THE FOREST FOR THE TREES? Government Policies and the Misuse of Forest Resources Robert Repotto VV () R L D R IE S C) U R CES INS T ITUT Q THE FOREST FOR THE TREES? Government Policies and the Misuse of Forest Resources Robert Repetto WORLD RESOURCES INSTITUTE A Center for Policy Research May 1988 Kathleen Courrier Publications Director Don Strandberg Marketing Manager Hyacinth Billings Production Supervisor FAO Photo Cover Each World Resources Institute Report represents a timely, scientific treatment of a subject of public concern. WRI takes responsibility for choosing the study topics and guaranteeing its authors and researchers freedom of inquiry. It also solicits and responds to the guidance of advisory panels and expert reviewers. Unless otherwise stated, however, all the interpretation and findings set forth in WRI publications are those of the authors. Copyright © 1988 World Resources Institute. All rights reserved. Library of Congress Catalog Card Number 88-050465 ISBN 0-915825-25-2 Contents I. Overview 1 The Extent and Rate of Deforestation 3 The Reasons for Deforestation in Tropical Countries 12 Forest Sector Policies 17 Policies Outside the Forest Sector 27 Conclusions and Recommendations 32 Policy Reforms by National Governments 32 Policy Changes by Industrial Countries and International Agencies 40 II. Country Studies 43 Indonesia 43 Malaysia 52 Philippines 59 China 66 Brazil 73 West Africa 81 United States 90 References 99 Acknowledgments e wish to thank the authors of Gregersen, Roberto Lopez C, Norman Myers, country case studies, whose schol- Jeffrey Sayer, John Spears, William Beattie and W arly insights contributed so much Roger Sedjo. We appreciate the support of to the study, and thank as well as the many WRI's advisory panel on the study of economic others who assisted in the research—Tinling incentives for sustainable development: William Choong, Mark Dillenbeck, Ruth Griswold, Baumol of New York University, Gardner Philip Huffman, Nancy Sheehan and Craig Brown Jr. at the University of Washington, Thomas. Hyacinth Billings, Esther Chambers, Anthony Fisher at the University of California Katherine Harrington and Karen Saxon put at Berkeley, Shanta Devarajan at Harvard, forth dedicated efforts in the lengthy produc- Charles Howe at the University of Colorado, tion process. and Jeremy Warford at the World Bank. Col- leagues at WRI, including Kathleen Courrier, We also wish to acknowledge the useful con- Peter Hazlewood, Jessica Mathews and Gus tributions and comments received from Paul Speth, provided strong support. Aird, Michael Arnold, Peter Ashton, Peter Emerson, Julian Evans, Suzannah Hecht, Carl R.R. Gallegos, Barin Ganguli, Alan Grainger, Hans 111 Contributors Eufresina L. Boado, (Ph.D. Forest Resources Li Jinchang, Director, Technical Economics Sec- Management, State University of New York at tion, Research Center for Economic, Technolog- Syracuse) was formerly the Executive Officer, ical, and Social Development under the State Project Management Staff, Philippine Forestry Council of the People's Republic of China, Bureau, Manila, Philippines and was the Beijing Project Coordinator, ASEAN, Manila, Philippines He Naihui, Deputy Chief Editor, Linye Jingji (Forestry Economics), Institute of Forestry Eco- John Browder, Visiting Assistant Professor of nomics, Chinese Academy of Forestry Sciences, Planning and Geography, Center for Latin Beijing American Studies, Tulane University, New Orleans, Louisiana Robert Repetto, Director, Program in Econom- ics and Institutions, World Resources Institute, Kong Fanwen, Research Fellow, Institute of Washington, D.C. Forestry Economics, Chinese Academy of Forestry Sciences, Beijing Lester Ross, (Ph.D. Political Science, University of Michigan) is a J.D. Candidate at the Harvard Malcolm Gillis, Dean of Graduate Schools, Law School, Cambridge, Massachusetts Vice-Provost for Academic Affairs, and Profes- sor of Public Policy and Economics, Duke University, Durham, North Carolina Foreword hroughout much of the Third World, tations, and agricultural settlements, too often accelerating deforestation is laying supported by multilateral development lending, T waste to vital economic assets, destroy- convert or destroy large areas of forest for ing fragile soils, and driving wild species to projects of questionable economic worth. extinction. In industrialized countries as well, forests are imperilled by pollution and con- Robert Repetto, Director of WRI's economic tested by conflicting uses. Warnings have research program, and an international group reached us, both from satellite images that of seven collaborators, including researchers in show forests in remote areas now much China, Brazil, and the Philippines have docu- smaller than reported in official