1. Historical background of forest plantation development

1.1. Historical resume

Forest plantations are not new in concept and practice for Malaysia. However, interest in forest plantations lacked the required impetus in the distant past. It has vacillated quite a bit, influenced on one side from fear of impending timber deficits in the future and poor results from planting trials. Up until the 1970s, Malaysia was endowed with vast areas of natural forest. Under such superfluity it was considered unnecessary and unnatural to convert natural forest into unstable monocultures.

A brief history of forest plantation trials can be found elsewhere (Appanah and Weinland 1993, Wyatt-Smith 1963). The most notable events in the history of plantation forestry in the country, especially in Peninsular Malaysia are summarised in Table 1. The situation in Sabah and Sarawak are more straightforward, and less illustrative to the changing tides in forest management that Malaysia underwent. Therefore, this chapter will mainly highlight the events on Peninsular Malaysia, and draw on the principal events in plantation development in Sabah and Sarawak

Like with the management of natural forests, plantation trials were first begun in P. Malaysia, and then subsequently in Sabah and Sarawak. Records of planting forest species date back as far as 1880, when concern for loss of desired species was expressed (Hill 1900). There was concern over the rapid destruction of the taban forests and it was also becoming increasingly difficult to obtain railway sleepers. This was the gutta percha era when the nyatoh taban (Palaquium gutta) trees were heavily felled for gutta percha which fetched a very high price. Interest in plantations of gutta taban caught on. Wildings were collected and planted in regular plantations. At Ayer Kroh, Malacca, 500 gutta percha plants were planted (Hill 1900). A scheme for planting hardwood trees in Sungai Buloh Forest Reserve was also initiated. All mature timber were removed and the hardwood species were line planted. About this time rubber production became the new excitement. In 1901, 180 acres of regular plantations of rambong (Ficus elastica) and para rubber (Hevea brasiliensis) were started in Pondok Tanjong, Perak.

Besides planting of heavy hardwoods, afforesting mining land and BRIS soils and reforesting forest lands were also of high priority. In 1898, the areas around Pekeliling (Circular Road), Kuala Lumpur, were planted with species such as Casuarina equisetifolia, Eugenia grandis, Dryobalanops aromatica, Swietenia macrophylla, Hevea brasiliensis and Fagraea fragrans. For example, the clumps of trees of C. equisetifolia and F. fragrans found on the Selangor Golf Course in Kuala Lumpur are remnants of plantings done between 1896 and 1901. Forest planting was limited to trials of extremely valuable exotics such as Eusideroxylon zwageri and Hevea brasiliensis, and local timbr species such as C. equisetifolia, F. fragrans, Intsia palembanica and Palaquium gutta.

After a while all these planting fell out of favour. Plastics replaced gutta percha. Rubber planting was taken up increasingly by private planters. The reforestation work, experimental in nature, did not perform well and the results were considered not commensurate with the expenditure. Nevertheless, some planting trials persisted here and there. Plantings of Intsia palembanica and Neobalonocarpus hemeii were continued. Besides these, species trial with teak was also reported. They were first planted by rubber planter in Langkawi Island (Annual Report 1903).

Table 1 Summary of the most notable events in the history of plantation forestry in Peninsular Malaysia

Year Events

1877 Rubber (Hevea brasiliensis) planted in Kuala Kangsar

1884 - 1900

Small trials of exotics started

1900 - 1913

Regular plantations of gutta percha (Palaquium gutta) and rubber (Hevea brasiliensis); Line planting of chengal (Neobalanocarpus heimii) in forest reserves; Experimental planting in abandoned mining land

1927 - 1941

Forest Research Institute set up in Kepong, and experimental plantations in lowlands were started; Plantation experiments in Cameron Highlands (ca. 1,500 m asl); Teak planted in Langkawi Island

1945 - 1950

Experimental teak plantations in north-west Malaya; Plantings in forest clearings resulting from distrubances during the war.

1952 FAO Eucalyptus study tour in Australia, and extensive species trials with Eucalyptus spp.

1954 - 1958

Species trials with Pinus spp. With potential pulp value were initiated; Experimental plantations were started on tin tailings; Taungya system tried using Gmelina arborea in tobacco farms; Line plantings of kapur (Dryobalanops aromatica) were established in Kanching.

1959 - 1962

Large scale experimental planting with Pinus caribaea and P. insularis in the lowlands. Pinus spp. From Central America and Populus spp. From Kenya were also tested; Experimental plantings in shifting cultivation areas; Line planting and small scale plantings of secondary growth of Dryobalanops aromatica, Eusideroxylon zwageri, Flindersia brayleyana, Fragraea fragrans, Khaya spp., Pentaspadon officinalis, and Shorea macrophylla.

1963 - 1965

Bigger trials of Pinus spp. were conducted in Selangor.

1966 - 1970

Under the UNDP assistance, pilot plantations of quick growing industrial tree species were initiated, mainly for production of pulp. Plantations of pine were expanded in Selangor, Johore, Pahang, Negeri Sembilan and Kedah; Shorea and Dryobalanops spp. were planted under the Taungya system in Negeri Sembilan. Jelutong (Dyera costulata) plantations were expanded in Sungei Buloh F.R.

1971 - 1976

Mixed plantations of Pinus and Araucaria were tested on poor soils in Bahau; Enrichment planting using indigenous species became an important forestry practice.

1981 - 1992

The Compensatory Forestry Plantation Project through ADB loan was initiated. Quick growing tropical hardwoods like Acacia mangium, Gmelina arborea and Paraserianthes falcataria were chosen for producing general utility timber. The Compensatory plantations came under review and the planting for sawlog production has been put on hold. Planting for pulp production continues.

1992 - 1996

Planting of teak beagan earnestly event in wetter sites; Sentang (Azadirachta excelsa) is also given importance as a plantation species.

These were the main developments and by the end of 1912 there were 922 acres of regular plantations and 4,828 acres were line planted under shade. By that stage results from improved felling in natural forests were available. These suggested that it was still better to improve the crop in the natural forest than establish regular plantations (Annual Report 1912). As a result, no further increase in plantations occurred and in the Annual Report (1920) it was noted that the area of regular plantations stood at 869 acres.

The Forest Department did most of the plantings but the records were meagre. Initially exotics were tried but subsequently local species were tested in the belief that they gave better growth. Foxworthy (1930) recorded that some 130 species were tested in all, but a high proportion of them yielded poor results. Overall, the plantings were haphazard, initiated by individuals, and scattered throughout the country. Many of the trials were lost when the officers got transferred. This was dubbed the “plant and forget” era (Oliphant 1932).

These disappointing results led to a major development in forestry in Malaysia. It was decided that a central permanent experimental station should be set up in Kepong. It was recommended that further planting should be initiated only after the species and methods have been tested in Kepong. The experimental plantations were started in Kepong in 1927. While more species were added to the trials in Kepong, much of it remained experimental. The emphasis was mainly on high quality timber species which have a long rotation. These would yield definitive results only in the decades after 1970. In the early 1930s, the position on planting did not shift as the researchers were not in favour of planting.

Despite the reservation on planting occasional experimental trials were conducted. In 1931, high elevation plantations were begun in Mentigi, Cameron Highlands to test out exotics (Annual Report 1933). In 1936 large scale planting experiments were carried out in Rantau Panjang and Bukit Sungai Puteh Forest Reserves, Selangor. In 1937, trials were begun to establish commercial pole crops on denuded areas in Selangor and on the poor BRIS land in Kelantan. The latter were totally unsuccessful. During the Japanese Occupation (1942 - 1945) many areas in Forest Reserves were cleared for farming. After the war there were some efforts to line-plant these areas. Taungya system was also tried. Progress was made but the survival rate was very poor. In the early 1950s, extensive plantations were established in devastated areas in Malacca, Selangor and Perak. The experimental teak plantations in north-west Malaysia were stepped up to test provenances from Java and Thailand (Wyatt-Smith 1961). This was also the period when many exotics were tried on an experimental plantation scale to gauge the costs. The species included some of the fast growing species like pines, yemane, and eucalypts. The pines and eucalypts were planted in the hills and lowlands. The pines were also tried on lalang infested areas and tin tailings.

In the early 1960s work still continued on trials of more pine species, especially the ones from Central America. Selection of elite trees of pines and their vegetative propagation were initiated. Another significant development then was a plan to set up a pulp and paper mill in Peninsular Malaysia. This resulted in a large programme for the pilot plantation of quick growing industrial species, carried out with UNDP assistance. Several species of pines and other conifers were grown on a pilot scale for pulp production. Plantations were started in several states, including the setting up of seed orchards. The early results appeared promising with Pinus caribaea and P. merkusii which had increments of above 21 m3/ha/year. Their pulping properties were found to be suitable for paper manufacture. But before the viability of such plantations could be ascertained the planned paper mill was scuttled. Thereafter interest in raising plantations for pulp production diminished as well.

In the early 1960s, following sweeping changes to land-use policy, forestry became confined to poorer soils and in the hills. With these poorer forests the old management systems were revised and planting was taken as an option to remedy logged sites which were poor in regeneration. The Forestry Departments embarked on Enrichment Planting under the Intensive Forest Management Scheme (Ismail 1964). Planting with potted seedlings and wildings of mainly indigenous species was carried out in several states, especially Selangor, Perak and Kedah. Such plantings dominated the Departments’ activities for most of the 1970s. The results were however dismal despite the high costs (Tang and Wadley 1976). Survival was moderate to low. Growth was good provided the canopy was kept open for a relatively long period. The species used were not necessarily the best for the purpose. Thereafter enthusiasm for expensive enrichment planting faded and is now employed to a minor degree only, to improve highly degraded sites.

