activity
activity in in developing wntries, particularly
developing countries, particularly in large projects.
in very
very large projects.
This participation muy generate a series of complex impacts on the
This participation may generate a series of cOJnplex impacts on the
availar.liv of foreign a/allange. There is initially an inflow of foreign
availability of foreign exchange. There is initially an inflow of foreign
capitl. At the say
capi tal. At the same time foreign investor may provide access to
Hr.- the
the foreign inves tor lnay provide access to
advanced technolor
advanced technology andtn t7 to certain as well as to superior
cert-An markets
marKets as well as to superior
management
Jnanagement and andtechnical
technicalskills,
skills, thus irtproving the
;-nas improving th7 7n7v-eCtive position
competitive position
of a developing country in inteinutional markeir. i. production is
of a developing country in international markets, If production is
oriented
oriented towardthe satisfaction oí
toward the satisfaction of cl,:mestic
domestic needs, ',71.gn involvement
needs, foreign involveJnent
may
may bebesought
soughttoto substitute
substitute imports
imports inin aa more
more efficient
efficientmanner.
manner.

However, once -LE activity

MLE activity is in established significant
established with
with significant
foreign participation, aeping foreit, exchange earnings in the country
foreign participation, keeping foreign excha:1ge earnings in the country
may be aa major
may be Inajor challe
chal cing ma"
facing
I ,a;',Hrmnents. Hudicious
many governments. use can be
Judicious use
made of profit rem
made of profit relnitta:1ce laws, laws, exchange controls, capital repatriation
, y,e controls, capital
and reinvestment
and and regulaticv, regardi of foreign inputs,
reinvestment 1laws, and regulations regarding uSe of foreign ts,
including expati
including .at labour.
expatriate ur. AA numb, of these L
number of these types of of concerns
conCerns can
can be
be
alleviated by
alleviated by writi oontrols into contracts with tYtt's for use of public
writing controls into contracts with MLE's for uSe of public
timber. wi
timber. With
th expe.., and some
ice and
exper ience some bargaining
barga in1ng powv,countries can also
power,, countr ies can also
control to some extent the negative aspects of transfer pricing that
control to some extent the negative aspects of transfer pricing that
essentially keeps out
essentially keeps out a portionportion ofof the
theforeign
foreignexchange
exchange earnings
earnings which
which
otherwise wouldflow
otherwise would flowinto
into the
the country
country in
in question.
question.

prcblen of
The probleln
The· "transfer pricing"
of "transfer pricing" cOlrunonly
c,.,; cr.F
ly crops up in
discussions of the :ole of transnational companter 7:'s)
discuss ions of the role of trans nat ional compan ies (TNC' s) in is developing
, ;eloping
countries. Abuser_ tesult in values, both for ertY 71
countries. Abuses result in values, both for exports and imports, that that do
do
not
not correspond
correspond toto ptices
prices found
found inin markets
markets that
thatTNC's
TNC's cannot
cannot control.
control. One
One
widely used method is underinvoicing unit values of exports sold to
widely used method is underinvoicing unit values of exports sold to
affiliated
affiliatedcompanies.
companies. This
This reduces
reduces the
the host
host country's
country'syield yieldfrom
fro,nincome
income
taxes
taxes and,
and, as inin Indonesia
Indonesia and
and Sawawak, also reduces
Sawawak, also reduces export
export tax
tax revenues
revenues
wherethese
where these are
are levict
levied on
on an
an ad
ad valorem basis. Host countries
basis. Host countries can
can counter
counter
this using "posted prices"
this by using prices" for exports which are based on national
exports which are based on national
export values for LI :ent rpecies of timber.
export values for different species of timber. In use in
This system
This systelu is in use in
Papua New
Papua New Guineu, ,esia and Sabah. Practical difficues arise
Guinea, Indonesia and Sabah. Practical difficulties arise
because it is often very difficult to obtain reliable L7u Con on
because it is often very difficult to obtain reliable information on
competitive
competitive prices different markets
prices in different ,narkets (De'Ath,
(De'Ath, 1980;
1980; GilL7,
Gillis, 1981).

