Mechanical Processing of Tropical Hardwood in Developing Countries: Issues and Prospects of Plywood Industry Development in the Asia-Pacific Region Kenji Takeuchi Division Working Paper No. 1982-1 January 1982 Commodities and Export Projections Division Economic Analysis and Projections Department Development Policy Staff The World Bank Division Working Papers report on work in progress and are circulated for Bank staff use to stimulate discussion and comment. The views and interpretations in a Working Paper are those of the author(s) and may not be attributed to the World Bank or its affiliated organizations. MECHANICAL PROCESSING OF TROPICAL HARDWOOD IN DEVELOPING COUNTRIES: Issues and Prospects of Plywood Industry Development in the Asia-Pacific Region January 1982 Prepared by: Kenji Takeuchi Assisted by: Jasbir Chhabra and Sompheap Sem Commodities and Export Projections Division Economic Analysis and Projections Department Development Policy Staff The W'orld Bank ACKNOWLEDGMENTS This report is one of a series of case studies for a research project jointly sponsored by the Commonwealth Secretariat and the World Bank on industrial processing of primary products. The author benefited from comments and discussions given on earlier drafts by the participants in the research project. He also would like to acknowledge the assistance rendered to him during the field work by government officials and industry experts in Indonesia, Malaysia, Singapore, the Philippines, and Japan. Earlier drafts have also been distributed to the Asia/Pacific Workshop on Negotiations with TNCs in the Tropical Hardwood Sector, sponsored by UN Center on Trans- national Corporations, FAO and ESCAP (Pattaya, Thailand, August 25 to Septem-ber 5, 1980) and the 12th Pacific and Trade Conference which met on the theme of Renewable Resources in the Pacific Basin (Vancouver, B.C., September 6-11, 1981). Useful comments given by the participants are gratefully acknowledged. Finally, but not the least, thanks are due to Mrs. Jasbir Chhabra and Mr. Somheap Sem for their valuable research assistance, and Ms. Dawn Gustaf son for her patience in typing various drafts. Table of Contents Page No. ACKNOLHEDGMENTS .................................... ............ ii LIST OF TABLES ................ ............................... . vi LIST OF FIGURES .................... ...............,.......... * viii ABBREVIATIONS .. . ................................................ . ix SUMMARY AND CONCLUSIONS, ...................................... x I. INTRODUCTION ...........................................1 II. THE TROPICAL HARDWOOD SECTOR .......................... 3 A. Tropical Hardwood in World Wood Economy ..................3 B. Production ...................................... 5 1. Tropical Hardwood Logs ........ ........... 5 2. Processed Tropical Hardwood Products 7 (a) Sawnwood ........................... 7 (b) Tropical Hardwood Plywood ........... 9 (c) Veneer Sheets. ........................ .11 (d) Particleboard .......................... 11 C. Trade and Consumption.., ......................... 12 1. Pattern of Trade Flows in Tropical Hardwood. 13 2. Exports of Logs and Processed Products 14 (a) Export Dependence .......... * ........... 14 (b) Share of Processed Products in Exports. 16 (c) Log Exports ............................. 17 (d) Processed Product Exports .......... 17 3. Consumption................................... . ** . 18 (a) Sawnwood ......................... 19 (b) Plywood ............................... . 19 D. Markets and Prices .. . . ................. 20 1. Market Structure ............................. 20 2. Trade Barriers .... .......................... 22 3. Prices ........... .......................... 25 4. Market Outlook ................ 26 iv - Table of Contents (Continued) Page No. III. THE EVOLUTION OF THE LOCATIONAL PATTERN OF MECHANICAL PROCESSING OF TROPICAL HARDWOOD IN THE ASIA-PACIFIC REGION....*.................33 A. Introduction ...............33 B. Plywood Trade in the Pacific Basin up to 1960. 37 C. Developments from 1960 to 1973...........................45 D. Trade in Processed Tropical Hardwood, 1974-1977 52 E. Developments from 1978 to the Present............ 52 IV. FACTORS AFFECTING THE LOCATION OF MECHANICAL PROCESSING OF TROPICAL HARDWOOD...............................60 A. Introduction....60 B. Entry Cos t s. .............61 C. Plywood Production Costs up to Ex-Factory o 62 1. Fixed CoSt. * * . * * . * * * * * * . 65 2. Variable production cost................... 65 (a) Logs... 65 (b) Glue and "Other Supplies". 68 (c) Labor cos6t................ . . 69 (d) Packaging...................................69 D. Post-Factory Costs for Plywood........................... 72 1. Post-Factory Costs up to FOB.72 2. Ocean Transport Cost...............................72 3. The cost of import duties in importing countries.. . ......... 74 V. THE BENEFITS OF INCREASED PROCESSING IN LOG-EXPORTING COUNTRIES. ........... E . .74 A. Value Added to Linkage Effects......... 75 B. Forcign Exchange Eang.. ...............................78 C. Employment E fee c t . 79 D. Regional Development Effects............... ....... 82 VI. POLICY ISSUES AND PROSPECTS ..................... 82 Table of Contents (Continued) Page No. ANI'TXsE S: A. Technical Characteristics of Tropical Hardwood Resources 87 B. Identification of Processing Chains 91 C. Uses of Tropical Hardwood Products 93 P. Taxes on Log Exports in Indonesia as of April 19P0 9 STATISTICAL APPENDIX 101 REFERENCES 130 LIST OF TABLES Page No. 2.1 PRODUCTION OF TROPICAL HARDWOOD LOGS BY REGIONS AND MAJOR COLTNTRIES, 1961. 1970, 1978 AND 1979 ........... 6 2.9 PRODUCTION OF HARDWOOD SATNTOOD BY MAJOR REGIONS AATD MAJOR COUNTRY ECONOMIES, 1961, 1970, 1977, 1978 AND 1979 z-=; ................................... 8 2.3 PRODUCTION OF PLYWOOD BY MAJOR REGIONS AND AREAS, 1955, 1961, 1965, 1970 AND 1979 . ....................... 10 2.4 PARTICLEBOARD PRODUCTION IN 1961 AND 1979 ................. 12 2.5 THE RATIO OF EXPORTS (LOGS AND PROCESSED PRODUCTS) TO LOG PRODUCTION IN SELECTED TROPICAL HARDWOOD-PRODUCING COUNTRIES, 1961 AND 1977 . . . . . . . . . . ..... * * * * * X X * e...... 15 2.6 PERCENTAGE SHARE OF PROCESSED PRODUCTS IN TOTAL TROPICAL TIMBER EXPORTS OF DEVELOPING"-REGIONS, 1961, 1970, 1977 AND 1978 ...................... . *. e*§§*@@ .....so........ . 16 2.7 EXISTING TARIFFS ON SELECTED WOOD PRODUCTS IN EEC, JAPAN, UNITED STATES AND CANADA ........... ..o ........... 24 2.8 PRICES OF SELE(TED "SOUTH SEA" SPECIES, LOGS AND SAWNWOOD 1970-1980 .., ................... 27 2.9 WHOLESALE PRICES FOR PLAIN PLYWOOD OF LAUAN SPECIES IN JAPAN AND PRILIPPINES .. .. ................ . . . 28 2.10 EXPORT UNIT VALUES OF TROPICAL HARDWOOD LOGS, SAWNWOOD, PLYWOOD AND VENEERS IN SELECTED COUNTRIES AND ASIA-PACIFIC REGION, 1970-79 ............ .................. 29 3.1 PHYSICAL, HUMAN AND COMBINED CAPITAL INTENSITIES OF VENEER/PLYWOOD AND SAWMILL PRODUCTS IN THE US, 1970, AND THEIR RELATIVE RANKING IN THE SELECTED 184 "INDUSTRIES" .............................*.. ...... 35 3.2 TOKYO WHOLESALE PRICE AND CIF IMPORT UNIT VALUE FOR PHILIPPINE LOGS AND OCEAN FREIGHT RATES FOR JAPAN'S LOG IMPORTS FROM THE PHILIPPINES, 1957-1961 ............. 36 3.3 PLYWOOD PRODUCTION IN SELECTED COUNTRIES/ECONOMIES, 1946-1979 ............................. ....38 - vii - List of Tables (Continued) Page No. 3.4 PLYWOOD EXPORTS OF SELECTED COUNTRIES/ECONOMIES, 1948-79 ....................................................... 39 3.5 PLYWOOD IM4PORTS BY THE US AND THE US, 1946-79 ............ 41 3.6 HARDWOOD PLYWOOD PRODUCTION, EXPORTS, IMEPORTS, APPARENT CONSUMPTION IN THE US, 1951-79 ................. 42 3.7 COMPARISON OF ESTIMATED COSTS OF TRANSPORTING PLYWOOD FROM THE PHILIPPINES, JAPAN, PROVINCE OF TAIWAN AND REPUBLIC OF KOREA TO THE UNITED STATES, 1968 ................. 49 3.8 TRENDS IN GROSS VALUE ADDED TO LOG MATERIAL IN PLYWOOD PRODUCTION IN JAPAN, PER CUBIC METER OF LAUAN LOG, 1970-1980 ............................ 53 3.9 SHARES IN WORLD EXPORTS OF TROPICAL HARDWOOD LOGS, SELECTED YEARS IN 1955-1979 ............................. 55 4.1 ESTIMATED ENTRY COSTS OF PLYWOOD FACTORIES IN INDONESIA AND MALAYSIA IN 1980 US DOLLARS .............. 63 4.2 ESTIMATED COST OF PRODUCTION FOR PLAIN PLYWOOD AT SELECTED LOCATIONS IN ASIA AS OF EARLY 1980 ............. 64 4.3 THE STRUCTURE OF COST OF PRODUCING PLYWOOD IN INDONESIA, MALAYSLI, PHILIPPINES, SINGAPORE AND JAPAN, INCLUDING COST OF DELIVERING TO JAPANESE MARKET, 1980 66 4.4 THE IMPLIED LOG PRICES PAID BY PLYWOOD PRODUCERS AT DIFFERENT LOCATIONS ................................... 67 4.5 ENERGY CONSUMPTION IN PLYWOOD PRODUCTION IN JAPAN 1973-1979 ... ......................................* 70 4.6 WAGES IN PLYWOOD INDUSTRY IN INDONESIA, MALAYSIA, PHILIPPINES, SINGAPORE AND JAPAN, AS OF 1980 ............... 71 4.7 FREIGHT COSTS FOR "SOUTH SEA LOGS" FROM SELECTED LOG-EXPORTING POINTS TO JAPAN - JULY-SEPTEMBER, 1980 .... 73 5.1 ESTIMATED GROSS VALUE ADDED TO LOG MATERIAL BY PROCESSING IN SELECTED COUNTRIES IN ASIA, 1977 AND 1978 ............. 76 5.2 DERIVATION OF VALUE ADDED IN PLYWOOD PRODUCTION: A HYPOTHETICAL CASE IN EAST KALIMANTAN ....................... 77 - viii - List of Tables (Continued) Page No. 5.3 ESTIMATES OF EXTRA EXPORT EARNINGS (GROSS) FROM HYPOTPETICAL COMPLETE SUIBSTITUTION OF PLYWOOD AND SAWNWOOD FOR LOG EXPORTS,MAJOR ASIA-PACIFIC COUNTRIES, 1978 ....... 80 5.4 EMPLOYMENT EFFECT OF PLYWOQOD PRODUCTION IN SELECTED COUNTRIES ............................ .......... 81 Annex A Table I NATURAL TROPICAL HARDWOOD FOR;ESTS, 1975 ........ 89 Annex C Table 1 EUROPE: ESTIMATED CONSUM4PTION OF SAWNWOOD, WOOD-BASED PANELS AND VENEER SHEETS BY MAJOR END-USES SECTOR, 1969-71 (AVERAGE) ............ 95 Annex C Table 2 IJNITED STATES: ESTIMATED CONSUMPTION OF SAWNWOOD AND PLYWOOD, 1962, 1970 AND 1976 X. 96 Annex C Table 3 PRESENT USES FOR FOREST PRODUCTS IN BUILDING 97 LIST OF FIGURES 2.1 PRICE OF LAUAN VENEERLOGS IN JAPAN, 1955-1980 ............ 30 2.2 PRICE OF MERANTI SAWNWOOD, 1958-1980 ......... 31 2.3 PRICE OF PLAIN LAUAN PLYWOOD IN JAPAN, 1963-1980........ 32 3.1 PERCENT SHARES OF MAJOR ASIAN SUPPLIERS IN TOTAL US IMPORTS OF HARDWOOD PLYWOOD, 1950-1978 ........... 43 3.2 PLYWOOD - RATIO OF EXPORTS TO PRODUCTION IN SELECTED ASIAN PRODUCERS . .............. ........ ** . . . 51 Annex A Figure 1 THE WORLD'S FOREST - MAIN VEGETATION ZONES ... 90 Annex B Figure 1 PROCESSINTG OF TROPICAL HARDWOOD LOGS .......... 92 ABBREVIATIONS ACP African, Caribbean and Pacific ADO Export Tax on Timber in Indonesia CIF Cost, Insurance, Freight DBH Diameter at Breast Height FAO Food and Agriculture Organization of the United Nations FOB Free on Board GOI Government of Indonesia GSP Generalized System of Pr&-erences HPH Concession of Holder MFN Most Favored Nations OPEC Organization of Petroleum Exporting Countries PNG Papua New Guinea RKT Allowable Quotas for Annual Cuttings SEALPA Southeast Asian Lumber Producer Association SEHH Exportable Log Quotas SUMMARY AND CONCLUSITNS Recent developments in the tropical hardwood sector in the Asia- Pacific region suggest that the structure of tropical hardwood trade in this region is changing dramatically with global implications. In the last few years, three major traditional suppliers, i.e., Indonesia, Malaysia and the Philippines, which together account for over 80% of world exports of tro- pical hardwood logs, have taken decisive steps to reduce log exports. The measures involve export quotas (or outright bans) and/or increased govern- ment charges ("royalties," "export taxes," etc.) on log exports. Their objectives are (a) to conserve the semi-nonrenewable resources, (b) to collect maximum resource rent from the rich forest resources which are owned by governments, and, most importantly, (c) to secure benefits from increased local processing of logs. This report examines the issues related to, and the prospects for, the growth of local processing of tropical hardwood in log-produc'ing areas. TWhile the report covers the broad issues of mechanical processing of tropical hardwood, the analysis is narrowly focussed on the plywood industry in the Asia-Pacific region. The plywood industry is considered the most important part of mechanical wood processing activities in terms of develop- mental strategy. Two-thirds of tropical hardwood logs are produced in the tropical Asia-Pacific region, which exports two-thirds of its production--80% as logs and only 20% in processed forms (sawnwood, plywood and veneers). The log-producing Asia-Pacific countries account for over 85% of world exports of tropical hardwood logs. Major log exporters in the region are '1alaysia, Indonesia, the Philippines and Papua New Guinea. Sixty percent of their log exports goes to Japan and 38% goes to the newly industrialized developing economies in Asia. While Japan consumes most of the imported logs at home, the Republic of Korea, the Province of Taiwan and Singapore "re-export" a substantial part of their imported logs in the form of pro- cessed products (plywood and sawnwood). The countries that produce tropical hardwood consume 55% of world production themselves, while Japan consumes 18-20%, Western Europe 12%, the United States 5% and the log-importing developing economies (Republic of Korea, Province of Taiwan, Singapore and Hong Kong) consume 8-9%. Almost 95% of Japan's imports are in log form, while virtually all of the US imports are in plywood form. In Western Europe, about 40% of tropical hardwood sawnwood consumed there is produced there from imported tropical logs and 60% is imported as sawnwood, while 60% of tropical hardwood plywood consumed in Western Europe is prodTuced in Europe from imported logs and 40% is imported as plywood. The evolution of the plywood and other mechanical processing industry in the Asia-Pacific region has been reviewed, and the following conclusions have emerged: (a) Throughout the post-World War II period, the sustained growth of US imports of tropical hardwood plywood has been the most important single factor responsible for the expansion of the plywood industry in the region. (b) From the end of World War II to the mid-1960s, Japan was the leading exporter of plywood which it produced from tropical logs imported from Southeast Asian suppliers. (c) Since the mid-1960s, the Province of Taiwan and the Republic of Korea have replaced Japan as the major exporters of plain plywood. (d) The main reasons for the change in the shares of these exporters were (i) the heavy subsidization of plywood exports as a part of the outward-oriented industrial develop- ment strategy in the Province of Taiwan and the Republic of Korea from the early 1960s to the mid-1970s, and (ii) the sharp increases in costs in Japan partly due to the apprecia- tion of the Japanese currency. (e) Plywood exports from the Philippines increased in the second half of the 1950s as the Philippines -enjoyed preferential access to the US market under the Laurel-Langley agreement. However, because of the continued inward-oriented economic policy the growth of Philippine plywood exports ran out of steam in the mid-1960s. (f) Exports of sawnwood and plywood to the UK market (and later the EC market as a whole) expanded steadily. The factors responsible for this success are the historical ties with the UK, the Commonwealth preference access and successful marketing supported by the work of Timber Industry Boards in Peninsular Malaysia and Singapore. Two important features of mechanical wood processing tend to favor the location of such activities in the log-producing areas. These are (a) that it is a relatively unskilled-labor-intensive activity; and (b) that it is a typically weight-reducing activity, and., in the long run, a transport-cost-saving activity. In terms of current government policy, the major tropical hard- wood-producing areas in the Asia-Pacific region are broadly divided into two groups: (a) states attempting to reduce log exports (the Philippines, Peninsular Malaysia, Sabah a,itd Indonesia) and (b) states with liberal log export policies (Sarawak, Papua New Guinea, other Pacific islands). Re- cently, the policies of the first group have been to apply quantitative restrictions on log exports, to increase government charges per unit of logs exported, and to promote local processing of logs. Increased exports of processed products would result in higher export earnings, higher value added, higher employment and regional development of remote least-developed areas. In contrast, the policies of the second group have been to encourage log exports. As a result, these areas have been experiencing rising trends in log export quantities and increasing foreign exchange earnings, but only a slow growth in processing and low government revenues from forest utili- zation. In this context, a distinction must be made between two objec- tives: (a) the objective of obtaining the various benefits of local pro- cessing and (b) the objective of obtaining maximum resource rent from the semi-nonrenewable resources. The latter objective requires careful consideration of the projected long-term price increases in tropical hard- wood logs in real terms and the fact that standing trees grow over time. For Peninsular Malaysia and the Philippines, the appropriate policy is to phase out log exports completely and to take steps to improve the cost competitiveness of the processing industries. This is being implemented already. The wood-processing industries in Peninsular Malaysia and the Philippines could be strengthened if the governments adopted more aggressive, outward-oriented industrial policies. In the case of Papua New Guinea (PNG), the liberal log export policy seems to be clearly the superior policy at this time . The timber resources of PNG are not so attractive commercially as those of the Philip- pines, Malaysia or Indonesia (excluding West Irian). Therefore, it is more urgent for PNG to develop a market for its species. In Sabah and Indonesia, policy options are more open than in Peninsular Malaysia, the Philippines or PNG. Sabah and Indonesia (excluding West Irian) happen to have the richest forest resources in terms of inci- dence of commercially attractive species per unit area. But there are a number of short-run problems in increasing local processing. Attracting the necessary labor force to Sabah or the Indonesian outer islands is a problem. The infrastructure required for the large-scale growth of pro- cessing industries in these areas would be a heavy financial burden. Until sufficiently large flows of processed-product exports are built up, trans- port cost economics works against such processinig. Furthermore, substantial resource rent that could be collected from log exports will have to be forgone until export-orienited processing industries are well established. This could take several years, or possibly a decade. Nevertheless, Sabah and Indonesia may consider it politically desirable to develop some kind of industries in the remote regions. If so, timber processing seems to provide the best chance of ultimate success. Indeed, timber processing, along with agriculture, could be used as the core of a regional development strategy. - xiii - Since the basic economics is in favor of local processing in Sabah and Indonesia in the long run, strong protection measures for the infant export industry may be justified in the light of the Korean and Taiwanese experiences. Adoption of an overall export promotion strategy such as Korea's could be quite effective. Specific steps needed include the following measures: (a) to minimize the use of price ceilings and other interventions in domestic markets; (b) to improve the efficiency of domestic transport (especially shipping) and port facilities; and (c) to develop a few wood product terminals at strategic locations. To ensure an internationally acceptable quality of products and to secure market access, joint ventures with experienced foreign companies could be effective at this stage of development. As for the state of Sarawak, it seems that it could collect higher resource rent on its log exports than it does now. Sarawak may be forgoing both the resource rent on logs and the benefits of local processing. It may very well be a case of favoring a group of private businesses at the expense of the public interest. One of the issues in the plywood trade has been the import duties in industrialized countries, especially the escalated nature of these duties, which result in very high effective rates of protection on tropical hardwood plywood. This has distorted the pattern of trade in tropical hardwood products. One reaction of industrialized countries to the recent changes in the log-export policies of major log-producing countries has been to reduce import barriers on veneers and sawnwood, which, of course, is a welcome trend. However, industrialized countries should, ideally speaking, reduce/eliminate import barriers on tropical hardwood plywood. Until this happens, the second-best solution in terms of maximizing world economic efficiency is for log-exporting countries to offset the distortion by subsidizing the plywood industry through a two-tiered system of pricing logs based on higher government charges on export logs than on logs processed locally. Plywood manufacturing should be the core of the development strategy for mechanical wood-processing industries. If development of the plywood industry is promoted, saw-milling and production of other wood-based panels (particleboard, etc.) would automatically be promoted because they would be complimentary to plywood manufacturing by improving efficiency in raw mlaterial usage. I. INTRODUCTION 1.01 Tropical hardwood-producing countries have long aspired to in- crease their exports of processed timber products and reduce their log exports. In fact, a number of Latin American countries have either banned or severely restricted their exports of logs for more than two decades. Some African and Asian producers of tropical hardwood also have taken measures to restrict their log exports in the hop.e that these would help accelerate expansion of their exports of processed timber products. While Latin American producers now process virtually 100% of their tropical hardwood, the majority of African and Asian producers are still exporting the bulk of their hardwood in log form. 1l02 Recent developments in the tropical hardwood sector in the Asia- Pacific region, however, suggest that a wholesale restructuring of the tropical hardwood trade is under way with global implications. In the last few years, three major traditional suppliers, i.e., Indonesia, Malaysia and the Philippines, which together accounted for well over 80% of world exports of tropical hardwood logs in 1978, have taken decisive steps to reduce log exports. There seem to be three main reasons for this trend. F:e;st of all, the governments of these countries have become increasingly aware of the possible exhaustion of their prime tropical hardwood -resources in the near future. Second, the success of OPEC in petroleum exports made the major traditional log-exporting countries appreciate greater economic rent pos- sible from their rich forest resources owned by the governments. Finally, but perhaps most importantly, the determination of these countries to accelerate the growth of local timber processing and to substitute mechani- cally processed wood products (such as sawnwood, veneer sheets, plywood and further processed products) for round-log exports has become firmer. 