As the 1980s approached most of the State Forests were converted and forest resources were limited to the Permanent Reserves only. These were much poorer in stocking. But meanwhile the industries had been developed for a much higher capacity than the natural forests would be able to sustain. This led to speculations that there will be a timber shortage in the future (Chong 1979). This led the Forestry Department to consider planting general utility timber under the ‘Compensatory Plantation Project’. The compensatory plantation was to cover 188,200 ha by the year 1995 and was supported by an Asian Development Bank loan. The plantations were planned to produce general utility timber of small saw log dimensions for the domestic market in 15 year rotations. For the purpose, quick growing tropical hardwoods such as Acacia mangium, Gmelina aroborea, Paraserianthes falcataria and Eucalyptus camaldulensis were identified. However, due to difficulty in procuring planting material, the majority of the areas were planted with mainly Acacia mangium because seed was easily available. The species has not proven to hold its initial expectations. Growth has remained below expectations, and many of the trees appeared to be susceptible to heart rot damage in some sites (Hashim et al. 1990). Overall, its performance for sawlog production remained dismal (Weinland and Zuhaidi 1990). As a consequence, additional planting of the species for sawlog production has been halted since 1992. But plans for planting the species for pulp production are being pursued on a big scale with development of one pulp and paper mill in Sabah and additional ones planned in Sarawak and P. Malaysia.

At present the Forest Department is looking for alternative species for forest plantations. Since the mid-1980s rubber wood has become an important source of timber for furniture production.

At present the source of rubber wood is mainly from replanting schemes. But the species has also been planted on a trial basis exclusively for timber production only.

Besides rubber wood, other promising candidates have also been tried out on larger scale. This includes teak (Tectona grandis) and sentang (Azadirachta excelsa). Teak was confined to the drier north-west of P. Malaysia before. But nowadays, it is being planted on a small scale in the wetter southern sites as well. Teak seems to grow just as well, the only drawback being the absence of close growth rings and therefore veneer quality may not be obtainable. The other species that has brought some excitement in the plantation scenery is sentang. This too has shown good growth rates in the early years and is mostly free of pests. The plantings have to mature somewhat before their true value can be ascertained. A few other species that are also being considered for planting at the moment include Khaya ivorensis and K. senegalensis, and to a lesser extent Swietenia macrophylla. Some of the dipterocarp species also appear to be good and are being investigated as potential candidates. The reason for the new spate of interest in planting timber species is partly because of the rising labour costs in the country. As a consequence many rubber and other cash crop plantation owners are looking for alternative and less labour demanding crops. Timber trees fit that label neatly.

For Sabah and Sarawak the gestation period between research to policy and implementation was usually shorter, taking off from experiences in P. Malaysia. The path to implementation was therefore less convoluted and more or less direct. In Sabah plantations were not considered important in its early forestry history although there were some attempts to test out a few species on an experimental basis. In the 1970s the planners concluded that more should be done for forestry development. Unlike with P. Malaysia, Sabah still lacks the momentum to develop its economy based on the industrial sector.

Forestry remains in the forefront of its economic activity and the planners realized something must be done if the State is to maintain its timber productivity. Moreover forestry appealed to the State as it provides the kind of rural development which is more appealing to the people, considering their lifestyle. SAFODA, the State’s Statutory Bodies spearheaded the reforestation program in Sabah. Thereafter, relatively rapid progress was made and by 1995 almost a 100,000 ha of plantations have been developed mostly through some of the statutory bodies responsible for rural development and reforestation (Anuar 1996). Both fast growing hardwoods and high quality timbers have been planted. Rattan (Calamus manan) has also been planted as an additional crop. Besides these developments a paper mill was set up in the 1980s and large areas are being planted up with fast growing pulp species.

In Sarawak too, there never was an urgency to go into plantations, considering the large areas of natural productive forest in the State. Nonetheless, there was some concern regarding the large areas of forest land that have become degraded as a result of shifting agriculture. In this regard some experimental trials were started in the early part of the century, especially with species that had agroforestry potential (Fahlman 1975, Lee and Lai 1981). In the mid-1960s there were some attempts to test the potential of pines for reforestation purposes. In the 1970s, fast growing exotics were investigated (Kendawang 1996). Also included were some long rotation species which yield high quality timber. But all said, there have been relatively few plantations in Sarawak although the position is likely to change very rapidly from now on.

1.2. Government policy

Forest plantations have long been recognized as an essential part of the strategic development plan for the suitable management of forest resources in Malaysia. This strategy dates back to the beginning of the century when efforts were made to test out both indigenous and exotic species in the country.

The Government is cognizant of the international debate on tropical rainforests and the concerns over their rapid degradation and loss. Malaysia’s rainforests are among the most bio-diverse forests worldwide and therefore their management is critical for the conservation of a vast number of plant and animal species. Hence, sustainable forest management has become the ‘buzz’ word for forest management. Under the Seventh Malaysia Plan, the Government has clearly expressed its commitment to protect the environment and ecological services by adhering to the principles of sustainable management. This would require that the annual felling rate is reduced by at least 12% over the 5 year period.

Malaysia is currently producing about 35 million m3 of sawlogs annually. With implementation of sustainable practices the sawlog production is expected to decline to about 27 million m3 by the year 2000. This is much below the total installed processing capacity. As the timber industry is already having difficulty sourcing timber the decline in production would affect the downstream timber industry considerably. New sources of wood like rubber plantations would assist marginally but most of its wood would be mainly used up for furniture production, and the need for pulp, utility timber and high quality timber would always remain unfulfilled unless appropriate measures are taken.

To make up for the impending deficit in timber production, plantations are to be developed. Besides plantations degraded forest land would be reforested and under-stocked forests would be line planted. There is an estimated 153,900 ha of degraded forest land in the country. The species to be planted would be of three different classes.

1.2.1. Wood for pulp and paper production

One pulp and paper mill is already in operation in Sabah (SFI), but it hardly meets the local demand for paper, and none for newsprint. Additional mills are being planned. For pulp production Acacia mangium has been identified as the principal species. Another species would be Paraserianthes falcataria. These would be planted in large-sized plantations so sufficient amount of pulp is produced in one site in short rotations of about 6 - 8 years. Such schemes would be developed in State lands.

1.2.2. General utility timber

There is a huge demand for general utility timber for industrial purposes. They go into cores of plywood and make up the major constituent of fibreboard, particleboard, interior construction wood, and other low grade use. Several species have been identified for this purpose and include Shorea spp. (Light Red Meranti group), Hopea spp., Dryobalanops spp., Endospermum malaccense, Hevea brasiliensis etc. Many of these species would be included in reforestation

and enrichment planting schemes within the Permanent Forest Estate. The species would have rotations of about 30 - 35 years.

1.2.3. High quality timber

High quality timbers are grown for veneers, panelling, furniture etc. The species identified for such needs include principally teak (Tectona grandis) and sentang (Azadirachta excelsa). Additional species include Araucaria spp., Dyera costulata, Swietenia spp., Khaya spp. etc. These would be grown both in small holdings and larger estates under full plantation conditions. Although some of the plantings would be located within the Permanent Forest Estate (PFE) most will be in the State lands and in private holdings. This is to ensure the PFEs are not converted. The rotations under full plantation conditions would be kept short, at around 15 - 20 years.

In addition, the rapid industrialization in the country has created a labour shortage. This has resulted in some agricultural sectors becoming less viable like the rubber plantations. Many small holders have neglected these plantations. Many small rubber estates are also beginning to experience labour shortage. Under these circumstances low-labour demanding forest plantations are being explored as a potential alternative to rubber and other labour demanding forms of agriculture. There are trials to plant timber-latex clones through replanting activities. These clones will be latex producers that will also maximize timber production.

In Sabah and Sarawak timber plantations are being promoted for social development as well. Large tracts of forest lands have become degraded as a result of poor shifting cultivation practices. In these remote sites traditional agricultural cash crops like oil palm and rubber are not attractive to the lifestyles of these people. In contrast timber plantations provide more attractive options.

Besides the above, fuller utilization of timber products is being promoted so there will be less pressure on the forests. Towards that, downstream processing of wood wastes into valuable products such as flake boards, particle boards and charcoal briquettes are being developed. Reduced forestry wastage and increased efficiency during processing would help ameliorate timber shortage, and also be environmentally less damaging. R&D efforts will be directed towards putting more efficiency into reducing wastage.

Malaysia aims to maintain a forest cover of at least 50% of the land area. In addition, it is committed to managing the Permanent Forest Estates on a sustainable basis. For achieving sustainability several policy options have been identified. They include Environmental Impact Assessments (EIAs) for forestry activities, subsidies for setting up forest plantations, rehabilitation of forests, and expanding the network of protected areas to include more ecosystems and thereby protecting the huge biodiversity of the Malaysian forests.

In summary, the objectives of the plantation programme would include:

To supplement the increasing timber requirement in Malaysia; To increase productivity of degraded forest lands;

To alleviate rural poverty through implementation of social forest plantation programmes;

To reduce excessive loss of foreign exchange by increasing production of raw material for the timber industry;

To diversify into low-labour demanding crops timber plantations offer an excellent opportunity with the increasing shortage of labour in the country; and

To introduce timber plantations which with their higher productivity would reduce pressure on the PFE, so the latter can be managed on a sustainable basis.

2. Current status of forest plantation development

2.1. Area, location, species and ownership

Considering the manner in which forest plantations have developed so far, their current status may appear to be an eclectic mixture of species with different management objectives, sizes, species, locations, and ownership. The best way to comprehend the current status requires that the three areas, P. Malaysia, Sabah and Sarawak are first treated separately. As mentioned earlier, most of the prospects and constraints of plantations took place first in P. Malaysia. The States of Sabah and Sarawak were in a position to pick the best options suited for their specific needs following the trials and the experiences gained in P. Malaysia.

