Economic Policies for Forest Resources Management

Economic Policies for Forest Resources Management

Economic Policies for Forest Resources Management

SUMMARY OF THE PAPERSAND PROCEEDINGS OF THE SEMINAR- WORKSHOPON ECONOMIC POLICIES FOR FOREST RESOURCES MANAGEMENT FEBRUARY17-18,1984

WILFRIDO CRUZ editor

PIIlIB _'"'_-

INSTITUTEFOR DEVELQC_ENT STUDIES

All Rights Reservedby THE PHILIPPINE INSTITUTE FOR DEVELOPMENT STUDIES 1985 ISBN 971-128-011-6

iv

CONTENTS PREFACE PART I.

.........................................

ResearchFramework for Forest ResourcesManagement ..................

Overview of the Forest Sector ................

Multiple Use Forestry and Land Allocation ............................

ResourceUseand Different Forest Uses............................

PART I1.

PART III.

Summary and Discussionof Workshop Papers .......................

SessionI - Commercial Forestry ..............

SessionII - Macroeconomic Policies ...........

SessionIII- Upland Development .............

SessionIV- Watershed Management ...........

Agenda for Policy Researchon Forestry and Upland Development .................

Long-Term Production and Commercial Forestry ..............................

Population Pressurein the Uplands ............

Assessmentof WatershedManagement Programs .............................

Macroeconomic Policiesand the Economic Development Context for Forestry ...........................

REFERENCES ......................................

PROGRAMME ......................................

LIST OF PARTICIPANTS .............................

vii 1 1 3 5

11 11 16 20 24

29 29 29 30

30 32 34 36

PREFACE in responseto the growing concern that policy researchshould directly address the problem of over-exploitation of Philippine natural resources,specifically in the area of upland and forestry development, the Philippine Institute for Development Studies (PIDS) commissioned several researchers to prepare assessment papers for various policy issuesin forestry. Four major topics were identified for these papers, namely: (1) land use and commercial forest resource management; (2) macro-economic policiesaffecting forestry; (3) upland development including the shifting cultivation problem; and (4) soil erosionand watershedmanagement.

These assessmentstudieswere presentedin a PIDS seminar-workshop, with the theme "Economic Policy for Forest ResourcesManagement", conducted at the Club Solviento, Calamba, Laguna in February, 1984. The main objective of the seminar-workshop was to discusspolicy issuesand identify researchgapsin forest resources management. Participants came from the government research and administrative sectors,the forestry-based industries,the upland conservationsector, aswell asuniversity researchinstitutions.

This report presentsan overview of Philippine forestry and introduces some of the key economic concepts of resource use and management. The introduction is followed by a summary of each of the seminar-workshoppaperstogether with the highlightsof the discussion and open forum for each session.The concluding portion includesan agendafor policy researchon forestry and upland development.

vii

ECONOMIC POLICIES FOR FOREST RESOURCES MANAGEMENT*

by Wilfrido Cruz** PART I. RESEARCH FRAMEWORK FOR FOREST RESOU RCES MANAGEMENT The study of the forest sector has traditionally concentrated on (a) the significanceof forest products in international trade and (b) forest management as it relatesto regulation of commercial logging concerns. While these are certainly important areasof concern, the approach has meant that there has been little recognition of the other aspects of the forest sector, specifically the multiple use/user nature of forest resource exploitation and the crucial implications of forest management for economic activities external to the sector.

This indicatesthat rationalization of forest policy in the context of economic development is not forthcoming unlessall the important economic actorsand aspectsof the forest sectorareclearly specified in a comprehensiveperspectiveon forest resourcemanagement.

In this introduction, the objective is to presentsuchan overview of Philippine forestry (with an effort at also relating it to Asian forest resources management) to serve as background for the conference topics and papers. The conference papers and discussions are summarized in Part II of this report. The summaries also distill the research topics that will set the agenda for future PIDS activities in this area.

Overview of the Forest Sector The conventional economic significance of forestry lies in its importance to Gross National Product (GNP). The whole sector has consistently contributed about five percent of net domestic product since the 1960s (Power and Tumaneng, 1983), with the logging industry accounting for about 12 percent of annual value added in agriculture and wood processing contributing eight percent of total manufacturing output (Segura, et al., 1977). *A report on the proceedings of the Seminar-Workshop on Economic Policies for Forest Resources Management, sponsored by the Philippine Institute for Development Studies, February, 1984. **Assistant Professor, College of Development Economics and Management, University of the Philippines at Los BaEos. The author thanks Marian Segura de los Angeles for helpful comments and suggestions.

1

In addition to its important contribution to GNP, forestry has been a major foreign exchange earner, with logsand lumber accounting for more than one-fifth of the value of the top ten Philippine exports from 1961 up to 1973. The peak for log and lumber exports was in 1967 when their value reached 32.5 percent of the total top ten exports' value, making forestry number one in the list (Segura, etaL, 1977). However, with the inability to keep yields sustainable due to over-cutting and the subsequent government restrictions on log exports, the contribution of forestry to economic growth over time has been declining. The values, for example, of wood products in proportion to total exports have gone down to 8 percent fin the eighties (Power and Tumaneng, 1983).

Notwithstanding this decline, it is clear that the export orientation of forestry has been of major significance. This role in the export market, however, has been primarily limited to log production. It has been reported, for example, that from 1966 to 1975 (with the exception of 1974), more than 60 percent of log output has been exported (Revilla, et oL, 1977). Thus, it is not unreasonable that concern for forest resource management has been unusually biased towards the logging industry. And yet, as has been pointed out, this subsector of forestry is just one component, albeit a very important one, of a much more complicated renewable resource system.

Figure 1 defines the sub-sectors within forestry and represents an attempt to put into a development perspective the policies and issuesthat may be raised in evaluating the condition of Phil|ppine forestry. Two major users of given forest resourcesare the commercial sector (composed of logging firms) and the informal forestry users (made up of households/communities whose livelihood is significantly dependent in some form on forest exploitation). While the output of commercial forest firms is primarily timber, the informal sector's use of the forest is less specialized. There are also interdependencies between these two sectors which are recognized to be important but about which very little information is available.

The non-forest sector focuses on the other usersand usesof land currently under forest (the most-important of which is the agricultural sector) and the external effects of forest exploitation (which centers on watershed management issues). While there are policies that address specific issuesor components of the forest sector_ e.g., traditional forest management is concerned only with the commercial forest firms, there has been no serious program of evaluating all of the major policies related to the sector. It should be clear ,from this perspective of the forest sector, however, that there is in fact a 2

basisfor attempting sucha study.

FIGURE1 The ForestSector Resource Commercial Logging InformalUsers User Firms (Communities) Output

Timber

TheNon.ForestSector Agricultural Sector: Competing Usesof ForestLands

Timber,Fuelwood ExternalEffectsof Agro-Foresl_/ ForestUseonWater_Products shedMa_r_agement

Current ForestManagement SocialFores1_/ Policy LogExport Affecting Restrictions Sector

GeneralPriceInterventionandTrade Policies

The procedure for differentiating among components of the forest sector follows from the principle of multiple useforestry and its implications for land allocation. This principle is discussedin the next section, after which focus is givento the specific actors within the system -- with respectto the resourcesthey exploit, the techniques or management schemes utilized, and the institutions that governaccessto resources.These actors include not only the formal usersof the forest - the concessionaires- but also the forest communities, an informal sector whose use of and effect on forest resources have been increasingly important. The competing uses of forest land for agriculture and watershed protection are also discussed.

Multiple Use Forestry end Land Allocation While land allocation for forest use may be based on rules-ofthumb or o priori pronouncements, e.g., "minimum forest land should at least be 40 percent of total land area", rational decisionmaking requiresthat the choice of land usebe based on the relative valuesthat the different usesof land can contribute to society. Following Clawson (i974), it is important to note that such land uses are of varying compatibilitY. It is often believed, especially among foresters, that the multiple-usechoice concernsonly particular forest uses,like for instance, (a) for wood production, includingfuelwood gathering; (b) for conservationas in watershed management;and (c) 3

tar non-tangible or amenity-related uses. The fundamental choice, however, is whether to keep land under forest or to use it for nonforest purposes. The problem of compatibility of usesis compounded by this observation.

Even within forest uses, there might be limited compatibility.

Consider the following alternatives. If the priority is for wood production, the extraction of timber generally decreasesthe soil protection and watershed value of the forest. In fact, even with sustained yield harvesting methods, one cannot escapefrom this fundamental trade-off. Of course, it is quite reasonable that one form of sustained yield harvesting may lead to less soil erosion than others, indicating possible opportunities for minimizing the conservation costs of wood production. This means that rational decision-making must still focus on relative gains and losses of alternative choiceseven within each type of use.

The choice problem is made even more difficult when one is forced to move beyond different forest usesand to consider forest vs. non-forest alternatives - particularly with respect to the conversion of forest lands to non-forest uses. In this particular choice problem, the process of conversion has to be evaluated in the conte_t of the over-all process of economic development. It is only within this context that we can appreciate the changing role of given natural resources.