Of course,
Of course, the
the first
firstand
and most
most appropriate place to
appropriate place to enter
enter this
this
process
process ofof gelding
guid foreign
foreign investment
investment and
and the
the influence
influence of offoreign
foreignMLE's
MLE's
in
is at
at the
thestage
stagewhere
where such
such involvement
involvelnent commences, i.e., at
commences, i.e., at the
the point
pointwhere
where
fc:elen
foreign capitu
capital o: initiate efforts
or entrepreneurs initiate efforts toto enter
e:1ter aa country,
country, or or
At this
this stage,
stage, a anwnber
ncllnber of
entrepreneur,3

wnere aa countrv
where country .coer
goes reeking
seeking (.ach
such involvement.
involv8lfient. At of
things
things can
can take
take p7aoe.
aCe. oae
One is for the
is for the govermnent
government toto step
stepininandandbeccme
become
involved with
involved with the
the proposed
proposed new enterprise. There
neW enterprise. There isis growing
growing tendency
tendency In in
the
the Asia
Asia region
region for
for this
this totohappen, for example
happen, for example in
in Indonesia,
Indonesia, Sabah
Sabah andelnd
Thailand.
Thailand.

Another approach is to set up a screening process, such as the

Another approach is to set up a screening process, such as the
one illustrated in Figure 3
one illustrated in Figure 3 for Potential projects are looked
ror Colombia.
Colombia. Potential projects are looked
at in termo of their releti.q.,,hip to existing policy constraints and
at in terms of their relationship to existi:1g policy cO:1straints and
national c-,ert.ves.
national objectives. There also possibilities to e.qico.ttane various
7;',er.e ,m,.
are also possibilities to encourage various
forms
forms ofof investment
in.'est.lent which
whichlimit
limIt the
the extent
extent ofof foreign
foreign invol',ment either in
involvment either in
terms of restrictions imposed on the proportion of total ont,estment that
tenns of restrict ions ilnposed on the proport ion of total lnves ttnent tha t
can
Can be
be foreign-,wned
foreign-owned or or in
in oerms
terms ofof the
the time
tilae span
span during
duri:1g which
which the
the foreign
foreign
investor is allowed to operate.
investor is allowed to operate. Eachof
Each of these
these institutional
insti tut ionalarrangements
arrangements
different responsibilities,
involves different responsibilities, potential potential benefits
benefits and potential
potential
negative impacts for the country. A representative sample of some
ative i,apacts for the country. A representative sample of SOme
different forms of investment strategies for ELE activity which are
di ferent forms of investment strategies for MLE activity which are
alternative
alternative totowholly
wholly foreign-owned operations is
foreign-owned operations is shown
shown inin Figure
Figure 4.
4.
 - 407 -

Finally. it
Finally, it should
should be
be pointed
pointed out
out that
that "saturation"
"saturation" laws
laws can
can bebe
instituted
instituted to
to guide foreign involvement in
guide foreign in the
the sector.
sector. These laws specify
These laws speci
the transition from foreign to
the to domestic ownership and the maximwn loaxilfiwn
proportion of aa project's
proportion of project's capital
capital and/or
and/or control
control that
that can be in
can be in foreign
foreign
hands. Some examples
exainples are
are given
given in
in Figure
Figure 5.
5.

Figure 33

Representation investment screening

~resentation of the foreign investment screening process in Colombia
process in Colombia

Authorized
Aulhoriied NOnaWflOUZPd
NonaIJUlOtll8d rickaas
Sector
51.!clOr 500M
SOCIOf

Economk sector Oron to

Opon to discretionary
d($cr6(,onary
ThroShold pown!
proem
------------------- _______
Postireo
POS!INO Negahee
rifle!
NI!9<1lI¥C
dahrke
fb!.wce 8,11,,(1C0 01
of
01 Payment
P :rym('(li Payment
Payment The (Moisten
Th$ tJecis.oo ts1$ enmity
DfG<lfly
E 11(,(1
Efteor El!oc!
Eftoot Dakota 01 Payment oo:>pon()on! Ott
dependant 00 °retileatria
;Js;:;qmpl,ons
tmzmohn
The-innate it Effect el thc sm
ollhe owner
SCllJl)f'i('f
--- .. _------- ----
Esnetialty
negativo
Ayet
Ave! Aga
MIa-
Cono,th,non so
C011h4h,hQn ~.;-.