2.1.1. Peninsular Malaysia

The tree plantations in P. Malaysia can be divided into three principal types. There are the specialty species like teak which was planted in the northern States of P. Malaysia formerly. Into this category would fall sentang which is now being seriously contending as another species in the same class as teak. Next are the pine plantations which were originally intended for producing pulp. In the third category belong the general utility timber plantations with species like Acacia mangium. Besides the three types of plantations, there are a few hundred species trials, many concentrated within FRIM, and some scattered throughout the country.

The teak plantations were initially tried out on an experimental basis in the northern State of Perlis (Mata Ayer), and some in Kedah (Bukit Enggang) (Wyatt-Smith 1957, 1961). These initial trials in the 1950s have since been expanded into larger scale plantations in the 1960s (Vincent 1964). Interest in planting teak outside the northern States took off in the 1980s and small hectarages have been planted in all the States from Perlis to Johore (Table 2).

Initially, planting of teak was purely a Forest Department effort. Now there has been a dramatic rise in interest from the private sector. This has been so because of the rise in the cost of labour

and rubber plantations becoming uneconomical. Many small holders and small estate owners are looking for alternative crops and are beginning to experiment with teak. Since the 1990s, such plantings have been ongoing. At present FRIM has embarked on an adoption scheme for small holders. This too has started attracting many small holders with less than 10 ha of land. So far such adoption schemes have been initiated in the States of Pahang, Perlis, Perak, Selangor, Johore and Kedah. The schemes range from 0.4 ha to 10 ha sizes, the total area only amounting to about 40 ha under the scheme.

Table 2. Teak and sentang plantations in Peninsular Malaysia (plantings <10 ha not represented)

State F.R/Company Species Hectares Year

Perlis Mata Ayer Teak 16.081953-1958

Teak 128.831960-1969

Teak 64.291980-1989

Teak 145.001990-1992

Kedah Tasoh Sentang 40.00

Kaki Bukit Sentang 28.00

Bukit Enggang Teak 31.631953-1957

Teak 76.001983-1986

Teranak Teak 54.801985

Gunumg Raya Teak 40.001985

Bukit Berangin Teak 626.301985-1990

Rimba Teloi Teak 43.601985-1986

Chebar Besar Teak 24.001987

Teak 24.001988

Bukit Perak Teak 19.001989

Mentega Sentang 800.00

Perak Bintang Hijau Teak 20.001984

Chikus Teak 45.001989

Maju Aik, Trolak Teak 45.001993-1996

Sentang 120.001993-1996

Selangor FRIM Sentang 6.00

Negeri Kenaboi Teak 150.001980-1988

Sembilan Setul Sentang 90.801995-1996

LPP-Tampin Sentang 300.001995-1996

Malacca IOI Sentang 60.001994

Kelantan Temangan Teak 81.001983

Jeli Teak 30.001983

Relai Sentang 200.00

RISDA P. Malaysia Teak 891.071993-1997

Total 4,200.40

Besides teak, sentang is also receiving similar attention these days (Table 2). There are few plantings that are sizable one being in Trolak, Perak where a private rubber planter has planted it over about 100 ha. Interest has been expressed elsewhere and plantings may be in progress in some cases.

In the 1960s there was the introduction of tropical pine plantations. As mentioned earlier, they were planted for purposes of pulp production. Once the plans for constructing the paper mill was scuttled these plantations were not managed anymore. Sizable plantations still exist, although some have been lost to other forms of development (Table 3).

In the 1980s large areas have also been devoted to Acacia mangium and other fast growing general utility timber species under the Compensatory Forest Plantation Scheme, funded by the Asian Development Bank (Table 4). The scheme was originally planned to cover some 188,000 ha by the end of the 7th Malaysia Plan. However, A. mangium was found to be prone to suffer from heart-rot problem and the Forest Deparment scaled down the planting of the species. The present extent of these plantations stands at around only 64,000 ha (Thai 1995). Some 10,000 ha were planted under State financing. Other species used in the scheme included batai (Paraserianthes falcataria), yemane (Gmelina arborea) and some tropical pines (Pinus spp.). However, A. mangium was the most extensively planted species. Interestingly, rubber (Hevea brasiliensis) too is gaining interest as a timber species and small trials have been initiated.

Table 3. Pine plantations in Peninsular Malaysia (planting <10 ha not represented)

State FR/Company Species Hectares Year

Pahang LentangBukit TinggiTerengganuKemasul

P. caribaea 2,2851964-1982

Johore Ulu Sedili P. caribaea 1,9321975-1983

Selangor Rantau PanjangUlu LangatSungai Buloh

P. caribaea 9031950-1974

Kepong P. caribae,P. insularis

P. merkusii

66

N. Sembilan Setul P. caribae 6691966-1980

GalahLenggeng

P. oocarpa

Kedah Gunung BongsuSengkupBukit Perak

P. caribaeP. oocarpaP. insularP. merkusii

201953-1964

Total 5,875

The target of Compensatory Plantations was later revised to 100,000 ha because of lack of poor and degraded PFEs for conversion to forest plantations and the inherent difficulties encountered with the species like A. mangium (Thai 1995). Note that with the earnestness to pursue sustainable forest management, there has been an aversion to convert natural forests into species-poor plantations.

The above three classes of plantations have been planted on a scale with commercialization prospects in mind. Besides those trees a huge number of species trial plots exist. They are mainly concentrated in FRIM, Kepong, but a sprinkling of relevant ones are also found scattered throughout the country. These were started way back at the beginning of the century, some even before FRIM was conceived. The information contained in the plots is very valuable for evaluating the potential of over 150 tree species.

Among these trials the dipterocarps seems to take centre stage. A huge number of species, excess of 55, from P. Malaysia, Borneo and Sumatra have been tried out in FRIM and several parts of the country. These represent a vital body of work which will provide the basic data for plantation development into the future.

Forestry Departments were the main agencies involved in developing tree plantations. The only crop which was originally planted by foresters and that has since taken over by the private sector is the rubber tree. It was promoted for the latex. The tide is certainly changing at present. More interest in tree plantations have been expressed by the private sector and several states companies have started planting teak and sentang crops in 100 ha parcels in several. Table 5 is a summary of the timber plantations. Only an insignificant amount, about 3.6% (2801.5 ha) has been initiated by the private sector initiatives are confined to growing sentang and teak and much of it began only since the mid-1980s.

Table 4. Compensatory Forest Plantations in Peninsular Malaysia

State/F.R./Company

State and Size Planted (ha)

A.mangium G. arborea P. falcataria Rubber Total

Pahang

- Kemasul 19,569 426 1,426 400 21,821

Johore

- Ulu Sedili 20,254 20,254

Selangor

- Rantau Panjang 4,305 - - 180 4,485

- Bukit Tarek 5,896 - - - 5,896

N. Sembilan

- Setul 1,809 89 4 - 1,902

- Gemas 2,441 - - 30 2,471

Perak

- Chikus 925 - - - 925

- Besut 3,553 - - - 3,553

Kelantan

- Relai 3,417 - - - 3,417

Terengganu

- Merchan 2,461 - 100 40 2,601

Total 64,630 515 1,530 650 67,325

Table 5. Summary of plantation areas in P. Malaysia (ha)

Plantation Type Area (ha) %

Compensatory plantations 67,325 87.0

Pinus spp. 5,875 7.6

Teak and Sentang 4,200 5.4

Total 77,400 100.0

2.1.2. Sabah

In Sabah there are claims that as early as the 1920s there were trials on teak (Rahim and Anuar 1995). In the 1970s the State Government came to the conclusion that forest plantations may be required to make up for the decline in production from natural forests which were being depleted rapidly. In 1974 the Sabah Softwoods Sdn. Bhd. (SSSB), a joint-venture company between Yayasan Sabah and North Borneo Timber was formed to initiate plantations. This was a creditable move for Sabah thus became the first to start plantations as a private commercial venture. The SSSB began to test some exotic species. About 60,000 ha of Pinus caribaea and P. oocarpa were planted in Brumas, southeast of Sabah.

In 1976 the Sabah Forestry Development Authority (SAFODA), a statutory body, was set up. Its task was to reforest the nearly 200,000 ha of degraded lands that resulted from bad shifting cultivation activity. In the process SAFODA was further aiming at providing additional employment in the rural areas.

In the 1980s more commercial forest plantation ventures were established. The first pulp and paper mill was set up in Sipitang by the Sabah Forest Industries (SFI), a State owned company. It has now been privatized. SFI expects to reforest up to 130,000 ha with industrial forest plantations, mainly with Acacia mangium. Next, both SAFODA and SFI have also initiated tree farming among smallholder in the neighbourhood of their plantation areas in Bengkoka and Sipitang. In 1987, Innoprise Corporation Sdn. Bhd. (ICSB), the commercial arm of the Yayasan Sabah initiated the planting of high value timber species and rattan in its 40,000 ha concession area in Luasong, in Tawau District.

Many more private companies joined the move towards developing plantations. They include Jeroco Plantation Sdn. Bhd., Sejati Sdn. Bhd. and Koprasa Sdn. Bhd., Sime Darby Plantations Sdn. Bhd., and Golden Hope Plantations Sdn. Bhd. Golden Hope has started planting sentang on a 800 ha wasteland in Tenom Valley while Sime Darby is into planting industrial grade wood. Sejati Sdn. Bhd. has so far planted over 2,000 ha of teak and other species in Lahat Datu, Tawau and Sandakan.