In Korea, for example, Park (1983) haspointed out that it is possible to consider the development of forestry in four stages: (a) in the early subsistence sl_ageof the economy, forests are primarily sources of fuelwood or construction materials; (b) with increasing pressure for productivity, forests are converted to croplands; (¢) as commercialization proceeds, remaining forests are exploited for commercial wood products; and (d) finally, with growing scarcity of forest resources, the trend is toward managed forests with the planting and culture of fast-growing, more valuable species. Indeed, the importance of conservation and amenity-related uses of forests in the developed world may be evaluated as a final stage associated with rich countries' higher levels of income and the availability of forest product substitutes from local manufacturing or foreign trade sources.

From the above, one can see that the optimal allocation of land depends on the social valuation of the usefulness of such land, and in turn, this is affected by the compatibility of specific land uses and the stage in economic development of a particular society. Two additional valuation aspects need to be considered because of their importance to forestry. The first has to do with on-site vs. off-site effects of forest uses, and the second concerns the concept of site4

value both in the standard optimal forest rotation problem, e.g., in Howe, 1979; Clark, 1976; and in the alternative land usesense,e.g., in Panayotou, 1983.

With respect to on-site and off-site aspectsof valuations, there has been a recent trend toward recognizingand quantifying not only thebenefits and costs of forest utilization within the sector, e.g., the revenues and costs of timber harvesting, but also its off-site effects, e.g., increasingsedimentation of reservoirsand waterways due to soil erosion. Indeed, there are indications that suchoff-site effects are of major significanceso that if they are to be included in the computation of net benefit streamsover time, the conservation related uses may end up to be as profitable as conventional wood extraction uses. The capability to implement such broad valuation procedures,however, necessitatesa decision-makingperspectivethat transcends the limited horizon of the private forest users. Consequently, an explicit role for public decision-makingis required in the management of forest resourceswhere such external effects are important, for example, in the managementof critical watersheds.

Finally, with respect to the site value concept, conventional forestry theory has emphasizedthe value of land in the growing of trees. The longer mature and over-mature trees (with their slow growth rates) are kept on the land, the greater is the opportunity cost in terms of not being ableto re-stockthe forest with new, faster growing trees. (in Philippine forestry, however, this aspect of site value seemsto have been underestimatedwith the use of the selective loggingsystem which will be described in the next section). A second, broader interpretation of site value goesbeyond the optimal forest rotation problem and focuses on the problem of forest degradation in contrast to deforestation. While there is no a priori problem with deforestation, as long asthe land isthereafter usedfor more productive social purposes,degradation is clearly socially undesirable. The reasonis that suchdenuded forest lands not only fail to produce forest products but they also fail to produce any alternative socially valuableoutput (Panayotou, 1983).

Resource Use and Different Forest Uses The Commercial Sector About 16 million hectares(or 56 percent of total land area) have been classifiedas forest lands by the Bureau of Forest Development (BFD, 1981), although not all forest lands are actually forested (Talbot and Talbot, 1964; BFD, 1981 ). Of these, about 7.7 million hectares (close to one-fourth of total land area of the Philippines) 5

was under someform of licenseor concession(BFD, 1981).

With respectto forest management,the government approach is to control exploitation through (a) a system of licensingthat _limits the area and duration of concession (50 years including renewals); (b) the collection of fees based on the volume cut; and (c) the enforcement of a maximum allowable cut derived from estimatesof sustainable productivity. In addition, the granting of licenseshas been tied to a firm's ability to set-up or link with a complementary sawmill or wood processingoperation.

The averagesize of concessionswas about 30,000 hectaresin the seventies (Segura, et al., 1977) and increasedto 36,000 hectares in the eighties, in 1982, timber licenseesnumbered about 250_ onethird of whom had 89 percentof total allowablecut. By 1982,_however, there was an evenningout of allowable cut among concession: aires: there were 217 concessionaires,and 86 percent of these had 92 percent of allowable cut. As far as employment generation is concerned, the commercial sector has historically generated many jobs. Although capital requirements per worker are large (about t_50,000 per worker in the mid-1970s), incremental increasesin employment have neverthelessbeen substantial.From 1961 to 1972, annual incrementsof employment in loggingreached26,000 per year while in the wood industries,it was64,000 per year.

With respectto the technology or resourcemanagementscheme, the commercial sector is required to follow the selective logging system (SLS). This system is designedas a sustainableyield management system where the logger is required to refrain from cutting a certain proportion of trees in the concessionas designated by the BFD. The residualstand is then supposedto be managedby the logger so that a secondcycle of cutting can be arrangedafter a specific growing period. Even if the first cut were to damage 50 percent of the remainingstand, the initial allocation of allowablecut is still conservativeenoughas to prevent any significant deforestation (Segura, eta/., 1977).

In fact, however, there has not only been a net drain on the country's forest resources;the drain, moreover, hastaken on alarming proportions. Estimates of deforestation differ, but there are indicationsthat this hasled to about 4.5 million hectaresof denuded forest land (Segura,et al., 1977), with the annual rate of forest loss for the 1970s of about 200,000 hectares (Segura-delosAngeles, 1981).

Clearly, there is something wrong with the managementscheme that has been adopted for the country's national forests. It should also be clear that the problem is not merely a technical one, having to do with the actual setting of cutting goals and techniquesof timber extraction, but also essentiallyan institutional one, havingto do 6

with the rules of accessand control that the BFD hasgenerally followed.

In the first place, all forest landsare under the jurisdiction of the BFD and are merely leasedto loggerswho are supposedto undertake the selective loggingsystem. It hasbeen shown (C. Cruz, 1982) that, while the first cut cycle of SLS is profitable for the private logger, the timber stand improvement (TSI) phase is not despite low fees paid to government. For example, in 1981, cutting chargesranged from only _ 5 to t=30 per cubic meter of wood while the market value of wood exceeded_600 per cubic meter (Power and Tumaneng, 1983). HoweVer, the TSI phasefor the secondcyclical cut is not profitable due to the long time period involved in waiting for the second cut. Given this particular structure of incentives, it is only logical that loggerswill attempt to maximize the revenuesfrom the first cut and to forego any TSI phase.Attempts by the BFD to control this can only have limited successsince it isunrealistic to expect credible enforcement of such a system over more than onefourth of the total land areaof the Philippines.

In addition to the inherent problem with the SLS within the formal sector, the encroachment on forest lands by shifting cultivators and other "informal" forest usersassoon asloggershaveopened up the forest make the selectiveloggingschemeunrealistic.

The problem is not isolated in the Philippines.Panayotou (1983) reports annual deforestation in tropical Asia at about 1.8 million hectares between 1976-80. The problem of the incentive structure behind deforestation has also been cited in Thailand (Tingsabadh, 1983) where alternative management schemessuch as clear-cutting with immediate re-planting have been suggested. Local efforts to reverse the process of deforestation have similarly met with very littlesuccess. For example, the reforestation goal is 1.4 million hectares by the year 2000, with an annual target for 1978-83 of 150,000 hectares per year. From 1962-75, however, actual government reforestation was only 260,607 hectares. Within concessions,private loggersare supposedtO undertake reforestation but this is seldom done. For example, in 1975, only 14 out of 81 concessionshad reforestation in about 33,000 hectares (Segura, eta/., 1977). More recently, reforestation efforts have somewhat improved with the government sector (mostly the BFD) reforesting 33,296 hectares and the private sector (mostly timber licensees) putting in 31,245 hectaresfor a year total of 64,541 (BFD, 1981 ).

The Informal Sector The problem of managingthe country's forests is compounded by the presenceof a large "informal" sector of forest users. These 7

are the users who have no legal claim to the resource (or whose claim is not recognized by the government). There are two major types of informal users. One is the tribal or ethnic minority subsector, made up of isolated tribes who have traditionally depe.nded on the uplands for their subsistence. Lynch (1984) has consistently argued that such groups retain valid legal claims on the land that they occupy so that their role in the management of such resources should be recognized by the government.

A second group of forest occupants is composed of migrants from lowland communities who have encroached in public forests or who have moved into concessions once these are logged over. A major problem in evaluating the role of this group together with that of the ethnic minorities is that no one seems to have a clear idea of their total population. The BFD (1981) places their number at about 164,635 families (or a population of 799,322) although the use of NCSO data, together with the BFD listing of upland communities, gives a radically much larger population (M. Cruz, 1984). This latter study, in fact, indicates that the official estimate may be in error by a factor of at least 10.

There is substantial agreement, though, on the economic characteristics of this sector. For example, there is very limited capital available to this group sothat their emphasison resourceuseis either oh land-usingor on labor-intensivetechnologies. Shifting cultivation is the major type of land-using l_echnique although there have been many (and spectacular) cases of labor-intensive practices such as exemplified by the rice terraces of the Ifugaos. In addition, many of these forest communities remain close to subsistence levels of consumption, and links with lowland markets for their products are quite tenuous.

Government policy has historically viewed these communities as "squatters", but while there have been consistent attempts at keeping them out of the forests,these have largely been unsuccessful.

Given the limited administrative resources of the BFD, a policy of exclusion will inevitably be a rule that cannot be enforced. In 1976, for example, there were 780 ill-equipped forest guards who were expected to police about 15,000 hectaresof forest land each.