Other
Othar criteria
cfileria
Job (;10t'1110n
Jo-b creation
I Enectiotly TookelogyeamAr
T QChnology Ir3nsl.er
The rolo of
The rola of rhe
he pressure
;)($SSUIA
High Average
AVOI;!ge Sterciure
$lruclUf6 al
01 the
11>0 focal
local
°ratios con
Cilfl be
bo important
IfllPO(!;li"i1
Conttibutron
Cont!!bultOn Contriburion
COl'l!ilOul,on tor:Jitney
'ndlJSlry

rOreshold m
Eteesholdle 4,4
" Local °automation
loc;>,1 £1.1III(;1Oalion
Regional daConlfGlizalion
I109i0(1;))
PoHulion
PoBolton
decentralization

._-_!.::_-----
GotarEvaiughon

ACCEPTED
AREA

Sou('ce:
Source: Lombard
Lombard 1978
 - 408

Figure 4
Six forms
Six of international
forms of interi. l irve
invest,nent

Assets, risks
Jeint Venture: Assets, risks and
ared profits,
profits, and
and ownership partici-
ownership partici-
mition
patlon are ,hared
shared by
by more
more than
than one
one firm,
firm, economic groupor
economic group or state.
state.
eee-oul agreements,
Fade-out wherethere
agreements, where is an:: initial
there is initial 5C/ equityparti-
50% equity pati-
istion, atat least,
cl.pation, least,by
bythe
thedevelopire country tilt er in
developing country in cascs
where the
the other
other partner
partner is in aa de
i5 in countly, or where the
developed country,
1 ir whe -b7
sre from
s are from more thanone
more than onedevelopir:g
developingnation,
nation,are
are interesting
interesting
example'ofof international
examples international joint
Joint ventures.
ventures.

Operations: A
Turn-key Operations:
Turn-key product-in-hand operation,
A product-in-hand operati , where
where the
supplier's responsibilities
supplier's responsibilitiesare areover
overwhen
whee! the -ect is
the project is sp rdted
operated
completsly by local personnel. Turn-key opers;
completely local persOe!nel. Turn-key operationss have be:s in
have been in
the limelight recently
the ·oecause of the
rece~tly becaw the multi-millitn
multi-million dollar
dollar con-
core-
tracts to
tracts to build
build industrial
industrial ..complexes being given foreign
being given foreign suppliers
suppliers
by OPEC nations.
OPEC nations.

International Subcontracting: A firm or

A firm or trading
trading house in a
house in
developed cou::try
developed country places
plepes orders
orders with
with subcontr.totors
subcontractors in aa developing
developing
country. Mates1-1: e provided
Materials are provided by
by the
the pr. whoalso
principal, who also sells
sells
the
the fi. -tied prodt
finished -- sometimes
product -- his hhome market
in his
sometimes in or ire
market or in aa third
third
countey market.
country I-Pff regulations
Tariff regulationsinindev:;oped
developed nations
nations and
and "free
"free
export zones"
export zones ll in
in some
some developing countries losve
developing countries increased the
have increased the
importance of this
importance his international
internatioy:alinvestment
investment form.
form~