In the last two decades commercial plantations have grown relatively rapidly in Sabah and at the end of 1995 there were over 90,000 ha established (Table 6). The Forestry Department too has planted some but they are mainly trial plots in the Research Stations at Sibuga, Gum Gum, Kolapis, Segaliud Lokan, Telupid, Sosopodon and Sook.

In Sabah, although the reforestation and tree planting started much later than in P. Malaysia, overall they have performed better in total hectares planted. In addition, the private sector has been instrumental in leading the planting of timber trees. Another distinction is that there are also real large scale plantings of the high quality timber species among the plantings. Without exception the move towards making planting a private commercial venture and the range of plantation species being tried would make Sabah the premier State for establishment and management of timber plantations.

The major species planted are the exotics Acacia mangium, Paraserianthes falcataria, Gmelina arborea, Eucalyptus deglupta and also rattan (Calamus manan). Their extent is given in Table 7.

In conclusion, the overall picture is that there is a steady growth in the establishment of plantations in the State. The Government made the decision that Sabah would need to develop its plantation sector, with the realization that the natural forests may not be able to maintain the required supply of timber. The types of plantations can be described as follows:

Industrial pulpwood production mainly with Acacia mangium, principally with SFI pulp and paper mill in Sipitang;

High quality timber species planted in reforestation schemes in degraded forests which are partly aimed at supplementing the income of rural dwellers. The private sector has also ventured into planting both high quality species as well as general utility ones. The success in plantation establishments in Sabah may mainly be attributable to the role played by the private sector.

Table 6. Forest plantations in Sabah as at end of 1995 (Rahim and Anuar 1995)

Organisation Area Total Area (ha)

Fast growing species High quality species

SAFODA 34,363 34,363

Sabah Softwoods Sdn. Bhd. 33,942 33,942

Sabah Forest Industries 12,139 12,139

Sejati Sdn. Bhd. 2,095 174 2,269

SAFODA Small Holders 2,057 2,057

SFI Tree Farming Scheme 1,596 1,596

Innoprise Corp. Sdn. Bhd.

- Luasong 712 712

- Danum 479 479

Koprosa Sdn. Bhd. 1,258 1,258

Bonrich Sdn. Bhd. 1,230 384 1,614

Forestry Department 600 300 900

Lak Sdn. Bhd. 495 495

Sime Darby Plantations 130 130

Kebun Singa Sdn. Bhd. 121 121

Total 90,026 2,049 92,075

Table 7. Species planted in Sabah

Species Area,(ha)

Acacia mangium 55,595

Paraserianthes falcataria 12,049

Gmelina arborea 10,142

Eucalyptus deglupta 5,728

Tectona grandis 1,704

Eucalyptus spp. 786

Pinus caribaea 695

Other spp. (Dipterocarpus, Swietenia, Pterocarpus, Araucaria, Pinus) 3,095

Total 89,758

2.1.3. Sarawak

Like in Sabah, interest in forest plantations in Sarawak began in the early 1920s (Kendawang 1996). But here the forests started with the indigenous species of the Engkabang group which are important producers of the illipe nut. Some 19 ha were planted in the Semengoh Forest Reserve.

The interest in this species was the need to find species that can be incorporated into the agro-forestry systems that were being encouraged for the natives who were practicing shifting agriculture. Besides the engkabangs fruit trees like the durian were also tested. Research has been continuing, albeit at a small scale, on testing many of the indigenous hardwood species for inclusion into the agroforestry projects.

No major plantings were done after the initial trials until 1965 when interest in a “Reforestation Research Programme” was initiated. The objective this time was to test out the fast growing exotic tree species, especially conifers, for reforesting land which was subjected to repeated cycles of shifting cultivation. From 1964 to 1968, a total of 200 plots of various provenances of tropical conifers such as Pinus caribaea, P. insularis, Agathis macrophylla, Araucaria cunninghamii and A. hunsteinii were tested. The results were poor and the conclusion drawn was that the fast-growing tropical conifers were not suitable for Sarawak conditions (Fahlman 1975).

The poor performance of the conifers led Sarawak foresters to look for alternatives. In the early 1970s, the Forestry Department began experimenting with some of the fast growing exotic tropical hardwoods like Acacia mangium, Gmelina arborea and Paraserianthes falcataria. Species with somewhat longer rotations like Swietenia macrophylla, Durio zibethinus and Shorea macrophylla were also added to the list. All these species were considered for reforestation of lands that underwent shifting cultivation.

The problem with shifting cultivation is a major one in Sarawak - the damaged forest areas have increased tremendously increasing from 2.25 million ha in the 1960s to 3.33 million ha in 1985, with a small percentage within the PFE as well. In Table 8 the progress of reforestation in Sarawak can be seen. The localities are shifting cultivation areas within the Permanent Forest Estate.

Table 8. Progress of reforestation in Sarawak (1979 - 1995) (ha)

Forest Reserve 1980 1985 1990 1995 Total

Niah 13.7 59.9 400.6 5,677.0 6,151.2

Sampadi 303.3 1,176.3 1,583.2 3,062.8

Sabal 876.1 803.5 240.7 1,920.3

Labang 441.7 711.2 1,152.9

Bakas 379.6 379.6

G.Gading 99.4 99.4

Sawal 75.8 75.8

Semengoh 12.4 14.0 11.7 38.1

G. Selang 17.2 17.2

Total 142.7 1,770.8 3,482.9 7,500.9 12,897.2

The extent to which each of the timber species are planted is given in Table 9. Shorea spp. of the Engkabang group cover about a third of the area, followed closely by Acacia mangium. In

Sarawak rattan, an agroforestry crop, has also been included into the area of plantation. The pattern of planting can be rapidly gauged from Table 8. Up to 1980 there was hardly any planting. By 1985, there was about 1,770 ha planted up. The area planted up in the next five years was double that in 1985. The pace quickened and during the period from 1991 to 1995 about 7,500 ha were planted. This is more than double that of the previous five years. As of late 1995, nearly 13,000 ha have been planted up with various timber species.

Among them are many species of Artocarpus, Pinus, and Ceiba planted in small trials. Although Acacia mangium has become one of the major species for reforestation the Forest Department has scaled down the planting in recent years. Numerous adverse reports about its susceptibility to heart rot has lead to such a decision. The plan in the future is to plant the enkabang and mahogany for their high value timber.

Things may change more rapidly from now on. For example, Keresa Sdn. Bhd., a private company has a joint venture with Sarawak Timber Industry Development Corporation to plant rattan. Borneo Pulp and Paper Co. Sdn. Bhd. has just applied for over 200,000 ha of State land for initiating pulp plantations.

Table 9. Species planted in Sarawak

Species Area, (ha)

Acacia mangium 3,714.1

A. auriculiformis 0.5

Alstonia & Dryobalanops spp. 17.5

Anthocephalus cadamba 36.8

Anthocephalus chinensis 49.8

Araucaria hunsteinii 4.6

A. cunninghamii 50.2

Artocarpus spp. 0.4

Azadirachta excelsa 97.2

Calamus spp. (rattan) 2,235.6

Ceiba pentandra 3.0

Dipterocarpus spp. 21.3

Dryobalanops spp. 113.9

Durio zibethinus 1,115.7

Eucalyptus spp. 0.4

Gmelina arborea 215.4

Hevea brasiliensis 94.6

Paraserianthes falcataria 175.5

Parkia leucocephala 20.3

Pinus caribaea 3.0

Shorea spp. (engkabang species) 4,780.3

Shorea spp. 31.0

Shorea parvifolia 2.7

Swietenia macrophylla 134.4

Total 12,897.2

The overall conclusion is that the situation differs somewhat in Sarawak compared to that in P. Malaysia and Sabah. The urgency to develop plantations has so far not been felt in Sarawak, considering the amount of productive forests still left. The major development in Sarawak was the problem of reforesting areas that have been degraded through shifting cultivation. Another related concern was to develop agroforestry systems to assist the rural folk. So the kind of species tested included many of the fruit trees like the illipe nuts, durian, and Artocarpus which yield both fruits and timber. In terms of industrial timbers, a safe “wait and see” attitude has been adopted by the Forestry Officials. This is so far a reasonable attitude to adopt considering there is no urgency in their case and also the lack of success with many of the industrial species.

The lessons learned in the other regions would ultimately come of value to them. But the scenario may be rapidly changing. Already many private companies are negotiating with the State for plantation lands. The State announced opening 500,000 ha for tree plantations to capitalize on the lucrative pulp and paper industry (Sarawak Tribune 1996). Another report concluded that if Sarawak succeeded in converting 20% of its natural forests into forest plantations the State would be able to increase timber production by as much as 200% (Sarawak Tribune 1996). Perhaps it is timely. With sustainable forest management practices logging of natural forests may have to be scaled down. Alternative sources of timber may have to be from plantations.

2.1.4. Malaysia

The plantation scenario for the whole country seems somewhat disparate. Each of the regions treaded a slightly varied pathway in its plantation development. Sabah with a boost from the private sector has made the greatest headway despite coming into field only some two decades ago. Sarawak, on the other hand, took on a cautious path, and is only just beginning to make its interests in plantations known, now that most of the policies and directions are beginning to be clearer and some significant advances have already been made in the technical areas. P. Malaysia is the one that had to sail before the wind and had to look a new after each mishap either from technical problems or sudden shifts in policies. Needless to say, the experience is a valuable one and the other regions are in a position to capitalize on it. The existing 180,000 hectares of forest plantations according to their age class are as shown in Tables 10 and the volume per hectare (m3/ha) for each of the species are as shown in Table 11. The situation for the country as a whole is summarized in Table 12.

From Table 12 it is quite evident that only Sarawak has timber surplus against its local processing capacity. Sabah and P. Malaysia are already or will be facing deficits in timber.