1.03 rhe purpose of this report is to review the issues related to, and the prospects for, the growth of local processing of tropical hardwood in log-producing countries. More specifically, the report tries (a) to identify the factors affecting the location of mechanical processing of tropical hardwood, especially the plywood industry in the Asia-Pacific region; (b) to assess gains and losses from promotion of tropical hardwood processing from the viewpoint of log-producing countries; and (c) to examine the policy options for log-producing developing countries. 1.04 While the report is concerned with the broad issues of tropical hardwood processing, the analysis is rather narrowly focussed in terms of both the processing chains and the countries involved. As regards process- ing chains, the study deals with mechanical processing of logs but not pulp and paper manufacturing. The products covered are tropical hardJwood logs (i.e., sawlogs, veneer logs, logs for sleepers) and the products derived from them through the first--stage mechanical processing--i.e., sawnwood -2- (including sleepers 1/), veneer sheets,,plywood (including blockboard) and particleboard. Wood products made from these "intermediate" products are generally excluded. 2/ Furthermore, the analysis concentrates on the plywood sector because (a) a majority (65-70%) of the logs exported from the producing countries are veneerlogs which are used mainly for plywood making in the impo.rting countries; and (b) the gross value added to the log mate- rial is generally higher in plywood than in sawnwood, and, therefore, there is a greater interest in plywood manufacturing than in sawmilling on the part of log exporting countries. 1.05 In terms of country coverage, the study focuses on the tropical Asia-Pacific region because it is by far the most important, account- ing for two-thirds of world tropical hardwood log production. The study pays special attention to the three most important tropical-hardwood-export- ing countries in the region, i.e., the Philippines, Malaysia and Indonesia. In addition to these three countries, it was possible for the field work to cover two major log-importing countries, i.e., Japan and Singapore, but the field work did not cover two other major log-importing processing areas, i.e., the Republic of Korea and the Province of Taiwan. Because of the importance of the latter two areas in the processing of tropical hardwood logs produced in the Asia-Pacific region, special efforts have been made to collect available information on the Republic of Korea and the Province of Taiwan from secondary sources. 1.06 Chapter II provides background information on the tropical hard- wood sector. It includes broad historical trends in and present patterns of production and trade of both tropical hardwood logs and their processed products. In addition, it covers trends in consumption, the market struc- ture, trade barriers, prices, export unit values and the long-term market outlook. Background information on technical characteristics of tropical hardwood resources, identification of processing chains anu uses of tropical hardwood is provided in Annexes A, B and C. 1.07 Chapter III discusses the postwar evolution of the plywood trade in the Asia-Pacific region and identifies major factors that have affected the location of the export-oriented plywood production in the region. The period is divided into four sub-periods: (a) 1946-1960; (b) 1960-1973; (c) 1974-1977; and (d) 1978-1980. 1/ "Sleepers" and "railroad ties" are used interchangeably. 2/ At least for some developing countries, the export potential in a group of secondary processed products, such as window frames, doors, parquet floorings) furniture components and other wood moldings in- cluding various joinery parts, is considered "promising", and deserves careful evaluation, but these are outside the scope of this study. -3- 1.08 Chapter IV analyses available cost of production data on plywood and attempts to identify the key determinants of location of processing. The analysis focuses on plywood because it is the most important product from the viewpoint of development strategy. The analysis presumes that the hypothetical end market is Japan. The costs of production are divided between "ex-factory" and "post-factory" costs (the latter including the cost of transportation to Japan and import duties in Japan). 1.09 Chapter V discusses the possible benefits of increased local processing Lrom the viewpoint of the log-producing countries. The possible benefits are a creation of value added, backward linkage effects, additional foreign exchange earnings, employment, and regional development, 1.10. Chapter VI presents the conclusions. II. THE TROPICAL HARDWOOD SECTOR A. Tropical Hardwood in World Wood Economy 2.01 Tropical hardwood is one of the most important primary commodities for developing countries in terms of export earnings. In 1979, exports of broadleaved (hardwood) industrial roundwood 1/ from developing countries amounted to $3.1 billion, while exports of coniferous (softwood) roundwood earned these countries a meager $75 million. Virtually all of the broad- leaved roundwood exports from developing countries are in the form of sawlogs, veneerlogs and logs for sleepers (logs, hereafter) 2/. Only a small fraction of these exports are pulpwood and other industrial round- wood 3/, and fuelwood exports are practically negligible. 2.02 In volume, tropical hardwood logs are a rather modest component of total world wood production (Statistical Appendix Table SAM). In 1979, world wood production amounted to 3.0 billion m3 , of which 47% was indus- trial wood with the remaining 53% being fuelwood. Within industrial wood, logs are the most important sub-category. In 1979 logs accounted for 61% of world production with pulpwood and other industrial wood accounted for 24% and 15% respectively. Only 28% of logs are broadleaved, or hardwood, and about one-half of hardwood logs are tropical hardwood. Thus, tropical hardwood logs account for only 4% of total volume of trees harvested. 1/ In this respect, the terms "hardwood," "broadleaved wood" and "non- coniferous wood" are used interchanigeably. Similarly,"softwood" and "coniferous wood" are used interchangeably. "Industrial roundwood" includes all forms of roundwood except fuelwood. 2/ "Sleepers" and "railroad ties" are used interchangeably. 3/ "Other roundwood" includes pitprops, poles, piling, scaffolding and formwork roundwood, etc. -4- 2.03 Within the "logs" category, however, the relative importance of tropical hardwood has been increasing. During 1961-1979, the period for which consistent data are available, production of tropical hardwood logs increased at 5.1% per annum, while production of softwood and temperate hardwood logs increased only at 1.4% and 0.5% per annum respectively (Sta- tistical Appendix Table SA1). 2.04 Furthermore, from the viewpoint of developing countries, tropical hardwood logs are of particular importance. Unlike softwood, production of which is dominated by industrialized countries and centrally planned economies, tropical hardwood, which accounts for almost one-half of world production of hardwood logs, is available only from developing countries. Exports of tropical hardwood logs and their derived products 1/ from developing countries have risen rapidly over the last three decades, amount- ing to some $5.8 billion in 1979 (Statistical Appendix Table SA2). These have risen sharply primarily because of the shortages of temperate hardiwood supply in the industrialized countries (Statistical Appendix Table SA3). 2.05 Tropical hardwood exports are especially important for a number of individual developing countries. For example, in 1976-1978, the share of tropical hardwood logs and sawnwood in non-oil exports was over 23% for Congo, Gabon, Burma, Indonesia and Solomon Islands; 11-17% for Cameroon, Central African Republic, Ivory Coast and Malaysia. 2/ Also, tropical hardwood exports have critical importance to regions (often rather remote regions) of some countries--e.g., the states of Sabah and Sarawak in Malay- sia, Mindanao in the Philippines, Kalimantan, Sumatra and other outer islands in Indonesia, and the Amazonia in Brazil. 2.06 There is every reason to believe that demand for tropical hardwood logs will continue to grow more rapidly than demand for softwood logs or for temperate hardwood logs. Provided that supplies of tropical hardwood logs are available, therefore, the relative importance of tropical hardwood logs within the logs category is expected to continue to increase, at least, over the next two decades and perhaps beyond. As tropical hardwood supplies from traditional sources dry up, supplies are expected to come increasingly from the hitherto little exploited tropical forest areas such as West Irian of Indonesia and the inner areas of Papua New Guinea, the Amazonia and Zaire. 1/ The products of first-stage mechanical processing, namely, sawnwood, sleepers, veneers, plywood, and other wood-based panel products. 2/ World Bank, Commodity Trade and Price Trends, August 1980, Table 9 and Table 11. -5- B. Production 1. Tropical Hardwood Logs 2.07 Production of tropical hardwood logs in the three tropical regions has expanded rather rapidly in the last three decades. It increased at some 5% per annurm in 1961-1979 (Table 2.1). Among the three producing regions, the tropical Asia-Pacific is the most important accounting for two-thirds of world tropical hardwood production today. It has also been the Lastest growing supplier, witth production having grown at 6.1% per annum in 1961-1979. Indonesia, Malaysia and the Philippines are the main pro- ducers in the region. While India also has been a major producer, its production is primarily consumed at home. Production in Papua New Guinea has picked up rapidly since the early 1970s. 2.08 Tropical Africa accounts for 13-14% of world production. Major producers have been concentrated in West and Central Africa. The most important producers are Ghana, Gabon, Ivory Coast and Nigeria (Table 2.1). These are followed by Cameroon, Liberia, Zaire, Congo and Central African Republic. 1/ 2.09 Tropical Latin America, which includes the Caribbean countries but excludes three temperate countries (Argentina, Chile and Uruguay), accounts for 19-20% of world production. Major producers in this region are Brazil, Costa Rica, Colombia, Ecuador, Peru and Paraguay. As will be discussed below, much of the production in these countries is consumed locally. l/ Countries that might become significant producers by 1990 include Angola and Mozambique. Table 2.1: PRODUCTION OF TROPICAL HARDWOOD LOGS BY REGIONS AND MAJOR COUNTRIES, 1961, 1970, 1978 AND 1979 Growth Rate 1961 1970 1978 1979 1961-79 /a ------million m3 (r) /b -------- % per annum Tropical Asia & Pacific /c 26.8 53.3 81.5 82.0 6.1 of which, Burma 1.6 1.7 1.2 1.2 -1.5 India 3.3 5.0 7.4 7.4 4.3 Indonesia 3.9 10.7 25.0 26.9 10.7 Malaysia 6.3 18.7 31.5 31.5 8.8 Philippines 6.9 10.7 7.2 6.6 -O.2 Papua New Guinea 0.1 0.4 1.1 1.1 13.5 Tropical Africa 9.1 14.9 15.8 16.2 3.1 of which, Cameroon 0.4 0.8 1.6 1.6 7.6 Congo 0.4 0.8 0.4 0.4 0.0 Gabon 1.6 1.9 1.1 - 1.1 -2.0 Ghana 1.7 1..6 2.1 2.1 1.1 Ivory Coast 1.3 3.5 4.6 5.0 7.4 Liberia 0.1 0.2 0.6 0.8 11.6 Nigeria 1.2 1.4 2.2 2.2 3.2 Zaire o.6 0.5 0o.3 0.3 -3.6 Tropical Latin America /d 12.5 15.3 22.2 23.3 3.3 of which, Costa Rica 0.4 0.7 1.3 1.3 6.4 Brazil 6.8 7.5 12.6 13.3 3.6 Colombia 2.2 2.0 2.0 2.2 0.0 Ecuador 0.7 1.5 1.7 1.7 4.8 TOTAL 48.4 83.5 119.5 121.5 5.0 /a All growth rates are based on end-points. /b Cubic meters roundwood. /c Inlcudes Kampuchea and Vietnam. -T Includes Caribbean countries. Source: FAO, Yearbook of Forest Products; and FAO yearbook of Forest products Standard Tapes. -7- 2. Processed Tropical Hardwood Products 2.10 Tropical hardwood logs harvested from the forests are processed into sleepers, sawnwood and veneer sheets. Sleepers are used as railroad ties without further processing. Sawnwood comes in a variety of shapes and is usually kiln dried. Logs suitable for peeling or slicing are made into veneer sheets, a predominant portion of which is used for making plywood. Logging, sawing and veneer-making activities produce wastes and residues and a good part of these are used in making particleboard and, to a much lesser extent, fiberboard. v/ (a) Sawnwood 2.11 Production of tropical hardwood saw¢nwood takes place both in the log-producing countries and in countries that import the logs. Unfor- tunately, global statistics on productioon of hardwood sawnwood do not distinguish tropical hardwood from temperate hardwood. However, some rough estimates can be made for production of tropical hardwood sawnwood. 2.12 Production of hardwood sawnwood in selected years is shown in Table 2.2. All production of hardwood sawnwood in the tropical countries and most production in such log-importing developing economies as the Republic of Korea, Hong Kong, the Province of Taiwan and Singapore are of tropical hardwood species. While 5-10% of Western Europe's production of hardwood sawnwood and 70-75% of Japan's production are made from imported tropical hardwood logs. Practically all hardwood sawnwood produced in other countries such as the United States, Canada, Australia, South Africa, New Zealand, Argentina, Chile, Uruguay and the temperate centrally planned economies is of temperate species. Thus, in 1979, about 62% of the hardwood sawnwood produced in the market economies was of tropical species. Of these, about two-thirds was produced in the tropical log-producing countries themselves with the rest sawn in the four Asian log-importing developing economies, Western Europe and Japan. 2.13 Over the last two decades, the shares of tropical-hardwood-produc- ing countries and tropical-log-importing developing economies in world production of hardwood sawnwood have increased significantly, while the shares of industrialized countries and centrally planned economies have decreased (Table 2.2). It is especially notable that production in tropi- cal-hardwood-producing countries has increased rapidly (at 4.3% per annum in 1961-1979). Production in the tropical log importing developing economies also grew rapidly (at 6% per annum). In contrast, production of hardwood sawnwood in the industrialized regions, which rose significantly in the 1960s, has stagnated since the beginning of the 1970s. 1/ For a more detailed description of processing chains for tropical hardwood, see Annex B. -8- Table 2.2: PRODUCTION cr HARDWOOD SAWNWODL. BY M!AJOR REGICNS AND MAJOR COUNTRY ECONOMfIES, 1961, 1970, 1977, 1978 AVND 1979 Growth Rate 1961 1970 1977 1978 1979 1961-79 -------million m3 (sawnwood)- - ------ per annu= Tropical riardwood-Producing Areas 14.97 20.92 31.14 31.20 32.07 4.3 Tropical Asia-?Paciic 7.35 11.31 15.93 17.00 '7.90 4.7 of which, Burma 0.45 .-62 0.-0 0.40 O.-O -0.7 India 1.20 1.95 2.60 3.00 3.50 6.1 Indonesia 1.71 1.66 3.50 3.50 3.97 4.8 Malaysia 1.63 3.10 5.,9 ,5.59 5.15 6.6 Philippines 1.04 1.34 1.57 1.78 1.45 1.9 Thailand 0.88 1.16 1.74 1.57 1.82 4.1 Papua New Guinea 0.03 0.09 0.11 0.11 0.11 7.5 Trooical Africa 1.83 2.50 3.62 3.51 3.57 3.9 of which, Ghana 0.42 0.36 0.32 0.32 0.32 -1.5 Ivory Coast 0.11 0.31 0.88. 0.66 0.67 '10.6 Liberia 0.04 0.04 0.14 0.04 0.05 1.2 Mozambique 0.07 0.13 0.11 0.11 0.11 2.5 Nigeria 0.37 O.57 0.94 0.94 1.00 5.7 Zaire 0.22 0.16 0.09 0.09 0.09 4.8 Tropical Latin America & Carib. 5.29 7.11 10.59 10.69 10.50 3.9 of which, Brazil 3.00 3.50 6.05 -.39 6.74 4.0 Colombia 0.98 1.09 0.90 0.90 0.95 -0.2 Costa Rica 0.26 0.36 0.68 0.68 0.05 -9.3 Ecuador 0.31 0.70 0.85 0.76 0.76 5.1 Nicaragua 0.05 0.10 0.23 0.23 0.23 8.8 Paraguay 0.04 0.21 0.38 ;).38 0.38 13.3 ?er' 0.10 0.31 0.47 0.42 0.42 8.3 Venezuela 0.15 0.33 0.35 0.35 0.35 4.8 Temperate Regions 33.40 45.83 42.50 44.54 44.90 1.7 Industrialized Councries 32.03 42.65 38.04 40.03 41.01 1.4 of which, United States 14.08 16.35 15.57 13.95 17.21 1.1 EC-9 6.93 8.88 9.09 3.63 8.31 1.0 Other Europe 0.60 0.83 0.96 0.98 0.90 2.3 Japan 5.02 9.83 6.24 3.16 8.16 2.7 Canada 1.01 1.33 1.05 1.33 1.16 0.8 Developing Economies 1.37 3.18 4.46 4.46 3.89 6.0 of which, Rep. of Korea 0.26 0.51 1.28 i.56 1.03 7.9 Hong Kong 0.13 0.17 0.23 0.26 0.26 3.9 Prov. of Tal-wan 0.06 0.82 1.50 1.57 1.32 18.5 Singapore 0.00 0.77 0.30 0.36 0.36 -8.1 /b Argentina 0.57 0.59 o.75 0.59 0.59 0.2 Chile 0.35 0.32 0.40 0.12 0.33 -0.3 Market Economies Total 48.37 66.75 73.64 75.74 76.97 2.6 Centrally Planned Economies 24.83 25.85 25.66 24.70 25.83 0.2 World Total 73.20 92.60 99.30 101.30 102.80 1.9 /a Includes both temperate and cropical hardwood species. /b 1970-1979. Source: FAO, Yearbook of Forest Produces Standard Tapes; for the Province of Taiwan, esti- mates were based oa local' sources. -9- (b) Tropical Hardwood Plywood 2.14 There are no official statistics on world production of tropical hardwood plywood as such, because FAO data on plywood do not distinguish even between hardwood and softwood. However, it can be assumed that all plywood production in the tropical countries and the tropical-hardwood-log- importing developing economies in Asia is of tropical hardwood species. In addition, 97-98% of production in Japan and ?7-40% of production in Western Europe consist of tropical hardwood plywood. Tropical hardwood plywood production in other countries (i.e.-, the United States, Canada, Australia, temperate developing countries in Latin America, etc.) is very small, perhaps less than 5% of their plywood production. The next two paragraphs concern plywood production of all species. An analysis of tro- pical hardwood plywood production trends is provided in a later chapter.l/ 2.15 World production of plywood increased very rapidly in the 1950s and 1960s, but more slowly since the early 1970s (Table 2.3), mainly due to the stagnant world economic growth. Over the last two decades, there has been a significant change in the relative shares of major producing regions. Excluding the centrally planned economies (which account for about 7% of world production), within the market economies, the share of the industrial- ized countries decreased from 93% to 80% in 1961-1979. While the share of Japan increased from 10% to 21% over the same period, 'the share of the United States, still the single largest producer (mainly softwood plywood), declined from 52% to 44%. Western Europe's share also declined, from 15% to 7%. l/ Statistical difficulties are compounded because of production of plywood from mixed species, softwood as well as temperate hardwood. - lo - Table 2.3: PRODUCTION OF PLYWOOD BY MAJOR REGIONS AND AREAS, SELECTED YEARS IN 1955-1979 1955 1961 1965 1970 1978 1979 -1,000 m3 (plywood)--------- Developing Economies 699 1,015 1,857 3,983 8,140 8,041 Tropical Africa 66 124 254 248 349 373 Tropical Latin Amer. & Carib. 164 315 409 652 1,222 1,261 of which, Brazil 97 190 220 342 722 762 Mexico 21 47 64 96 188 206 Tropical Asia-Pacific 137 272 495 1,144 1,923 1,978 of which, India 49 73 101 128 176 180 Indonesia 0 3 3 7 472 525 * Malaysia 0 7 28 197 465 490 Philippines 56 112 257 653 490 503 Log Importing Producers 53 256 687 1,866 4,581 4,359 Rep. of Korea 11 4 215 847 2,560 2,338 Prov. of Taiwan 21 165 351 794 1,527 1,527 Singapore 0 0 32 215. 482 482 Hong Kong 0 0 0 10 12 12 Temperate Latin America 39 1 66 73 65 70 Industrialized Countries 8,715 13,472 19,985 26,199 30,631 32,012 United States 5,840 8,580 12,811 14,078 17,056 18,200 Canada 684 1,104 1,702 1,851 2,807 2,511 EC-9 929 1,355 1,640 1,832 1,448 1,562 Other W. Europe 457 791 1,044 1,308 1,135 1,197 Japan 683 1,499 2,627 6,922 8,041 8,400 Other /a 122 143 161 208 144 142 Market Economies Total 9,414 14,486 21,842 30,182 38,771 40,053 Centrally Planned Economies 1,422 2,034 2,478 2,992 3,172 3,161 World Total 10,836 16,520 24,323 33,174 41,943 43,214 /a Australia, New Zealand and South Africa. Source: FAO, Yearbook of Forest Products Standard Tapes, and FAO, World Forest Product Statistics 1954-1963. 2.16 In contrast to the experience of industrialized col.ntries, deve- loping economies' plywood production, which had grown rapidly in the 1960s, continued to grow at a respectably high rate, 8% per annum in the 1970-1979 period. As a result, the developing economies' share increased from 7% to 20%. Among the developing economies, plywood production has been rising rapidly in both the tropical hardwood-producing countries and the log- importing "processor" economies. And yet, the share of the tropical hardwood-producing countries as of 1979 was still only 9% while the share of the log-importing developing market economies was close to 11% in that year . (c) Veneer Sheets 2.17 The bulk of veneer sheet production consists of veneers produced by plywood companies and used for plywood making within their own plywood factories. These veneers are not included in global statistics of veneer production. In 1979, world production of "reported," or "market," veneer sheets amounted to 4.6 million m3, of which 1.6 million m3 were produced in developing market economies. As available statistics do not distinguish tropical hardwood veneers from veneers made from temperate hardwood or softwood, it is difficult to know precisely the volume of "market" veneers produced from tropical hardwood. However, most of veneers produced in developing. market economies can probably be presumed to be of tropical hardwood species. The Philippines alone accounts for 40% of "market" veneers produced in developing economies. 