The recent shift to a policy of "social forestry" therefore represents an attempt to rationalize the government's approach to forest resourcemanagement. The strategy calls for (a) introducing forms of tenure to upland Communitiesthat recognizetheir rightsof acce_ to the resource together with (b) the introduction of the appropriate (agro-forestry) technologies for upland resource use. The approach has only been recently implemented, and consequently, the proper mix of technology and forms of tenure together with the coml_ina8

tion of government and local resourcesand participation will have to be determined.

The Non-forest

Sector

The non-forest sector that has already been identified as a major competitor for forest lands is agriculture. Increasing population pressure on given agricultural lands has led to both an intensification of agricultural technologies since the 1960s (Crisostomo and Barker, 1973) and the conversion of uplands to food crop agriculture. The former process (of intensification) has been facilitated by research into new technologies and by government support for their adoption. However, the process of conversion of forest lands to agriculture has been going on independently of public policy. Indeed, in marly instances, it has been done in spite of existing laws against occupying public lands.

From the perspective of land allocation, the problem of conversion of forest lands to-agriculture arises when the process involves lands which are physically not suited to the continuous cropping associated with sedentary agriculture. In this case, while individual farmer net benefits might be positive (at least in the short term), the social costs of soil erosion might be substantial. The intermediate conversion from forest to shifting cultivation, however, may be feasible both from the private and social perspectives and may represent a response to population pressure that does not require major costs in terms of investment in terracing or other artificial or biological erosion control methods.

Watershed Protection A watershed is defined as "... an area of vegetation-covered land which accepts and catches the rainfall during the raidy season, absorbs it rather like a sponge, and releases it during the rest of the year in a relatively even flow of... underground water, springs, streams and rivers" (Talbot and Talbot, 1964, p. 11-7). While watershed protection might be included under forest uses of land, the critical importance of the protection aspect renders secondary the standard forest uses such as timber growing or fuelwood extraction.

Indeed, the nature of the vegetative cover itself (or its substitution with man-made structures) becomes important only in so far as it is efficient from the perspective of catching, absorbing, and eventually draining rain water. This is especially so where such watersheds have become part of major investments such as multi-purpose dam projects and irrigation systems. In these instances, watershed 9

degradation often leadsto sediment build-up at the dam-site during the wet seasonand limited water supply during the dry season,both of which have very high social costs.

Consider, for example, the Ambuklao dam which ceasedto be operational much earlier than its initial expected lifespan due to accelerated sedimentation from its denuded watershed. Inoreased flood intensity is an additional concern. For example, the 1972 flood which inundated much of Central Luzon causedproperty damageof aboutt_1.35 billion and crop damageof anothert_1.5 billion (Segura, et al., 1977).

It is because of these high social costs that up to 334,711 hectares have been proclaimed as watershed reserves (BFD, 1981 )..While logging is kept out of such watersheds, in many instances, forest communities have settled there. Resettlement of households outside the watershed area is often not feasible due to its very high costs. At the same time, resettlement efforts offer no assurance that the problem of new encroachment will not arise in the future. In these cases, the job of watershed management becomes not primarily one of forest protection but of mediation between the needs of the forest community for a livelihood and the requirements of controlling soil erosion within the watershed.

To summarize, in this section concerned with a research framework for forest resource management, the scope for which economic analysis can have a major contribution to forest management in the context of development has been established. This has been shown through the argument that, because of the basic characteristic of forestry as a multiple use/user system (where alternative choices have become increasingly critical with growing resource scarcity), rule-of-thumb decision-making is no longer sufficient. A rational choice framework that can encompass valuation problems dealing with production, on-and off-site effects, and related aspects of equity and accessto resourceuseneedsto be applied. By presenting an overview of the formal and informal forest sectors,including the issueof conversionof forest to agricultural land and the problem of watershed management, this section has set the perspectivefor such a comprehensiveevaluation of policy for forestry development.

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PART II. SUMMARY AND DISCUSSIONOF WORKSHOPPAPERS* SessionI: CommerciolForestry Two paperspresentedat the workshopdealt directlywith commercialor formal sectorforestryissues: A, V. Revilla's"Forest Land Managementin the Contextof NationalLandUse"andCerenillaA. Cruz and MarianSegura-delos Angeles'"PolicyIssuesin Commercial ForestManagement."

Revilladiscussed the generalissuesof land usemanagementand multipleuseforestry andfocusedspecificallyon the implicationsof the recentlyintroducedPeoples'Forest program.Thecloserelationship betweenmultipleuseforestry managementand landallocation was emphasizedin the paper.The three major servicesor outputs from forestsare production (e.g., of wood, fiber, water, food), protection (e.g., from siltation,floods,droughts),and the provisionof omenitles (specificallywith respectto recreation).Theseservicesare "sustainable" inasmuchas the forest resourceis renewablewith proper monogementover time. The society'sdemandor valuation for the output of forestsmaythen be utilized asthe basisfor land userequirements.

The land managementprocessitself requires:(a) the classification of land- in termsof its inherentbio-physicalcapacityfor production (land capability) and in terms of the appropriateness of a particular area for specificland use (land usesuitability); and (b) the actual allocationof land into varioususesbasedon identified objectivesand managementstrategies.The history of land classificationin the Philippinesdatesback to 1919 and hasbeenpreoccupied with distinguishingbetweenforest and non-forestlands. The BFD target isto keepat least40 percentof total area underforest (basedon slopeand vegetativecover criteria). The slow processof classification,however,togetherwith the lackof controloveractual land usehasallowedthe growingpressurefor conversionof forest landsinto agricultureto biasactuallanduseawayfrom forestry.

Consequently,the official estimatesof availableforest landare not wholly accurate.They are,for the mostpart, basedon soilcover and vegetativedataasextrapolatedfrom datageneratedin the 19.S0s and 1960s. Thus,of the 16.6 million hectaresfor forestland,a significant amount is either unproductiveor still unclassified(Please seeFigure2). *The assistanceof Lota Almira and EdgarJoveroin preparingthis summary is gratefully acknowledged.

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FIGURE 2 PHILIPPINE LAND ALLOCATION Total LandArea (30 million hectares)

! .

J,Jw,,, •

i

i

Forest Lands (16.6 million hectares)

Alienable & DisposableLands (13.4 million hectares)

I '1

I

]

I

UnclassiMed

Timberland

(5.6 million hectares)

(11 million hectares)

] I

I

Productive (9.4 million hectares)

Unproductive (1.6 million hectares)

,I

I Old Growth Forest (2..7million hectares)

:i SecondGrowth Forest (3.8 million hectares)

Source: A.V. Revilla (1984) basedon BFD estimates.

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This points to the need for better data on which forest landsare actually forested. Revilla suggestedthat the best current estimates may be basedon 1969 BFD information which puts forested forest lands at 10.0 million hectares. If an adjustment for conversion to agriculture (since the estimate was made) is used,this figure would be reduced to 7.8 to 8.3 million hectares.Of this, the remainingold growth forest would only be 2.0 to 2.5 million hectares,and if one presumes(as is normally done) that only 50 percent of this is accessible, then commercial old growth forests would only be 1.2 to 1.5 million hectares. This givesa much lessoptimistic view of commercial forest resourcesthan the official estimatesin Figure 2.

Beyond these disturbing data on commercial timber resources, Revilla has pointed out a more critical area of concern, related to forest use that is not normally considered part of commercial logging: the problem of fuelwood supply. With current useof fuelwood of 26 million cubic meters being more than four times the sustainable production of 4 million cubic meters, intensiveor plantation methods for fuelwood production (evenin private lands) may be required. For this reason, social forestry projects such as the People's Forest program may be called for to complement the commercial forest sector. A major concern, of course, is that estimates of the potential contribution to productivity of such programs should be based on realistic appraisalsof actual growing conditions.

Indeed, recent researchindicatesthat ipil-lpil yields which were measured from actual plantation conditions are only 35-50 percent of earlierofficial estimates(Revilla and Gregorio, 1983).

Turning to management systems in the commercial sector, the focus of the paper by C. Cruz and Scgura-delosAngeleswas on the assessmentof the selective loggingsystem (SLS) in terms of economic returns to the private loggingfirms. They comparedthis technology with other concessionor plantation systems. The SLS has already been describedas the main approach supported by the BFD toward the sustainedyield managementof natural forests. By definition, it entailsthe "... removalof mature, over-mature and defective trees.., to leave an adequate number.., tO assurea future crop of timber and forest cover." The specific goal is to assurea second cyclical cut comparable in volume and quantity to the old growth cut.

The three phasesof SLS are tree-marking, residual inventory, and timberstand improvement (TSI). This means that trees cannot be cut beyond a maximum annual amount (determined by the BFD), that relogging is prohibited, and that a second cut is allowed only after a givenlapseof time.

Recent assessmentof the system (C. Cruz, 1982) has shown 13

that.(a) SLS is feasible but not optimal, and (b) the first cut led to high returns but the second cut itself had a benefit-cost ratiol less than one. It is not surprisingtherefore that licenseestend to overcut since the profitable procedure is to maximize the first harvest, with the economic incentive structure biased againstsustainedyield management.