Moreover the present outputs from the PFEs are on the unsustainable level and will have to be reduced considerably if they are to be managed on a sustainable basis. This would mean a further reduction in production from the PFEs in Sabah and P. Malaysia. Some 20 - 30% reduction is expected in the two regions, and similarly for Sarawak. Following that, while Sarawak will be able to meet the needs of its industry, the deficits for Sabah and Sarawak would magnify further from the current annual deficit of about 5 million m3 to about 11 million m3/year.

If timber imports are excluded the only recourse for Sabah and P. Malaysia is to develop their timber plantations. The 180,000 ha of plantations in existence seem paltry against the actual requirements. The 180,000 ha at a conservative production rate of 10 m3/ha/year would only produce some 1.8 million m3 of wood annually. An additional 11 million m3 are required in the equation if Malaysia is going to balance the timber requirements without causing the timber industry or the natural forests to suffer. The problem here is time - plantations initiated today will take a while at least one decade before the benefits can be perceived. What can be done in the interim period is any ones guess.

Table 10. Forest plantations in Peninsular Malaysia by species and age classes

Species <5 years 6-10 years 11-15 years 16-20 years >21 years Total

Pen. Malaysia

Acacia mangium 19,642 39,648 5,340 - - 64,630

P. falcataria - - 724 806 - 1,530

G. arborea - - - 515 515

Pinus spp 40 2,320 1,883 1,632 5,875

Hevea spp 650 - - - - 650

Teak 936 641 371 444 164 2,556

Sentang 1601 38 - - 6 1,645

Total 22,829 40,367 8,755 3,648 1,802 77,401

Sabah

Acacia mangium 15,627 35,502 4,430 - - 55,559

P. falcataria 230 1,980 7,763 2,076 - 12,049

G. arborea - 781 6,335 3,026 - 10,142

Pinus spp - - - - 695 695

Hevea spp - - - - - -

Teak 325 611 515 250 3 1,704

Eucalyptus spp - 1,501 2,718 2,295 - 6,514

Other spp - - 500 500 2,095 3,095

Total 16,182 40,411 22,261 8,147 2,793 89,758

Sarawak

Acacia mangium 700 2,002 1,012 - - 3,715

P. falcataria - - - 176 - 176

G. arborea - - - 215 - 215

Pinus spp - - - - 3 3

Sentang 98 98

Shorea spp - - 1,000 2,000 1,814 4,814

Other spp 1,000 2,877 3,867

Total 798 2,002 2,012 3,391 4,694 12,897

Grand Total 39,809 82,780 33,028 15,186 9,289 180,056

Table 11: Volume (green) per hectare for the different species (m3/ha)

Species >21 years 16-20 years 11-15 years 6-10 years <5 years

Acacia mangium - - 229 152 123

Paraserianthis falcataria - 270 233 229 -

Gmelina arborea - 92 59 41 -

Eucalyptus spp 120 115 95

Pinus spp 128 122 110 - -

Hevea spp

- Estate 190 - - - -

- Smallholding 180 - - - -

Teak 350 280 175 - -

Sentang 315 262 158 - -

Dipterocarps and others 290 - - - -

Table 12. Summary of plantation hectares in Malaysia, compared to the PFE and the current timber output from them. The production and industries needs reflect the 1990s figures

Region PFE(million ha)

ProductiveArea

(million ha)

WoodProduction(million m3)

IndustriesNeeds

(million m3)

PlantationArea(ha)

Sabah 3.35 2.42 7.96 11.34 89,758

P. Malaysia 4.69 2.79 11.38 13.20 77,400

Sarawak 4.46 3.85 16.32 5.65 12,897

2.2. Management objectives

The management objectives with regards to plantations did not remain consistent throughout the period that interest in plantation was expressed. They varied between the three regions of P. Malaysia, Sabah and Sarawak. This was obviously decided by the amount of natural forests still remaining in production, the state of development of the downstream industry, status of research in plantations, loans from international donor agencies, availability of labour as well as social-economic development concerns.

In the past the position for plantations remained somewhat hazy and the commitment remained lacklustre. When some decision was made there were reversals along the way. At present the forestry sector in Malaysia is undergoing much change. These are influenced by both internal factors such the growing demand for timber by the industries and external factors that include international concerns about logging and degradation of tropical forests.

The past events appear to have shaped more concrete plans and objectives in the case of forest plantations. Under the Seventh Malaysia Plan the management objectives in Malaysia are the following.

2.2.1. To meet the anticipated deficit in timber supply

The timber industry is a big contributor to foreign exchange earnings with some RM 13 billion per/year and employing over 200,000 people. If the mills are to remain in supply of the raw material timber alternative sources besides that from the natural forests have to be explored. Plantations offer good prospects with year round growing climatic conditions. The biggest demand will be for general utility timber that can be raised cheaply over short to medium term rotations. There is also a growing demand for pulp and paper material and Malaysia is importing considerable and increasing amounts of the material. Therefore, this sector of pulpwood production has also been identified as critical. A few paper mills are already in the pipeline and one is already in operation. The need for pulpwood plantations is enormous and the government has to assist the private sector in developing this sector of plantations.

2.2.2. To reduce pressure on natural forests

Malaysia has traditionally relied on timber from natural forests. However, concern for their sustainability has become a moot issue these days. If sustainable practices are to be adopted the total amount of timber would decline. But this has to be balanced against our need for preserving the environment. Malaysia is committed to preserving a good balance of forest for perpetuity including the preservation of biodiversity and the ecosystem functions. This would mean that more timber has to be obtained from other sources. Plantations offer a promising source of timber.

2.2.3. To ensure better land use

A lot of degraded or under-utilized land is found in the country. This is due to the rapid shift in the economy of the country and labour shortages have resulted in neglect of many of the agricultural lands. In States like Sabah and Sarawak shifting cultivation has resulted in degradation of a significant area of former lands. One attractive solution to these two issues is

plantation development which is a low labour intensive industry. Besides ensuring the lands are well utilized in the country and there is also the added benefit of bringing social development to the rural people.

3. Constraints and challenges in forest plantations

3.1. Strategies in establishing forest plantations - issues to be resolved

In Malaysia, while forest plantations are a lucrative option to supply the ever increasing demand for wood on a sustainable basis, the planting of timber trees on a plantation scale is constrained by a number of other factors that are critical.

3.1.1. Ecology

The establishment of forest plantation involves extensive alteration of the ecosystem particularly when heavy equipment is employed. The complex closed nutrient cycle in tropical rain forests is disrupted for a long time. This can lead to reduction of productivity unless meliorative measures are undertaken. Furthermore, mono-cultures further destabilize the system and require heavy use of fertilizers and pesticides. Many slow-growing species grown under fast plantation conditions have poorer quality. There is the problem of species-site matching for the heterogeneous area of large plantations. The danger of fire may also increase in exotic species plantation.

3.1.2. Land

It is an established fact that land is the world’s most valuable resource and public scrutiny of land is becoming more intense with each passing year. With increasing population the competition on land for agriculture and development is ever increasing.

For a forest plantation investment to be commercially viable a large area is required. The size of the land required will vary with the objective of the plantation. If the timber is for sawmilling and furniture manufacturing then an area of around 15,000 to 20,000 ha would suffice. On the other hand, if the objective is in establishing a chip or pulp and paper mill then an economic-sized plantation should be in the range of 90,000 to 200,000 ha. It would always be desirable to have a single contiguous piece of land area and if not, the required land area should just be in about two or three nearby parcels only. This is to ensure easy and efficient management of the activities. It is always preferable that the acquired land is close to basic amenities and near a relatively accessible road system and within an economic range to a processing mill or market. As an example, to operate efficiently a pulp or a chip mill the plantation should be located within

a 100 km radius. Otherwise, exorbitant cost for the transportation of logs would render the operations uneconomical.

Another factor is that land is under the State’s jurisdiction. This implies that in Peninsular Malaysia a large plantation project may stretch across state borders. Land being a state prerogative implies that commercial organisations may have to deal with different procedures adopted by individual State governments. Often inquiries on information regarding land can become very difficult. Details for example on information regarding forest reserves are obtainable from the respective State Forest Departments while that on State land is obtainable from the Department of Land and Mines or Department of Agriculture. The setting up of a coordinating agency is desirable to overcome this and thus encourage the easier establishment of plantation forests.

Besides sufficient land the location with suitable infrastructure and the premium rate for leasing are also crucial factors. Considering the long period of investment required in forest plantations many companies in Malaysia have requested that they be given the prerogative of allocating a fraction of the land leased for planting agricultural plantation crops which can begin providing some revenue after three years of establishment. This is considered a necessary activity to cushion the long waiting period before final harvests. However, according to the Forest Department such a request is not permissible unless the land allocated is State land and lies outside the forest reserves. Forest reserve land is strictly to be planted with forest trees. If forest reserves are ever to play a role in forest plantation establishment this issue needs to be reviewed.

The leasing period for land requested by commercial organisations varies. In order to attract their interest in forest plantations, land should be made available for leasing ranging from a period of at least four rotations or up to 99 years. The intention is to have tenures long enough to assure that sufficient returns are obtained for the investments ploughed in.

Another concern that is slowing down the commercial sectors’ participation in forest plantation investments, either as joint venture partners or outright investments, is the issue of claims for customary rights by natives residing in affected logged over forest lands where plantations are to be established. In Sabah for example, although these lands belong to the State and are untitled, under the provision of the Land Ordinance a native can claim customary rights on them as long as he or she has been living in it for at least three years. Such issues need to be resolved before investors would consider investing in forest plantations.