2.18 Another problem with statistics on veneer production is that they do not distinguish sliced veneers from peeled veneers. Decorative veneers are made by slicing high grade logs of decorative species and are used as face veneers for plywood, blockboard, particleboard or sawnwood. lEn terms of volume, sliced veneers of decorative quality are only a small fraction of market veneers, but they are much more valuable than peeled veneers on a per-unit volume basis. It should be pointed out, however, that sliced veneers are also made from low-grade logs for use in packaging and other utility purposes. The bulk of veneer sheets is peeled veneers which are used for plywood making. (d) Particleboard 2.19 So far, discussions have focused on trc:ical hardwood logs, sawnwood, plywood and veneers. The wastes and residues derived from processing tropical hardwood into sawnwood, veneers and plywood are used, among other things, for making particleboard, although it is impossible to trace how much particleboard is made from the wastes and residues of tropical hardwood. A short review of trends in the particleboard industry is provided below. 2.20 The growth of world particleboard production has been phenomenal in the last 20 years. World production grew at 13% per annum in 1961-1979 (Table 2.4). It is a relatively new industry which has grown rapidly as particleboard has substituted for sawnwood and plywood in many uses mainly because particleboard prices have been relatively low. - 12 Table 2.4: PARTICLEBOARD PRODUCTION IN 1961 AND 1979 Volume of Growth Rate Production 1961-1979 1961 1979 % per annum -------------thousand m3-- Developing Countries 81 1,849 17.9 Asia 19 626 20.2 Africa 7 118 16.0 Latin America 55 1,105 17.1 Industrialized Countries 34129 30,405 12.7 Western Europe 2,362 20,044 11.9 United States 578 7,200 14.2 Japan 105 950 12.3 Other 84 2,211 18.8 Market Economies Total 3,210 32,254 12.9 Centrally Planned Economies 739 8,785 13.9 World Total 3,949 41,039 13.1 Source: FAO, Yearbook of Forest Products, various issues. 2.21 The development of the industry so far has been concentrated in industrialized countries, especially in Western Europe. As of 1979, industrialized countries accounted for 74% of world production, while developing countries contributed only 4.5%. Western Europe alone accounted for almost 50% of world production. Particleboard is produced largely for local consumption and rarely for export. In 1979, world exports accounted for 14% of world production, but over 80% of these exports consisted of intra-West European trade. C. Trade and Consumption 2.22 Because of the relative scarcity of temperate hardwood logs, the market for tropical hardwood in industrialized countries (all of which 13 are located in the temperate, zones) has been expanding rapidly. From 1961 to 1978, consumption of tropical hardwood in industrialized countries increased at 6.8% per annum. Consumption of tropical hardwood in some fast-growing developing economies whose domestic hardwood availability is limited has also been rising rapidly. Consumption in the log-producing countries increased at 4.2% per annum. 1. Pattern of Trade Flows in Tropical Hardwood 2.23 Broadly speaking, most of the world trade in tropical timber flows from three major producing areas -- Southeast Asia, West and Central Africa and Latin America -- to three main market areas -- North America, Western Europe and Japan. For logs, the rather close traditional relation- ship between origin and destination and the transport cost factor have strongly influenced trade developments and the trade pattern. Schemati- cally, the major trade flows have been as follows: Origin Destination WIest and Central Africa - Western Europe Southeast Asia ) Japan, Republic of Korea, Pro- vince of Taiwan, Singapore, and Hong Kong Latin America > Western Europe- The United States, Canada, Australia and New Zealand import only small quantities of tropical logs. One recent change in the rabove pattern of trade is that log exports from Latin America have been reduced to negligible quantities as a result of the policies of the exporting countries in that region. Statistical Appendix Table SA4 illustrates the log trade-flow matrix for 1977. 2.24 For tropical sawn hardwood, the pattern of trade flows is more diversified tnan for logs. Schematically, major sawnwood trade flows can be illustrated as follow: Origin Destination West and Central Africa. Western Europe Asia-Pacific Japan, Australia Latin America - North America Statistical Appendix Table SA5 shows the major trade flows in tropical sawn hardwood in 1977.' Exports of sawnwood from Southeast Asia to Western Europe have been increasing rapidly. In contrast, Japan's imports of tropical sawnwood from Asia have been rising only sluggishly, as consumption of hard- wood sawnwood there tended to decrease during the 1970s. - 14 - 2.25 World exports of tropical hardwood plywood originate mainly in Asia, which includes two types of exporters -- log-producing (Malaysia, the Philippines, etc.) and log-importing (the Republic of Korea, the Provirice of Taiwan, Singapore, Japan, etc.). In the 1950s through the mid-1960s, Japan was the largest exporter of tropical hardwood plywood and the United States was the main market. As other in-transit processor exporters such as the Republic of Korea, the Province of Taiwan and Singapore expanded their exports and Japanese domestic consumption increased, Japan's exports of tropical hardwood plywood declined. Main importers have been the United States, Canada and Western Europe. The existing trade pattern in tropical hardwood plywood can be schematized as follows (Statistical Appendix Table SA6): Origin Destination West & Central Africa - Western Europe Asia - United States Latin America -.zZ2Žz Canada, Australia, Japan 2.26 World trade in tropical hardwood veneers is relatively small compared with trade in logs, sawnwood or plywood. Unlike plywood, exports of tropical hardwood veneers mainly come from the log-producing countries, with the minor exception of Singapored. The basic pattern of trade is as follows (Statistical Appendix Table SA7): Origin Destination West & Central Africa--- Western Europe Asia - United States Latin America.. > United States One notable feature of tropical hardwood veneer exports is that they have been rather stagnant since the mid-1960s except for the surge in 1971-1974. 2. Exports of Logs and Processed Products a. Export Dependence 2.27 A high proportion of tropical hardwood log production is exported in various forms. The "export dependence" of log production as measured by the ratio of combined exports of logs, sawnwood, plywood and veneers (in roundwood equivalent volume) to log production in the log-producing coun- tries as a whole has been steadily increasing over the last two decades;-it increased from 35% in 1961 to 53% in 1977 (Table 2.5). The ratio varies significantly from one country to another, but generally speaking, the export-dependence ratio has increased significantly for most countries (with some notable exceptions such as the Philippines and Ghana). In the tropical Asia-Pacific region between 1961 and 1977, the export dependence of tropical - 15 -- hardwood rose from 37% to 67%. A decline in the ratio for the Philippines was more than offset by the increase for Malaysia and Indonesia. For Africa, overall export dependence decreased as increases for Gabon, Cameroon and Liberia were overwhelmed by declines for such traditional exporters as Nigeria, Ghana and Ivory Coast. In Latin America, only 7% of tropical hardwood produced there is exported. Table 2.5: THE RATIO OF EXPORTS (LOGS AND PROCFSSED PRODUCTS)/a TO LOG PRODIUCTION IN SELECTED TROPICAL HARDWOOD-PRODUCIYG COUNTRIES, 1961 AND 1977 1961 1977 -------f(Percent)----- Tropical Asia-Pacific 37.4 66.7 Indonesia 3.2 81.8 Malaysia 59.4 72.7 Philippines 74.4 45.2 Tropical Africa 67.7 51.4 Ivory Coast 83.5 78.8 Ghaha 73.9 36.4 Gabon 86.5 93.7 Cameroon 45,9 80.3/b Liberia 17.1 66.6 Nigeria 72.1 5.3 Tropical Latin America 6.8 7.2 Brazil 1.6 6.0 Colombia 5.6 2.5 EcuLador 7.7 7.3 All Tropical Regions 35.0 53.2 /a Roundwood equivalent. /b 1975. Source: FAO, Yearbook of Forest Products, 1977. - 16 - 2.28 Exports of tropical hardwood generally flow from log-producing countries to industrialized countries, predominantly in log form. However, substantial quantities of tropical hardwood logs are also exported from the log-producing countries to a few rapidly industrializing developing areas such as the Republic of Korea, the Province of Taiwan, Singapore and Hong Kong; the latter areas in turn export processed wood products to industrialized countries. Developing economies' exports of tropical hard- wood (logs and processed products combined) are dominated by log-producing Asia-Pacific countries and log-importing in-transit processing areas which are located in East and Southeast Asia ("other developing" in Statistical Appendix Table SA8); these two groups accounted for 71% and 15% respectively of developing economies' exports in 1978 and are responsible for the rapid increase (about 9% a year in 1961-1978) in developing countries' (gross!/) exports of tropical hardwood (logs and processed products combined). (b) Share of Processed Products in Exports 2.29 The share of processed products (sawnwood, plywood and veneers) in the total tropical hardwood exports (roundwood equivalent volume) of log-producing countries has been relatively low (Table 2.6). Having de- clined in the 1960s, it increased in the 1970s, recovering to the 1961 level of 23.4% by 1978. Thus, although the processed-product share is estimated to have increased even further in the last two years, log exports are still the dominant form of tropical hardwood exports of log-producing developing countries. Table 2.6: PERCENTAGE SHARE OF PROCESSED PRODUCTS/a IN TOTAL TROPICAL TIMBER EXPORTS OF DEVELOPING REGIONS, 1961, 1970, 1977 and 1978 1961 1970 1977 1978 ---------------Percent------------- All Exporting Regions 24.7 25.5 33.7 34.2 Tropical Asia-Pacific 20.6 12.8 20.0 20.9 Tropical Africa 24.2 22.7 21.4 22.4 Tropical Latin America 50.0 73.3 100.0 100.0 Total Log-Producing Regions 23.4 16.8 22.6 23.4 Log-Importing Developing-- 100.0 100.0 100.0 100.0 /a Processed products include sawnwood, veneers and plywood only. The share is based on the roundwood equivalent volume. /b Includes Hong Kong, Singapore, Republic of Korea and Province of Taiwan. Source: FAO, Yearbook of Forest Products Standard Tapes. 1/ Without deducting the logs imported by the in-transit processors. - 17 - (c) Log Exports 2.30 The log-producing Asia-Pacific countries account for over 85% of tropical hardwood log exports (Statistical Appendix Table SA8). Major exporters of logs are Malaysia, Indonesia, the Philippines, Papua New Guinea and Burma in the Asia-Pacific region; and Cameroon, Congo, Gabon, Ghana, Ivory Coast and Liberia in Africa (Stati3tical Appendix Table SA9). There are no significant log exporters in Latin America because of strict govern- ment policies to discourage or prohibit log exports and encourage local processing. (d) Processed Product Exports 2.31 In the last two decades, the processed-product exports of log- importing developing economies have experienced a dramatic expansion. As a result, the share of processed products in total tropical hardwood exports of all developing economies (the log-importing and the log-producing com- bined) has increased sharply--i.e., from 25% to 34% in 1961-1978 (Table 2.6). Plywood exports from log-importing processing areas have increased the most, followed by sawnwood exports (Statistical Appendix Table SA8). In veneers, exports by the log-importing developing areas have been relatively insignificant. 2.32 Exports of tropical hardwood sawnwood from developing economies increased at 9% per annum from 1.8 million mV to 7.0 million m3 in 1961- 1978. Major exporters of tropical hardwood sawnwood are: among the log- producing Asia-Pacific countries, Malaysia, the Philippines, Indonesia, Burmaa and Thailand; in Africa, Ivory Coast; in Latin America, Braz-'l and Parguay; and among the log-importing processors, Singapore (Statistical Appendix Table SA1O). 2.33 Exports of tropical hardwood plywood by developing economies increased at 12.6% per annum in 1961-78, reaching 4.5 million m3 in 1978. Major exporters of tropical hardwood plywood are: among the log-producing Asia-Pacific countries, the Philippines and Malaysia; and among the log- importing Asian economies, the Republic of Korea, the Province of Taiwan and Singapore (Statistical Appendix Table SAll). It is noteworthy that, as of 1978, the latter group accounted for 76% of developing economies' exports while the former group accounted for 19%. There are no "major" exporters of plywood in Africa or Latin America. 2.34 As will be discussed in Chapter III, the last three decades have seen dramatic changes in the cast of main actors in the tropical hardwood plywood export scene. In the 1950s, Japan was the principal exporter of plywood made from imported tropical hardwood. The main destination was the United States. In the 1960s, Japan's exports ceased to grow although they remained at high levels. In the meantime, the Philippines, Gabon and the Province of Taiwan emerged as significant exporters in the early 1960s, and exports by the Philippines and the Province of Taiwan expanded rapidly. - 18 - Furthermore, the Republic of Korea emerged as a major exporter in the mid-1960s; Singapore and Malaysia in the late 1960s. In the 1970s, largely as a result of the sharp appreciation of the yen against the US dollar and the concomitant rise in Japanese wage levels in US dollar terms, Japan's exports declined dramatically while exports by the Republic of Korea, the Province of Taiwan, Malaysia and the Philippines held up relatively well. 2.35 As for veneers, there are no major exporters among the developing economies, although Congo, Ivory Coast, Brazil, Malaysia, the Philippines and Singapore do export some. The largest exporters of tropical hardwood veneers is currently Malaysia with 185,000 m3 exported in 1978 (Statisti- cal Appendix Tables A12). In terms of roundwood equivalent volume, veneers accounted for less than 4% of total processed exports of developing econo- mies in 1978 (Statistical Appendix Table SA8). 2.36 Among the log-producing developing countries, there is quite a variation in the percentage share of processed products in timber exports; the percentage ranges from less than 10% for Indonesia and Gabon to practi- cally 100% for Brazil and some other Latin American countries (Statistical Appendix Table SA13). The very high percentages for Latin American coun- tries reflect the fact that :11 Latin American countries have maintained policies of either totally prohibiting or severely restricting log exports. 2.37 The above discussions of processed tropical hardwood products exclude particleboard. Particleboard production in developing economies is still minimal and that is domestically consumed. Indeed, particleboard exports are limited. Over 80% of what little world trade takes place consists of intra-West European trade (Statistical Appendix Table SA14). Particleboard is heavy and of relatively low value per unit weight (and volume), making it unattractive for shipping over long distances.l/ The principal advantage of particleboard over sawnwood and plywood is its low cost. A high transport cost would wipe out this advantage in competing with sawnwood and plywood. 3. Consumption 2.38 Currently, a little over 50% of tropical hardwood (logs and processed products) is consumed in the log-producing regions while indus- trialized countries consume almost 40% (Statistical Appendix Table SA15). The market for tropical hardwood has been growing more rapidly in industri- alized countries than in log-producing countries mainly because of the relative scarcity of temperate hardwood logs. Statistical Appendix Table SA16 shows total hardwood (temperate as well as tropical) consumption. 1/ The FOB export unit value (S/m3) of particleboard is about one-third of that of plywood for EEC-9 as well as for industrialized countries as a whole. On a value per unit weight basis, the relative "price" of .particleboard vis-a-vis plywood is even lower. - 19 - (a) Sawnwood 2.39 Apart from the log-producing countries themselves, major consumers of tropical hardwood sawnwood are Western Europe, Japan, and a group of importing developinLg economies such as Singapore, the Republic of Korea, Hong Kong and the Province of Taiwan. The tJnited States, Canada, Australia and South Africa import tropical hardwood sawnwood in modest quantities but they produce very little of it themselves. Therefore, their consumption of tropical hardwood sawnwood is relatively small. 2.40 In Western Europe, consumption of hardwood sawnwood in 1977 reached 16.2 million m3(s), of which about 27%, 4.3 million m3(s), is esti- mated to have been of tropical species.l/ About 40% of tropical hardwood sawnwood consumption in turn is estimated to have been sawnwood produced in Western Europe from imported tropical logs (Statistical Appendix Table SA17). 2.41 In Japan, consum tion of hardwood sawnwood in 1977 is estimated to have been 9.7 million m (s), of which 4.6 million m3(s), or 48%, were of tropical species. Almost 95% of the latter was sawnwood made in local sawmills from imported tropical logs. Back in 1961, consumption of tropical hardwood sawnwood was only about 2 million m3(s), or 41%, of total hardwood sawnwood consumption in Japan (Statistical Appendix Table SA173).- - 2.42 Western Europe and Japan together consumed some 8.9 million m3(s) of tropical hardwood sawnwood in 1977. Of this, 6.1 million m3(s), or almost 70%, were sawnwood made in these consuming countries from imported logs. (b) Plywood 2.43 Major consuming regions of tropical hardwood plywood are Western Europe, Japan and the United States, as well as the developing economies that produce tropical hardwood plywood. Other industrialized countries (Canada, South Africa and Australia) also consume modest but significant quantities, importing most of these in plywood form. 2.44 Despite inadequate statistical data, some rough estimates have been made for production, consumption and trade of tropical hardwood plywood in Western Europe, the United States and Japan in 1976 as shown in Statis- tical Appendix Table SA18. 1/ Cubic meter units in this and the following two paragraphs refer to actual sawnwood volume. - 20 - 2.45 Virtually all tropical hardwood plywood and veneers consumed in he United States are imported as processed products rather than as logs. Ln contrast, the bulk of tropical hardwood products consumed in Japan is processed there from imported logs. In Western Europe, about 48% of hard- wood plywood production is of tropical species. About 40% of cons=mption is imported in the form of plywood (including veneers) while the remaining 60% is imported in logs and processed in the region. D. Markets and Prices 1. Market Structure 2.46 There is no comprehensive literature on the global market struc- ture of the tropical hardwood sector. Therefore, what can be said on this subject is limited to some generalizations based on the partial bits of information that are available. 2.47 Generally speaking, the world market for tropical hardwood logs is fairly competitive. It is certainly not a typical oligopolistic or oligopsonistic market in terms of the numbers of buyers and sellers involved at the world level. There are countless producers, sellers, buyers and consumers of tropical hardwood logs. However, it is also true that competi- tion in the tropical hardwood log trade has been less than perfect in some respects as explained below. 2.48 First of all, because of the heterogeneity of tropical hardwood species and the vast variety of products (different sizes of sawnwood, plywood, etc.), there is no organized market that deals with tropical hardwood logs or tropical timber products. Information regarding "world market prices" for tropical hardwood logs, sawnwood and plywood is not readily available; onlv some indicative price quotations for some products in some national markets and CIF and FOB prices for some countries are regularly published.l/ 2.49 In the case of logs, transportation costs have limited expansion of the market. At least partly because of the high transportation costs (relative to the value of the commodity), there has been a tendency for trade flows inX logs to be geographically concentrated.2/ 2.50 There is a fairly visible concentration of importers of South Sea logs in Japan 3/ which is the world's largest importer of tropical 1/ Prices are discussed below in Subsection 3. 2/ See Section C, Subsection 1, above. 3/ Tropical hardwood species (excluding teak) produced in Southeast Asia and South Pacific islands are referred to as South Sea timber in Japan. - 21 - hardwood logs. In 1977, when a total of 158 companies imported 21 million m3 of South Sea logs into Japan, the "top ten" firms accounted for 52% of the total imports and another ten firms for a further 24%.1/ Considering that many of the other importing firms are affiliated with the largest twenty, the degree of concentration of market power in South Sea log im- porting in Japan is rather high, although there is no evidence of collusive market distortions by importers. 2.51 On the supply side, a large number of producers are engaged in tropical hardwood log production. For example, in Indonesia, there were some 296 logging concessions in 1976.2/ In the Philippines, there were 215 timber licenses in operation as of the end of 1978.3/ In Papua New Guinea, there were about 55 logging licenses in operation in 1978 (excluding the ones smaller than 1,000 hectares).4/ How many logging operations exist in Malaysia today is not known. 