Other forms of forest management were also discussed.Private plantation schemeswhich involve individual farmers in tree-farming, such as in the Paper Industries Corporation of the Philippines (PICOP) model, were cited in the paper as possiblesolutions to the over-exploitation problem. However, these schemesalso suffer from delayed pay-offs similar to TSI so that an agro-forestry component is often required to bring some net returns closer to the present.

Another limitation of this model is that the reliable market for output (as supplied by PICOP) is often not available in other communities. Becauseof the constraints of such an approach, the government isalso investigatingalternative approachessuchasthe establishment of industrialtree plantations and agro-forestryfarms.

A common problem in the managementof both natural and plantation forests isthe direct inclusion in the assessmentnot only of the private costs and benefits of the activity but also of the external costs of deforestation and degradation. In addition, the evalu_ion should include the assessmentof attempts at controlling externalities through alternative techniques like (a) continuing SLS, (b) reforestation by concessionaires,and (c) the involvement of forest occupants.

Discussion aqd Open Forum Issues 1. On the size of concessions and the role of forest occupants In commercial logging. Patrick Dugan, the discussantfor sessionI, pointed out that government policy has been biased toward large management units in concessionsfor forest lands. Such a bias may have been justified in the past when the price of oil and capital inputs were substantially lower. Becausepolicies are formulated for large concessions,smaller forest users(mostly forest occupants) are penalized, forcing them to engage in illegal and oftentimes destructive activities.

He also pointed out that TSI which may be uneconomic for large firms is profitable for small userswho have excess labor available for harvestingthe residualsof logging and who use these for both home consumption and for sale. This view challengesthe traditional belief that capital-intensive methods are best for the com14

mercial exploitation of forests.

During the open forum, the issue of whether or not loggers should be requiredto engagein the processingof logswas alsoraised.

Current policy which requires this may, in fact, be creating inefficiency in the industry and, most probably, hasbiasedentry into the sectortoward big loggingconcerns.

2. On the Impact of government administrative procedures on forestry projects.

Dugan also brought up the negative effect of general administrative policy o.n projects such as reforestration.

Since allocations for reforestation are only made annually from the national budget, the scheduling of reforestation activities is hindered because it often cannot be synchronized with the budgeting system.

For example, he cited the government's policy of reverting back to the national budget unused funds for a particular fiscal year. However, this may adversely affect the sector since many programs are dependent on rainfall patterns or growing seasons that do not coincide with the fiscal year.

On a related matter, he pointed out that the private sector has shown willingness to cooperate with the government in reforestation, such as in contributing to a forest development fund that the government has set up. However, the special deposits that were supposed to go to reforestation and similar forest development activities have not been clearly utilized for such programs so that concessionaires have become hesitant when similar projects are suggested. During the open forum, a representative from the private sector contended that the problem was not so much government refusal to utilize the fund for reforestation but the inability of many concessionaires to prove that they had undertaken reforestation activities worthy of funding. A related point which was raised focused on the need to perhaps put more emphasis on funding forest rehabilitation instead of (ineffective) regulatory functions.

3. On trade and the export of forest products. Dugan suggested that instead of imposing an export quota on logs, it might be better to have a price floor on the kind of logs being exported.

In this procedure, only high-quality logs with prices above the minimum price will be allowed for export. Low quality logs would then be processed locally, following the principle that it will be more efficient to transport the higher quality output.

In the open forum, however, it was pointed out that the more important problem is the presence of illegal exports. If this persists, then an efficient system of log exportation cannot be successfully 15

implemented.

4. On the demand for fuelwood.

The emphasisplaced by Revilla on the forthcoming excessdemand for fuelwood was noted during the open forum. One observation was that a major contributor to the increase in demand (aside from the growth in hOusehold requirement with increasing population) would be industry for energy production and for small-scaleuse in bakeries, tobacco drying, and the like. Such a trend will continue even with the growing scarcity of fuelwood because the potential for substitution (especially of petroleum-based products) is still quite limited. One participant ventured an estimate that the difference in cost between petroleum and fuelwood for each unit of energy was in the order of four to one.

Session I1: Macroeconomic Policies Session II focused on the role of macroeconomic and trade policy in forest management and upland development. A paper

by Gerald C. Nelson on "The Impact of Government Policy on Forest Resource Utilization" as well as a paper by John H. Power and Tessie Tumaneng on "Comparative Advantage and Government Price Intervention Policies in Forestry" were presented. The latter paper had been prepared for a previous PIDS project and was summarized by Cristina C. David for the conference.

Nelson's paper was concerned with relating national policy to effects on forest management. The task of forest resourcemanagement is considerablycomplicated by the major role of environmental externalities associatedwith rates of resourceexploitation, leading to over-exploitation from the social decision-making point of view.

In forestry, the sourcesof depletion are two-fold: logging (primarily for the export market) and informal use (for construction, fuel, and conversion to agriculture) - with the former driven primarily by price incentives and the latter affected mostly by population pressure. The growing concern about this trend for overexploitation hasarisen from the changingperspectiveon goalsw,hich government has held for the forest sector.

From the initial emphasis on increased foreign exchange and employment, two additional goalshave gained importance in recent years: (a) the reduction in environmental degradation, especially as this affects e,osion and sedimentation, and (b) the improvement of the welfare of upland communities. It was pointed out that there 16

are two ways of viewing howgovernment policy canaffect the forest sector. The first is to find out the impact of government on the direct determinants of forest depletion; the other is to evaluate government policiesasthey affect the allocation and use of land.

On the one hand, policy may be sector specific, e.g., the log export ban a logging ban, harvest charges or taxation, long-term leases,investment incentivesfor wood industries,and socialforestry.

On the other hand, it may be in the form of general macroeconomic policy, e.g., monetary and fiscal, exchange rate, and investment incentivespolicies. Any change in economic policy implies a subsequent change in current or future prices of outputs, intermediate inputs, or primary factors of production. For example, taxes and subsidiesrepresent direct price changes while institutional change (such as an increasein the length of a lease) may be equivalent irl effect to a decreasein the discount rate (or marginal rate of time preference) of the lessee.

In general, most sector specific policies are geared towards reducing depletion rates by decreasing output prices. However, with respect to macroeconomic policy effects, there is inadequate understanding of the links between such policy changes and the pricing of outputs and inputs in the forest sector. Such links are important since they show how national government policies affect resourcedepletion even in an indirect manner. An example of the latter is government emphasison researchthat pushesthe intensive margin of land use upward as in the case of researchon rice technology. Such researchmay lead to technology that increaseslabor absorption in the lowlands thereby reducing somewhat population pressureon the extensivemarginof land use,the uplands.

Power'and Tumaneng (1983) have presentedan analysisof the forestry sector utilizing such a macroeconomic perspective. They pointed out the problem of stagnation of the industry, and they identified the basic goalsfor forestry to include the capture of economic rent, the promotion of foreign exchange earnings,and the generationof revenuesfor forest administration.

The main concern of their study is the evaluationof comparative advantage of the forest industry and the role of price intervention policiesbeing followed by the government. As the indicator of comparative advantage, they used the concept of domestic resource cost or DRC - "the rate at which an activity can convert domestic resourcesmeasuredin peso social value into foreign exchangeeither by exporting or substituting for imports" (Power and Tumaneng, 1983, p. 33).

However, to carry out this investigation, the authors were 17

constrained to assumethat sector specific policies on optimal (and sustainable)resourcemanagement have been identified and are operational. With this assumption, they evaluatedthe effect of different trade policies on forestry output, foreign exchangeearnings, rent and government revenue,and consumer vs. producersurpluses.

The major distinction among the policies was with respect to using limits or quotas vs. taxation or fees. Direct controls on forest exploitation may thus be basedon cutting limits vs. cutting charges.

With respect to output changes,both limits and chargeswill decrease output, thus being consistent with conservation goals. There will also be lower foreign exchangeearningswith either policy. However, the major advantage of cutting charges vs. limits is that, with the former, government will earn revenuesand will be able to capture economic rents on marginaloutput.

In the export sector, both export taxes and quotas may be used.

While both controls will limit output and tend to reduce foreign exchangeearnings,export taxes are better becausethey allow government to appropriate some resource rents and generate revenue.

Both controls, however, entail substantiallossesin producers'surplus so that it is to be expected that the commercial sector will oppose such policies (if such are being proposed) or will avoid compliance (if the controls are already in effect).

In the area of trade, the study reported that forestry offers an opportunity for the country to have additional efficient means of earning and saving foreign exchange. Effort should focus on the promotion of domestic processingof wood, together with reforestation and forest protection, to enhance forestry's long-run capacity to earn and save foreign exchange. In the area of conservation, the paper noted that because of externalities and the need to meet both the qualitative and quantitative aspects of conservation, direct controls and regulations are needed. For example, forest charges by themselves could meet the requirement of limiting output (assuming they are effective), however, it is not clear that they can meet the qualitative requirementsof conservationpolicy.