statistics, and mented these policies and the ensuing ecologi- from desperate forest dwellers protecting with cal and economic losses. The Forest for the Trees? their lives their diminishing legacy. Scientists Government Policies and the Misuse of Forest have drawn for us the connections between Resources, the first full report of their findings, deforestation and genetic impoverishment, eco- examines the situation in ten countries on four nomic deprivation, and climate change. continents. It shows that instead of an inexor- able conflict between economic development What can be done to protect and use these and forest conservation, there are ready oppor- resources more wisely? Many have attributed tunities to promote both by improving current the loss of forests in the Third World to relent- government policies. less pressures from growing populations, land- hungry small farmers, and rural households in Consider just a few of the findings: search of fuel wood and forage. These pressures are real, but a different and powerful force is • Between 1979 and 1982, Indonesia's often overlooked. government sacrificed over $2 billion dollars of potential forest revenues to logging con- In many countries, government policies lie cessionaires and allied interests, fueling a behind the wastage of forest resources. Tax in- destructive timber boom. centives and credit subsidies guarantee large • In the Philippines, over these same years, profits to private investors who convert forests forced forest-based industrialization gave to pastures and farms, whether or not these competing uses are sustainable. Governments rise to inefficient mills that lost $500 million allow private concessionaires to log the nation- in potential resource rents. al forests on terms that induce uneconomic or • Generous tax and credit incentives created wasteful uses of the public domain. Massive over 12 million hectares of large cattle public expenditures on highways, dams, plan- ranches in the Brazilian Amazon, even Vll though the typical ranch could cover less increased attention to and investment in the than half its costs without these subsidies. forest sector. Policy reform and increased development effort go hand in hand. Unless • On more than 100 million acres of national policies that induce forest destruction are forests, the U.S. Forest Service consistently changed, investments in reforestation, water- produces and sells timber that isn't worth shed management, and wildlife conservation the direct cost of harvesting and marketing will be overwhelmed. it, sacrificing potential recreational and wildlife benefits. This report also extends the findings in Robert Repetto's recent WRI studies on the Painful facts like these and others are found harmful effects of large government subsidies in The Forest for the Trees? Government Policies to pesticide sales and irrigation projects (Paying and the Misuse of Forest Resources and the much the Price: Pesticide Subsidies in the Developing longer book that will present the full country Countries and Skimming the Water: Rent-Seeking case studies (Public Policy and the Misuse of For- and the Performance of Public Irrigation Systems). est Resources, Cambridge University Press, fall In these and related studies, WRI has com- 1988). They have far-reaching policy implica- mitted itself to finding and publicizing practical tions. Indeed, they shift the debate over how policies that promote more sustainable use of to manage forest resources for development. the global resource base. No longer can governments justify forest destruction as the unfortunate but necessary road to economic development. If the policies Financial support for this study was provided that have sacrificed so much of the world's by the United States Agency for International forest estate are themselves costly and the Development, the World Bank, and the World alternative uses they promote are often uneco- Commission for Environment and Develop- nomic, then creating a better policy framework ment. WRI's overall program on tropical forests is the first step toward sustainable resource has received support from the W. Alton Jones management. Foundation, the Andrew W. Mellon Founda- tion, the Jessie Smith Noyes Foundation, the David and Lucile Packard Foundation, and the The policy recommendations spelled out in Pew Charitable Trusts. To all these institutions, The Forest for the Trees? Government Policies and we express our deep appreciation. the Misuse of Forest Resources complement those implicit in Tropical Forests: A Call for Action (The James Gustave Speth World Resources Institute, The World Bank, and the United Nations Development Pro- President World Resources Institute gramme, 1985), which identified the need for Vlll I. Overview hreats