2.52 The effective number of independent companies engaged in log production in these countries, however, must be substantially less than the above numbers of logging licenses and operations indicate. A number of companies are engaged in logging operations at more than one place (some- times in different countries). Also, interlocking ownership relationships tend to reduce the effective number of independent companies involved. Furthermore, recently Indonesia has been encouraging consolidation of smaller concessions into larger units. 2.53 The involvement of foreign companies in logging operations is substantial. In addition to outright equity ownership relationships, dependence of local logging firms on foreign firms through suppliers' credits for initial purchase of equipment and associated marketing arrange- ments for log output is quite pervasive. ComprThensive data showing such relationships, however, are not available. 1/ Based on information provided by the Japan Lumber Importers' Associa- tion. 2/ C.E.M. Keil, Logging and Log Processing in Indonesia, Annex Table A-4. 3/ Based on: Philippines, Ministry of Natural Resources, Bureau of Forest Development, Philippine Forestry Statistics 1978. 4/ Papua New Guinea, Office of Forests, Compendium of Statistics 1978. - 22 - 2.54 Prompted by the collapse of the log export markets in 1974,,. the national timber trade associations of Indonesia, the Philippines and Malaysia (Sabah) established the Southeast Asian Lumber Producer Association (SEALPA) in 1975. The association was later joined by Papua New Guinea. The main objectives of SEALPA are to stabilize the tropical hardwood log export market, to promote the growth of timber processing in these coun- tries, to standardize grading rules and to promote reforestation. Although SEALPA's nickname, the "green cartel," overstates the organization's current capabilities, its efforts toward supply management at a time of depressed market conditions apparently have had some impact on the market. On the whole, SEALPA's influence on the market seems to be effected mainly through regular consultations and exchanges of information. The effectiveness of SEALPA has been enhanced materially by the participation of the Japan Lumber Importers' Association, the Korean Plywood Industries Association, the Taiwan Plywood Manufacturers and Exporters Association and the American Imported Hardwood Plywood Association.l/ 2.55 One important feature of the tropical hardwood market is that the semi-nonrenewable resources are in the state-owned forests. For the purpose of collecting resource rent, the governments have set rates of royalties, taxes, and other charges on the production and/or exports of logs. These government charges could be, and have in fact been, changed radically and these changes have affected the prices of logs. Furthermore, on the grounds of environmental and other concerns, these governments could take measures affecting markets, e.g., to restrict the volume of production and/or ex- ports. While the details of recent developments in this area will be dis- cussed in Chapter III, it suffices here to emphasize the influence of government policies on the market. 2.56 For sawnwood and plywood, the markets are very competitive for the following reasons. First, these industries consist of numerous small and medium-size firms. Second, consumers are scattered in a variety of dif- ferent industries. Third, compared with trade in logs, transport costs for processed products are less important, so that the potential market for processed products is more diversified geographically. 2. Trade Barriers 2.57 Import barriers in industrialized countries are mainly tariff bar- riers. Although there are no tariff barriers on tropical hardwood logs, 1/ Elizabeth B. Bollmann, The Timbering and Wood-Processing Industries of Indonesia, p. 40. - 23 - significant tariffs are imposed on more processed products. Table 2.7 summarizes the existing tariff structure on the relevant wood and wood products in the major consuming countries, the EEC, Japan, the United States and Canada. Generally speaking, in terms of Most Favored Nation (MFN) tariff schedules, log imports are free oC" duty everywhere. Simple sawnwood imports are also generally free of duty except in Japan whe re imports of sawnwood made of Southeast Asian species are dutiable. Better grades of sawnwood are dutiable in the majority of industrial countries at about 5-10%, except in the United States where they are duty free. Veneer sheets, plywood and particleboard are subject to IFN duties ranging from 7-20% in the major consuming countries.I/ 2.58 For tropical hardwood plywood, Japan has an MFN duty rate of 20% and no Generalized System of Preferences (GSP) relief has been offered so far. In the United States, MFN duties range from 3-17% on hardwood plywood and veneer panels. While a relief rate of 8% is available for the hardwood plywqood imports coming from the least developed countries, there is no relief for tropical hardwood plywood under the GSP of the United States. In this context, it is noteworthy that the list of the least developed countries does not include Malaysia, the Philippines, Indonesia or Papua New Guinea and that, therefore, the MFN 14% rate applies to the imports from these countries. The EC's MFN rate on tropical hardwood plywood is 12.6%. While the EC offers duty-free access tojdeveloping countries under the GSP, duty-free imports are subject to quote ceilings. Under the Lome Convention, unlimited duty-free access is assured to all ACP countries,2/ but Malaysia, Indonesia and the Philippines are not among the ACP countries. Thus, tariff barriers in the major industrial countries are a significant factor affecting the export potential of s-he Southeast Asian plywood exporters. 2.59 In the context of the Asia-Pacific tropical hardwood trade, tariff escalation seems to have played an important role in the historical deternaination of the location of processing activities. The main importers of tropical hardwood have been Japan and the United States. Both coun- tries--and, to a lesser extent, Canada--have maintained substantial import duties on processed products while having no duties on logs. The situation has entailed rather significant effective rates of protection for their industries competing with imports. 1/ The US eliminated import duties on veneers as of January 1981. 2/ A total of 57 African, Caribbean and Pacific developing countries. Table 2.7: FXISTIWG TARIFFS ON SELECTED 'otOD PRODUCTS IN EEC, JAPAN, UNITED STATES AND CANADA EFC Japan United States Canada British Prefer- BTftII Commodity HMFMLb CSP Le 1Ftldb GSPLc tid1Fb i)1DiL4 CSP/c HFN/b ence csPAC ----------------------------------(Percent) --------------------- 44.03 Uood In the rough. Free Free Free Free Free Free 44.04 lWood, roughly squared Free Free Free Free Free Free 44.05 Wlood, simply sawn thicker thian 5mm Free Free Free Free Free Free - Dipterocarp specfes Free 10.0 5.0 Free Free Free Free 44.07 Ruilway sleepers 4.9 Free Free Free Free Free 44.11 Fiher building board 10.9 12.0 Free 0.15 Free Free /e /e /e 44.13. IJood, planed, tongued, etc., 4.9 Free Free Free 5.0 5.0 3.0 PQ - Depterocarp species 10.0 Free Free Free 44.14 Veneer sheets, thiickness less thzan 5mm 6.9 Free /e 15.0 Free Free Free Free 10.0 10.0 6.5 - Slheets for plywood 15.0 7.5 Free Free Free 10.0 10.0 6.5 44.15 Plywood - Dlpterocarp) species 12.6 Free Ie 20.0 N.A. 14.0 8.0 N.A. 10.0 10.0 N.A. - Otlher hardwood 12.6 20.0 tl.A. 6.4-17.0 8.0 15.0 15.0 10.0 44.18 Recotistitiatedl wood (particleboard) 11.8 15.0 Free 5.5-8.5 4.0 /e /e /e 44.19- Woodeni mosaldings, packing 4.28 cases, buckets, joinery, hiouiselhol1l titensils, tools, other articlea of wood 6.1-13.2 0-15 Free (0-17 0-8 0-20 0-17.5 0-13 /a Brussels Nonmenlattire. /h Most-Favored-Nat lon daut les. Ic Veneralized Scliemue of Preferesices. Id Preferences for tihe least developed developing countries. Ie l'tt kasown. If Sil. ject to ceilJing qur)tas. Sourj-e: EC Official Jotirnal of the European Commuoltlea; Japan Tariff Association, Customs Tariff Schedules of Japan; IIS International Trade Cominissl0io. - 25- 2.60 Japan's imports of processed wood products have been restricted by the high tariffs. Plywood imports especially have been restricted by the 20% duty. Japan's GSP has excluded tropical hardwood plywood. Since the cost of logs accounts for a rather high percentage of the price of plywood (60-70%) and since all other inputs are produced in Japan, the effective rate of p?otection on plywood is high, indeed. More specifically, the cost of logs accounts for some 71% ol the cost of plywood in Japan.l/ Therefore, the import duty rate of 20% on plywood and the zero duty on logs imply an effective rate of protection of well over 60%('.) for the Japanese plywood industry. 2.61, On the exporting countries' side, trade barriers exist in the form of export quotas and export taxes. In the Asia-Pacific region, the Philip- pines, Malaysia and Indonesia have imposed, or attempted to impose, export quotas and/or export taxes on logs, with either the short-term objective of reducing oversupply in the face of depressed market conditions or the long-term objectives of resource conservation and/or promotion of local processing.2/ It should perhaps be emphasized here that export taxes in this context are not just "export barriers." Although these government charges are called export taxes, they are economically similar to stumpage fees or royalties. However, since these charges have often been higher than those imposed on locally sold logs, the export taxes have indeed had the effect of discriminating against overseas sales of ,logs. 3. Prices 2.62 Because of inherent differences in the quality of the wood and because of sizable margins of error in reporting, great caution should be exercised in comparing tropical hardwood prices. Nevertheless, a few observations may be justified. First, FOB log prices in the Philippines and Sabah seem to be consistently higher than FOB prices in Kalimantan (Sama- rinda). This seems to reflect, at least partly, the quality preference of the consumer for logs from the former area, and also partly, the lower freight rates from the area to Japan and other log-importing regions. Second, within Japan, lauan logs suitable for sawing are consistently more expensive than lauan logs suitable for plywood making. Third, as illus- trated in the two sawnwood price series shown in Table 2.8, sawnwood price levels can be very different when the species, qualities, sizes and loca- tions involved are different. Fourth, the tllinner the plywood, the more expensive it is in terms of the price per unit volume. Among the three representative series of plain (unfinished) plywood prices in Japan shown in 1/ See the analysis of the cost-of-production structure of the plywood industry in the next chapter. 2/ For details, see Section E below. - 26 - Table 2.9, the cheapest is the 12mm (thickness) plywood; the 4mm plywood costs about 22-30% more. The most expensive is the thinnest type (2.5-2.7mm thick) whose price is about 30-48% higher than the 4mm type. The prices do not necessarily move exactly in parallel. 2.63 The unit values of exports of logs, sawnwood, veneer sheets and plywood from selected countries in the Asia-Pacific region are presented for 1970-1978 in Table 2.10. Since species composition of exports (and quality, etc.) can and do change over time, unit value changes do not necessarily reflect proportionate changes in prices which normally refer to specific products, markets and qualities. 2.64 Finally, long-term price trends for tropical hardwood logs, sawnwood and plywood can be observed from Figures 2.1, 2.2 and 2.3 respec- tively. Trends in "real" prices could look quite different depending on the deflators used. 4. Market Outlook 2.65 World consumption of tropical hardwood in the pre-oil-crisis period increased rather rapldly, e.g., at 7.3% per annum in 1961-1973. It then declined sharply in 1974 and 1975--by 19% over the two years. It recovered strongly in -1976, increasing by some 20%. From 1976 to 1979, it increased at 3.3% per annum. Thus, it is clear that since the violei; boom-bust-recovery cycle of 1973-1976 the growth of tropical hardwood consumption has been much slower than before that period. Tabiv 2.8* PFMiCFS OF SKlECTEO -51111 SEIT A" A xi'*clS, LOUS ANiD BAIJNUOOJi 1970-19110 Logo -Inoneg - -Jaj ---- SAWulood Fmxtnct Ivvrmre FOR -I1R- 1 ri a li ames Averalj-4* l4msmslIl'a- NimIlmyj4la --_--_._-- price to Japan from Fejort, average FON Exjilmrt, averag;e Ironems lssfi r.parl, nv*rnge io8 IJImolemale price, Seoroda, meoanti primle to Japapi from price to Japan Plywood price lor alork red louen plake* loeSabah. 9h, . lo. lu>ia 1loseaoga qa ImIIt Sat 1bye meremat I /a 3.0-3.Acm x 30c x 4.0o 11S dolmera per cubic Meter (actual llue)- ------------- -- ---- ------------ J770 NA NA 3).2 NA 51.2 NA 1911 NA NA NA 3H .O NA Sl.9 hA 1972 NA Ua& NA 37.6 NA 79.6 NA 1973 51.1 66.8 55.3 65.6 NA 116.2 HA 1975 17.1 64.7 54.2 78.6 NA . .P8.6 NA 1915 40.0 54.0 41.1 59.3 80.5 103.1I 225.7 1976 56.8 71.5 68.2 . 79.6 91.1 132.0 256.) 1917 5.) 80.3 81.2 89.8 116.9 130.8 306.1 1971 S9.5 90.0 81.1 91.8 137.8 176.9 377.7 1979 137.1 114.2 154.S J59.1 192.6 262.0 517.o 1910 130.0 116.5 168.3 181.9 243.9 NA 622.3 /a CLS Otrip Ond ecsntllnga, etandArd and bettl:r. tIak red aeramiti IN ono of tiS. xasly snamiam, n t l I c treated e waeohat diatactily in Cho marketplace. Sources For lalayelan sawawood - FAO, Fureac froducts Prices 1961-1980. All othiere - Forestry A&ency of Japaln HIkutel Shlkyo Cappo (IbMoilml Wood and Noo Proadtct. Report). aruious lasuca. - 28 - Table 2.9: W4HOLESALE PRICES FOR PLAIN PLYWOOD OF LAUAN SPECIES IN JAPAN AND PHILIPPINES Japan /a Philippines Thickness 12.0mm 2.5-2.7mm 4.0mm 6.35mm Width O.90m. 0.91m 0.91m 1.22m Year. Length l.80m 1.82m 1.82m 2.44m 1973 NA NA NA 109.1 1974 NA NA NA 124.7 1975 152.6 226.9 198.4 136.4 1976 196.8 242.8 234.1 164.4 1977 206.1 285.4 269.8 205.4 1978 224.7 331.0 301.2 191.2 1979 344.4 455.6 420.1 NA 1980 377.2 481.3 445.9 NA /a The typical size in Japan is 0.91m (width) by 1.82m (length) with the thickness from 2.5mm to 12.0mm or more. Source: Forestry Agency of Japan, Mokuzai Shikyo Geppo (Monthly Wood and WJood Products Report), various issues; FAO Forest Products Prices 1961-1980. 2.66 Up until 1973, tropical hardwood consumption grew at a fast pace because industrialized countries increasingly substituted tropical hardwood for temperate hardwood, supply of which was constrained. In recent years consumption growth of tropical hardwood has been distinctly slower, not only because of the slowdown in world economic growth but also because of emerging supply constraints and the resultant rising trends in tropical hardwood log prices. - 29 - Table 2.10: EXPORT DIT VALLMS O F7PZCAL RAR OCO LC, SA.WNMOV, PLYNOOD .Af 7EENEZ3S IN SELICTED Co0r1-3s AsD ASIA-PAcIFIC .tEcIN, l970-1979 1370 1971 19t72 1973 1974 1975 197S 1977 1978 1979 tndouetsi Logs 11.0 15.1 17.1 30.3 41.7 31.5 *".5 47.0 46.." 76.1 Sawowood 34.0 33.9 20.6 49.0 79.1 79.6 75.1 84.5 L13.3 :11.9 log equivalent (ac 530%) 13.7 18.6 12.3 27.0 43.4 43.7 41.2 46.5 62.2 10.0 Plyvood ^ - - - 106.7 66.7/a '72.6 231.1 246.2 log equivalent (at !00. - - - - 53.4 33.4/a 85.8 .1J.6 ';3.1 Venoer sheets - - - - - - log qutwaleant (at 52.62) - - ' ^ - - Nala7sLa Tgs 18.5 18.8 20.1 30.8 35.6 26.0 37.0 8.6 43.0 43.0 Saiivood 48.3 48.0 55.5 106.3 103.4 9A.5 71X.2 1.7..1 124.6 1:o.5 lcs squivaleot at (55.0Z) 16.6 16.A 30.5 "8.5 U6.9 52.0 621.9 63.9 68.3 69.6 Flwo'd 115.3 104.6 113.2 la5.8 206.9 192.6 123.9 194.j ZC6.3 ZC6.4 log equivalent (ac 50.0?) 57.7 52.3 56.6 92.9 103.5 96.3 92.0 97.0 103.2 '.03.0 Vener sh4ets 34.2 3A.0 29.8 "4.3 51.6 41.9 52.3 57.1 '8., 4.4 log equLvaleoc (at 52.SZ) 18.0 17.9 15.7 23.3 27.1 22.0 ;7.8 3Q0.0 2.6 -6.0 T±ipplaes Lop 25.5 6.5 25.3 39.1 46.0 36.3 38.0 63.4 65.8 115.7 Sewuood 60.1 tt.9 64.0 82.2 105.9 107.2 135.3 1'46.6 14a.l -27.6.8 log equivalent at (55.02) 33.1 23.0 354.2 45.2 3e.2 59.0 76.1 30.6 81.5 L1.9.2 T?yood 97.5 98.2 1o7.6 15Z.1 161.. 131.2 166.0 754.7 1.9 5.0 271-.1 lot equivaleec (at 30.0x) - 4a.8 49.1 53.8 76.2 80.5 65.$ 83.0 32.4 97.5 '35.6 Toaeer sheets 66.4 52.6 81.5 1C9.1 98.6 82.0 '703.0 120.$ 146.Z ?1'.3 log equivalent (at 52.6%) 34.9 27.6 42.91 57.4 52.9 43.1 54.2 68.7 76.9 i00.9 Papt Wrv Gu±fae Lop 14.3 13.7 12. 18.9 27 .2 25.4 .3 S.1 3.2 35.6 35.6 Savmud 68.8 74.2 10-.2 134.6 138.7 129.6 134.3 1;9.4 137.5 !', . . log equLvalett at (55.0?) 37.8 40.8 56.8 74.0 76.3 71.3 73.9 82.2 I5.5 '75.6 1Iyvood 233.2 229.0 Z!2.3 263.3 311.1 .79.5 a00.9 ;65.5 "25.3 5:C.3 log tquivalent (at 50.02) 119.1 114.5 116.2 131.9 t 5.6 7.9.8 .00.5 Z325 162.7 252 Veorne sheets 96.0 90.6 86.4 126.7 139.4 112.5 !22.2 131.0 *17.0 117.0 log *quivalent (at 52.6:) 50.5 47.7 43.9 66.6 73-1 59.2 64.3 6a.9 61. 5 61.5 Asia Tota1l. Lop 19.5 20.6 70.I 33.6 41.2 21.3 43.5 45.5 47.2 64.5 Savawood 54.x- 52.0 '8.7 102.6 110.8 101.8 117.5 123.3 133.0 172.6 ,log equLvalent at (55.02) 29.4 2.4 3.1 56.0 6C.5 55.6 64.2 S7.3 71.2 04.9 Plyimod 117.9 122.4 131.3 188.7 192.4 180.1 203.7 222.3 238.7 304.8 log equivalent (at 50.02) 62.0 64.4 89.1 99.3 1.01.2 94.7 lC7.1 116.9 119.4 152.4 Vernir sheets 63.0 51.9 66.4 98.9 82.5 91.8 138.4 143.4 136.8 229.7 lot equivalent (at 52.6%) 33.1 27.3 34.9 52.0 43.* 48.3 72.8 75.4 73.0 ±'0.8 a, The data are suspected of s5ri±us biase*. I Zucludas. later asll, eports from the lag-partlng processors such as Singapore, the Ropublic of Xored &ad the Province of Taivan. A dash (-) seans no exports. Sorces A. Yearbook of Forest Products Setadard ?ueao. FIGURE 2. 1: PRICE OF LAUAN VENEERLOGS IN JAPAN, i 95S-1980 CUS$/Cm) 1751 1 IN 1980$, DEFLATED BY WORLD BANK IPII 75 | . /IN 1980$, DEFLATED BY US GDP DEFLATOR'z 150- -~ -4-. CURRENT$I 257 I -i"'-- - (t) |Z ---- l / - 1111|r|m-a- 1 055 19567 1 959 1 96 1 1 963 1 965 1 967 10969 1 97 1 1 973 1 975 I 977 10970 YEAR SOURCE N BASED ON STATISTIAL APPENDIX TABLE SA 19 FIGURE 2.2: PRICE OF MERANTI SA^WNWOOD 1I958-1980 CUS$/CM) 400 - -- - 350- IN 1980$, DEFLATED BY WORLD BANK IPI L >.. ,o / I 1: .1/1 -', l, 20 | IN 1980$, DEFLATED BY US GDP DEFLATOR , ' . - ' "'U - - - - CURRENT * _ S0- 0 , I | - I I . 111 ---F-11-1-r-I -']--FI 1958 1960 1962 1964 1966 1968 1970 1072 1074 1976 1978 1980 YEAR SOURCE: BASED ON STATISTICAL APPENDIX TABLE SA20 FIGURE 12.35 PRICE OF PLAIN LAUAN Pl-YWJOOE IN JAPAN'. 2963-1960 CUS$/Cm) 500. -- ....-- .. - .- .-- ...... .-.....- -.....- - IX IN I0 80S, DEFLATED BY llORLD BANK IPI T /\ ~I .- o' I\jL, (1) .00- ....................... .,x;- - 2 B 0 -v £GSE J G S1gjxo-.- -- CUJRREN4T />>v t 9 - -* - ] a' - --t----t-t---l 1- -r--rl4-- -t - 1 os 1aw 1067 1 S6k3 1 871 10-?3 t a7F 187 7 1.970 YEAR SOURCE. BASED ON STA71STICAL APPEMIX TABLE SA 1 - 33 - 2.67 In the long term (1980-2000), consumptioa of tropical hardwood logs is expected to grow at 2-3% per annum, depending on the world economic growth rate and supply availability. Since the potential of the traditional supplying regions is limited, additional supply has to come from the hither- to relatively unexploited tropical forests in West Irian, Papua New Guinea, the Amazonia and Zaire. Under the currently known technological conditions, the cost of bringing out commercially marketable logs from these forests in significant quantities is likely to be substantially higher than the cost of production in the currently exploited forest areas in the Philippines, Malaysia, Indonesia, etc. Thus, prices of tropical hardwood logs are expected to edge up in real terms in the lona run. III. THE EVOLUTION OF THE LOCATIONAL PATTERN OF iYECHANICAL PROCESSING OF TROPICAL HARDWOOD IN THE ASIA-PACIFIC REGION A. Introduction 3.01 There are two apparent factors that should tend to favor mecha- nical processing of wood in the log-producing developing countries. First, mechanical wood processing is considered to be relatively labor-intensive and, therefore, comparatively advantageous industrial activity for deve- loping countries where the opportunity cost of labor is generally low. Second, the first stage of mechanical wood processing -- i.e., production of sawnwood, veneers and plywood -- is a highly weight-and volume-reducing activity and therefore, since the cost of moving logs from producing to importing countries accounts for a substantial portion of the CIF price, location of processing in the log-producing countries should be favored. Despite these two factors, however, major log-producing countries in the Asia-Pacific region continue to export an enormous volume of lobs (about 80% as of 1978), with only 207%l/ of their tropical hardwood exports being exported in the form of sawnwood, veneers and plywood. 3.02 The purpose of this chapter is to review how the locational pat- tern of mechanical processing of tropical hardwood evolved in the Asia- Pacific region in the last 30 years or so and to understand why it evolved the way it did. Our attention is focused on the plywood sector because a majority (65-70%) of the logs exported from the producing countries are veneerlogs which are used mainly for making plywood in the importing coun- tries. Furthermore, the value added to the log material is generallv higher in plywood production than in sawnwood production, and, therefore, there is a greater interest in plywood manufacturing than in sawmilling in the major log exporting countries. 1/ In roundwood equivalent volume. - 34 - 3.03. That production of mechanically processed wood products is a rela- tively labor-intensive activity is supported by a study by Hal B. Lary.!