Power and Tumaneng proposed a package of controls which they consider practicable in the present context of forest management and trade. Sucha rational pricing and taxation packageshould include: (a) removing the export tax on processedwood; (b) rescinding the log export quota and imposing, instead, higher export taxes on logs; and (c) assessing forest concessioncharges,including more local government participation in taxation. They emphasized, however, that this package pre-supposesthat the conservationgoal will be addressedseparately by sector specific policies on sustain18

able yield forest management.

Discussion and Open Forum 1.

On export controls and the domestic processing of logs.

The first discussant was Ramon Saraos. He commented on the recommendation of Power and Tumaneng regarding the removal of the export ban on logsand the imposition of export taxes instead.

His concern was that such a program may only serve to increase the lucrativenessof exporting, leading to a higher propensity for smuggling, and consequent domestic shortages of wood products.

With respect to the domestic processingof logs, Saraos suggested that this has led to the closing up of many firms which could not afford the expensivetechnology for processing. Cristina C. David, however, suggestedthat the main reason for the failure of these local firms was not the requirement to engage in processingbut the undervaluation of forest products.

2. On recognizing conservation and equity issues in edditlon to the concern for efficiency.

The second discussantwas Percy Sajise. Sajise noted Nelson's presentation of the economic factors affecting optimal exploitation of forest resources, and proposed cooperation between economistsand natural scientiststo determine a more comprehensiveset of factors that govern the optimal yield of forestswithout sacrificingtheir socialvalue.

In addition to the efficiency issues,Sajiseemphasizedthe need for equity considerations in the area of upland development. For example, from preliminary results of a survey in Palawan, it was found that forest products (such as honey, rattan, wild pigs, and almaciga) constitute about 31 percent of the income of farmers.

On the other hand, these farmers do not receiveany income from timber. Sajise then reiterated a comment made by C. David during her presentation to the effect that decisionscannot be left alone to price and market mechanisms.Other factors are neededas far as the formulation of economic policies is concerned, and these other factors include the regenerativecapacity of forestsand the equitable distribution of income.

3. On the opproprioteness of policies end their implementation. During the open forum, it was brought out that even before considering an integrated or comprehensive package of policies, there should be immediate evaluation of specific rules that are patently inappropriate in the context of current goalsfor forestry, in 19

particular, and for economic development, in general. For instance, the policy granting duty-free importation of tractors for logging tends to encouragethe greater useof machinesratherthan of labor, thereby increasingthe drain on foreign exchange.

In addition, it was pointed out that if a policy cannot be implemented, then it is not a good policy. The implementation Of policies should be made part of the policy-making process. O_ne example of an un-implementable policy is the requirement for loggersto plant five trees for every tree felled.

Session II1:

Uplond Development

Session III expanded the framework for viewing forest resource management by explicitly considering upland development issues in general and the role of informal resource users. As has been pointed out earlier, it has long been recognizedthat a major actor in resourceexploitation hasbeenthe upland communities - both indigenous (ethnic minorities) and migrants from the lowlands. The paper by Ma. ConcepcionCruz focusedon the specificissueof population pressurein the uplandsand the factors leadingto this. Doris Capistrano and Sam Fujisaka's paper, on the other hand, catalogued some of the agro-forestry technologiesavailable to upland dwellers and their implicationsfor resourceuseand conservation.

M. Cruz, in her paper "Population Pressure, Migration, and Markets: Implications for Upland Development," surveyed the approaches taken to analyze the role of population pressure in technical change. One view holds that an optimal level of population based on some maximum per capita productivity, given resources and technology, can be determined (Grigg, 1976). On the other hand, it has been argued that optimal population and therefore the carrying capacity of land is constantly changing due to changesin behavior patterns and technical change. For example, the continuous trend for a decrease in fallow period or a changein the manner of cultivating a given crop has definitely led to significant multiples of population density. Thus, a decreasein fallow period from 24 to 9 years has allowed population to increase from 12 to 30 persons per square kilometer in tropical shifting cultivation (Gronou, 1966) while a changefrom shifting cultivation to rice and subsequently to transplanted rice has led, respectively., to population densities from 12, 98, and 381 persons per squa_ kilometer in Southeast Asian rice-growing communities (Hanks_ 1972).

The trend for increasing population pressure in the uplands is due to what M. Cruz calls "frontier" migration. Using National 20

Census and Statistics Office (NCSO) data for 1960 and 1970, together with the listing of upland communities based on BFD Integrated Social Forestry communities (which constitutes approximately 71 percent of the entire social forestry program), Ms. Cruz estimated that upland residentsnumbered about 11 million in 1970 or about 30 percent of total population. This is a much larger population than what previous "guesstimates" have given. More importantly, more than half (or 56 percent) of the total migrant population are to be found in the uplands, indicating the need to examine this pattern of frontier migration at least with the same interest shown to the pattern of urban migration.

Finally, the inclusion of two very relevant factors - increasing government intervention and the greater role of markets - expands the original population pressuremodels (such as that of Boserup, 1965) and directly addressescurrent policy issues. For instance, population growth during the land surplus stage in Philippine economic development was largely influenced by government resettlement. At the same time, the growing importance of production for market (vs. production for household subsistence)is increasingthe demand for more intensive exploitation of forest and other upland resources.

The paper by Capistrano and Fujisaka on "Tenure, Technology, and Productivity of Agro-Forestry Schemes" reviewed the literature on some of the agro-forestry based technology currently being disseminated. Since many upland areas currently provide open access resourcesto present occupants, the authors found that environmental degradation represents a "tragedy of the commons" problem in which resourcesare over-utilized by upland dwellers.

The government, through the BFD, tries to avert ongoing overexploitation by granting upland cultivators certain rights over their farms. These rights include two-year renewable leasesgranted to Forest Occupancy Management Program participants, 25-year renewable leases to Communal Tree Farming communities and legally incorporated organizations, and 25-year renewable stewardship contracts to Integrated Social Forestry program participants.

As of the end of 1981,255 social forestry projects had beenstarted, covering 500,000 hectares (or about 2.7 percent of the public domain).

Information on technical and economic productivity of different upland agro.forestry systems are few and where available are: (a) usually based on controlled experimentation, (b) limited to short term (one seasonor one year) estimates, and (c) usually based on combinations of ipil-ipil and other crops. (This last aspect reflects 21

the predominance of ipi/-ip//based technologies in upland development projects). The literature also tends to overestimate productivity and profitability of agro-forestry systems. The discrepancy between projected estimates and actual figures derives from differences in resource quality and availability in ideal, experimental conditions and in farmers' fields. Constraints to high agro-forestry yield include the lack of capital and labor inputs, the problem of stray Gr wild animals, and pest infestation.

In addition to the technical factors constraining agro-forestry yields, small size of landholdings and insecurity of tenure on the land are two often cited obstaclesto the adoption of agro-forestry technology. Tenure insecurity is generally thought of as a land use practice biased in favor of crops'that yield immediate returns but cause environmental degradation. There are, however, no studies that investigate the direct quantitative effects of tenure on the intensification of upland cultivation and on the environmental externalities involved. With respect to participatory development issues, many programs have been described as "participatory" in approach.

However, real participation remains to be defined and operationalized. For the most part, participation in programs has meant, for the upland farmer, contributing labor and attending seminars and meetings. Upland communities have not had much say in project decision-making.

Discussion and Open Forum 1. On upland migration and its determinants. Mahar Man@has, the discussantfor Session III, pointed out that the main empirical contribution of M. Cruz's paper is the computation of migration rates in upland communities, particularly for the Integrated Social F'oresty (ISF) communities. Becauseof its importance, he recommended that this aspect of the study be amplified since such information cannot be found in other studies.

During the open forum, it was suggestedthat another important result of the paper was that it debunks the myth that the uplands are inhabited primarily by cultural minorities. Programson upland development and strategies will substantially differ depending on whether the prime beneficiaries are cultural minorities or migrants from the lowlands.

On the factors affecting migration, Man@has indicated that future studies should focus on the specific circumstance of the migrants in their place of origin and their expectationswhen they reach their destinations. For example, it would not be sufficient to look at averagesat the placeof origin (suchasthe averageincome) 22

since those who migrate are probably those who are not average but those who are quite worse off. On the other hand, it might be sufficient to use average income at the destination to evaluate the "pull" factors affecting migration.

2. On conflict.oriented vs. evolutionary change. Mangahas questioned the implication of M. Cruz's characterization on the penetration of markets and commercialization into upland communities, in his view, commercialization should be seen as a natural outcome of progressand not as an intrusion into the livelihood of upland communities. In this sense, it would not be fruitful to evaluate the role of middlemen and traders as explorative unless it can be shown that they indeed possessmonopsonisticpower.

M. Cruz replied that increased commercialization (as observed in the increasing proportion of production going to sales rather than to home consumption) has been treated as an indicator of population pressurerather than the causethereof. Moreover, the literature indicates that monopsonistic control in the hands of traders does exist, and in some instances,the commodity market hasbeenshown to be tied up with the credit market.

