For more details on economic issues see FAO (2000) andKeogh (1996).
For valuable hardwoods the competitive advantage results fromhaving high growth rates without detrimental effects to wood quality, highprofits and a large market share. Key factors are available land at reasonablecosts, high plantation yields, well-developed plantation practices, a skilledlabour force, strong research backing, the existence of a viable market, and astrong supporting infrastructure to ensure cost-effective delivery tomarkets.
To encourage valuable hardwood species for the niche orspeciality markets they should be given separate attention from commodityspecies. The economic conditions necessary to develop valuable hardwoodplantations, with a view of offsetting timber demand pressures on the naturalforests, include:
Rotation lengths need to be relatively long so that these slowgrowing can produce large valuable logs. Financial resources are thereforelocked up without returns over long periods. It is therefore difficult forprivate finance, especially the local investors in tropical countries, to bewooed into such ventures without the necessary incentives that will ensureacceptable profitability. Brown (FAO 2000) states that In many casesincentives have provided an important stimulus to planting, and may have been amore important driver than expectations of future prices andearnings.
Growth rates and transport costs are often the criticalfactors in plantation profitability. Acceptable profitability, therefore,results from growing high-quality genetic material on fertile sites with goodsilviculture and having the plantation close to processing facilities aspossible. Using the best methods of management is essential. The production ofvalue-added items, instead of exporting unprocessed logs, may further enhancereturns.
An assured adequate future market price for the plantationwood at harvesting is necessary to sustain investor interest in replanting, aswell as encourage new growers.
Plantation management should ensure that risk of pests,diseases and fire are minimised or prevented. Similarly, it is important thatthese valuable plantations are insured against such intangibles as fire andwindstorms.
b) Government Policy. The appropriate role ofgovernment in plantation forestry remains an issue of debate, regardless of thelevel of public ownership. The various responsibilities of government haveincluded fostering an environment conducive to investment in tree growing; theregulation of industry and land use; environment and other community values(Kanowski 1997). The establishment of a secure and stable policy (e.g. withrespect to land tenure/tree tenure) and financial environments for plantationinvestment, is essential for the sustenance of investor confidence.
c) The capture and retention of niche markets. Due topublic perception of tropical deforestation tropical hardwoods have lost some oftheir appeal in some environmentally sensitive markets. Therefore, it isimportant that plantations are economically viable, environmentally appropriate,and socially desirable. Land tenure aspects - both legal and customary - oftenneed to be considered. Environmental or 'green' certification may also assist inmaintaining and developing markets.
It is essential that high-grade hardwood plantations areestablished on a relatively large scale and planned for a continual supply ofsimilar quality timber. There should also be the possibility for producing somelarge dimension material, if the market requires this, as timber value isusually related to log size.
Decorative timbers are also subject to swings in consumerfashion. Choice of versatile species is important to counter thiseffect.
There are considerable barriers to expanding the market sharefor luxury or valuable hardwoods. Plantation grown teak may be exception to thisrule (FAO 2000). Further, many supply characteristics for valuablehardwoods are not widely understood, so market research and development isrequired to capture and hold markets. The maintenance of high quality standardsfrom production to marketing is essential.
Experience in Brazil and elsewhere have indicated thatplantation establishment efforts should have direct links to an existing orplanned end-user.