Agior re
Licensees are girs1 specific
specific -s of
rights
acce.. toJ and
access and uuse of one
one or
or :P technolil.es in retwa Cr a
T. technologies in return for a fee,
~ore
percentage of sales, royaltI-
aa por:hintage royalties, share, .r
., shares of equity
equity or r, pr
produced
tr
by the
tflelicensee
licenseeandand bough.
bought by
by tne
tr,e supplier
supplier at
at aadiscounu.
discount. A A
1-.ensing agreement
licensing acieementoftenoft--relies
relies ononanane~terprise
enterise already
already ininopera-
opera-
tail, in
tion in aa hoit
host country,
country. Thekhe issue
issue ofof right
right '-tog"ve out
out lihences
licences
fJi ,pa-ific technologies
for specific technologies -- -- especially te r-rlrgy --
especially information technology
has
has been
been aa source of controversy
source of controversy in in Nortn-8 utn relations.
North-South relations.
M.edementContracts:
1-1anagement Ii,tracts: A supplier
A suppller es ----and
manages
i andprovi 1' training
provides .aniag,
;Peal workers
to local 4 .r7rrs for
for --
-- aa project terprise in
project or enterprise in the je ting
the developing
country. lhe
The bontract
contract maymay include
include h,...Jing over authority to locals
handing over authority
after aa certain
certain time
time or
orthe
thehost
hGstcountry
countrymay
may use
useindependent
independent experts
experts
to monitor
,"onitor the
themanaging
managingcompany.
company.

Trilateral Ponperation or Tripartite Industrial C--perati t: Three

Europe" "rstern
;ned 07 org;nizations from three regions -- kaseern Euro; Western
7P.ropo, flerth cmerlata or Japan; and the South -- j_in to
Europe, North America or Japan; ae:d the South -- join to y out
carry out
leo: es or
programmes the developing
or projects ie: the
. developing country.
country.
 -- 909
409 -
-

Figure 5
4
"Saturation" laws for
Satura;:on" 1is fori-or.gn
foreigninvest:.
investlnents ,r projects
s i'n timber
in insular South.,:ast
in -
Southeast Asia
mIa:and Papua New Guinea

;----~-----,-----------~----~~---,-~~--------

Nature of
Nature of Saturation La,
Law Joint Venture Req~i­
Venture NecjAi-
Country in Fores
l.fl FOreSt
t Sector
Sec tor rements:Ncw,Ti~ber
rements:New,Timber
Investments
Investr.tents

Indonesia
Indonesia' TNC must for sale to
must offer for-sale to Since 1974,
Since 1974, all
all new
new
local investors (including
local (including foreign investments
'foreign investmer::ts
the central government 51%
the central 51% of inin timber
timber must
must
shares within
shares ,ithin aa specified
specified involve
involve local joint
local joint
period (usually
(usually 10
10 years
years freer
f ve~ture partners.
venture partners,
the
the beginning of operations.

ilippines TNC's m
TNC's may only as
enter only as mino-j
c- all new
mino- Since 1974, all new
rity partners
rity p,rtr- ::s (40% of equity foreign
(401 of invest~2nts
foreign investTents
or less)
less). ~ in
in timber
timber must
involve local
involve local joint
joir.t
venture
venture partners.

Mal
Malaysia: Sabah Sabah foundation to to be sole
sole From 1984
From on,ard,all
1984 onward,all
1984; Equ-
concessionaire by 1984; foreign ti~er
foreign tiber pro-
pro-
ity
ity shares
shares flexible,
flexible, but
but in
in- jects must
jects must take form
general
general Scbah Foundation
:abih Foundation joint 'venture
of joint venture wit
expect_-_;totohave
expected have aa minimum
minimum Sabah Foundation.
Founcation.
share of
51% sh..tre of equity.
ecuity.