3. On the importance of historical end institutional factors in migration.

Mangahas observed that a major factor affecting migration has to do with historical events and institutional changes such as government initiated resettlement schemes or radical changes in the political or peace and order situation. Further research should thus pay more attention to the way people perceive their present condition and what changesin the environment motivate them to move. He cited, as an example, the resettlement program in the 1950s which can be closely associatedwith agrarianunrest in Central Luzon at that time.

In addition, he pointed out that carrying capacity (asa measure of environmental change) should also include the institutional setting and not just the limited biological or technical concept of the man.land ratio. Other factors should be included such as the system of justice, the protection of people's rights, and the way conflicts are resolved. In reality, one does not wait for the manland ratio to increase in order to move if the situation is chaotic and threatening.

4. On institutional arrangements and participatory change.

During the open forum, it was observed that while there are no studies documenting the effects of tenure and productivity on conservation, informal observations on the various forms of tenurial arrangements in the uplands can already provide some preliminary 23

hypotheses. For example, in a study on the Pantabangan area, it was found that there were ten different informal tenurial arrangements which can be studied for their implications on resource management.

With respectto the issueof participatory development, the need for dialogue between project implementors and beneficiaries was emphasized. The _current project preparation schemes of many agencies seek to please funding agencies or government officials rather than the beneficiaries themselves. Dialogue, in the interest of genuine participatory development, should leadto a more rational project preparationphase.

5. On appropriete technology for the uplands. During the open forum, it was pointed out that in the development of the uplands, the goal should not only be the increase of production but also the concern for conservation. Hence, the most appropriate technology for the uplands should suit the limitations of topology and the environment.

The criteria that should be considered in choosing appropriate technology for the uplands should thus include not only potential productivity but also social acceptability and environmental sound ness.

Session IV: Watershed Management Two papers were presented on watershed management. The first, by Wilfredo P. David, was on "The Environmental Effects of Watershed Modifications_', and the second was by jose A. Galvez on the "Management and Costs of Watershed Reforestation".

David's paper was concerned with a general evaluation of the role of watersheds and different watershed covers in controlling water run-off and soil erosion. Galvez, on the other hand, discussedin deta.ilthe specific watershed managementprogram being undertaken for two major projects in the Philippines - the Pantabanganand Magat watershed reforestation programs.

According to W. Dayid, the more significant environmental impacts of watershed modifications are hydrologic in nature indicating changes in some of the interactions in the water cycle.

There are four of types of land uses that have distinctly different implications for watershed behavior:forests, grasslands,arable lands, and urbanization or industrialization. For conservation purposes,a forest cover providesthe best protection on the land.

24

With respectto water flows, the infiltration rate of soil in forest lands, for instance, isgreater than any other type of land use(except for deep tillage with contour ridges and mulching). Also, water run-off throughout the year is quite smooth becauseof good water absorption. In general, water absorption is best with hardwood forest, followed by permanent managed pasture, wheat crop, a second year meadow, corn with improved practices, corn with prevailing practices, and, finally, roads. It therefore follows that, with respect to water flows, the removal of forests increasesflood flows, reduces the baseor low flows of rivers, increasesthe water table, and leadsto higherstream temperatures.

With respect to controlling soil erosion, forest cover is similarly beneficial. Soil erosion has already been identified by National Environmental Protection Council asthe most seriousenvironmental problem. Erosion is closely related to water flows since the suspended sediment carrying capacity of a river isdirectly proportional to its dischargeraisedto the power of 1.4 to 2.0. Thus, for example, if river discharge doubles, .then its sediment carrying capacity increases2.6 to 4 times. Aside from averagestreamflow, the intensity of water flow at the upper extreme is a major determinant of soil erosion. In the Philippines, most of the sediment transported (about 40 percent) isattributed to the extreme 5 percentof flows.

Aside from forest, other land usesare obtained in watersheds.

While grasslandsare in general inferior to forests for protection purposes, under managed conditions, their conservation value can approximate that of forests. The lossof soil protection when land is converted to crop use may be controlled with proper land management, such as bench terracing. Such controls, however, are quite costly, and in the United States, it has been found that even with a 50 percent government subsidyon land modification costs,the payback period for such investments is still in the order of 30 years.

Finally, urbanization or industrialization in a given area leadsto the lowest water absorption rates and introduces (in addition to the soil erosion problem) an entirely new problem - the deterioration of water quality. With respectto the actual measurementof the erosion potential of different land uses, W. David has suggestedthat it is already feasible to make approximations of erosion ratesfor various cover, slope, soil, and rainfall conditions in the Philippineswith the useof a modified soil lossequation.

Becauseactual land use is substantiallyaffected by human population, the human influence may also be seen as a major issuein watershed management. Population pressure often leads to the manipulation of watershedswith no due regard for environmental consequences beyond the short-term or beyond the immediate 25

boundaries of farm plots. The key therefore to watershedmanagement is to control the problem of population pressureby integrating effective livelihood programs with the vegetative or engineering modifications that are necessaryfor watershedconservation.

To focus the discussionon particular instancesof watershed management, the second paper (by Galvez) presented the caseof Pantabanganand Magat. The Pantabanganwatershed,which include_ part of Nueva Ecija, Nueva Viscaya, and Aurora, encompasses 82,900 hectares (excluding the reservoir of 8,000 hectares). The major problem in the area issoil erosionwhich is found in 46 percent of the watershed. (The author could not determine the actual rates.)

The population in the area is 23,200 or 3830 households,based on a 1979 National Irrigation Administration (NIA) survey. Fortyfour percent of these households derived income primarily from farming and fishing while 35 percent were employed by government agencies,suchasthe NIA and the BFD. The reforestation programs for the watershed consisted of the following: (a) The Republicof the Philippines-JapanTechnicalCooperation Project, which was started in 1979, was supposedto cover 8,000 hectares. Between 1977 and 1987, 4,500 hectareshad been planted, and the restof the project will be completed in 1986. (b) The BFD Carranglan Forest District had replanted 2,200 hectaressince 1973. (c) The BFD Pantabangan District replanted 6,800 hectares.

With respect to conditions in the Magat watershed, the area (which includes part of Nueva Viscaya, Ifugao, and Isabela) is 414,300 hectares,excluding 4,900 hectaresin the reservoir. Erosion is severe to excessive in 83 percent of the watershed with sediment yield at the dam site estimated to be 8.5 million tons per year (based on the planning studies of the dam). The BFD had reforested 11,000 hectares,but this area had been reduced by fire damage.

To ensure the proper coordination of reforestation work, the NIA organized the Watershed Management and Erosion Control Project in June 1980. The project had three components. First, the Magat Watershed Feasibility Study had the goal of formulating an integrated development plan for the various critical sub-catchments of the watershed. Second, the Forest Protection Pilot Program was set up to integrate forest occupancy management,forest guarding, fire control, and watershed rehabilitation. Finally, the Reforestation Component had the goal of rehabilitation of the Pantabangan watershed and parts of Magat by reforesting some 32,000 hectaresof open grasslands.

26

By September i983, the project had planted 28 million seedlings, established agro.forestry plantations on 10,700 hectares in Pantabanganand on 3,800 hectares in Magat (which was45 percent of the total goal). Road construction reached 320 kilometers (60 percent of the goal) with 250 kilometers constructed in Pantabangan and 70 in Magat. A network of nurserieswas alsoset up in the area.

By September 1983, 45 percent of the reforestation goal had been met, but Galvez reported that serious problems were still encountered. The list of problems included non-availability of seed and propagation, excessiveweed growth in reforestation sites, pest and disease,forest fires, and continuing destructive practices (such as logging,hillside farming, and grazing). The crucial lessonslearned in the project, according to Galvez, was the importance of transportation and accessroads, the proper selection of speciesfor the different sites, fire prevention and protection, and the proper timing of outplanting.

Discussion and Open Forum 1. On the importance of economic assessment of reforestation efforts.

The first discussant, Marietta Adriano, emphasized the importance of evaluating the benefits and costs in watershed projects.

The investigation should include not only the direct benefits (such as revenue from trees planted) but also secondary and off-site effects.

It is also important to directly consider the impact of watershed projects on income distribution especially since such projects normally utilize public funds.

In addition to the benefit-cost analysis of on-site and off-site effects of watershed programs, it was pointed out that pre-investment calculations must be evaluated with respect to actual levels of investment. Such appraisal estimates can be useful in decision-making for future projects and for redesigning possible implementation approaches.

2. On government agency participation in watershed development. The usual problem associated with inter-agency coordination involving resource development is present in the management of watersheds.

Agencies involved are the National Irrigation Administration (NIA) for the downstream, dam-siltation effects, the Bureau of Forest .Development (BFD) for the control of soil erosion in the upstream, and the National Power Corporation (NPC) for the hydroelectric component of the multipurpose dam facility.

The issue of identifying primary and secondary responsibilities in the actual management of the watershed will have to be resolved.

This was cited, for example, in the World Bank recommendation 27

of creating a lead agency which has as its primary function the managementof the country's watersheds.

3. On using actual benefit_ost estimates of completed watershed management studies. It was suggested that agencies concerned with watershed management make use of existing estimates of benefits and costs derived from an appraisal of post-investment operations of particular watershed projects. The experiences of the Pantabangan and Magat watershed projects were cited as relevant case studies for periodic appraisal of expected and ex post benefit-cost estimates.

