Reforestation Incentive Systems for Tree Plantations in the Tropics

Abstract

Incentive systems for tree plantations are an important instrument to create renewable resources through credible mechanisms to encourage private landowners to engage into the tree planting business. Experiences in Latin America provide some of the most promising examples on how to guide and promote land-use changes for tree-growing purposes. Convincing benefits such as job creation and tax incomes must be combined with budgetary and good governance commitments. Negative experiences from Asia illustrate certain shortcomings that should be avoided. Lastly, an outline for renewed and modern commitments to an incentive system for tree plantations will have to include the following stages: Stage 1, consulting established laws, policies, and national forestry strategies; Stage 2, updating and/or catalyzing the national reforestation program; and Stage 3, proposal for the creation of a trust for the reforestation incentive program.

Adapted from Castañeda (2013)

Annex 1: Assessment of Forest Incentive Programs Described in This Analysis

	Evaluation criteria	Indicators	Classification and reasonsa
Chile	Program established date	D.L. 701 from 1974 to 1994	Very efficient program, first financial instrument since 1934, very active participation from the private sector, decision by the timber industry to substitute forest timber for plantation production, participation of the private banking sector, long periods for payments and benefits, political commitments, exemption from forest taxes, variety of types of incentives, strictly commercial plantations. Right to private property proportion of the % of plantation area to the total forest area increased considerably over the years. Good job creation. This is the second most important economic activity of the country. Solid technical and administrative capacity of forest authorities. Negative aspect from 1974 to 1994: the forest incentive policy only favored large enterprises rather than smallholders or businesses
	Continuity and acceptance of the program	Forest Law (1974), with extensions through 2012 and beyond
	State funds allocated to the program (USD)	1976–2000, $162 million (USD)
	Non-state investment generated by the incentive	Exportations have increased 30 times over 18 years. In 1995, over 400 forest products and derivatives generated income of 2.3 billion dollars. In the year 2000, the forest sector generated income of $2.35 billion; exportations in 2001 were for $2.21 billion. This sector generates some 100,000 jobs
	Sector contribution to GDPb	In the year 2000, the forest sector contributed $3.2 billion (USD) to the GDP (around 2 %)
	Reforested area (thousands of ha)c	1,707 (1990); 1.36 (2000); 2,062 (2005); 2,384 (2010)
	Reforestation rate (ha/year)	61,300 (1990–2000); 61,400 (2000–2005); 64,000 (2005–2010)
	Percentage of total forest area (%)	11.4 (1990); 14.9 (2000); 16.5 (2005)
Uruguay	Program established date	Forestry Law #15939 from December 1997	The program is very efficient; it has adopted positive aspects from the Chilean experience. High political commitment to the activity, clear interest from the start in developing the forestry industry. Facility for favorable loans or credit for several years via state banks, existence of credit lines for investment in the sector. Large reforested area (ha/year) and mainly with economic ends. Private sector initiative in planting trees without economic resources from the program. Plantations make up a high % of forests. Law 15939 for exempt status. Respect for private property. Negative aspect: High emphasis on large producers and little participation of smallholders
	Continuity and acceptance of the program	Program widely accepted by private owners, although the majority already plants with their own resources or credit from private banks. First plantations were established in 1987
	State funds allocated to the program (USD)	Forest fund with annual contributions equivalent to the cost of establishing 10,000 ha/year
	Non-state investment generated by the incentive	$1.3 billion (USD) (2011); $1.12 billion (USD) (2012)
	Sector contribution to GDP	1.0 % (2006) as part of the 6 % contribution of agriculture to GDP
Costa Rica	Program established date	1979: Forest Promotion Certificate (CAF)	Efficient program run only at the level of smallholders; administration independent from the state forest authority; capacity to raise external funds for the trust, program implementation in cooperation with agricultural centers, municipalities, and NGOs. Use of the “regent,” high-level state commitment to program objectives. Evident national culture of conservation and protection of natural resources and biodiversity. Use of various types of “forest promotion certificates” including advance payments. Negative aspect: reforestation in small plots and not on a commercial scale
	Continuity and acceptance of the program	Forest Law #7032 was passed in 1986, FONAFIFO in 1990
	State funds allocated to the program (USD)	3.5 % of selective taxes on fuel and other income from forestry taxes; $14 million (USD) for PES; $46.4 million (USD) for 1988–1995
	Non-state investment generated by the incentive	$122 million (USD) (FAO, 2005)d
	Sector contribution to GDP	6 %, including agriculture, silviculture, and fisheriese
	Reforested area (thousands of ha)	295 (1990); 203 (2000); 222 (2005); 241 (2010)
	Reforestation rate (ha/year)	−9,000 (1990–2000); 4,000 (2000–2005); 4,000 (2005–2010)
	Percentage of total forest area (%)	0.1 (2000); 0.2 (2005)
Indonesia	Program established date	Forestry Law 41/1999	The program had several shortcomings: too much centralization of the program from the start, followed by decentralization, but states did not demonstrate the technical and administrative capacity to implement the program. The program was centralized once again, and the government seized that opportunity to do “special favors” with the program funds. The literature reports a high level of corruption, to which the program ultimately succumbed. The government had more interest in managing natural forests and leaving aside possible tree plantation lands for African palm production. Significant certified plantation, but with some losses. Negative aspects: Significant corruption and loans with considerable amounts for few companies. Encroaching border of “African palm” endangers forest land
	Continuity and acceptance of the program	Little continuity and easily reversible changes
	State funds allocated to the program (USD)	From 1989 to 2009: $5.8 billion (USD)
	Non-state investment generated by the incentive	The sector contributes approximately $21 billion (USD) to the country’s economy and generates 3.7 million jobs, equal to over 4 % of the national workforce
	Sector contribution to GDP	Entire forestry/industry sector 3.5 %
	Reforested area (thousands of ha)	2,290 (1990); 3,672 (2000); 3,699 (2005); 3,542 (2010)
	Reforestation rate (ha/year)	5,000 (2000–2005)−30,000 (2005–2010)
	Percentage of total forest area (%)	1.9 (1990); 3.1 (2000); 3.8 (2005)

1. ^aClassification of a program as “successful” or “efficient” is in general terms and despite certain difficulties within the programs over their years of existence
2. ^bData were sought for this contribution prior to the incentives, but information was not found; it is assumed that the cited data are only after the establishment of the program
3. ^cNational data but complemented with statistics from FAO evaluation of global forest resources from 2005 to 2010
4. ^dFAO, 2005. Evaluation of global forest resources
5. ^eEdmundo Portolés; January 2012; Costa Rica: Economic Structure