amanah saham pahang

Economy and Environment Program
for Southeast Asia
Tanglin PO Box 101
Singapore 912404
Phone:
Fax:
E-mail:
Web site:
(65) 6831-6854
(65) 6235-1849
eepsea@idrc.org.sg
www.eepsea.org
Pricing Policies
for Malaysia's
Forests
EEPSEA POLICY BRIEF' No. 2003 - PB2
The Economy and Environment Program for
Southeast Asia (EEPSEA) was established
in May 1993 to support training and
research in environmental and resource
economics across its 10 member
countries: Cambodia, China , Indonesia,
Lao PDR, Malaysia, Papua New Gu inea ,
the Philippines, Sri Lanka, Thailand, and
Vietnam. Its goal is to strengthen local
capacity for the econom ic analysis of
environmental problems so that .
researchers can provide sound advice to
policymakers.
The way In which timber companIes pay to use
forests can have a profound effect on sustainable
forest management. A well-designed pricing policy
can help ensure the efficient utilization of forest
EEPSEA Policy Briefs summarize the key
results and lessons generated by EEPSEAsupported research projects, as presented
in detail in EEPSEA Research Reports.
resources, a long-term sustainable harvest and
mInImum ecological and environmental damage.
Highlighting this, a new report shows that
Peninsular Malaysia's pricing policy neither
produces optimal financial returns for the
government nor provides the best incentives for
sustainable forestry practice.
EEPSEA Policy Briefs and Research Reports
are available online at
http://www.eepsea.org.
-+
A summary of EEPSEA Research Report 2003-RR2, Forest Pricing Policy in Malaysia, by
Awang Noor Abd. Ghani and Mohd. Shahwahid Hj. Othman. Contact: Awang Noor Abd.
Ghani, Department of Forest Management, Faculty of Forestry, Universiti Putra Malaysia,
43400 UPM Serdang, Selangor, Malaysia. awang@putra.upm.edu.my
The most striking result was th~
~ The
study was carried out by a
investigations by looking at the
compa r tments in Pahang and 25
team of researchers from the
current pricing policy framework in
compartments in T erengganu. The
Universiti Putra Malaysia (Awang
Peninsular Malaysia . The system
sites in Pahang had relatively high
Noor Abd . Ghani, from the
typically comprises a mix of volume-
royalty and prem i um charges, each
Dep artment of Forest Management,
based and area-based charges, the
delivering rough ly equal shares of
and Mohd . Shahwahid Hj . Othman,
revenue from which provides a
revenue. The Terengganu sites had
from t he Department of H ospitality
significant source of public funds in
lower royalties and premiums, with
& Recreation, Faculty of Economics
some states. The area-based forest
royalties providing the larger share.
and Management). They looked at
charge is known as a p r emium and
concessions in several logging areas
is levied for the right to harvest a
Forest Figures
and found that the introduction of
specifi c concession area granted
The reseal"chers started their analysis
a tender system for logging
under a permit or a license.
by estimating the value of the t imber
concessions would be the best way to
Volume-based timber fees include
in each area - its potential s t umpage
create an efficient market for
royalties and a silvicultural cess.
value. This is the total value that
logging rights . This, in turn, was
Royalties are based on the actual
could be realized if a forest area is
predicted to improve both the
volume of logs extracted from t he
logged through clear fe ll ing. Since
competitive performance of logging
forest. The cess has been collected
clear fe ll ing is not allowed in many
companies and the equitable
in all states since
allocation of fO]'estry revenue.
aloe designated for forest
maximum . They used a residual
r ehabilitation and development.
value technique to calculate
The Need for BeHer Pricing
Rights to harvest timber from
stumpage values. I n t his approach,
The study was carried against the
logging concessions are allocated
the value of standing timber is the
background of recent changes in
using open
difference between the price of the
Malaysia's forest industry. The
through negotiation or u n der long-
products that co u ld be made from it
economy has seen a significant shift
term con t racts.
and the stump - to - market processing
0'"
1973; its revenues
closed tendering,
towards manufactu ring while
a r eas, this value is a hypothetical
costs (including margins for profit
agriculture has been beset with
Revenue vs Value
and risk). Data on log prices came
labour shortages, rising wages, and
The research team then looked at
from Amanah Saham Pahang - a
increasing competition from other
how much revenue this system
state-based economic development
agency and from previous surveys.
land uses. The future of the fO"estry
generates and whether this
sector in Peninsular Malaysia is
,"epresents an opti mal value. The
open to question and the need for
,"esea r ch was carried out on logging
potential stumpage values ranged
sustainable management more
sites in the states of Pahang and
[mm
important than ever. In light of
Terengganu. These states were
MYR 42,532 (USD II, I92) pe"
this, the researchers decided to look
chosen because of their importance
hectare . Although the estimates of
at forest pricing policy to see how it
as log producers. their broadly
potential stumpage value varied by a
could contribute to improving the
similar forests and their proximity
factor of six, the researchers found
The researchers found that
MYR 7,078 (USD 1,862) to
overall economic and environme n tal
to each other . Through consultation
that the average values in the two
performance of the sector.
with state forest offices, research
states were not much different
sites were chosen in 27 logging
(MYR 24,161 [USD 6,358] in
The researchers began their
EEPSEA Policy Brief .