Besides forest reserves, Malaysia has more than 1 million ha of idle lands. Such lands include tin tailings, BRIS (sandy) soils and ex-shifting cultivation and abandoned paddy lands. A recent survey jointly carried out by the Forest Research Institute Malaysia and The Forest Department of Peninsular Malaysia (1996) on land area with potential for forest plantation development is shown in Table 13. These lands with some inputs could be converted into productive forest plantations.

Table 13. Land area with potential for forest plantation development (ha)

State Forest Other State Alienated Total

Reserve Reserve Land Land

Perlis - - - - -

Penang - - - - -

Malacca - - - - -

N. Sembilan - - 2,893 - 2,893

Kedah 61 132 2,652 814 3,659

Selangor 1,942 - 5,143 817 7,902

Johore - - 38,902 12,864 51,766

Perak 25,589 - 10,269 16,352 52,210

Trengganu 1,798 - 21,570 44,740 68,108

Pahang 3,600 63 49,129 43,421 96,213

Kelantan 45,100 - 18,550 27,630 91,820

Sabah 98,934 - 475,978 344,163 919,075

Sarawak 66,223 1,459,854* Na Na 1,526,077

Total 243,247 1,460,049 625,086 490,801 2,819,183

(Source: FRIM & FD 1996) * - Native customary land Na - Data not available

3.1.3. Species selection

A review of about 45 reforestation projects in the tropics revealed that about 95% of all projects utilized exotics in the reforestation programmes. Sixty percent of all projects carried out their species trials in parallel with their project activities. About 60% of the projects received additional information during their life span that resulted in new species selection (Evans 1982, Abod 1995).

For plantations, although indigenous species are available, a greater preference is given for the selection of exotic species. The reasons for this are:

There is generally a lack of adequate knowledge in the propagation and silvicultural management of indigenous species;

There is generally plentiful supply of seeds of the exotic species;

The exotic species are easy for handling; and

The exotics are fast growing and high yielding.

There is a great challenge ahead to carry out adequate studies on the indigenous species to see their viability for forest plantations.

3.1.4. Inadequate supply of quality planting material

In general high levels of productivity are achieved when genetic and physiological potential of the species are well matched with management practices which promote rapid growth. Valuable improvements can be made in important properties such as stem form and wood density through selection and breeding. One major constraint that is currently perceived is the shortage of good planting material for the various plantation programmes. Quality seeds and plus trees that have been selected and reproduced by vegetative methods are inadequate to meet current and projected needs. While efforts are being stepped up to overcome this problem middlemen and overnight nurseries are providing planting material whose genetic sources are unknown. FRIM has now signed MOUs with four private nurseries to step-up production of quality planting materials of the required species while the Forest Department of Peninsular Malaysia is in the process of setting up the National Seed and Planting Material Procurement Centre at Lentang, Pahang to address this need also. In Sabah and Sarawak too similar efforts are underway.

3.1.5. Labour and mechanization

Labour supply is another issue of great concern. In Malaysia the agricultural sector is experiencing a shortage of labour because of the rural to urban migration of youth to work in factories. Although the labour requirement in forest plantations is less then in agriculture it still has to compete for labour in an expanding Malaysian economy where the working conditions in other industries are usually more conducive.

A natural tendency is for the plantation sector to engage foreign workers. The foreign labour recruitment process had never been efficient. The weaknesses have been attributed to inconsistent government policy on foreign workers’ employment coupled with lack of dedication of the foreign workers resulting in extremely high turnover of manpower. One option to alleviate the labour shortage is increased mechanization. Machines developed in countries like Finland and Canada for example are environmentally friendly and highly flexible in their operation in forest plantations.

3.1.6. Finance and private involvement

The planting of timbers on a plantation scale is constrained by a number of economic factors as well. These are:

The high initial capital investment to establish the forest plantations; The long period between initial planting efforts and harvesting and thus the

corresponding concern for the high capital cost or interest being carried until harvesting period;

The high biological and economic risk involved in forest plantations; and

Unattractive and inappropriate investment incentives provided by the government for forest plantation investments in the past.

3.2. Government tax incentives and regulations

Considering the constraints to private venture in forest plantations, in order to attract such ventures, the Government has recently offered a monetary incentives package in the form of:

Pioneer Status: Tax exemption from corporate tax of 100% for 10 years on all statutory income;

Investment Tax Allowance: An investment tax allowance at the rate of 100% of the statutory income for 5 years.

The above incentives though in place are not yet sufficient to attract private sector venture into plantation forestry. Perhaps the situation could be improved if the following could be put in place:

Provision of ‘group relief’ which would encourage companies with other business ventures to undertake forest plantation activities since losses incurred in forest plantation in the initial years can be offset against income of other profitable ventures.

Exemption at the state level on royalty payments and quit rent for at least the first rotation

Setting up of plantation forestry fund which offers a soft loan or subsidy for establishing new forest plantations and management costs.

3.3. Privatisation

Commercial ventures in forest plantation development are relatively few and new in Malaysia when compared to USA, Chile, Brazil, New Zealand or Japan and China in Asia. In view of the rapidly declining resources the Government should formulate new policy directions and incentives to promote privatisation of the existing forest plantations or even establish new forest plantations. Only then can long term security of wood and the growth of an expanding wood-based industry in this country can be assured.

4. Current status of rubber estates as forest plantations

4.1. Introduction

The Malaysian rubber (Hevea brasiliensis) plantations originally established for latex are currently regarded as an important source of timber for wood based industries. It is estimated that annually around 2 million m3 of Hevea wood logs are harvested and utilized for the production of furniture and furniture components. In terms of Hevea area about 30,000 to 40,000 hectares are involved yearly. The Hevea wood products are exported to well over 20 countries. The value accelerated from a mere RM 4.5 million in 1980 to RM 1.4 billion in 1995. Exports in 1997 is expected to in the region of RM 2 billion.

With the rapid expansion of the Hevea wood-based industry there appears to a short supply of Hevea wood and this is expected to be serious as more hevea area are converted into other land use. Measures are in hand to ensure sustainable supply by intensifying research and development towards high Hevea wood productivity in the existing plantations. Efforts are also initiated to provide Hevea wood as an alternative source of commercial wood for timber.

4.2. Log production and consumption

Logging for Hevea wood has accelerated over the last ten years. In 1993 Hevea wood contributed more than 4% of the total log production in Peninsular Malaysia. The heveawood logs are extracted during replanting which is normally carried out when the trees reach the end of the 25 - 30 year economic cycle for latex production. The volumetric yield of Hevea logs per hectare varies with soil, terrain, management practices, diseases, planting cycle and final stand at logging. On the average the estates and smallholdings can yield 190 m3/ha and 180 m3/ha of greenwood, respectively. In the case of sawlogs the estates can produce about 57 m3/ha while the smallholdings provide about 54 m3/ha. After sawing the estates and smallholdings can yield around 18 m3/ha and 11 m3/ha of sawn timber respectively.

Currently around 200 sawmills, 75 preservative treatment plant, 110 kiln drying plants, 3 plywood/veneer mills, 96 furniture plants, 2 chipboard plants and 5 medium density fiber board factories are involved in the processing of Hevea wood logs, sawn timber and chips in Peninsular Malaysia (Lofty et. al. 1997).

4.3. Total area of land under Hevea plantations

Over the years the actual hectares of land under Hevea has been slowly dwindling (Table 14). This is particularly so in the estate sectors. These areas cleared of Hevea trees have been slowly replaced with oil palm which have in terms of price and economics when compared to growing rubber. It is clear that the smallholdings as a whole contribute to the bulk of the latex and Hevea wood production in the country 86.3% smallholdings as compared to 13.7 % group estates.

Table 14. Planted area of natural rubber in Malaysia from 1980-1996 (‘000 hectares)

Region Sector 1980 1990 1992 1993 1994 1995 1996

PeninsularMalaysia

EstateSmallholdingsTotal

491.61,205.71,697.3

342.41,193.91,536.3

308.81,182.21,491.0

291.21,172.31,464.5

270.61,162.91,433.5

249.11,125.41,374.5

219.91,120.41,340.3

Sabah EstateSmallholdingsTotal

12.194.6

106.7

5.485.791.1

4.586.791.2

4.587.792.2

4.588.793.2

4.588.793.2

4.590.695.1

Sarawak EstateSmallholdingsTotal

2.4197.4199.8

0.9208.3209.2

0.8209.3210.1

0.8210.3211.1

0.8210.5211.3

0.8210.5211.3

0.8213.3214.1

Total Estate 506.1 348.7 314.1 297.5 275.9 254.4 225.2

Malaysia %Smallholdings%

25.31,497.7

74.7

19.01,487.9

81.0

17.51,478.2

82.5

16.81,470.3

83.2

15.91,462.1

84.1

15.11,424.6

84.9

13.71,424.3

86.3

Grand Total 2,003.8 1,836.6 1,792.3 1,767.8 1,738.0 1,679.0 1,649.5

(Source: Statistics on Commodities 1997)

Table 15 shows the age class of the existing plantations within the country. Those plantings ranging from 25 years and above in principle have completed their economic latex production life and under normal circumstances can be felled for replanting and their logs taken for timber production. Under this category there is about 700,000 ha which can be felled progressively for timber production.