4. On the need to devise useful indices of soil erosion for benefit-cost calculations.

It was pointed out that indices of projected rates of erosion for different types of vegetative cover in watersheds should be made using Philippine conditions and experiences.

For example, certain types of vegetation in watersheds may be projected to increase or decrease the life of reservoirs, which can then be used as a guideline in the benefit-cost evaluation of the dam.

28

PART III. AGENDA FOR POLICY RESEARCH ON FORESTRY AND UPLAND DEVELOPMENT In this concluding portion of the report, a researchagendathat has been derived from the presentationsand discussionsduring the seminar-workshopis presented. This agenda representsa more focused sub-set of the general policy issuesidentified in an earlier PIDS assessmentof the forestry sector (in Segura-delosAngeles, 1982), and outlines the major emphasis for research that PIDS will be undertaking in the future.

Long-term Production and Commercial Forestry There is a need to look at the long-term potentials for forestry output in relation to the changing structure of demand for forest products. While the sustainability of timber output will be of increasingconcern in the next two to three decades,the major problem for the future will be fuelwood supply. For example, projected requirements of both domestic and industrial users have been estimated at 63 and 106 million cubic meters in 1990 and 2000, respectively. Current efforts at promoting ipll-ipil based agro-forestry technologiesas potential sourcesof fuelwood need to be evaluated since recent researchfindings indicate that ipil-ipil yields measured from actual plantation conditions are only 35 to 50 percent of earlier estimates.

With respect to the management of commercial concessions for logging purposes, it has been shown that current chargesfor forest exploitation are too low and the effort to test the stumpage appraisal system should be intensified. There is, in addition, a clear need to evaluate the selectiveloggingsystem of timber exploitation and to study alternative systemsof management.

Population Pressurein the Uplands The importance of surveying the options for management programs for upland communities and available agro-forestry technologiesis also recognized. A more comprehensiveand quantitative evaluation should be made to allow one to movebeyond the simple community casestudiesthat characterizecurrent research.

In addition_ it was emphasizedthat a formal study of population pressure, in terms of lowland to upland migration and scientific estimates of upland population, is required. At present, there is limited basis for development planning for programsthat address 29

the problemsof livelihood for upland dwellers. Not enoughinformation is available on their numbers nor on the patterns of migration and growth of these communities. This means that agro-forestry development projects, being in responseonly to specific and immediate instancesof upland resourceover-exploitation, cannot address the long-termproblem of population pressure.

Assessmentof WatershedManegemerlt Progroms One very useful manner of studyingthe upland resourcemanagement problem is with the framework of watershed planning. This is especiallyvaluable for policy in caseswhere the watershed is also the site of on-going government projects, such as major waterimpoundingactivitiesfor hydro-electricity or irrigation.

There are already two important sourcesof information about the resource management issuesin watershed management: (a)Lprimary data collection on agro-forestry potentials; and (b) soil conservation as part of primarily technical studies and benefit-Cost analysis as part of standard project appraisal for externally funded projects. What remains to be done is to consolidate these information in an integrated study of the effectsof watershedmodifications - in terms of implications for the communities within the site, soil erosion problems for the reservoir, and effects on the off,site "social" benefitsof the project. This will entail an explicit economic valuation study of the major components of the watershed management program.

Mocroeconomic Policies and the Economic Development Context for Forestry While the previous topics focused on studies specific to the forest .sector, the seminar-workshop also suggestedthe importance of moving beyond solely micro-oriented approachesor case.studies.

There is a need to relate the pattern of upland exploitation to national economic policies and to the general economic development context of the forest sector.

National economic policies refer primarilY/ to forestry policies that are sector-specificsuch as the Control of timber trade and incentives for the wood-based industries. Completed studies have already addressedthe most important of these, and the recent work of Power and Tumaneng (1983) has integrated much of this literature.

Other economic policies, however, arise from the general economic development context of the country, and these may have 30

significanteffectson the trend for forestexploitationand upland resourceuse. For example, during the postwar period of fast economicgrowth,forestry wasseenessentially asa sourceof foreign exchangeearningsfrom timber exports. In that kind of econOmic contextand giventhe relativeabundanceof old growthforestsat that time, the forest wasusedprimarilyasa resourceto be mined.

It should come as no surprisethen that, notwithstandingpolicies for conservation,the eventualresultwas a pattern of exploitation that effectivelyreducedthe extent of productiveforestlands.

The past two decades,however,havewitnessedthe closingof muchof the country's agriculturalfrontier. This, togetherwith the recognitionof the limits of the country'sforestsin relationto the new demandsbeing placedon it by populationpressure,has led to attemptsto alter the trend of forestusefrom over-exploitation to conservation. This relationshipbetween general economic developmentconsiderationsand the prospectsfor forestry hasnot beenadequatelystudied. Thishasnow becomeespecially significant sincethe current economiccrisis requiresa generalre-definition of the role that different resourcesectorsshouldplay in economic development.

31

REFERENCES BONITA, M. L. and A. V. REVILLA, JR. 1977. Philippine Forest ResourCes: 19762026. in PREPF (Popul_lon, Resources,Environment and the Philippine Future: Scenarios for the Year 2000). A researchconsortiumof the DevelopmentAcademy of the Philippines,the U.P. Schoolof Economics, and the U.P. PopulationInstitute. Vol. 11-3A.Philippine Forest Resources.

BOSERUP, ESTER. 1965. The Conditions of Agricultural Growth. London: Allen and Unwin.

BUREAU OF FOREST DEVELOPMENT (BFD). 1981. Philippine Forestry S_tlstlcs, Quezon City: Bureauof Forest Development,Ministry of Natural Resources.

CLARK, COLIN W. 1976. Mathematical Bloeconomics: The Optical Management of Renewable Resources.New York: John Wiley and Sons.

CLAWSON, MARION (ed.) 1974. "Forest Policy for the Future," Resources for the Future, Inc., WorkingPaperLW-1, June.

CRISOSTOMO, CRISTINA and RANDOLPH BARKER. 1973. "Growth Rates of Philippine Agriculture, 1948-1971." Honolulu: Conferenceon Agri_ul, tural Growth in Japan,Korea, and the Philippines.

CRUZ, MA. CONCEPCION. 1984. "Population Pressure,Migration and Markets: Implicationsfor Upland Development," Paper Presentedat the Workshop on Economic Policiesfor Forest ResourcesManagement,Club Solviento, Calamba, Laguna,February, sponsoredby the PhilippineInstitute for DevelopmentStudies.

CRUZ, C. A. 1982. "Economic Analysisof the SelectiveLoggingSystemin Selected Areas in the Philippines." UnpublishedPh.D. dissertation,Collegeof Forestry,Universityof the Philippines,Los Baffos,Laguna.

HOWE, CHARLES W. 1979. Natural ResourceEconomics: Issues,Analysis, and Policy. New York: John Wiley and Sons.

LYNCH, OWEN J. 1984. "Natural ResourceDispositionin the Philippine Uplands:A Searchfor EquitablePoliciesand Practices,"Paperpresentedat the Workshopon Policy-OrientedResearchon Equity in Natural ResourceDevelopment: Issuesand Data Needs,Tagaytay City: DevelopmentAcademy of the Philippines.

PANAYOTOU, THEODORE. 1983. "Present Status of Asian Tropical Forest and Needed Measures:An Overview," Paper presentedat the Seminaron Managementof Forest Resources,Los Ba_os, Laguna,Philippines,July, sponsoredby the AgriculturalDevelopmentCouncil and the japan Center for InternationalExchange.

PARK, JIN H. 1983. "Forest ResourceDevelopmentin A GrowingEconomyin I_orea",Paperpresentedat the Seminaron Managementof ForestResources: Issueson ForestPolicy in the DevelopingCountriesof Asia,Los Ba_os, Laguna, Philippines, July, sponsoredby the Agricultural Development Council and the Japan Centerfor International Exchange.

POWER, JOHN and TESSIE TUMANENG. 1983. "ComparativeAdvantageand GovernmentPoliciesin Forestry", Paperpresentedat the Workshopon the Impact of EconomicPolicieson Agricultural Development,Tagaytay City, 32

March 25-26, jointly sponsoredby the Philippine Institute for Development Studies(PIDS) and the PCARRD, (PIDS WorkingPaper8305).

PREPF. 1977. Population, Resources,Environment and the Philippine Future, (PREPF): Scenarios for the Year 2000. A researchconsortiumof the Development Academy of the Philippines,the U.P. School of Economics,and the U.P. PopulationInstitute. Vol. 11-3A,Philippine ForestResources.

REVILLA, A. V. JR.; M. L. BONITA; and M. SEGURA. 1977. "Evaluation of Certain Policiesand ProgramsAffecting ForestryProductionThrough2000 A-D." in Population, R_ources_ Environment and the Philippine Future (PREPF).

REVILLA, A- V. JR. and MYRNA C. GREGORIO, 1983. "Predicted Wood Yield for LeucaenaPlantations in the Philippines." Policy Paper No. 10, Forestry Development Center, University of the Philippines_Los Banes, Laguna.