No. 2003 • PB2
small size of government revenue
Pahang and MYR 24.503 [USD
85% in Pahang and 65% in
relevant data from all logging
6,448J in Terengganu).
Te r engga nu.
compartm e nts , so only figur es for
Much logging in Malaysia is based
From th is, th e authors
conclude tha t the amount of revenue
selected co mpa rt ments were
on the Select ive Management System
forgone due to th e SMS logging
calcu lated ),
(SMS), which prohibits the harvesting
regulation s is low .
was the sm all size of governm e nt
of trees below a certain diameter .
The m o st striking result
revenue in most a r eas , relative to the
Thus, the amount of potential
A Bad Deal for the Government
prescribed realized r ent (i. e. the
stumpage value of the tr ees on a site
T h e researchers then investiga ted how
value of the trees that could be
is split between the stum p age value of
much revenue the government is
harvested - and so the hypoth etical
those trees be low the cutting limit
obtaining from th e com p a n ies
financ ial value of the site) . This
(the prescribed silvicultul'al rent) and
operating logging concess ion s.
ranged from 0.1% to 35.4% with an
those above th e cutting limit (the
Est imates of government r evenue were
average of about 10%.
prescribed realized rent). In both
obtain ed from d ata on th e roya lty.
slates, the major ity of the st u mpage
s ilvic ultural cess, and pre mium s. (Th e
investigated wh at kin d of charging
value was prescribed reali se d r e n t -
resea r c h e r s were unable to obtain th e
framework would provide th e
In ligh t of th is , th e researchers
government with better returns. T o
do this they invest igated how
alternative royalty sys tem s might
Production Forest
(Timber Producthm -
Perm~nenl fINest rst~tt)
~
pe r form. They assu med th a t
concessionaires would aim fo r a
I
Short·term Concessiona ire
(l icensee)
1
I
I
Allocation or
Long-term Concessiona ire
(lTC)
1
tendering
. _.. _._._ .. _......
: Sells the area to
,
other logger
,
~~~-~~-~~
1
-
.
competit ive bidding system, the
I
S'.lIing I Buying
......1.....
:
Th ey found that under a
~-
(Stumpage market)
The next togger
sells to other
: logger until profit ,
margin is
'
~ ~~ !"2rJi~~ _ _ ~ ..
:
I
Pays royalty
Pays cess
Pays premium
Tendering
average bid price for logging
concessions would be MYR 19,100
(USD 5,026) per hectare. Unde r a
I
_._ .. _"
,
I
base th e ir bid on prevailing market
prices and h arvesting tech niques .
Conducts own logging.
contrac t oul or
tendering the area
'
on discu ss io ns with forest
practitione l's in the field) and th en
Rerenue
1
_._.,
, ~~.----~-- - ,
Pays royatty
Pays cess
Pays premium Of tender
price
I
Allocation or
tendering
Conducts own togging
t)r contract out
profit margin of 30% (a level based
I
Pays royalty
Pays cess
Pays premium or tender price
I
State Revenue
Fores t AlIOC.1riOll System in Penin sular Malaysia
system based on fixed roya lties and a
premium equal to the estimated
p rescdbed realized rent, the average
amount be paid by a concess ionaire
would be MYR 16.278 (USD 4.283)
per hect a re .
A BeHer Deal Through
Tendering
T he study shows that the govel'nment
Pricing Polici es for Ma laysia's Forests
is curren tly coll ecting a relatively
system pegged to the hypothe tical
requ ires full informatio n on timb er
small share of the total possib le
value of logging sites .
vol umes, log p rices and loggin g
commercial value of Peninsular
Competitive b idding (either
costs an d the absence of coll usion
Malaysia's forests. D rawing on
through open or sealed bid s) is a
among bidde r s . If th ese cond itions
findings fr om other studies, the
good method for granting fo r est
exist , or can be created, there is
authors warn that th is could
concessions because it can capture
great potential t o us pricing pol icies
contribute to rapid d e·ple tion of
sign ifi cant revenue fo r the
t o improve the management o f
forests, wasteful extraction p ractices,
government, el imina te rent seeking
Malays ia's fo r ests .
jllegal logging, and a bias against
behaviour by co n cessionaires,
conservation. They recomme n d that
improve the transparency of timber
the government switch t o a
disposal, and create incentives for
competitive bidding system or a
efficie n t timb er harvesting.
fixed r oyalty and premium price
work we ll , however, such a system
To
3.8 MYR
I
USD
EEPSEA is an international secretariat administered by Canada's
International Development Research Centre (IDRC) on behalf of EEPSEA's sponsors:
IDRC ~ CRDI
International Development
Research Ce ntre
Centre de recherches pou r Ie
developpement internationa l
Royal
Danish
Ministry
of
Foreign
Affairs
DAN IDA
1+1
Canadian Intern ational
Devel opm ent Agency
Agence canadienne de
developpement international
~
.Sida
Swedish International Development
Cooperation Agency