Table 15. Hectares under rubber planting in Peninsular Malaysia by age classes

Planting Years Age Class Peninsular Malaysia Sabah Sarawak Total

1953 - 1965 32 - 44 340,519 21,115 67,952 429,586

1966 - 1970 28 - 31 123,508 18,787 39,324 181,619

1971 - 1975 22 - 27 165,848 15,798 18,776 200,422

1976 - 1980 17 - 21 162,634 14,100 25,397 202,131

1981 - 1985 12 - 16 203,438 14,300 23,393 241,131

1986 - 1990 7 - 11 208,833 11,000 14,607 234,440

1991 - 1995 2 - 6 100,736 - 16,650 117,386

1996 1 34,784 - 7,001 41,785

Total 1,340,300 95,100 214,100 1,649,500

(Source: Statistics on Commodities 1997)

5. Economic viability of Hevea, acacia, teak and sentang

5.1. Introduction

For all the four species mentioned above a conceptual paper examining the expected returns for these species incorporating viable alternative options were prepared and presented at a National Seminar on commercial cultivation of timber trees in 1997. A summary of the economic feasibility discussed at this seminar is presented here.

In formulating the options for the planting of timber species various factors were taken into consideration which included different planting cycles, planting densities and agro-silviculture requirements, and in the case of Hevea clones and period of latex extraction.

5.2. Different options

Hevea plantations for timber and latex production Hevea plantation for timber production

Sentang plantation

Teak plantation

Acacia plantation

Mixed plantation: Hevea-Sentang and Hevea-Teak

In each of the option, plantation size of 2,000-ha for estate and 40-ha for consolidated smallholdings were considered. A 15-year cycle was proposed for the mono-crop options to realize earlier timber yield. For the agroforestry options proposed for smallholdings involving integration of Hevea with timber species a 20-year cycle was recommended to take advantage of longer latex extraction.

5.3. Assumptions

5.3.1. Products

The study assumes the sale of sawlogs and roundlogs as the pricing point as the study is to examine the viability of commercial planting of timber species from the grower’s viewpoint. No processing of timber is assumed although the economics of wood processing into sawntimber is highlighted in the case of Hevea to provide insight on its expected returns and margin where it is considered important for the purpose of clarification.

5.3.2. Log volumes

Sawlog volumes per tree at final harvest vary between timber species from 0.4 m3 for Hevea (under high density planting 15-year cycle) to 1.0 m3 for sentang (20-year cycle under mixed plantation). Details of sawlog and chiplog volumes for the various species at final harvest are shown in Appendix 1. It is assumed that optimal requirements with regards to soil condition and appropriate agro-management practices are met for each individual species.

5.3.3. Log prices

Log prices differ by the various timber species and year of harvest. The prices of Hevea sawlog are based on existing quarterly prices since 1988 and are statistically projected through regression analysis. The projected Hevea sawlog prices are RM 95/m3 after 15 years and RM

115/m3 after 20 years. The price of teak is projected at RM 600/m3 which is based on plantation grown teak in Thailand (RM 700/m3), Indonesia (RM 1000/m3) and Myanmar (lowest grade RM 1,5000/m3) which are grown over a longer rotation varying from 40 - 60 years. Projected price of sentang at the end of 15 years is estimated to be RM 450/m3. This is based on mixed hardwood prices which at present average around RM 290/m3. For acacia which is also based on the current mixed hardwood prices but due to its shorter rotation and smaller size the price is conservatively projected at RM 150/m3. Chiplog prices are assumed to be similar for all wood species at RM 40/m3 at the end of 15-year cycle and RM 45/m3 at the end of a 20-year cycle.

5.3.4. Silviculture and agro-management

It is assumed that combined silvicultural techniques and agronomic management practices have been properly applied for each option to produce the projected timber and latex yields. Contrary to the general perception of ‘plant and forget’ these options require appropriate agro-silvicultural inputs to produce the desired yields under the proposed short period of 15 and 20 year rotation.

Generally these species are well adapted to Malaysian climate and require good, deep and well-drained soil. However, Hevea being a domesticated species needs selected clonal planting materials and good agronomic inputs in the early years of establishment. In the case of sentang and teak greater care is required to control pest problems in the early stage of planting. As for acacia, although well adapted to a wide range of sites, proper and timely silvicultural treatments (pruning and thinning) are required to produce timber of sawlog quality.

5.3.5. Latex yield

Latex yield is based on RRIM large-scale clonal trial. As commercial yields are expected to be lower than the yields from the clonal trials these have been accordingly adjusted. Further yield discounts per tree have been made under high density and hedge planting before arriving at the final yield taking into account the final stand and response to stimulation.

Tapping under the high density option is proposed to commence in the 9th year to encourage girthing for better wood yield. Stimulated latex yield under this option (700 trees/ha at initial planting) is projected at 2,200 kg/ha/year while that under mixed planting is 1,370 kg/ha/year.

5.3.6. Latex price

This is based on RSS 1 price of 300 sen per kilogram. The weighted price for latex and lower grades used for computation of revenue after allowing for appropriate discount is 270 sen/kg.

5.4. Planting density and final stand

This varies with the options used (Appendix 1).

In the case of Hevea wood-latex options an initial density of 700 trees/ha is suggested. This is expected to decline through natural thinning to 570 trees/ha at final harvest.

For the Hevea wood only option a high planting density of 1,100 trees/ha is suggested with deliberate thinnings in the 5th and 10th year to leave a final density of 460 trees/ha.

For the sentang or teak monocrop option 833 trees/ha are planted initially with 300 standing trees/ha at final harvest after two deliberate thinnings at years 5 and 10.

Three thinnings in the 3rd, 5rd and 8th year are proposed for acacia initially planted at 900 trees/ha leaving a final density of 180 trees/ha.

Under mixed planting hedgerow Hevea is initially planted at 400 trees/ha and is expected to leave 340 trees/ha at final harvest due to natural mortality. Sentang or teak planted in the wide inter-row spacing with a density of 533 trees/ha is thinned twice in the 3rd and 5th year to a final density of 195 trees/ha.

5.4.1. Log harvesting cost

This is assumed to range from RM 18/m3 to RM 22/m3 depending on the year of harvest based on current harvesting cost. Where non-commercial thinning is carried out, this is estimated to be RM 250/ha.

5.4.2. Tapping cost

Where latex exploitation is only for a short period of 7 years this is assumed to be contracted at a weighted latex and scrap price of 103 sen/kg. In the case of mixed plantation where tapping is carried out by the smallholders over 15 years tapping cost is imputed based on rates as stipulated under the MAPA-NUPW wage agreement.

5.5. Limitations of the study

As in all viability studies results of analyses depend on the key assumptions made. However, should there by any significant changes in the assumptions made this may invariably affect the outcome of analyses in the document. To date, while prices of Hevea wood are available there are no reliable records on prices of plantation-grown teak, sentang and acacia in Malaysia. The prices assumed in this study are based on current mixed hardwood prices in Malaysia as well as those available from neighbouring countries currently extracting fully grown plantation timber. It has to be pointed out that those involved with the planting of teak and sentang seem to suggest that these prices are somewhat conservative.

The projected price of Hevea sawlog based on current price trend is low relative to other timber species. Judging from the impressive value-added and price of Hevea sawntimber the price of the domestic Hevea sawlog is perhaps artificially depressed. This is probably due to hevea sawlog being traditionally treated as a residual resource during replanting. Nevertheless, the analyses are based on available price records. The scenario may change should the domestic prices of Hevea sawlog increase.

This study assumes other things to remain equal. In today’s dynamic economy the supply and demand situation on wood could change and this would affect the viability of planting Hevea, sentang, teak or acacia. If wood supply increases relative to demand when large scale plantings are implemented this may lower the prices. On the other hand, shortage of supply with the present rapid growth of the domestic wood-based manufacturing industries and the declining supply of raw material from the natural forest could affect log prices favourably. External demand and supply factors have also not been taken into account in this study due to the lack of data.

5.6. Return on investment

The financial measures of the projects like Net Present Value (NPV), Internal Rate of Return (IRR) and Benefit/Cost Ratio (B/C ratio are used in this study to examine the return on investment and financial viability of the various options (see Appendix 2).

Option 1: Hevea wood-latex extraction (high density 15-year cycle; 7 years latex extraction; 2000-ha estate and 40-ha consolidated smallholding)

At the assumed price of RM 95/m3, a total net revenue of about RM 60 million (RM 30,000/ha) can be expected under this option for a 2000-ha size estate. The computed IRR of 15% which is above the 10% cost of capital indicated that the project is viable. An NPV at 10% discount of RM 7.1 million (RM 3,500/ha) could be expected from this investment. A B/C ration of 1.3 indicated that for every ringgit invested a return of RM 1.30 could be expected.

At assumed prices of RM 200/m3 and RM 300/m3 (the latter price being comparable to that of mixed medium hardwood but still lower than light red meranti - a species also used for furniture making as Hevea) the computed IRRs are 18.3% and 20.5%, respectively.

This option is also viable under consolidated smallholding conditions although the IRR is lower at 12.8% with a per hectare NPV of RM 2,100 and B/C ratio of 1.2 based on the assumed price of RM 95/m3. At assumed prices of RM 200/m3and RM 300/m3 the IRRs are expected to improve to 16.7 and 19.2% respectively.

Option 2: Hevea plantation for wood extraction only (15-year cycle; 2000-ha plantation and 40-ha consolidated smallholding)

Under estate conditions this option is found to be only marginally viable at the projected log price of RM 95/m3. The computed IRR was 11.1%. A net revenue of RM 42.6 million with an NPV of RM 1.4 million (RM 700/ha) can be expected from this investment which assumes no further downstream activity. At the assumed price of RM 300/m3 (comparable to that of mixed medium hardwood) the computed IRR is 20.9%.

Under smallholding conditions based on the projected price of RM 95/m3 this option is not viable as the NPV is negative and IRR at 7.3% falls below the cost of capital.

Option 3: Sentang plantation (15-year cycle; 2000-ha plantation and 40-ha consolidated smallholding)

Based on the assumed log volumes and projected prices of RM 150/m3 during commercial thinning (at 20th year) and RM 450/m3 at final harvest investment in sentang plantation is expected to provide a net revenue of RM 144.2 million (RM 72,100/ha) for a 2000-hectare plantation. The computed NPV is RM 17.9 million or RM 8,950/ha. This positive NPV and an IRR of 16.4% indicate that the project is viable.