/ Using the value added per employee as a guide to factor intensity in manu-- facturing in the US in 1965, he concluded that, among the 19 major industry groups, six industry groups are "intensive in the use of relatively unskil- led labor since they are below the Uni'ted States average in both wage and nonwage value added per employee" (The six groups were the sectors pro- ducing (1) textiles, (2) clothing, (3) "lumber and wood products", (4) furniture, (5) leather and leather goods and (6) a "miscellaneous group comprising a variety of items" 2/ 3.04 In a more recent study, Bela Balassa estimated physical and human capital intensities for 184 product categories in the manufacturing sector in the US in 1972.3/ The results of his estimates for "veneers and plywood" and "sawmill products" are shn-,own in Table 3.1. The results indicate (a) that, at least, in terms of the "flow" measure of plysical capital inten- sity, both veneer/plywood and sawmill products rank very low among the 184 product categories; and (b) that, in terms of human capital intensity, both "industries" rank well below the averages of the 184 "industries" examined. Put another way, Balassa's resuilts indicate that both veneer/plywood and sawmill pro.ducts can be labelled as relatively unskilled-labor-intensive products.4/ 1/ Hal B. Lary, Imports of Manufactures from Less Developed Countries. 2/ Hal B. Lary, p. 23. Concerning the limitations of the methods used by Hal B. Lary, see A.S. Bhalla, "the Concept and Measurement of Labour Intensity' in A.S. Bhalla (ed.), Technology and Employment in Industry, pp. 20-23. 3/ Bela Balassa, "A 'Stages' Approach to Comparative Advantage. 4/ This, of course, does not mean that plywood making does not require any skilled labor. It means that, among the whole range of industries existing in an industrialized, diversified economy like the US economy, plywood making is relatively unskilled-labor-intensive. - 35 - Table 3.1: PPYSICAL, T3TAAN AND CtIMBINRD CAPITAL INTENSITIES OF VESEFR/ PLYWOOD AND SAWM\ILTL PRODUCTS IN THE US, 1070, ANT) TEFIR RELATIVE RANKING IN THE SELECTED 1,84 'IYDUSTRIES" Veneers and Plvvood Sawmill ?roduccs Concept of Ranking Ranking Capital per USS per Among All USS per Among All Nature of Capital rVorker Worker IndustriesL5. Wo rker Induscries/a s P Physical stoc}c 11,850 54 10,940 69 H Puman Stock 21,362 112 10,586 155 r Combined/b stock 33,212 103 21,526 146 i f P Physical flow 4,370 145 4,058 153 f - R Human flow 7,350 125 6,272 152 f / K Combined/b flow 11,720 134 10,330 135 /a Giving Rank I to the largest magnitude of each capital intensitv mea- sure listed, among the 184 *industries" covered in the study, chese two groups of products are ranked as indicated. /b Physical plus human capital. Saurce: Bela Balassa, A 'Stages' Approach to Commarative Advantaze, Appendix Table 1. 3.05 That the cost of ocean transportacion of logs is relatively high is illustrated by the fact that freight cost accounted for roughly 25Z of the CIF unit value of Japan's imports of lauan logs from the Philippines in 1958-1967 (Table 3.2). The logs are transported from che log-producing regions in S,,utheasc Asia to Japan and ocher wood processing regions bv special log carriers on a charter basis. Since only about half of the Iog volume is actually recovered in sawnwood and pLywood, there is a presumption -that, if processing is done in the log-producing regions, there might he ;i 36 -6 substantial saving in transport cost. However, so long as shipping of pro- cessed products is done on a liner basis, savings in transport costs would not automatically result from locating processing plants in log-producing areas. Only when the flow of processed products from a producing region to a consuming region is large enough to justify shipping on a charter basis, could there be savings in transport costs from transferring processing facilities from Japan, the Republic of Korea, the Province of Taiwan, etc. to the log-producing areas. Table 3.2: TOKYO THOLESALE PRICE AND CIF I!MPORT UNIT VALUE FOR PHILIPPINE LOGS AND OCEAN FREIGHT RATES FOR JAPAN'S LOG IMPORTS FROM THE PHILIPPINES, 1957-1967 CIF Unit Ratio of Value of Ocean Freight Freight Wholesale Price of Lauan Log For Logs From Cost to Philippines Lauan Imports From Philippines import Year Logs in Tokyo Philippines to Japan Unit Value US$/m3 (r) US$/m3 (r,) US$/m3 (r)/a (%) 1957 29.88 24.30 8.32 34.2 1958 26.50 19.80 5.17 26.1 1959 29.96 22.40 6.00 26.8 1960 33.67 26.30 6.21 23.6 1961 29.73 24.50 6.65 27.1 1962 34.76 27.10 6.69 24.7 1963 35.83 27.90 6.40 22.9 1964 33.88 26.00 6.59 25.3 1965 35.54 27.40 6.75 24.6 1966 37.54 29.90 7.12 23.8 1967 39.83 32.00 7.20 22.5 1958-67 24.74 (average) /a Converted at 360 Yen = $1. Source: Wholesale price of logs and ocean freight - Japan, Bureau of Forestry, Timber Market Monthly Report; UNCTAD, The Maritime Transportation of Tropical Timber, TD/B/c.4/59, 5 January, 1970, p. 114. CIF unit value of logs - Japan, Ministry of Finance, Japan Exports and Imports, Commodity by Country, various issues. - 37 - B. Plywood Trade in the Pacific Basin up to 1960 3.06 In Asia, plywood was produced in Japan, India, the Republic of Korea and the Province of Taiwan before 1945. The details of early plywood operations in these regions are not known, but, at least, in Japan and the Republic of Korea, the history of plywood production goes back to before World War IF .! It can be safely assumed that plywood was also produced in India well before 1940 and in the Province of Taiwan, during World War II at the latest (although under Japanese management). 3.07 In the years right after World War II, plywood production expanded very rapidly in Japan, rose at modest pace in India, and was re-established in the Republic of Korea and the Province of Taiwan (Table 3.3). At that time, plywood production in these areas was primarily for domestic consump- tion and exports were only inciderntal. 3.08 Beginning in 1948, Japan started to '.mport Lauan logs from South- east Asia (mainly the Philippines). The importation of logs was urged by the US military occupation forces to meet the hardwood plywood needs at their facilities in Japan. Log imports from Southeast Asia expanded very rapidly as plywood producers received priority allocations of foreign exchange for log imports. In the late 1940s, Japan also started to export plywood, mainly to the US (Table 3.4).2/ Small quantities of plywood produced in Malaysia began to be shipped to the UK. 3.09 Throughout the 1950s, Japanese exports of plywood expanded at a phenomenal rate, reaching 375,000 m3 per annum in 1959-61, or 7.6 times the level in 1950. About 70% of these exports were sent to the US. Thus, along with the export incentives based on priority allocations of foreign exchanges for raw material imports, the rapid expansion of US imports of hardwood plywood played a critical role in the growth of Japanese plywood exports. 1/ See Kazuo Kitamura, Mokuzai-Gyokai (The Wood Industry), p. 99; and US Agency for International Development, Survey of the Korean Hardwood Plywood Industry and International Plywood Markets, p. 15. 2/ A brief account of the development of "South Sea" log imports and plywood industry expansion in Japan in the period up to the mid-1950s is provided in Japan Lumber Importers' Association (Nihon Mokuzai Kyokai), Progress of Twenty Years (Niju-nen no Ayumi), pp. 132-136. - 38 - Table 3.3: FLYWOOD PRODUCTION IN SELECTED COUNTRIES/ECONOMIES, 1946-1979 Prov. of Rep. af Papua Year Taiwan Korea Hong Kong Stngapore H,alaysia ?hilippines India Indonesia Israel ThaLland M. Guinea japAn 1946 - 15 - - - - 67 1947 (1) 2 - - - 24 - - - - ' 00 1948 (1) 2 - - - - 21 - - - - 1 1949 (3) 3 - - 1. - 22 - - - - 147 1950 (5) 1 - - 1 (2) 31 6 - - - 149 1951 (7) 1 - - 1 (6) 40 7 - - - 233 1952 8 t - - 5 (11) 27 7 8 - - 298 1953 9 2 - - 5 (17) 34 8 11 - - )08 L954 12 5 - - 6 (19) 34 8 16 - 1 537 1955 '3 11 - - 6 (27) 49 8 21 - 14 5S3 1956 12 14 - - S (45) 55 2 21 - 12 S52 1957 14 21 - - 7 (58) 56 3 28 3 13 979 1958 22 23 - - 6 (81) 55 3 28 6 12 1,067 1959 33 27 - - 2 (128) 58 3 35 ;1 11 1,293 1960 36 Z9 - - 2 (139) 72 3 40 19 14 1,286 1961 65 45 - - 7 112 73 3 47 15 10 1,499 1962 88 84 - - 10 136 79 3 54 16 14 1,833 1963 152 99 - - 12 172 93 3 60 18 11 2,073 1964 227 148 - 14 12 202 97 3 10 24 10 2,453 1965 250 215 - 32 28 257 101 3 88 26 20 2,627 1966 296 353 1 45 59 308 99 3 72 38 1Z 3,101 1967 300 440 1 76 73 610 101 3 76 40 12 3,778 1968 436 703 7 110 120 309 114 4 81 43 17 4,743 1969 609 821 10 193 172 338 112 7 94 46 16 5,893 1970 760 847 iO 215 197 653 128 7 96 47 16 i,92'2 1971 879 1,024 12 250 231 642 146 7 97 49 1i 7,197 1972 1,324 1,093 12 327 330 732 -30 4 108 56 '6 7,748 1973 1,342 1,481 12 350 375 705 126 9 113 55 18 3,596 1974 1,101 1,217 12 350 311 274 143 24 102 60 22 7,443 1975 1,043 1,436 12 334 404 423 127 104 64 51 19 6,168 1976 1,227 1,671 12 380 525 416 141 214 71 63 15 7,136 1977 1,272 2,289 12 348 565 489 149 279 71 68 15 7,476 1978 1,607 2,560 12 A82 465 490 176 472 71 75 15 8,041 1979 1,451 2,338 12 A82 490 503 180 525 71 80 15 8,400 Source: Except for Taiwaa and Philipptnes, FAO data have been used as follovs: 1946-1953.....FAO, World Forest Products Statistics 1946-1955 (Rome, 1957); 1954-1960.....FAO, World Forest Products Sta:iszics 1954-1963 (Rome, 365); 1961-1979.....FAO, Yearbook oi Foresc Products Standard Tanes. Taivan 1947-1952.....The author's esc6*maces based on FAO, World Forest Proaucts Statistics 1946-1955 (Rome, 1957); and the report mentioned below. 1953-1979. Taiwan Plywood -Manufacturers and IXoorters Association, 'Plywood Industry in Taiwan', January 1980, p. 7 Table 2. Philipoines: Because of the obvious discrepancy becween the figures reported in the FAO Forestry Taoe and those t- the earlier FAO publications mentioned above, the figures regorted tn the lacter for 1946-1960 have been 'sdjusted' by the author by dtviding the reported figures by 2.065 (i.e., the average ratio for the over- lapping years 1961-1963). Data for 1961-1979 have been taken from che FAD Forestry Tape. - 39 - Tsble 3.4: PLYWOOD EXPORTS OF SELEC-TD COUN RtES/ECONOMIFS, 1948-1979 Prov. of Rep. of Paoua Tear Taiswan Korea Hong Kong SLngapore Malaysia Philippines Tadia Indonesia Thailand N. Guinea rerael Japan 1948 - - - - - 2 1949 - - - - - - - - - - 9 1950 - - - - I - - - - - 16 1951 - - - - 1 49 1952 - - - - - 1 22 1953 - - - - 2 - - - - - 2 58 1954 - - - 1 (1) - - - - 6 L65 1955 - - 1 - 2 (3) - - - - 1 234 1956 1 - .1 - 2 (10) - - - - 8 260 1957 2 - 1 - 2 (15) - - - - 11 328 1958 10 - S - 1 (49) - - - - 12 345 1959 16 1 19 - 18 (93) - - - - 23 425 1960 20 2 - - 5 (51) - - - - 23 354 1961 52 12 1 - 2 73 - - - 10 21 345 1962 72 1S 2 - 3 84 - - - 12 26 358 1963 133 54 7 - 2 119 - - - 8 38 342 1964 208 104 8 7 6 148 - - - 9 44 360 1965 222 170 3 10 10 145 - - - 10 4 B 382 1966 263 277 1 28 18 171 1 - - 8 44 377 1967 269 311 2 40 40 171 1 - , - 10 53 '37 1968 377 600 5 69 71 261 2 - - 11 43 425 1969 576 709 5 110 107 204 5 - - 11 40 393 1970 682 822 1 132 144 261 10 - 3 12 44 122 1971 781 1,028 1 178 191 278 6 - 12 12 51 3"7 1972 1,116 1,195 i 278 271 317 6 - 19 9 54 270 1973 1,116 1,322 2 436 355 388 23 - 28 13 53 150 1974 804 1,030 1 289 215 171 29 - 28 16 33 123 1975 761 1,258 1 380 233 157 15 1 9 12 33 116 1976 862 1,623 2 459 407 260 33 13 11 11 33 133 1977 946 1,703 - 441 344 340 15 14 S 6 33 140 1978 1,240 1,605 - 553 410 383 15 85 1 6 33 105 1979 1,078 1,297 1 568 432 406 7 116 - 6 33 - 105 1980 - - - - - - - - - - Source: The data sources are the same as those for zhe ply*vod production data in Table 3.3. The figures in Darenrhe- sis for the Philippines are :he author's estImates based on (a) the average ratio for 1961-1963 between the figures in FAO Standard Forestr7 Tapes and those in FAO, World Forest Products Scatistics 1954-1963, and (b) rho figures given in the latter for 1954-1960. - 40 - 3.10 In 1946, the UK was the single most important importer of ply- wood, accounting for 60% of world imports, while the US accounted for only 4% (Table 3.5). In the first postwar decade, imports by both the UK and the US increased very rapidly. However, US imports increased far more rapidly than UK imports, and by the late 1950s, the US share in world imports had reached some 30%, while the UK share had declined to below 40%.II (Indeed, while the US share has almost always remained above 30% since the early 1060s, the UK share declined until the early 1970s and has since remained well below 20%). 3.11 The rapid increase in plywood imports by the US played a vital role in the development of the tropical hardwood plywood trade in the Asia-Pacific region. While domestically produced softwood plywood has alwavs accounted for more than 70% of US plywood consumption, the share of imports in hardwood plywood consumption has steadily increased through- out the postwar period, rising from 10% in 1951-54 to 67% in 1975-79 (Table 3.6). Furthermore, within the expanding US imports of hardwood plywood, the share of imports from Asia rose rapidly, reaching over 80% by 1957 and over 90% by 1965; in contrast, the share of imports from Canada declined from about 80% in 1950 to below 10% by 1957. Statistical Appendix Table SA22 shows US imports of hardwood plywood by major suppliers in 1950-1978, while Figure 3.1 shows the changing shares of major suppliers in the US imports of hardwood plywood in the same period. It is evident that Japan's share rose sharply in the 1950s and that in 1954-1960 Japan became the dominant supplier, accounting for over two-thirds of US hardwood plywood imports. 1/ Two distinct characteristics should be noted regarding UK imports of plywood. First, the UK has never had a larye plywood industry at home, with production never exceeding .60,000 m . Therefore, most UK plywood consumption requirements have been met by imports. Second, except for imports from Canada (which have accounted for 15-25% of total UK imports), UK plywood imports have consisted of hardwood variety (including moderately significant volumes of birch plywood from Finland). - 41 Table 3.5: PLYWOOD IMPORTS BY THE US AND THE UK, 1946-1979 ________ _ Share in World Total World Hardwood UK US & Total US Total Only US Total UK -------1,000 m3 percent -------- 1946 365 1.4 217 n.a. 3.8 59.5 63.3 1950 405 37 183 n.a. 9.1 45.2 54.3 1955 996 247 429 n.a. 24.8 43.1 67.9 1959 1,526 539 491 423 35.3 32.2 67.5 1960 1,517 411 640 n.a. 27.1 42.2 69.3 1961 1,556 451 576 n.a. 29.0 37.0 66.0 1963 1,960 675 701 551 34.4 35.8 70.2 1965 2,577 892 . 859 665 34.6 33.3 67.9 1968 3,873 1,624 1,075 784 41.9 27.8 69.7 1970 4,701 1,771 1,101 820 37.7 23.4 61.1 1973 6,946 2,200 1,480 1,190 31.7 21.3 53.0 1974 5,349 1,337 921 704 25.0 17.2 42.2 1975 5,287 1,674 830 641 31.1 15.4 46.5 1976 6,312 2,058 1,058 886 32.6 16.8 49.4 1977 6,055 1,963 874 681 32.4 14.4 46.9 1978 6,846 2,209 1,063 836 32.4 15.5 47.9 1979 6,957 1,836 1,213 n.a. 26.3 17.4 43.8 Source: 1946 and 1950 - FAO, World Forest Products Statistics 1946-1955, Rome, 1957. 1955 and 1960 - FAO, World Forest Products Statistics 1954-1963, Rome, 1965. 1961 to Present - FAO, Yearbook of Forest Products Standard Tapes UK imports of hardwood pywood have been derived by subtracting imports frwn Canada from total imports of plywood. - 42 Table 3.6: HARDWOOD PLYWOOD PRODUCTION, EXPORTS, IMPORTS, APPARENT CONSUMPTION AND THE SHARE OF IMPORTS IN CONSUMPTION IN THE US, 1951-1979 The Share of Apparent Imports in Period Production Exports Imports Consumption Consumption -------------1,000 m3 per annum /a- ------------- --Percent--- 1951-1954 1,055.8 0.7 126.3 1,181.4 10.3 1955-1959 1,130.2 L.6 552.7 1,681.3 32.5 1960-1964 1,332.6 1.8 7"3.6 2,067.4 36.7 1965-1969 1,758.2 9.2 1,336.1 3,085.1 42.6 1970-1974 1,587.9 36.7 2,112.2 3,663.4 57.3 1975-1979 1,000.3 48.9 1,966.2 2,917.6 67.3 /a Converted to cubic meter units at the ratio of: 1 million square feet (3/8 inch basis) = 886.290 m3. Sources: U.S. Department of Commerce, Bureau of Census: Softwood Plywood; Hardwood Plywood; U.S. Exports: Schedule B Commodity by Country; U.S. Imports for Consumption and General Imports: TSUSA Commodity by Country of Origin. - 43 - FIGURE 3 1: PERCENT SHARES OF MAJOR ASIAN SUPPLIERS IN TOTAL US LMPORTS OF 1IARDWQOD PLYWOOD, 1950-1978 - dAAN - PHiLpPPxi,4S s9- - - pROV. OF TAXWAN - - RE. OF KOREA 70- 50 /, - / seI- /- -I-f / 11 ; W E ' fi W J ^ § § i §- FSS 404- I M it8 t963 I;W WD I SaS I a 1 9t7t tQ74 1877 18S2 SOURCL' * AT:ITCAL APPEDI TABLE SA23 - 44 - 3.12 During this period (1946-1960), Japan was the only country in Asia where the government rigorously promoted exports.II In contrast, the Province of Taiwan, the Republic of Korea, Malaysia, the Philippines and Indonesia were still in the process of consolidating their statehoods, having become independent only after the war. They were following the so-called "inward-oriented" trade and industrial policies. / In Singa- pore, the government's initial industrial policy had no particular bias (inward-/or outward-oriented), but the economy was oriented toward commer- cial rather than industrial activities. Only after the People's Action Party won the May 1959 elections did the government start to focus on the need for industrialization.1' The fact that Japanese hardwood plywood was exported to US at very competitive prices is attested to by the repeated attempts of the US hardwood plywood industry to get protection during the 1950s. There was an appeal to the US Tariff Commiss-on in 1954-55, an investigation of suspected dumping by US Treasury Department in 1955, another appeal to the Tariff Commission in 1958-59, and repeated attempts to introduce bills in the Congress to restrict imports from Japan.4/ 3.13 In the second half of the 1950s, plywood exports from the Philip- pines reached significant proportions (Table 3.4). These were mainly sent to the US market where Philippine plywood had preferential access under the Laurel-Langley agreement, although the preferential edge began to erode gradually beginning in -1956. The Philippines accounted for over 10% of US hardwood plywood imports in 1960 (Figure 3.1). At least one of the 1/ A brief, well-balanced account of the role of external trade policies in postwar Japanese economic growth is provided in Lawrence Krause and Sueo Sekiguchi, Japan and the World Economy. 2/ Bela Balassa, The Process of Industrial Development and Alternative Development Strategies; See also Don Keesing, Outward-Looking Policies and Economic Development; Anne 0. Krueger, Foreign Trade Regimes and Economic Development: Liberalization Attempts and Consequences; and Ian M.D. Little et al., Industry and Trade in Some Developing Countries: A Comparative Study. 3/ Lee Soo Ann, Industrialization in Singapore, pp. 7-34; see also Augus- tin H.H. Tan and Ow Chin Hock, "Incentive Policies and Economic Dev- elopment in Singapore". 4/ Nihon Mokuzai Yunyu Kyokai, Niju-nen no Ayumi, op. cit., p. 143, pp. 157-160, and pp. 179-182; and U.S. Tariff Commission, "Hardwood Plywood," Report on Escape-Clause Investigation No. 39, Washington, June 1955. -45- reasons why the Philippines fai'led to expand its plywood exports is believed to have been the "inward-oriented" nature of its industrial and trade policies at that time, e.g., the implicit overvaluation of its currency-1/ C. Developments from 1960 to 1973 3.14 After l eaking in 1959, Japanese exports of plywood stagnated at around 350,000 m during the 1960s, except for the second peak year of 1968. In the meantime, Philippine exports increased to around 150 000 m3 in the mid-1960s and further to a peak of 390,000 m3 in 1973. 3.15 A new development in the early 1960s was the emergence of first the Province of Taiwan and then the Republic of Korea as major exporters of plywood. Their exports kept increasing rapidly until the boom year of 1973, when the Province of Taiwan and the Republic of Korea exported 1.1 and 1.3 million m3, respectively (Table 3.4). 3.16 Exports of plywood from Japan, the Philippines, the Province of Taiwan and the Republic of Korea during this period were closely geared to the US market. The dramatic changes in the positions of the leading plywood exporters are clearly reflected in the changes in the exporters' relative shares in US imports (Figure 3.1 and Statistical Appendix Table SA23). 3.17 One important factor that led to large increases in-the exports of plywood (and other "light" manufacturers such as textiles) from the Province of Taiwan and the Republic of Korea in the 1960s was the industrial policy reforms carried out around 1957-1962. The Province of Taiwan began to change its overall industrial and trade policies in 1957, and by the early 1960s was pursuing completely outward-oriented policies with emphasis on labor-intensive exports.Z/ Similarly, in 1961 shortly after President Park took charge, the Republic of Korea shifted from an inward-looking industrial strategy to an outward-looking one of industrialization, with emphasis on all-out promotion of light-manufacture exports.3/ These aggressive export promotion policies involved substantial effective export subsidies as well as various unquantifiable incentives for exports of manufactures and in both countries, plywood exports benefited. 1/ John H. Power and Gerado P. Sicat, The Philippines: Industrialization and Trade Policies (Oxford University Press, 1971), Chapter 5. 2/ Most authoritative analyses of the policy reform in the Province of Taiwan are provided in: Ching-yuan Lin, Industrialization in Taiwan, 1946-72: Trade and Import-Substitution Policies for Developing Coun- tries; Mo-Huan Hsing, Taiwan: Industrialization and Trade Policies; Gustav Ranis, "Industrial Development"; and T.H. Lee and Kuo-shu Liang, 'Incentive Policies and Economic Development in Taiwan". 3/ Kwang Suk Kim, "Outward-Looking Industrialization Strategy: The Case of Korea", Wontack Hong, Trade Distortions and Employment Growth in Korea, especially Chapter 3. - 46 - 3.18 In the Province of Taiwan, as early as, July 1955, the government promulgated the Regulations for Rebate of Taxes on Export Products, provid- ing for the rebate of import duties, defense surtaxes, and commodity taxes to encourage the processing of imported materials for export. However, this was not sufficient to promote exports. Starting with the devaluations in 1958 and 1959, a series of policy changes on rebates and subsidies was put into effect, resulting in a 62% change of "real effective exchange rate for export" from 1957 to 1959.1/ The process of currency devaluation and increasing rebates/subsidies continued until mid-1960. The total of (a) -interest subsidy, (b) rebates of custom duties on imported inputs and (c) indirect tax rebate had increased steadily, reaching 8.3%. of the offi- cial nominal exchange rate in 1962 and the peak of 14.3% in 1971.1/ Other export incentives given were exemption from business and related stamp taxes, 2% tax reduction for manufacturing, mining, or handicraft corpora- tions that exported more than 50% of their output. 