Papua
Papua New Guinea Export'~'Ll':nterprises
A. Log __Exporting Enterprises A.
A. Log
Log EEXDQ.rting
cting
(siTIaller
..11er scale) Enterp>:.ise~_
En.
Foreign
,-eign involvement to to be
be No
No jc.
joint ventures;
,entures;,

~estricted
rgs-.ricted to to 10
10 year
year ma-
ma- management
man,- em,:dt COn-
Con-
nagement
na,:.7tmentcontracts wit.lp
contracts wit.l;:1 tracts
tra. ,s only~
only.
lo~ally owned firms.
locally firms.
8. . Timber r'roncesc,ing Enter- 8. Plo no Enter-
r-
Pc)- ,.

s ininwhich
t).::,3tts -nich aa mini-
mini- -.1; , <1.- ventures
";entures
mom of 30%
mu~ of logs are
30~ logs are pro-
pro- Req:.1ired~
Ric,oired.
cessed
cessed reqUire
require atl 26~
26% equ-
ity
ity shares for go'Vernment
shares fhr er~~ent
in first five
in first five years ofof
projects, ,ith
projects, with Cption for
ciption for
purchasing a
purchasing a majority
shore after 55 years.
share years.
C.
C. Lou 7 u;rt - " Enteroriseslses C__ Log
I[Or-..Q ,ICI lLaccje jtale,
F-,LEJ-.' share~older
:,ha...Jolder res-
res- Joint
Joini. ventures
ventures
trlctcd ZD minority
1.11te, to r1: sity share
share allo~ed
allo:-::d.
of equi.:y
0 f ed g ,.. .

Source:
Source, Glllis,
Gillis, 1981
1981
 -- 410
410 --

3. EMPLOYMENT
EMPLOYMENT AND INCOME GENERATION
AND INCOME

A
A public goal associated forest industry
associn-n-ied with forest industry growth is is
expansion
expansion of of employment. Specific concerns
employment. Specific concerns may
mayfocus
focusononcertain
certain high
high
unemployment
unemployment reg regions
ions -- often those in
often those in which major forest
which major forest resources
resources areare
found. Long-term
Long- term concern
concern is wiwith
th steady
steady expansion
expans ion of
of economic activity
econolnic act i vi t y
beyond
beyond thethedirect
direct impacts
impacts ofof the
the newly established forest-based
newly established forest-based industry,
industry,
i.e., inditect
i.e., employment
indirect emploYInent generation
generation becomes
becolnes ananissue,
issue, often
often tied
tied up
up with
with
strength of
the strength forward and
of the forward backwar.f linkages
and backward associated with
linkages associated with thethe
particLThr
particular industry established or expanded.
industry being established expanded. Finally, when
Finally,
a nation's
expinaitaticn of a nation's natural
exploitation fre:r.
natural forest resources
rcsources isis involved,
involved, then
then
governmentsbecolne
govermnents becomeconcerned
concerned withappropriate
with appro,i.rig sharing
c sharingofofthe
the rents frote
rents from
exploitation.
exploitation.

MLE'svary
MLE's varygreatly
greatly in
in terms
terms of
of their
theiremployment
employment impacts.
iinpacts. At ene
lit one
extreme, pulp and paper mills use some of the most-capital intensive
extrelne, pulp and paper 1111l1s use some of the Inost-capital intensive
industrial processes
industrial processes while
while other
other production
production processes
processes such
such asas sawmilling
saw;nilling
can
can be
be higAy
highly labour Large scale forest products enterprises
labour intensive. Large scale forest products enterprises
can have
can -.jar local
have inajor local-nt impacts.
encnn
employment impacts. For
For example,
eXBlnple, direct
directemployment
employment
t o r,;( Industrien Conporation
at the Paper Industries
at Corporation of of the the last
the Philippines
Philippines has
has in the last
three or
three ( -.-ears fluctuated
fourn years fluctuated around
around 1010 000a reforestation/
000 persons
persons and
and a reforestation/
..usidiary ofofBeloo-Mineira
charcoal subsidiary
charcoal Belgo-Mineira in inBrazil 000 in the
Brazilemploys
employs some
so;ne 88 000 in the
forestry and
fores charcoal operdtions
- charcoal
' operations alone.
alone.