Under smallholding conditions (40-ha) the option is also viable with an IRR of 15% and NPV of RM 0.32 million or RM 8,000/ha. While computations show that this option is viable based on the assumed price of sentang smallholders may not find this option attractive given the long gestation period of 15 years before revenue is realised.

Option 4: Teak Plantation (15-year cycle; 2000-ha plantation and 40-ha consolidated smallholding)

The plantation of teak is also found to be viable based on the assumed log volumes and projected prices of RM 250/m3 during commercial thinning (at 10th year) and RM 600/m3 at final harvest. This option is expected to generate a net revenue of RM 177 million (RM 88,350/ha) with an NPV of RM 23.8 million for a 2000-ha estate (RM 11,900/ha). The computed IRR was 17.3%.

This option is also found to be viable under consolidated smallholding condition with an IRR of 16.2%. Net revenue under a 40-ha holding is computed to be RM 3.3 million (RM 82,500/ha) with an NPV of RM 0.46 million or RM 11,500/ha. Despite the positive returns (if projected prices are realised) as in the case of sentang smallholders could ill afford the long gestation period before realising revenue.

Option 5: Acacia plantation (15-year cycle; for 2000-ha plantation)

Return on investment measured by the IRR at 14.5% indicates that this option is also viable. This option is expected to generate a net revenue of RM 17.4 million (RM 8700/ha) and the computed NPV for a 2000-ha estate is positive at RM 5.1 million or RM 2,550/ha. The computed B/C ratio of 1.38 indicated that for every ringgit invested a net return of 38 sen can be expected.

Option 6: Mixed plantation, hevea-sentang and hevea-teak (20-year cycle; 40 ha consolidated smallholding)

Analyses of returns for mixed cropping of Hevea-sentang and hevea-teak combination under consolidated smallholding conditions indicate favourable returns at the assumed latex and log yields and their respective prices. The computed IRRs are 16.1% for the Hevea-sentang combination and 15.8% for Hevea-teak.

Total net revenue for a 40-ha holding is RM 4.3 million (RM 106,750/ha) with an NPV of RM 0.45 million (RM 11,250/ha) for Hevea-sentang. Net revenue for hevea-teak is marginally lower at RM 4.2 (RM 104,500/ha) million with an NPV of RM 0.44 million or RM 11,000/ha. The

computed B/C rations for both combinations are about 1.5 suggesting a 50 sen net return for every ringgit of investment.

5.7. Discussion on viability

A review of the findings of all the options is carried out in this section. For this purpose the options have been categorized under three sections: Mono-culture plantation for wood extraction; Hevea plantation for wood and latex extractions; and Mixed plantation.

5.7.1. Mono-culture: wood extraction only

Under the mono-culture option for Hevea wood, sentang, teak and acacia teak plantation appears to provide the highest return given its assumed relatively higher projected price of RM 600/m3

compared to RM 450/m3 for sentang and the much lower prices of RM 150/m3 for acacia and RM 95/m3 for Hevea wood.

Sensitivity analyses on large-scale planting of sentang and teak indicate that the options are still viable under 20% adverse changes in expenditure and revenue. For acacia it is marginally viable if the projected revenue drops by 20%. In the case of Hevea (under large scale planting) given the low price of Hevea sawlog a 10% adverse change in revenue or expenditure projections could make the project non-viable (i.e. assuming the establishment of plantations for the sale of sawlogs without any further downstream activity). Conversely, the IRRs would improve to 15.2% and 20.9% if prices of Hevea sawlogs increased to RM 150 and RM 300/m3, respectively. At the latter price, despite being lower than the assumed price of sentang and teak, the IRR could to be more attractive. Sensitivity analyses based on 10% and 20% changes in revenue and expenditure estimates on various options are as shown in Appendix 3.

It must be emphasized that this study assumes the sale of sawlogs (roundlogs). Obviously, given the vast projected price difference between the assumed price of sentang (RM 450/m3) and teak (RM 600/m3) compared to Hevea at RM 95/m3 (which at present is artificially depressed being treated as a residual resource) investment in the later option may erroneously be considered as unattractive. Profit in the Hevea wood trade is actually very lucrative compared to the other species but the margin lies in processing and in further downstream wood-based manufacturing industry.

Comparative economic assessment of sawn timber production between light red meranti and rubber wood carried out in 1994 showed that despite the low recovery rate of Hevea wood (20%) as against light red meranti (67%) profit per cubic meter of hevea sawn timber was RM 475 compared to only RM 69/m3 for light red meranti. This is primarily attributed to the low Hevea sawlog price then at RM 41/m3 compared to light red meranti at RM 545/m3. The price of hevea sawn timber was lower at RM 765/m3 compared to light red meranti at RM 911/m3. The computed profit margin over cost for Hevea sawn timber was 164% compared to light red meranti at only 5%.

The above analysis was based on tapped rubber trees from existing rubber plantations. For untapped Hevea trees grown specifically for timber the wood volume and recovery is expected to

be much higher. This would further reduce cost and increase profit margin if the present price difference between Hevea sawlog and sawn timber persist.

For the above reason the establishment of Hevea solely for log extraction must be integrated with at least sawn timber or fibrewood processing activities to benefit from the lucrative value added. This is appropriate for the big time investors like Guthries and Golden Hope that could afford capital intensive processing plants.

For the smallholding sector the planting of any wood species solely for timber is not advisable as the majority of smallholders could ill-afford the long gestation period before realizing income from wood.

Even though the analysis indicates that acacia plantation is viable it is relatively less attractive as compared to sentang and teak. However, with its known fast-growth rate and adaptability to poor soil conditions the species is recommended for lower-end products such as general utility timber, panel products and fibre material for pulp and paper at shorter rotation. The economic viability can be further enhanced if the planting of this species is integrated with processing facilities such as integrated timber complex or pulp and paper mill. However growing acacia solely for pulp and paper and without integrating with pulp and paper mill and taking into account the cost of land will yield only an IRR 3.3% which is not viable based on earlier study conducted by the Forestry Department in 1992.

5.7.2. Mono-culture: Hevea wood - latex extraction (shorter planting cycle)

Analysis on high density planting over shorter planting cycles indicates that this option is viable with an IRR of 15%. This is a promising alternative to investors desiring earlier Hevea wood extraction. Despite the projected low price of Hevea logs this option provides good returns from the combined contribution of latex extracted seven years prior to log harvesting. Revenue from latex exploited under intensive stimulation is expected to provide good returns and being extracted earlier than wood helps to increase the present value of returns. With existing timber/latex clones that provide both good latex and log volumes this option shows promise.

Presently, being treated as residuals, Hevea log prices have been depressed despite the high value-added when converted to sawn timber. Sensitivity analysis indicates that the investment is viable except in the case where adverse changes of 10% and 20% occur simultaneously in revenue and expenditure or vice versa (Appendix 4). Computation of returns at sawlog prices of RM 200/m3 and RM 300/m3 (still much lower than that of light red meranti - a species also used in furniture making as Hevea) provides IRRs of 18.3% and 20.5%, respectively.

Obviously this option if combined with downstream processing of Hevea wood would provide better returns from value-added manufactured products. Towards this end Guthries and Golden Hope have established Hevea plantations to extract wood to feed their MDF (Medium Density Fibreboard) plants. Apart from benefiting considerable profits from value added the plantation ensures adequate and uninterrupted supply of Hevea wood. Several logging and sawnmilling companies in East Malaysia have also integrated upstream establishing Hevea plantation for wood and latex extraction.

5.7.3. Mixed plantation: Hevea-teak and Hevea-sentang

This mixed plantation practice (the planting of Hevea trees interspersed with sentang or teak) is considered appropriate for smallholding and is intended to maximize revenue from sentang or teak logs while ensuring a continuous flow of annual income during the latex exploitation period.

In terms of future value the per hectare gross revenue contribution by sentang or teak accounts for about 52 - 53% of total revenue, with latex contributing 34 - 35% and Hevea wood the balance of 13%. In terms of present value contribution, however, since revenue from latex is accrued earlier latex contribution at RM 17,000/ha accounted for 52% of the total contribution with sentang or teak contributing about RM 12,000/ha (39%) and Hevea wood 9 %. Hevea is therefore still the major revenue contributor under this mixed plantation practice.

The option appears attractive given the bonus income from sentang or teak integrated with the hedgerow planting system of Hevea. The viability of this project depends on the attainability of the projected log volumes and prices. Sensitivity analysis carried out indicates that the proposed option remains viable even at 20% adverse changes in revenue and expenditure.

6. Conclusions

It must be reiterated that analyses for this study are made from the growers’ perspective to examine viability of commercial planting of several timber species for the sale of sawlogs. Two crucial assumptions affecting results of study are obviously the price of sawlogs of the various species and their estimated log volumes.

It must be cautioned that given the low projected price of Hevea sawlog based on present depressed Hevea log prices used in the study against prices of other timber species which are assumed to be many times higher may lead to the mistaken conclusion that investments in hevea is relatively not attractive. Returns and margin from Hevea wood investment are presently very attractive although as indicated earlier, benefits accrue at the stage of processing and further downstream activities.

This is primarily attributed to the low sawlog price (hence low raw material cost). Once converted into sawn timber their substantially high price provides very attractive margin. The present Hevea sawlog price (July 1997) as provided by MTIB (Malaysian Timber Industry Board) was RM66/m3 while that of Hevea sawn timber varied between RM 473/m3 to RM 805/m3 depending on the size of sawn timber.