Mabulay, Sejara T.

FRM 118 – CD1

Reaction Paper on Value Chain Analysis of the Wood
Processing Industry in the Philippines

The wood processing industry in the Philippines plays an important role in our economy

as it adds economic value to logs and increases the incomes and employment of involved

communities. After reading the PIDS Value Chain Analysis, I found out that the total log ban

imposed by Executive Order (EO) 23 had a significant negative impact on the Philippine wood

processing industry's economic performance. It is the reason why our country's wood processing

industry has been on the decline for many years now, despite its economic contributions. The

implementation of EO 23 not only had an impact on the supply of wood products to the wood

processing industry, but it also contributed to the increase in rural unemployment. It also

encourages the practice of illegal logging with the DENR unable to effectively monitor and enforce

the order.

According to the study, the industry's growth has also been impeded by numerous issues

and problems that limit it at various points throughout the chain. Wood processing companies

typically employ outdated production technologies and equipment. For instance, the initial

purpose of existing sawmills was to handle huge diameter logs. With the implementation of EO

23, the majority of the logs harvested are now produced in tree plantations, which yield smaller

logs. Even though the sawmills of today can still process these logs, the procedure is inefficient.

Additionally, these outdated methods only generate a small variety and quantity of processed

products. Both the domestic and imported log supplies are unreliable or inadequate. Due to this,

certain wood processing businesses are forced to run at a reduced capacity. Average costs are

higher, and processing companies are unable to take advantage of economies of scale due to
the irregular log supply. While a stronger dollar relative to the peso can encourage exports, the

same exchange rate's effect on higher input prices can greatly negate this benefit. As a result,

some companies that process wood have stopped exporting their finished products because they

are unable to compete with the cheaper wood products coming from other Southeast Asian

countries. Older technology causes wood processing companies to have low recovery rates and

produce enormous amounts of residues. The challenges have gotten worse as a result of the

erratic and inconsistent policies relating to the wood processing sector. For instance, frequent

policy changes related to the harvesting of logs have discouraged investment in wood processing.

The policy changes were also done without proper consultations with stakeholders on the ground.

To sum up everything, we can’t deny the fact that the wood processing industry of the

Philippines has made great contributions to our economy. The total log ban is a big help to ensure

the protection, preservation, and rehabilitation of the forest, but the government must also help

provide employment options as well as safety nets to workers displaced by the log ban. For me,

logging is not that bad if it is managed properly. Proper and wise utilization of forest resources is

important as it balances the demand for development, including economic growth and

sustainability, that meets the needs of the present without compromising the ability of future

generations to meet their own needs.