3.19 Perhaps the most important incentive for exporting plywood was that which provided the rights for retention of foreign exchange earnings in order to import raw materials and machinery and the privilege of selling these rights to other firms. Unfortunately, detailed data on the "worth" of such exchange entitlements are not available with respect to plywood exports in the early 1960s. However, Lee and Liang estimate that the margins paid to the transferees generally amounted to 2.5-10.0% of the official exchange rate.l/ Lin reports that, in 1968, in the case of wood products, 70-85% of export earnings were approved as "import exchange entitlements," and that 66% of these foreign exchanges were transferred to other firms, yielding premiums equivalent to 6.2-8.2% of the official exchange rate.4/ Since the free US dollars were more valuable in the earlier part of the 1960s, it is reasonable to assume that higher premiums were paid in the early 1960s, 1/ T.H. Lee and Kuo-shu Liang, "Incentive Policies and Economic Develop- ment in Taiwan", Table 10.3. The official nominal exchange rate "declined" by 54% in 1957-59. 2/ Ibid. Rebates of custom duties on imported inputs and indirect tax rebates are not subsidies. Nevertheless, they had the effect of promoting exports. 3/ Ibid., footnote 14. 4/ Ching-Yuan Lin, Industrialization in Taiwan, 1946-72, pp. 97-100, 113-114. According to Lin, in 1966, exporters of cotton yarn received a total of 48% over the official exchange rate in the form of all the incentives. -47- 3.20 The Republic of Korea, which had been preoccupied with domestic reconstruction and stabilization after the Korean War, underwent two conse- cutive changes of government in 1960 and 1961. In 1963, Korean development strategy be an to change radically, focusing on export promotion for manu- factures.V A most significant change among the series of new policy measures for outward-oriented industrialization strategy was the devaluation in 1964 of the exchange rate from 135 won to 256 won per US dollar. Since 1965, however, the purchasing-power-parity-adjusted, real, effective ex- change rate has been maintained at an almost constant level 2 3.21 Westphal and Kim summarize the most important price incentives to exporters as of 1967 as follows: "unrestricted access to and tariff exemptions on imported intermediate and capital goods; exemption from payment of indirect taxes both on major intermediate inputs, whether imported or purchased domestically, and on export sales; generous wastage allowances in determining duty and indirect tax free raw material imports, which permitted the use of some of these imports in production for the domestic market, reduced prices for several overhead inputs including elec- tricity and railroad transport, which were intended at least in part to compensate for payment of indirect taxes included in the normal charges for these inputs; a 50% reduction in dire"zt taxes on income earned in exporting, along r,.th accelerated depreciation; and, immediate access to subsidized short and medium term credit to finance working capital and fixed investment respectively. In addition, the export- import link system entitled selected exporters to import certain popular items that were not otherwise approved for import ... .this system was used to subsidize exports during the late 1950s and much of the 1960s. "3/ 1/ For details of the process of policy change, see Kwang Suk Kim, "Industrialization and Structural Change in Korea," especially Chapter II. 2/ Ibid., p. 21. /3 Larry Westphal and Kwang Suk Kim, Industrial Policy and Development in Korea, pp. 1-10. Among the various incentives, the most important for plywood appears to have been the benefit derived from the wastage allowance (Song Son, The Growth of the Plywood Industry, pp. 71-72). -48- 3.22 Westphal and Kim recognize that some of these incentives are not genuine subsidies. They distinguish two eLfective exchange rates for exports: a "gross" rate, which includes indirect tax and tariff exemptions per dollar of exports, and a "net" rate, which does not include them. They believe that the "gross" rate is the more relevant concept for measuring the extent of overall incentive to export the product instead of selling it in the domestic market. In addition to generally applicable export incen- tives, plywood and .sawnwood received extremely generous wastage allowances. According to the estimaces preDared by Westphal and Kim, the effective export subsidy as a percentage ratio to value added in 1968 for plywood, lumber, and lumber and plywood combined was 95.6%, 25.1% and 94.7%, respectively. Thus, the export incentives given to the mechanical wood processing industry in the Republic of Korea in the mid-1960s were, indeed, very substantial. 3.23 Another factor that contributed to the Korean success in increas- ing plywood exports to the US during this period was that ocean freight costs to the US were significantly lower from the Republic of Korea than from the Philippines, the Province of Taiwan and even Japan. Table 3.7 illustrates the freight cost differences among various points in Asia that exported to the US market in 1968. 3.24 The reason why the -actual freight costs for plywood from the Republic of Korea to US destinations were so much lower than those from Japan and other Asian exporters is not fully known. But, it appears that most Korean exports were shipped at cheap nonconference rates. The Pumoo Steamship Company associated with the Retla Steamship Company of Long Beach, California, dominated the transport of Korean plywood, carrying 99% of the Korean plywood shipped to the US in 1970.1/ Also, one US company, Evans Products Company, of Santa Ana, California, which owns Retla Steamship Company, purchased from 44% to 60% of all Korean exports to the US. The remaining exports were purchased mainly by three other companies.2/ 3.25 In contrast to both the Province of Taiwan and the Republic Korea, industrial policy in Indonesia continued to be extremely inward-oriented. The overall policy in the Philippines also remained inward-looking, although the government did make some attempts to encourage industrial exports.-/ Indeed, while the extreme inward-orientation of Indonesia's export policy has softened since the government changed in 1967, both Indonesia and the Philippines have never made a clear switch to an outward-oriented indus- trial strategy. 1/ US Agency for International Development, "Survey of the Korean Hardwood Plywood Industry and International Plywood Markets, p. 77. 2/ Ibid., p. 42. 3/ John H. Power and Gerado P. Sicat, The Philippines: Industrial and Trade Policies, pp. 102-104. - 49 - Table 3.7: COMPARISON OF ESTIMATED COSTS OF TRANSPORTING PLYWOOD FROM THE PRILIPPINES, JAPAN, PROVINCE OF TAIWAN AND REPUBLIC OF KOREA TO THE UNITED STATES, 1968 Cost comoarison wich the case of: Trip From Philippine Trio from ?hilippim2e Transport Customs Port Out-?0rcs Prom To Cosda R difference Z Ratio Fro {JS$ c US$--- (A) Philippine/b Pacific-OCPFd 11.60 - 100 customs port Pacific-local 12.32 - 100 -- Atlantic/Gulf 15.44 - 100 - - (B) Philivpiaer/b Pacific-OC.L2 12.00 - - - 100 out-ports Pacific-local 17.72 - - - 100 Atlantic/Gulf 15.84 - - - 100 (C) JapaZ/-b Pacific-OCP/d q.96 22.64 74 3.04 75 Pacific-local 10.07 2.25 82 2.65 79 Atlantic/Gulf 12.87 2.57 83 2.97 81 (D) Prov. or Taiwan/c Pacific-OCPLd 8.54 3.06 74 3.46 71 Pacific-local 8.80 3.52 71 3.92 69 Atlantic/Gulf 11.12 4.32 72 4.72 70 (E) Republic of Pacific-OCP.d 6.98 4.62 60 5.02 57 Korea.LE Pacific-local 7.68 4.62 62 5.04 60 Atlantic/Gulf 8.32 7.12 54 7.52 53 /a Transport cost per 800 sq. ft. 1/4 inch plywood, equWavalent to approximate recovery volume from 1 Z3 of logs. /b Conference rates. /c Nonconference estimated rates. Id OCP, overland common points; rates which apply to shipments destined to the area east of the Rocky Mountains. Source: National Economic Council of the Philippines, based on inTornation supplied by Plywood manufacturers -Association of the Philippines. Cited from UNCTAD, "Level and Structure of Freight Rates; The Maritime Transportation of Trooical Timber', TD/B/C.4/59, Jan. 5, 1970, p. 126, Table IV-16. - 50 - 3.26 By the mid-1960s, plywood exports from Malaysia and Singapore reached modestly significant proportions and they have risen steadily ever since (Table 3.4.). Their export destinations have been well diversified including (a) neighboring countries such as Laos, Thailand and Vietnam, (b) the UK and other European countries, (c) the US and (d) oil-exporting countries in the Middle East such as Kuwait. But, the UK has always been an important destination for them (partly because of the Commonwealth pre- ference), and it could probably be said that without their special connec- tions with the UK market, their plywood exports would never have developed as much as they did. 3.27 Most of Malaysia's plywood exports, however, have been from the relatively better developed Peninsular Malaysia and not so much from the states of Sabah and Sarawak, which have been the more important sources of log production. Peninsular Malaysia, along with Singapore, were successful in improving the product quality to meet the strict requirements of the UK market. 3.28 An important factor that affected developments in the plywood trade during this period (1960-1973) was the growth of domestic demand in Japan. Economic growth in Japan during this time was running at above 10% per annum and the expansion of building and construction activities was phenomenal. Consequently, apparent domestic consumption of plywood (vir- tually all hardwood) increased from 1.15 million m3 to 7.61 million m3 in 1961-1972,1/ or at 19% per annum. In 1972, Japan accounted for 19% of world plywood consumption. Indeed, although expanding exports were an important factor in the growth of the Japanese plywood industry, the share of exports in total production rose only to 30-35% in 1955-1959 and then declined to less than 20% by 1973. 3.29 In contrast, in the Province of Taiwan and the Republic of Korea, the ratio of exports to production was very high because their exports increased tremendously in the early 1960s. However, the ratio has decreased somewhat in recent years. In the Philippines and Malaysia, because of the continued inward-oriented industrial policies export dependence has remained well below the levels achieved by the Province of Taiwan and the Republic of Korea during the period concerned. Figure 3.2 shows the evolution of the ratio of exports to production for the selected countries in 1948-1979 (see also Statistical Appendix Table SA24). 1/ 1972 is chosen as the end period rather than 1973, because consumption in 1973 was so abnormally high because of the exceptional boom condi- tions in that year. FIGURE 3.2: PLYWOO[) RATIO OF EXPORTS TO PRODUCTrTOrj IN SELECTED ASIAN PRODUCERS 90 - I II 80 / 30 % j / i- JAPAN if.... IDI 20 2 N t \/ t' 9 ^ a | . f |- - -- PROV . OF TAIUAN I----- REP. OF KOREA 1 \ ,\ : - :PHIlLIPPINES 18 / / / *6 --ALAYSIA 50 1-' 1 1 I 1---(-T I1948 1951 1054 1957 1060 1963 1966 1969 1972 1975 1978 YEAR' SOURCE: STATISTICAL APPENDIX TABLE ISA24 - 52- D. Trade in Processed Tropical Hardwood, 1974-1977 3.30 Because of the worldwide recession following the oil crisis in 1973-74, export trade in plywood collapsed in 1975 and the recovery has been rather slow. Because of the stagnant growth in demand and the sharp ap- preciation of the yen against the US dollar, plywood exports from Japan decreased sharply in 1973-75 and subsequently declined further (Table 3.4). Japan still exports plywood made from imported lauan logs but it is mainly in the form of specialty products, e.g., "prefinished" with uLliquely Ja- panese fancy species, printed, laminated, waterproofed, fire-proofed, etc. Since the domestic market also collapsed and stagnated, the Japanese in- dustry has been trapped in "structural stagnation." Table 3.8 shows how the "gross value added to the wood material" in the plywood sector was squeezed in Japan after 1973. 3.31 While the Province of Taiwan's plywood exports stagnated in 1974-77, the Republic of Korea's continued to rise although at a slower pace than before. In the meantime, exports of plywood from Malaysia (mainly Peninsular Malaysia) and Singapore increased steadily, with their exports to the Middle East rising rapidly. Since these two countries had been ex- porting sawnwood to the UK for a long time, they had already established quality standards for sawnwood and marketing channelsz Beginning in the late 1960s, sawnwood exports from Malaysia and Singapore to other European markets also increased rapidly primarily on the basis of their dependable quality. The Timber Industry Boards in the two countries played a key role in promoting exports of sawnwood and plywood. E. Developments from 1978 to the Present 3.32 In recent years, the Philippines, Malaysia and Indonesia have taken progressive steps to restrict log exports. There are three main reasons for this trend. First, the governments of major log exporting countries have become increasingly aware of the possible exhaustion of prime tropical hardwood resources in their natural forests. Second, they have reconfirmed their determination to step up the growth of local timber processing industries in order to replace their log exports by processed products such as sawnwood, veneer sheets, plywood and other processed wood products (e.g., mouldings, doors,< window-frames, flooring materials and "knockdown" furniture). Third, having observed the spectacular success of the OPEC actions in petroleum exports, the major log-exporting countries have come to realize the opportunities for extracting greater economic rent from their government-owned forest resources. This subsection reviews the recent policies of the major log-producing countries, i.e., the Philippines, Malaysia, Indonesia and Papua New Guinea,L/ and then discusses the impact of these policies on the processing industries in log-importing areas. 1/ Table 3.9 summarizes the broad changes in the shares of major countries in tropical hardwood log exports in the last 25 years. Table 3.8: TIRENDS IN GROSS VAl.llF A0I10) TO LAIG )iATERIAI. 14 P'LYWOOD IlOlilICTlON IN .JAPAN, PRR C:illm: PIIPTEit OF (AllAN l.OC INPUT, 1970-1980 (A) (N)()(1)() (F) (C) (1)(I -) Crosn World Bank Gross value Frice per ValnIe on 34 G roan valtie .Japan Crime velue Value Ilidex of added per sleiet of a1,eets of Price of an.:t4tl per %3 wsbolei-le' adctil per I Exchnonj1, added In Intetnat-lonal of logs in Year plywood /a plywood /h latisan logo Ic of logo prlre Itidex .3 of logs rate currenit nflatlon 1979 US$ ----------Yen---------- --yen per a3 of logo-- (1979-10n) 1979 Ye-In Ye/S ll/ ' (1979-100) US$ 1970 990 . 33,660 13,400 20,260 56.98 35,556 357.60 56.66 33.5 169.13 1971 R88 29,920 13,30n 16, 6 20) 56.52 29,'i05 314.80 52.80 36.3 145.45 1972 871 29,580) 11, 40o 11,180 56,98 31,906 302.20 60. 16 40.2 149.65 1973 1,370 46,5'0 l7,80o 211,7910 66.04 43, 5:o 271.22 106.11 48.3 219.69 J974 1,t06 36,040 22,900 13,140 86.77 15,143 291.51 45.08 60.2 74.85 1975 900 30,600 17,600 13,000 89.37 14,546 296.80 43.81 69.4 63.13 19'76 1,6I0m 39,440 23,f00 15,840 93.92 16,865 296.55 53.41 70.7 75.54 1977 1,100 37,400 24,100 13,300 95.62 13,909 268.51 49.53 76.2 65.00 1978 940 31,960 19,200 12,760 93.21 13,690 210.47 60.63 88.3 68.66 1979 1,500 51,000 35,500 15,500 100,00 15,500 219.17 70.72 100.0 10.72 1979 June 1,610 54,740 34,400 20,340 1979 H.Lvembler 1,620 55,080 46,100 8,980 1980 February 1,890 64,260 46,600 17,660 1980 April 1,830 62,220 47,800 14,420 /a Wholes le prlce In Japaa (national average). Ab I n3 of rousndwood can be converted Into 34 sheets of plywuod (12 -, 90 co x 180 co). /c Wholesale price, national averages. for veneerloga. tD) - (t) - (C) (F) - (D) deflated by (B) (d) -(D)-:-(G) (J) - (H)-1-MI) X 100 Sources Forestry Agency of Japan, Hokuzxa Silkyo Geppo, various tesues. IMF, International FInancial Statistics, varlotu issues - 54 - 3.33 In 1972 the Philippine government decided to ban log exports in principle and announced a program aimed at gradually reducing log exports until they were phased out completely by 1976. However, due to recurring balance-of-payments difficulties, the government has repeatedly postponed the complete cessation of log exports and has permitted them on an excep- tional basis by quota allocation. Nevertheless, according to official statistics, Philippine exports of logs have declined quite dramatically-- e.g., from 9.6 million m3 in 1970 to 1.25 million m in 1979 (Statis- tical Appendix Table SA9) and to below 1 million m3 in 1980.1/ 3.34 Philippine forest resources have been depleted far more than the official Bureau of Forest Development data indicate. The country's forest resources have been intensively exploited for over 30 years since World War II. Unless a policy of strict conservation and rational utili- zation is implemented, forests in the Philippines will not be able to sustain any substantial growth of the wood processing industry or perhaps even the present level beyond a few years.2/ 3.35 In Peninsular Malaysia, also, the policy of restricting log exports was established in 1972 when a ban on the exports of logs was imposed, first on 11 species and later on 16 species. Although the ban was somewhat liberalized in 1977, log exports were allowed only on a quota basis. Exports of logs from Peninsular Malaysia declined steadily from 1.6 million m3 in 1970 to practically nil in 1979 (Statistical Appendix Table SA9). Indeed, Peninsular Malaysia has recently been suffering from log shortages. Despite abolishing in late 1978 the 15% import duty and the 5% surtax on log imports, imports of logs into Peninsular Malaysia have not increased dramatically. Although the overall level of log production in Peninsular Malaysia has not decreased since 1970, it clearly has now become a log-importing region. 3.36 In the State of Sabah in Malaysia, exports of logs peaked (in volume) in 1973, declined during the "oil crisis" years of 1974-75, and then sharply increased to over 12 million m3 in 1976-1978. However, in 1979 the State government established the policy of reducing log exports 1/ It is widely believed that unrecorded exports of logs have increased in recent years. Even if such "extra-official" exports are allowed for, it is undeniable that Philippines' log exports have decreased substantially over these years. 2/ Wood Industry Development Study Group and Atlanta Industrie-und Unter- nehmemsberatung Gmbh, "Wood industry Development Study Base Survey I: Forest Resources Base Study", prepared for the Philippins Ministry cf Natural Resources, October 1980. - 55 - Table 3.9: SHARES IN WORLD EXPORTS OF TROPICAL HARDWOOD LOGS, SELECTED YEARS IN 1955-1979 Tropical Region/country 1955 1961 1970 1973 1975 1978 1979 ------ - -------------------- -percent -------------- Asia-Pacific 50.0 60.8 80.3 81.1 84.3 86.3 85.0 Indonesia 0 0.8 : 21.4 37.3 36.8 42.7 44 .C Malaysia 12.4 21.5 31.0 26.0 31.7 37.2 36.5 Papua New Guinea 0.1 0.1 0.5 0.9 1.0 1.0 1.0 Philippines 32.4 35.8 26.2 15.6 13.5 4.9 2.8 Africa 43.2 36.9 18.7 17.7 15.5 13.6 14.8 Gabon 13.7 9.6 4.5 3.5 2.9 2.7 2.7 Ghana 8.2 6.1 1.6 2.8 1.6 0.7 0.3 Ivory Coast 4.1 8.0 648 7.0 7.1 6.0 7.3 Latin America 6.7 3.0 1.0 1.1 0.1 0.1 0.2 Source: Statistical Appendix Table SA9. - 56 - gradua'ly, and export quotas have since been applied.l/ In the meantime, the royalty rates were increased sharply around mid-1979. These new royalty rates have had the effect of raising the share of government revenue in FOB log prices dramatically--i.e., from the previous 32% to 60%. Log exports from Sabah declined sharply from 12.4 million m3 in 1978 to 9.8 million m3 in 1979 (Statistical Appendix Table SA9). Log exports declined further to 8.2 million m3 in 1980. 3.37 According to Mr. M. Munang, Acting Senior Assistant Cons;ervator of Forests of Sabah, the theoretically appropriate level of log production A"Li;er conditions of full allocation" (based on 70 year rotation) would decline from the peak 10 million m3 in 1975, to 8 million m3 in 1980, to 5 million m3 in 1985 and 3.7 million m3 in 1990. 2/ Although the basis for setting these "annual allowable cut" targets appears to be rather arbitrarily conservative, it is safe to assume that if log production in Sabah continued at the rate of over 1-0 million m3 per annum, commercially attractive forest resources would become very scarce within the next 5 to 10 years. 3.38 The declared objective of the Sabah government is to reduce annual log exports to nil by 1985. Although substantial slippage can be anticipated in the implementation of this program of phasing out log exports completely, there is no doubt that log exports from Sabah would be reduced sharply by mid 1980s. 3.39 In the State of Sarawak, where logging conditions are not as favorable as in Sabah or Peninsular Malaysia, log exports declined in 1970-1975 from 3c1 million m3 to 1.3 million m3, but they have been rising rapidly since 1976, reaching 6.7 million m3 in 1980. There have been modes t exports of processed timber, but they have not been increasing in volume terms. 3.40 Sarawak has'taken a rather liberal log export policy. The govern- ment charges (royalty, export tax, etc.) have been rather low--aroind 10-15% of FOB charges (royalty, export tax, etc.) have been rather low--around 10-15% of FOB prices, depending on species--and there is not much discri- mination against log exports in favor of processed timber exports. 3.41 Commercially attractive virgin forests in Sarawak are estimated to last for another 20 years at the current rate of exploitation, but the 1/ According to the Constitution of the Federation of Malaysia, forestry is a State matter. Therefore, forestry policy including trade and tax policies relating to forest products is autonomously decided by the State authorities of Sabah. This principle also applies to Sarawak. 