SEGURA, MARIAN; A- V. REVILLA, JR., and M.L. BONITA. 1977. "A Historical Perspective of the Philippine Forest Resources,"in Populotion, Resources,Environment and the Philippine Future (PREPF).

SEGURA-DELOS ANGELES, MARIAN. 1982. "Research on Forest Policies for Philippine Development Planning: A Survey" in Survey of Philippine Development Research II. Manila: Philippine Institute for Development Studies.

TALBOT, LEE M. and MARTHA H. TALBOT. 1964. RenewableNatural Resources in the Philippines - Status, Problems and Recommend_lons.

Manila: South East Asia Project of the International Commission on National Parksand the International Union for Conservationof Nature and Natural Resources.

TINGSABADH, C. 1983. "Issuesin Forestry Managementin Thailand," Paper presentedat the Seminaron Managementin Forest Resources,Los Ba_os, Laguna, July, sponsoredby the Agricuitural Development Council and the JapanCenterfor International Exchange.

33

SEMINAR PROGRAMME Day 1 February 17, 1984 8:30- 9:00 9:00- 9:15 9:15- 9:45

Arrival and Registration Opening Remarks and Organizational Matters (Dr. Filologo Pante jr., President, PIDS) Overview and Workshop Objectives (Dr. Wilfrido Cruz, UPLB-CDEM) SESSION I: Moderator:

9:45-10:15 10:15-10:30 10:30-I I :15

11:15-11:30 11:30-12:30 1:2:30- 2:30

"Forest Land Management in the Context of NatiOnal Land Use" (Dr. A. V. Revilla, Jr., UPLB-CF) Coffee Break "Policy Issueson Commercial Forest Managemenl_" (Dr. C. A. Cruz, UPLB-CF and Ms. M. S. de los Angeles, PI DS) Discussion by Mr. P. Dugan, USAI D Open Forum Lunch Break SESSION II: Moderator:

2:30- 3:00 3:00- 3:30 3:303:454:004:156:30

3:45 4:00 4:15 5:15

COMMERCIAL FORESTRY Dr. M. Eusebio, FORI

FOREST POLICY AND DEVELC!PMENT Dr. W. T. James, ADB

"Trade and Fiscal Policies for Forest-Based Commercial Sector" (Dr. C. David, IRRI) "Economic Policies and Pressureon Forest Resources" (Dr. G. C. Nelson, ADC) Coffee Break Discussion by Engr. R. Saraos, PCWID Discussion by Dr. P. E. Sajise, UPLB-PESAM Open Forum Cocktails and Dinner

Day 2 February 18, 1984

8:30- 9:00

34

SESSION III:

UPLAND DEVELOPMENT

Moderator:

Mr. Edwin Payuan, BFD

"Population Pressure, Migration and Markets: Implications for Upland Development" (Dr. M. C. Cruz, UPLB-CDEM)

9:00- 9:30

9:30- 9:45 9:45-10:00 10:00-11:15

"Tenure, Technology, and Productivity in the Uplands" (Dr. S. Fujisaka, ADC and Ms. A. D. Capistrano, UPLB-CDEM) Discussion by Dr. M. Mangahas, DAP Coffee Break Open Forum SESSION IV: Moderator:

11:15-11:45 11:45-12:15

12:151:301:452:003:00-

1:30 1:45 2:00 3:00 3:15

3:15- 3:45 3:45- 4:45 5:00

WATERSHED MANAGEMENT Dr. S. Saplaco

"Assessment of Environmental Effects of Watershed Management" (Dr. W. P. David, UPLB-CEAT) "Management and Costs of Watershed Reforestation" (Dr. J. Galvez, N IA; paper read by Mr. Alexander G. Coloma, NIA) Lunch Break Discussion By Dr. M. Adriano, NEDA Discussion By Dr. I. Esteban, BFD Open Forum Coffee Break Summary Open Forum Departu re

35

LIST OF PARTICIPANTS

1. Dr. Marietta Adriano Director, Agriculture Staff National Economic and Development Authority (NEDA) NEDA-Pasig Building, Amber Avenue Pasig,Metro Manila 2. Mr. David Alverson ConsuItant United States Agency for International Development (USA ID) Ramon MagsaysayCenter Roxas Blvd., Manila 3. Mr. Rogelio Baggayan Chief, Planning and Evaluation Division Bureau of Forest Development Ministry of Natural Resources Visayas Avenue, Quezon City 4.

Mr. Emmanuel Buenaventura Policy Coordination staff National Economic and Development Authority (NEDA) NEDA-Pasig Bldg., Amber Avenue Pasig,Metro Manila

5. Ms. Ana Doris Capistrano Instructor College of Development Economics and Management (CDEM) University of the Philippines at Los Bafios,College, Laguna 6. Mr. Alexander G. Coloma Resident Manager, WatershedManagement and Erosion Control National Irrigation Administration EDSA, Quezon City 7. Dr. Cerenilla A. Cruz AssistantProfessor 36

L

Collegeof Forestry University of the Philippines at Los Banos,College, Laguna 8. Dr. Wilfrido Cruz AssistantProfessor Collegeof Development Economics and Management(CDEM) University of the Philippines at Los BaEos,College, Laguna 9.

Dr. Cristina C. David Agricultural Economist Department of Agricultural Economics International Rice ResearchInstitute Los Bafos, Laguna

10.

Dr. Wilfrcdo David Professor Collegeof Engineering and Agricultural Technology University of the Philippines at Los Ba_os,College, laguna

11.

Mr. Patrick Dugan Consultant Hodam and AssociatesIncorporation 4th Floor, D & E Restaurant Quezon Blvd., Quezon City

12.

Dr. Felix Eslava Chairman Department of Social Forestry College of Forestry University of'the Philippines at Los Ba_os,College, Laguna

13.

Dr. Isidro Esteban Chief, Afforestation and Reforestation Bureauof Forest Development (BFD) Ministry of Natural Resources VisayasAvenue, Diliman, Quezon City

14.

Mr. Mario C. Feranil Project Director (UNDP Project)

37

PIDS, NEDA sa Makati Bldg., Amorsolo St. Legaspi Village, Makati, Metro Manila 15. Mr. Gabriel Formoso President National Industrial Tree Corporation 6th Floor Vernida IV Bldg., SalcedoVillage, Makati, Metro Manila 16.

Dr. William T. James Staff Economist Economics Office Asian Development Bank 7th Floor, Mondragon Bldg., Buendia Avenue Extension, Makati, Metro Manila

17.

Dr. Aida Librero Director Socioeconomic Department Philippine Council for Agricultural ResourcesResearchand Development (PCARRD) Los Ba_os,Laguna

18. Mr. Camilo Jose Lira, Jr. Economic Planning and ResearchStaff National Economic and Development Authority NEDA-Pasig Bldg., Amber Avenue Pasig,Metro Manila

38

19.

Dr. Mahar Mangahas Vice-Presidentfor Researchfor Development Development Academy of the Philippines San Miguel Avenue, Pasig,Metro Manila

20.

Dr. Gerald C. Nelson Specialist Agricultural Development Council and College of Development Economics and Management University of the Philippines at Los BaSos,College, Laguna

21.

Dr. Filologo Pante, Jr. President Philippine Institute for DevelopmentStud ies (PI DS) NEDA-Makati Bldg., Amorsolo St., LegaspiVillage, Makati Metro Manila

22.

Mr. Edwin Payuan Chief Social Forestry Division Bureau of Forest Development Ministry of Natural Resources Visayas Avenue, Quezon City

23.

Dr. Mario Eusebio Assistant Director Forest Research Institute (FOP,I) Forestry Campus, University of the Philippines at Los Ba_os,College, Laguna

24.

Dr. Josefina Ramos Director, Regional Development Staff National Economic and Development Authority NEDA-PasigBldg., Amber Avenue Pasig,Metro Manila

25.

Dr. Adolfo V. Revilla, Jr. Director Forestry DevelopmantCenter Collegeof Forestry, University of the Philippines at Los Ba5os,College, Laguna

26.

Dr. Percy Sajise Dean Collegeof Humanities and Sciences Universityof the Philippines at Los Ba_os,College, Laguna

27.

Dr. SeveroSaplaco Chairman Department of Forest ResourcesManagement Collegeof Forestry, 39

University of the Philippines at Los Bal_os,College, Laguna 28.

Engr. Ramon Saraos Officer-in-Charge Presidential Committee on Wood Industries Development Quezon City

29.

Ms. Marian Segura-delos Angeles ResearchFellow Philippine Institute for Development Studies (PIDS) NEDA-Makati Bldg., Amorsolo St. LegaspiVillage, Makati Metro Manila

30.

Mr. Aniceto Sobrepe6a Director, Policy Coordination Staff National Economic and DevelopmentAuthority (NEDA) NEDA-Pasig Bldg., Amber Avenue Pasig,Metro Manila

31.

Dr. Florentino Tesoro Commissioner Forest ProductsIndustries DevelopmentCommission Forestry Campus,University of the Philippines at Los Ba_os,College, Laguna Observer:

1. Dr. Andrew P. Vayda Professor of Anthropology Rutgers University

4O