Someofof these
SOlne these MLE's
MLE'shave havesubstantial
substantial forward
forwardlinkages
linkages to to other
other
activities
activitieswhich
which employ
employ additional
additional labour.
labou~. Further,
Further, the the indirect
indirect effects
effects
on
on employment
employment ininlocal local communities
communities can canbebesignificant.
significant. AS As aa rule
rule ofof
thumb,for
thumb, for each
each ten
ten persons employeddirectly
persons employed directlyinin the the MLE,
MLE, atat least
least eight
eight
additional jobs are
additional jobs are created
created in in related
related sectors.
sectors.

In connection
connection with with the proportion of
the proportion unski
of unskilled ,orsus skilled
verSus skilled
workersrequired
workers requiredinin industrial
industrial processi-,g, forest-h- - MLE's
processing, forest-based 's show
show e a wiJe
wide
variation. Thus,
variation. Thus, pulp pu and
and paper millo require
paper mills require a a pr rtion of
proportion of highly
highly
skilled workers,
skilled workers, while wh sawmills
sawinills andam"]other
other types
types of c wood conversion
wood convetsfon
activities
activi ties may
lnay be
be heavy
heavy users
users ofof unakilled
unskilled labour. Available evidence
labour. Available evidence
indicates that,
indicates that,among
among industries
industriesiningonpral,
general, wood
woodproducts
products manufacturing,
inanufacturing,
excluding
excluding pulppulp and paper, paper, is is particularly
particularly intensive
intensive in the the use
use ofof
unskilled labour
unskilled labour (Balassa,
(Ba1assa, 1979).1979).

A CO!IUnon
A common pastpastcriticis;n
criticismaffecting
affecting those
those MLE's
MLE's thatthat are
are foreign
foreign
owned
owned or or operated
operated has has been
been the that they
fact that
the fact they tendtend to to useuse a a high
high
vn,prtion of
proportion of permanent expatriate labour,
permanent expatriate 1,bour, thus
thus reducing
reducing the the possibilities
possibilities
for etiective
for effective transfer
transferof ofscarce
scarces,ills anoand
skills local
localemployment.
employment.

In fact
In fact the
theproblem
problem seems
seems to to be more related
be wore related to to the
the proportion
proportion of of
foreigners
foreigners in in managerial
managerial positions
positions or in positions
or in positions whichwhich require
require aa high
level of
level of skills
skills than than to to their
theirproportion
proportion in in the
the total
totallabour
labour force.
force.
De'Ath, for
De'Ath, for example, documentsthe
example, documents thecase
case of
of the
the Jant
Jant project
projectinin Papua
PapuaNewNew
Guinea where, after
Guinea where, . ,iveral years
after several years ofof operation
operation and and despite
despite the the desire
desire ofof
tne goverrunent
the cvermnenttotoaccelerate
a'c,,lerte transfer
transfer of of responsibilities
responsibilities to tolocal
localpeople,
people,
superior
ior managemerf
;nanagement and hndtechnical
technical expertise persistently remained
se persistently relnained in in hands
hands
of expatriates
expatriates (De'A,i:,
(De'Ath, 1980).1980).

In many countries the problem of excessive use of e'«patciate

In many countries the problem of excessive uSe of expatriate
labour has
labour has been
been virtually
virtually eliminated.
eliminated. For example, Indonesia
For example, Indonesiainstituted
inatitoted aa
tax on
tax on use
use of
of foreign
foreign personnel
personnel inin1974,
1974, when
when the
the estimated
estimated percenta,ic
percentage of
of
foreigners in total labour force of large transnationals in the fotest-
foreigners in total labour force of large transnationals in the forest-
based sector was
based sector was around
around 25
2S percent.
percent. By 1978 the
By 1978 the percentage
percentage had
had dropped
dropped to
to
around55percent
around percent (Gillis,
(Gillis, 1981).
1981).
 -- 411 --

Another
Another common
COiluflon criticism
criticisln ofof mLE's
MLEls operating
operating with
with large
large ti!nber
timber
concessions in LDC' s is
in LDC's is the fact that govermnents
fact that governments have
have captured
captured a very
small part
small part of the
the economic
economic "rent""rent" from
from tropical
tropical forest
forest exploitation.