2/ M. Munang, Forest Resources Base, Policy and Legislation of Sabah, p.32. - 57 - second round of cutting is expected to yield substantially less than the first round. If the present liberal log ex ort policy is continued, log exports from Sarawak could rise to 8 million m by 1983. 3.42 In Indonesia, hardwqood log production, having peaked in 1974 (at 26.2 million ma) and having plummeted in 1975 (to 16.3 millioti Mn3, recovered to 26.9 million m3 in 1979. 1/ However, during 1980 and 1981, it declined, due, at least partly, to the significant changes in the log export policy introduced in 1979-81. Logs produced in Indonesia are export- ed largely in log form although very recently exports of sawnowood and plywood began to increase. Fluctuations in the country's log production thus reflect the variations in its log exports, which in turn reflect the fluctuations in demand and, more recently, the effects of the restrictive log-export policy. 3.43 Indonesia's forestry policy has been based on three principles-- export quotas, selective cutting and domestic processing. These principles were incorporated into laws in the late 1960s and early 1970s and also were written into forestry concession agreements. The general objective of the forestry policy has been to maximize the long-term benefits arising from forestry-related activities to the Indonesian economy. The more specific objectives have been to make sure an adequate resource rent is collected from logginig activities and to encourage the growth of domestic wood- processing industries. The government, however, did not enforce these principles until 1978. 3.44 Around the beginning of 1978 the government of Indonesia decided to take steps to increase fiscal revenue from the forestry sector and also to give stronger incentives to increase local processing. In February 1978, the govermnent increased the export tax on logs from the previous 10% to 20% of the government-determined "check prices." In the summer of 1979, a new export tax of 5% was imposed on roughly sawn timber. This was to extract some resource rent from sawn timber and also to discourage the practice of exporting simply roughly squared logs (which can hardly be called "pro- cessed") solely to av.old the 20% export tax and other changes imposed on round log exports. There are currently about eleven separate government charges on log exports, and the "tax" burden of log exports in Indonesia now seems to be as high as 40-45% of the FOB prices of logs (See Annex D). 3.45 In April 1980, the ministers of agriculture, trade and industry announced their joint decision to restrict log exports through linking the 1/ Statistics on forestry and forest industries in Indonesia vary widely depending on thae sources. It is difficult to reconcile production, export, local processing, etc. The figures cited are based on data reported in FAQ, Yearbook of Forest Products 1978. Published statis- tics on annual log production are not always in agreement. See C.E.M. Keil, Logging and Log Processing in Indonesia, April 1978, p.17. See also Statistical Appendix Table SA25. - 58 - log export quota allocations to the "industrialization" performance of concessionaires. The quantitative export restriction sy'stem works through the assignment of allowable quotas for annual cuttings and exportable log quotas for each individual concession holder on the basis of the conces- sionaire's recent performance in local processing. 3.46 The overall effects of these policy initiatives have been remark- able. Indonesia's log exports were down in 1980 and 1981. Log export prices climbed sharply in 1979 and stayed high until the fall of 1980 (although prices have been lower since). At the same time, a substantial differential between the prices of export logs and local market logs nas been created. Export prices ranged around US$125-135 per m3 (FOB Kali- mantan) during a good part of 1980, while logs of almost comparable quality were available in the local market at US$70 per m3, or at roughly half price. This price differential, if it is expected to persist, would provide a powerful incentive for local processing so long as exports of processed products are subject to little or no tax. As the capacity to process logs locally is built up over the next few years, the price differential might narrow somewhat, but as long as there are substantial taxes on export of logs, the differential will remain substantial. In fact, Indonesia's exports of sawnwood and plywood have been increasing rapidly (Statistical Appendix Tables SA10 and SA1l). 3.47 Also, the determined attitude of the Indonesian government has signaled both the log-importing areas and the potential investers at home that this time the government really means business. This is reflected in the recent rust, of applications for the government's approval on a number of wood-processing projects, especially plywood production projects. As of May 1980, 22 plywood factories, with an aggregate capacity of 1.1 million m3 (plywood) per year, were in operation, compared with 16 plants at the end of 1978. An additional 20 or so had already been approved (as of May 1980) and are expected to bring the country's total capacity to 2.1 million m3 (plywood) per year by the end of 1982. Reportedly, some 50 to 80 more projects have been proposed and are in various stages of preparation. If all of these projects are implemented, the total number of plywood plants in Indonesia would be well over 100. Although no clear information is available on plans for increased sawmilling capacity, it is believed that many of the planned and proposed plywood plants would accompany sawmills. 3.48 In April 1981 another "radical" policy was announced on log exports.-! Essentially, the new policy is to give log export quota alloca- tions only to the forest concessionaires who have processing facilities 1/ Joint Decree of Indonesian Director General of Forestry, Director General of Industry, Director General of Domestic Trade and Director General of Foreign Trade, No. 78/KPTS/DJ/I/1981. - 59 (with "concentration" on plywood production) either already in operation or under construction. This means that those concessionaires who have merely filed applications for approval of construction of plywood and other pro- cessing facilities would not be given log export quota allocations until the proposed projects are under construction. If this policy is strictly enforced, log exports from Indonesia should immediately decline dramatical- ly. Judging from the reported log-price movements and Japanese log import statistics for May-June 1981, however, the policy does not appear to be strictlv enforced. Nevertheless, in all probability, Indonesia's log exports are likely to decrease further in the coming years. 3.49 In Papua New Guinea, log exports peaked around 1974 at 0.4 million m3 - 0.45 million m-J per year and have remained at that level since. In early June 1979, the Ministry of Forestry issued the Revised National Forest Policy, which reversed the previous practice of restricting log exports in favor of local processing. The major thrust of the revised policy aims at revenue generation, national ownership, regional development and political stability. The government intends to "concentrate its efforts over the next few years in seeing to the efficient utilization of existing (and finmly proposed) timber processing capacity, and on the formation of a number of Papua New Guinea owned export logging ente,prises."l/ Whether or not log exports from Papua New Guinea could increase substantially in the future depends critically, among other things, on the successful implementation of the last point, namely, the formation of a number of domestically owned export logging enterprises. 3.50 Other countries in the region are only minor log exporters. Thailand has become a net importer. Burma could potentially increase log exports but is likely to do so only gradually. Vietnam is basically a wood deficit country. Thus, with the exception of Sarawak, Papua New Guinea, Burma and possiby Laos, countries in the region are likely to continue to reduce their exports of logs significantly in the future. 3.51 The impact that increased restrictions on log exports in the Philippines, Malaysia and Indonesia have had on the processing industries in Japan, the Republic of Korea and the Province of Taiwan has not been very clear. It is true that production of plywood declined in Japan, the Repub- lic of Korea and the Province of Taiwan in 1980-81, but it seems that the depressed demand for plywood in the United States and Japan has been a more important influence than the restrictions on log supply. However, had there not been a tightening of log export restrictions in the major supplying areas, log prices would have declined much more dramatically than they did in the face of receding demand in 1980-1981. All this, however, represents only short-run repercussions. It is important to assess the long run implications of the recent trends in the timber export policies of the major supplying countries. These will be discussed in Chapter VI. 1/ Papua New Guinea, Office of Forests, Facts and Figures 1980 Edition, p. 1. - 60 IV: FACTORS AFFECTING THE LOCATION OF MECHANICAL PROCESSING OF TROPICAL HARDWOOD A. Introduction 4.01 It is clear that incentives provided by governments played an important part in the develoDment of export-oriented plywood industries in Japan, the Republic of Korea and the Province of Taiwan, especially during the initial stages. The most effective incentive measures involved linking foreign exchange allocations for raw material imports to export performance (generous "wastage" allowances constituted an effective subsidy for plywood exports). Exports of processed products from Malaysia and Singapore were facilitated by special ties with the UK. Another important non-cost factor that helped increase processed timber exports from Malaysia and Singapore seems to have been the work of Timber Industry Boards in quality control. 4.02 There are other government actions that affect the location of processing facilities through the cost of production. Trade barriers appear to have affected the evolution of locational pattern of processing industries. Tariff escalation in major importing countries played a role in influencing the locational pattern. Also, differential government charges (export taxes, royalties, etc.) on logs for export vs. logs for local processing as well as restrictions on log exports appear to have influenced the location of processing industries. The purpose of this chapter is to compare the production cost structures of major Asian exporters of processed tropical timber in order to understand the determinants for timber process- ing locations. 4.03 Our attention is again focused on the plywood sector because a majority (65-70%) of the logs exported from the producing countries are veneerlogs which are used mainly for plywood making in the importing countries. Furthermore, the value added to the log material is generally higher in plywood than in sawnwood, and, therefore, there is a greater interest in plywood than in sawnwood on the part of the major log-exporting countries. 4.04 Cost data have been collected for six locations--i.e., Indonesia, Peninsular Malaysia, Sabah, the Philippines, Singapore and Japan. The cost data collected are rough and their reliability is uncertain. The data are fairly recent, but in the last 2-3 years, there have been rather "radical" changes in the conditions affecting wood material supply, demand for ply- wood, and thus the profitability of the plywood industry in the region. Therefore, comparison and interpretation of the cost data must be done with extreme caution. Unfortunately the field work could not cover two major tropical hardwood plywood producing areas--the Province of Taiwan and the - 61 - Republic of Korea. On these areas, no cost data have been obtained, and only spotty, somewhat old information from secondary sources has been utilized for this study. 4.05 The following section examines whether or not entry costs have been an important barrier to the growth of wood processing in the log- producing countries. Then, costs of producing plywood, including costs of delivering it to the Japanese market, are compared for six locations, including log-importing Japan and Singapore and log-producing Sabah, Sarawak, Peninsular Malaysia, Indonesia and the Philippines. B. Entry Costs 4.06 Estimates for costs of entry into mechanical processing of tropical hardwood seem to vary considerably, depending on the type of machinery used, whether or not kiln drying is involved, the number of workshifts employed and the extent of need for supporting facilities (transportation, housing, medical service, etc.). Some estimates are given below. On the whole, in the context of the Asia-Pacific region, entry costs required to start operations on a minimum economic scale in sawmilling and veneer/plywood production do not seem to have been the key obstacle to establishing processing plants. Entry costs involved in starting economic scale particle-board production are substantially higher than entry costs for sawmilling and plymilling. In establishing particleboard plants, entry costs have been at least one of the major problems--although not the most important problem. 4.07 Entry costs have never been a serious problem in sawmilling. A typical modern sawmill with the rated annual capacity of 15,000 m3 of sawnwood output would today require a total investment of US$2.0-$5.0 million (constant 1980 dollars). In other words, initial investment re- quirements range from US$130 to $330 per cubic meter (sawnwood) of annual production capacity. 4.08 Similarly, entry costs for establishing a modest but efficient modern plywood factory donot seem to be a major problem unless an extensive infrastructure needs to be created. Estimates for investment requirements for building a modest but reasonably efficient modern factory for plain plywood making would range widely from US$110 to $540 per each cubic meter (plywood output) of rated annual production capacity (in constant 1980 dollars). Table 4.1 provides estimated entry costs for five separate projects sited, or to be sited, at different locations. One possible reason for the vast differences in the magnitudes of investment requirements per cubic meter (plywood output) of annual capacity might be the type of machinery involved. On the one hand, data for the project in northern East Kalimantan have been taken from a feasibility study, in which the most expensive machinery seems to be assumed. On the other hand, the hypo- thetical example for Peninsular Malaysia may have assumed the use of the - 62 - simpliest and least expensive type of machinery. The examples for Balik- papan, East Kalimantan, and Sabah assume medium quality equipment. In any case, given the wide range of possibilities, it cannot be concluded that entry costs have been a serious problem in establishing plywood plants. 4.09 Production of wood-based panels other than plywood seems to require much larger entry costs for an economic scale operation. One recent feasibility study for a modest scale wood-based panel complex to be sited in a central African country indicates entry costs of about US$1,940 (constant 1980 dollars per m3 (output) of annual production capacity. The proposed project involves an annual production capacity of 15,000 m3 of Qarticle- board, 3,000 m3 of waferboard, 6,500 m3 of hardboard and 500 J of in- sulation board. The total capital cost required is about US$36.6 million for the capacity to produce a total output of 25,000 m3 per year (60% particleboard), while the total financing required is estimated at US$48.5 million (including infrastructure). 4.10 Although the capital cost required for the wood-based panel plant mentioned above seems to be overestimated, it is undeniable that production of wood-based panels other than plywood involves substantially higher capital requirements per m3 of output of annual capacity. At least in the past, entry costs seem to have been among the key constraints on the development of the wood-based (non-plywood) panel industry in tro- pical hardwood-producing countries. C. Plywood Production Costs up to Ex-Factory 4.11 Table 4.2 compares costs of producing plain plywood in Indonesia (East Kalimantan), Poninsular Malaysia, Sabah, the Philippines, Singapore and Japan. Assuming that plywood is to be delivered to the Japanese market, the table shows not only the cost of physical productior but also the costs of delivering to the vessels at export points, ocean freight and insurance for shipping to Japan, and Japanese import duty. All estimates refer to the cost conditions as of the first half of 1980, although some estimates are derived from data that are dated earlier. 4.12 The estimates given in US dollar terms in Table 4.2 are then shown in percent share terms in Table 4.3. In all countries except Japan, the production cost up to ex-factory accounts for about 68-75% of the total cost of plywood delivered to Japan. In the case of Japanese factories, production up to ex-factory accounts for practically 100% of cost by de- finition, ignoring the cost of shipping to customers that are typically located nearby. This means that the overseas producers are "handicapped' by "post-factory" costs of some 30% in competing with the domestic producers in the Japanese market. These costs will be discussed later. Table 4.1i KSTINATKD KNTMV COSTS OF PLYWJOOD FAcTWJMS IN IlNDOMSIA AND H4AIASIA IN 191U) US WLLAIS Couantry -ldoneala _--- -- -_____ Localiou East Kali.aalata (1 )/ lar KaII.an`t`a` (i1)jF Saba,1i-c ipe.iln lau /e ft..duct fle 4-25.. x 1.25 a 250. a .1. a 2.42------ -- 1.21 xa 2.42. rtilckslaeaa .Snaa(11 Capacity (plywood a3Iyaar) 61,500 a] 3,6000 *3 43,000 .3 tIO,oo .3 Not apecltlcJ Investment cost 14 TotAl (USe .IlltQuo 43.6 9.6 11.6 12.1 Not available US4 p-r K4 (plywoud) at annual capacity 537 2U 215 110 297 Sa waaed on a proposed lalegratad projecL to be aited Ian norhean test lali-^uao a. lovgatmeatL raquire.enl. appear to l too hligh. Lb Nased on a pcopoaed plywood projoct to be sited in Maiikpapao. Ic Saied oa a recently aatabilied aperatting plant la Smn,lakAn area. 1d 5ad on dAta proviled tPa Icilacal Soser, Report ull Inidustrial Strategy Studiac. Jc Died oa asn eatiatad lacanent cat ('nationial average). Sonarcee Eatlmatia banad au iatornastion provided by Iliduatry aourcee. 4.2l.: 4.2: EstiATID COaT oWr rBUaItiatiJf ttlt IIAIS P'T144)(IXI AT SILXCTED LOCATIONS IN ASIA AN tOF EiAtlY 19110 I ndonol. laolb Weolnaular b'aluyoIc Phlllpplota 'l'!4el"ir" J~lM' A lodal PIait A. llperatni- Plat 1ypicol t A Iiypothet1cal Ploo- A Hla.t Oper-ting to Operate at (perhaps aor ao A Il.og (I-orotIg ..c (X,ndltloU. u tout 94liatao- /Ia *t 651 CapacIty |b 70X Capslty /c typica1) /d FI)l Copacity I, Votitiln Pl.oto /L Copocity (o1 t plyo - ld J r -Y.) 36 000 43 000 110 000 -0 000 5 04441 Product _Ide 4r u 1.2. x 2.42. 4- 1.2. - 2.42. 4-(t) 1.2. x2.42Z 4a() x 1.2. a 2.42. 1.0-3.6 * I 2.42. 12cc a 0.91o x 1.h2 U-s per (a3) of plyood output -- W-od reco--ry r.1c 52.01 0520X 45.0X 50.1 50.0X 67 .0 Fixed coot 57 53 41 53 34 25 Depreclarlo624 21 11 5 13 5 Intereara 14 20 12 6 5 4 Ce eralaanaicaooLLA! 19 12 1i 42 20 16 V Icbl roo 233 237 173 203 304 377 Lne 152 T10 99 201 26 Llu 28 30 26 34 26 32 Other oulle. 22 3* 22 27 20 Labor di-rot x t ic2 24 20 24 25 35 36 P.Cl_ki.g S 9 6 10 a 3 Tr--porta-lon to the p..rt 0 4 3 8 3 0 Chariea Ct ttue por.Lt 2 9 4 5 4 0 tEdL la-es Salf ta. 4 0 0 0 0 1) 4N Total cozt u!!P POti 294 290 214 256 31'2 :4)2 (Export prIce) (323) (310) (270) (303) (358) (385) U .an frel5ht& 1--- CO! -!)1. 0 43 26 I1 23 26 Ocea.. freilht O40 23 o2 20 23 lonuraca 3 3 3 3 3 JoP-.voc Ioport duty 73 67 *0 65 7 'oIt -ply ..o. dL I LU I dJl ilthout Japanane f-port doty 337 317 245 279 318 Otohoily , c1p.,obl After I.p-rc luty (201)LI 410 383 305 344 445 d e to Il*,,rence 1 pIroduct (.I.t) /k /a A hypothetical proJect lu Eact Kall wantu. MoatL cl the b6 input 1 to b- j A plant in oper-tion for over live y.a:.. Oper-te l .1 throc Il 1 haula. lo6 lIpu. ..pplled by thb. ..oc lated co-paui.e enga.gd la logIlrg. A .u... threb-hitt t anrlly laportoJ. operatlnna. Over two thlda of nutput 1 to ba arported. blood ra .duaa ar- to be u.ed a. fu[loo. at the plant. /f f tlaarea baaed ou the -rtll data Iproeld- d l lodu t-y -oJ 8004 *urca Iu -ap... Noat ot the Ic. input t pre-uacd ro he -Soth S,.- Irilcol h,do--od. Th. Ab A joint venture co-pany operatIng In Sbah. Th. plant I. loc- ed 1. lb. product 1 uaed aIluly tur concrete fora. T.er-forc* the * 1oality ot Ioi U.-, tJEnd. vitcllty of a p40t. All output 1 eported. About 55-602 of log inpat J- to be below ae1raic. fro. the co-panya o.o loggin. cotce.aloa io Sabab. Th. plant I. operated o- a two-hift Wi . Uood re,ldu. are uad am tuelwood at tie plaar. -a .clude. aaorclo.d poe-i ovtataote.l.o.ea /c Ea mat.-d coat data pro.Ided 1n the -Neport uo l-duatrJIa ltr.egy Stodlaa.d /b i.l.udino It-.-eltare co-t- ouch a: i-itlib r-uc locliltlto .0d Iccl,olcul lee by fliclarl Iioeaer *d Holayalan fconoalc Planning Unlt. are u-ed to (out&lde .oilonera oto.) obtal the eotlaatea In 1900 dollra. Tha model plant Ia aaaoaed to bh loca ed about 60 k. itr tua- Luapur. Io Slreaban. /J .iclude. the L oar ot loadlog tIl ohIp. - teta.teh ba.ed on data supplied byaconautlng coapany. wIth a w-rnIng th.t L Th. amount ot duty 1. c-ltul-ted u, the lo- ore .141c (I.r.. lSh * lu prict llO. tIe dta'. r-Ilbillty I. queatlomable. The data provided have b-. djoated treisht .ad l,auta,ce) rot uu the coot p 1.1 P44I pl. tCvllht 0,41 l.. omIe. t.r Iilatloo to obtaIn tie eatI-c Ia 1980 dolara. Log to potaara .opplied by ibe tfir.' own loigging co .ealo. The unua higly hi8h Lkeer-l /1 Somewhat aore eaparalbe prIce 044014 bh that tor 4 oI Ib,4,'kenn plywood, d Wc - .n.a...ent coat .u.t be ooted. 272 of It 1. attrlbuted to 'otfica Iu Hr-'i . male pIrc. ..e..g. d y46i/ .3 in .la_ory-.l y ly 19fUI. l, v ut- that, lt Japooot 1.I. 80S of output Ia eaporcd. Th. plaat Ia pparated oa two-al,ht bai.el 1 091. a 1.82 a tht-r tha. 1.2a o 2.42. Su .:.c Aothora entimotee baced on inf-oraatlnn nd . avilable by lbd, try .unrc.-- - 65 - 1. Fixed Cost 4.13 The fixed cost of producing plywood, i.e., depreciation, interests and general management, seems to vary widely, ranging from US$25 to $57 per m3, or 6-15% of total cost. The financial charges (depreciation and interests) are relatively small in the cases of Japan, Singapore and the Philippines because the plants referred to have been operating for at least seven years and are well depreciated by now. The projects in Indonesia and Malaysia are either recently established or proposed. While this difference does affect the current competitiveness of individual producers, for the purpose of determining the location of future processing facilities costs involved for new projects should be used as the basis of comparison. "General management" accounts for 3-6% of total cost except for the case of the Philippines. The underlying data for the estimated costs at an average Philippine plant are of very uncertain reliability. The obviously high cost of $42 per m3 of plywood for general management there includes expenses attributed to "office in Manila," the nature of which is not clear. In any case, allowing for the inevitable inconsistencies involved in attributing cost items, the cost of general management seems to be fairly similar everywhere except in the Philippines. 2. Variable Production Cost (a) Logs 4.14 The most important cost item in all the cases is raw material logs, accounting for 41-53% of ex-factory cost in the log-producing count- ries, and for 60% and 71% in log-importing Singapore and Japan respectively (not explicit in Table 4.3). The enormous variation in the dollar cost of log material among the cases under review is striking because all the plants involved are using essentially similar material in terms of species and sources. The wood cost ranges from $100 in the Philippines and Peninsular Malaysia to $200 and $286 in log-importing Singapore and Japan respectively. This variation is due to differences in the prices of logs and not to differences in the wood material recovery rate. 4.15 The implied log prices are shown in Table 4.4. The prices paid for logs by different plywood producers differ considerably for two basic reasons. First, for the producers who are located in log-producing regions and obtain logs from their own logging concessions, the pricing of the logs is a rather arbitrary accounting decision, while for those producers who actually procure them from independent suppliers market prices prevail. Second, producers in log-importing countries such as Singapore and Japan must pay international market prices which are substantially higher (even on FOB basis) than local market prices in log-producing countries because of (a) various charges that are not imposed on locally sold logs (e.g., royal- ties, export taxes) and (b) substantial ocean transport and other costs involved in moving logs to the plywood factories. Table 4.3: TlE; STPIJCTIIRE OF COST OF PRODtUCINCG PLYWtOOD IN INDONFSIA, NALAYSTA, P1111[PPINES SINGAPOFE AND JAPANJ, INCLUDING COST OF DELIVERINC TO JAPANESE MARKET, 1980 A B C D E F C Peninsular Sabah Aveage of Indonesia tfalaysia Malaysla Plilippines Singapore Japan A, B, C, and D ----------- - -Percent------------------------------------------ Production costs (tip to ex-factory) 70.3 72.5 67.9 70.6 75.3 100.0 70.3 Depreciation 5.9 5.5 3.6 1.5 2.9 1.2 4.l 1 Interests 3.4 5.2 3.9 1.7 1.1 1.0 3.6 0 General Management 4.6 3.1 5.9 12.2 4.5 4.0 6.5 Logs 37.1 33.1 32.8 28.8 45.2 71.1 33.0 Glue 6.8 7.9 9.2 9.9 5.8 8.0 8.5 Othier supplies 5.4 10.0 2.6 6.4 6.1 5.n 6.1 Labor 5.9 5.3 7.9 7.3 7.9 9.0 6.6 Packaging 1.2 2.3 2.0 2.9 1.8 -3.7 2.1 Ditribution (up to (FOB) 1.5 3.3 2.3 3.8 1.6 0.0 2.7 Vcean freigh. and Insurance 10.4 6.7 10.2 6.7 5.9 8.5 Ocean freight to Japan 9.8 6.0 9.2 5.8 5.2 - 7.7 Insurance 0.6 0.7 1.0 0.9 0.7 - 0.8 Japanese Import duty 17.8 17.5 19.7 18.9 17.3 - 18.5 Total cost, delivered Japan 100.0 100.0 100.0 100.0 ]tO.(J 100.0 100.0 (inml. Japanese import duty) Source: Table 3.2 - 67'- Table 4.4: TFE IMPLIED LOG PRICES PAID BY PLYWOOD PRODUCERS AT DIFFERENT LOCATIONS $ US per m3 Location of Plant of logs Indones ia 80 Sabah 66 Peninsular Malaysia 45 Philippines 50 Singapore 100 Japan 192 Source: Table 4.2. - 68 4.16 While transport costs for logs will be discussed later together with transport costs for plywood, the price differential between inter- nationally marketed logs and locally sold loos is explained here briefly. The three countries that have served as major sources of log exports in the Asia-Pacific region - i.e., the Philippines, Malaysia and Indonesia - have recently taken measures to restrict log exports because of heightened concern for the environment, forest resource exhaustion and resource rent appropriation, as explained in Chapter III. Because of the dwindling availability of logs and increased government charges on export logs from these traditional sources, international log prices rose sharply in the recent years. The average price of lauan/mercanti veneer logs delivered to mills in Japan, thus, rose from US$92 per m3 in 1978 to $211 per m3 in April-June 1980. 4.17 Obviously, the discriminatior against export logs and in favor of logs destined for local processing in terms of taxation, royalties and other charges amounts to a subsidization of local processing activities at the expense of log exporting. Whether or not such policies are worthwhile from the viewpoint of national economic development will be discussed later. It will suffice here to point out that tt'e "two-tier" prices of logs resulting from these policies are critically affecting the coot competitive positions of the plywood and other processing industries located in the log-producing countries and those located in the log-importing countries. - 4.18 Another important aspect of the role of log cost in the plywood production cost structure is the question of the wood recovery rate. As can be seen from Table 4.2, the wood recovery rate in Japan (67.0%) is substantially higher than in the other countries compared (45.0-52.7%). The main reason, according to industry experts, is the difference in the size of the products. Due to the unique specifications of Japanese build- ing/construction design practices, the bulk of Japanese demand in construc- tion/building industries is for the O.92m x 1.82m size. Wood recovery is much higher in making plywood of the 0.92m x 1.82m size (the so-called 3" x 6") than in making the 1.22m x 2.42m size (the so-called 4" x 8") plywood which is standard elsewhere. According to Japanese industry sources, if 1.22m x 2.42m plywood is made in Japan, the wood recovery rate would be as low as 54% or so. Therefore, if a plant producing the 0.92m x 1.82m size were built in one of the log producing countries (or even in Singapore for that matter), the wood recovery rate should be much higher than the 45-53% indicated in Table 4.2, and it should reduce the cost of logs per m3 of plywood output substantially (perhaps by up to 25%). (b) Glue and "Other Supplies" 4.19 There does not seem to be a large variation in the cost of glue used by plywood producers in different locations. Whether the producers use locally produced glue or imported glue does not seem to make much dif- ference. - 69 4.20 The category "n'-ther supplies" in Table 4.2 includes miscellaneous items, but the coverage i- not always clear. Usually, it includes electri- city, repairs and maintenance, machinery parts, tapes for mending damaged veneers, etc. It is suspected that the Peninsular Malaysian "model" calculation may thave omitted some items and thus underestimated the cost involved under this category. 4.21 The importance of energy in the cost structure of the plywood industry seems to have been contained well everywhere because of both the swift change to the use of alternative fuels--i-e., substitution of wood residues for oil-based fuels--and energy saving measures. Wood residues that used to be used in particleboard production, pulp and paper production, or simply thrown away, are now being used as fuelwood for veneer drying, hot press and sometimes for electricity generation. Changes in energy consump- tion for plywood production in Japan in 1973-79 are shown in Table 4.5. (c) Labor Cost 4.22 The labor costs for plywood production are higher in Singapore and Japan (US$35-$36 per m3) than in Malaysia, Indonesia and the Philippines (US$20-$25 per m3). W4hile there may be differences in labor productivity among the different locations, a simple comparison of available rough estimates of wages presented in Table 4.6 leads to the following broad observations. First, there is enormous difference between Japan and all the other countries. Second, wages are substantially higher in Singapore and Malaysia than in the Philippines and Indonesia. Third, within Indonesia, wages in East Kalimantan are 3.5-4.0 times the levels in Java. 4.23 Unfortunately, we do not have enough detailed (and reliable) data to estimate "labor productiv,.ty" in different locations to draw f-arther concl-blsions. However, so far as plain plywood is concerned, it is hard to imagine that the difference in labor productivity between Japan and the .4ther countries is great enough to offset the difference in wages fully.!l (d) Packaging 4.24 Since separate data were not available in some cases, packaging costs for plywood were estimated by the author in several instances. Therefore, accurate comparison of packaging costs is not possible. However, the following observations can be made. Since plywood made in Japan is usually delivered to nearby customers, relatively simple packaging for short-distance trucking is sufficient, and thus, packaging can be presumed to cost less for Japanese producers than for producers located elsewhere who 1/ C'hianges in gross value added to logs, production volume per employee and annual wages/salaries per employee in the Japanese plywood indulstry in the 1970s are shown in Statistical Appendix Table SA26. - 70 - Table 4.5: ENERGY CONSUMPTION IN PLYWOOD PRODUCTION IN JAPAN, 1973-1979 1,000 k cal per sheet/a Electricity Year produced /b Consumption Oil-based Wood residuies per Sheet/a energy and wastes Subtotal KWH /b 1973 4.1 3.4 7.5 0.73 (100) (100) (100) (100) 1974 4.1 3.8 7.9 0.79 (100) (112) (105) (108) 1975 3.3 3.2 6.5 0.79 (80) (94) (87) (108) 1976 3.0 3.6 6.6 0.68 (73) (106) (88) (93) 1977 2.9 4.0 6.9 0.72 (71) (118) (92) (99) 1978 2.2 3,.5 5.7 0.71 (54) (103) (76) (97) 1979 1.8 3.9 5.7 0.66 (44) (115) (76) (90) /a 4mm x 0.91 m x 1.82m, plain plywood. /b Indexes in parentheses. Source: Plywood Information Center of Japan Federation of Plywood Manufac- turers' Associations, No.45 (June 30, 1980), pp.14-15. - 71 - Table 4.6: WAGES IN PLYWOOD INDUSTRY IN INDONESIA, MALAYSIA, PHILIPPINES, SINGAPORE AND JAPAN, AS OF 1980 Type of Labor unskilled semi-skilled skilled ---------(US dollars per month)------- Indonesia Java 16 24 40 East Kalimantan I 56 68 128-176 East Kalimanta II 60 72 127-175 Malaysia 102 n.a. n.a. Peninsular Malaysia 102 n.a. n.a. Sabah (including housing) 114 155 273 Philippines 47 68 100 Singapore Japan 634 1,062 n.a. Source: Estimates based on information provided by industry sources. Conversion of local currency data into US dollars is based on official exchange rates. - 72 - ship their products overseas. However, the apparent variations in the cost of packaging, taken alone, perhaps are not important enough to have a decisive impact on the competitive advantage of the countries considered. D. Post-Factory Costs for Plywood 1. Post-Factory Costs up to FOB 4.25 In addition to the ex-factory costs for plywood including pack- aging costs, there are usually costs for transportation to ports, various charges at the ports, and possibly some taxes, before the goods are on board ocean-going vessels. The reliability of estimates given in Table 4.2 for these items is uncertain. They represent only broad orders of magnitudes. The costs for the hypothetical plant in East Kalimantan may be somewhat underestimated because a part of such costs seem to be already included under "general management," "other supplies" and "labor". 4.26 .So far as the examples chosen are concerned, indicated differences in these costs taken alone do not seem to be important enough to make a critical difference in the determinationa of the competitive advantage of each location. Plants in Japan, of course, are prasumed to enjoy some advantage in this respect over overseas suppliers. 2. Ocean Transport Cost 4.27 Ocean freight and insurance costs account for 6-10% of the total delivered cost of plywood in Japan, depending on the source of supply (Table 4.3). This could be compared with the percent share of shipping costs in the FOB prices of logs, which ranges from 15-23% (as of early August 1980). An interesting and relevant question is, does the price structure of ocean transport encourage or discourage location of plywood production in the log-producing countries, other things being equal? 4.28 The freight-rate structure for log shipments from various log exporting points in Southeast Asia to Japan as of July-September 1980 is shown in Table 4.7. In addition, insurance costs of about 0.7% of the FOB value should be added to freight costs. Also, freight and insurance costs for shipping plywood from Sabah, East Kalimantan and the Philippines are shown in Table 4.2. 4.29 Taking Sabah as an example, comparative c&iculations can be made. As mentioned earlier, if 1.21m x 2.42m (so-called 4 x 8) plywood were made in Japan, the wood recovery rate would be, at best, 54%. This means that 1.85 m3 of logs are needed to produce 1.0 m3 of plywood of that size. The transport cost for 1.85 m3 of logs is $47.26. In contrast, the shipping cost for 1.0 m3 of plywood is US$26.00. Even if the packaging cost of $9.00 is added, the total. cost for shipping plywood would be only $35.00 as opposed to the log transport cost of $47.26. Clearly, for 4 x 8 plywood the transport-cost economics favor the location of plywood plants in Sabah - 73 Table 4.7: FREIGHT COSTS FOR "SOUTH SEA LOGS" FROM SELECTED LOG-EXPORTING POINTS TO JAPAN - JULY-SEPTEMBER, 1980 From Freight rate Bunker surcharge Total/a - --------------------US$ per m3------------------- Davao 26.60 1.10 27.70 East Kalimantan 29.10 1.10 30.20 Sabah 24.42 1.10 25.52 Sarawak 27.42 1.10 28.52 New Britain Island 31.60 1.10 32.70 /a In addition, there is a schedule of currency surcharges which may be positive or negative depending on whether the yen exchange rate against the US dollar is below or above 230-250 yen per dollar. Source: Japan Lumber Journal, "YJanyogai Freight Agreement", June 30, 1980. - 74 - rather than in Japan. Since the wood recovery rate is better for 3 x 6 plywood, the cost saving gained by shipping it instead of logs would be less dramatic. 4.30 How do similar calculations work out for East Kalimantan? The cost of shipping 1.85 m3 of logs from East Kalimantan to Japan works out to be US$57.78; the shipping plus packaging costs for 1.0 m3 of 4 x 8 plywood come to $48.00. If "liner rates" are used, the plywood shipping cost would be $10-$15 higher. On the other hand, if many plants are located near the same exporting point and thus the volume of traffic is increased and the port conditions improved, then the transfer freight cost for plywood can be reduced by $5-7. Thus, although it cannot be said that under the current conditions there would be a great deal of "cost saving" by shipping plywood instead of the equivalent volume of logs, it is significant that, at least at the margin, transport-cost economics seem to favor locating ply- wood plants in East Kalimantan rather than in Japan. 4.31 It could be argued that the wood wastes and residues contained in logs have a greater economic value in Japan than in log-producing areas and that the above calculations are misleading. However, since wood re- sidues produced at plants in the log-exporting countries are now econo- mically used as fuelwood at these plants, the relevance of the argument is less important today than a few years ago. 3. The Cost of Import Duties in Importing Countries 4.32 As can be seen from Table 4.3, the Japanese import duty of 20% on the CIF value amounts to 17.3-19.7% of the total "cost" of plywood delivered to Japan from the five locations in Southeast Asla. Also, as discussed earlier, this tariff, which is not lessened by GSP as Japan's system of preferences does not include tropical hardwood plywood, represents a rate of over 60% of effective protection. Obviously, this is one of the key factors for the continued survival of the plain plywood production sector in Japan. V. THE BENEFITS OF INCREASED PROCESSING IN LOG-EXPORTING COUNTRIES 5.11 Local processing of primary commodities that are now being ex- ported in raw form is considered desirable on the grounds of various mac- roeconomic benefits for the countries producing the primary products. In the context of mechanical wood processing, these benefits can be discussed under four headings: (a) creation of value added, (b) increased foreign exchange earnings, (c) employment effects and (d) regional development effects. - 75 - A. Value Added and Linkage Effects 5.02 Some indications of the gross value added to log material by processing in Indonesia, Malaysia and the Philippines are given in Table 5.1, which shows the estimated "log equivalent" unit values for sawnwood, plywood and veneer exports in 1977 and 1978. The gross value added to logs is indicated by the differences between the FOS export unit values for logs and the "log equivalent" FOB unit values for processed products. It is found that the value added as defined in this manner is equivalent to 23-65% of the log export unit value for sawnwood and 26-150% for plywood, but is negligible for veneer sheets. 5.03 There are several problems in such an approach. On the one hand, loo export prices contain substantial elements of resource rents which are collected by the governments in the form of log export taxes (including taxes labelled otherwise) that are not collected on logs processed locally. This can be considered as a form of subsidy to local processing activities. To the extent that the export unit values of logs reflect such charges, the above approach underestimates the "value added to log material" by that amount. Furthermore, the approach ignores "leakages" in value added to other industries (domestic and foreign) that provide non-log materials to the processing industry. On the other hand, the approach ignores "foreign leakages", which are purchases of foreign inputs used in local processing activities that should not be a part of the value added locally. 5.04 In order to estimate the true gross value added in plywood produc- tion the cost data for the hypothetical plywood project in East Kalimantan as provided in Table 4.2 have been used. Details of the calculations are shown in Table 5.2. First, the itemized cost data in US dollars per cubic meter of plywood are converted to data in terms of US dollars per cubic meter of log input. Against a log cost of $80 per m3, the gross value added is $90.12 per m3 of log inputs. In order to attain the amount of gross value added in a standard sense, the costs of inputs provided by other industries, including logs, are deducted from the total price, which works out to be $61.63 per m3 of roundwood. Now, even if the ownership of such an enterprise happens to be 100% local, there is some foreign "leakage", because (a) usually, at least, machinery and equipment are imported, and (b) some-funds are provided by foreigners who would collect interest on these funds. So, domestic gross value added works out to be about $50 per m3 of roundwood. l/ l/ If plywood production is undertaken on a joint venture basis with 50% foreign capital and management participation, gross value added excluding "foreign leakages" would be about $40-42 per m3 of round- wood (Table 5.2). - 76 Table 5.1: THE ESTIMATED GROSS VALUE ADDED TO LOG MATERIAL BY PROCESSING IN SELECTED COUNTRIES IN ASIA11977 AND 1978 (US$ per m3 of logs and as % of log unit value), Country and Product 1977 1978 $/m3(r) Percent $/m3(r) Percent Indonesia Sawnwood (-) 0.5 (-) 1.0 15.9 34.3 Plywood 124.6 82.6 NA NA Veneer sheets NA NA NA NA Malaysia Sawnwood 25.3 65.5 25.6 59.5 Plywood 58.4 151.3 60.3 140.2 Veneer sheets (-) 8.6 (-) 22.3 () 17.3 () 40.2 Philippines Sawnwood 15.2 23.2 16.0 24.3 Plywood 17.0 26.0 28.6 43.5 Veneer sheets 3.3 500 2.7 4.1 Source: Table 2.10. Table 5.2: IWFIUVA'ION OF VAlUE ADDIE) IN P'LYWOOD MlUIiIiUCT1011: A llYi'OTl'HETICAL CASP IN EAS'r KALIMANTAN Per Ulit Cost Cross Value Addled - Cost per Cost p-er 100% Doonestic 50% i)omest1c Ba:kwurd w3 of w3 of ownershlitp/a owae rsiJIp/b Linkage Effect piywot)dL los Total Doluestic Foreign DowLest 1c Po rI Dwe stIc Foreign I)eprec Iattop. 24; 12.65 12.65 3.80 8.86 3.80 8.86 nLe t±ests 14 7.38 7.38 4.80 2.58 3.6'9 3.69 Gen&eral iarnagement 19 10.01 10.01 10.01 0.0 7.00 3.01 Logs 152 80.10 - - - - (152) CoA e 28 14.76 - 14.76 Othier sapplies 22 1.59 - - - - - 9.27 2.32 Labior 24 12.65 12.65 12.65 0.1) 12.65 0.0 Paclhju;lng (including labor) 5 2.64 n.50 0.50 0.0 0.50 0.0 2.14 Cost from ex-factory to FOU 6 3.16 3.16 3.16 0.( 3.16 (.0 'rofIls 29 15.28 15.28 15.28 0.0 10.70 4.58 - - 'Total 323 170.22 61.63 50.20 11.43 41.50 20.14 26.17 2.32 la Assmnes 70% of depreclatioin represents limported imdaciJnery; 65% of finiIaei1ng Is domtsLic; all rnanagLresirt scaff Is Indsneslan. fh Assui5nts 70% of depreciatIon represenas Imported m9tachinery; 50% of fJIldial4 1nst Is fo0liL,gnr; 30% of uaanageineait is ,foreign; corporate profit tax of 40%; 507 of after-tax profits goes LI) forelgn owners. Soure:: Tabile 4.2 - 78 - 5.05 Currently, Indonesia, Malaysia and the Philippines together export about 36.7 million m3 of logs (estimate for 1979). If hypothetically one-half of this volume were exported in the form of plywood, it could mean $1.1 billion of gross value added, or some $0.9 billion of gross value added excluding "foreign leakages." Some data on the percent share of value added in gross output in wood-processing sectors are presented in Statis- tical Appendix Table SA27. 5.06 Since the plywood factory in this hypothetical situation would purchase supplies (apart from logs) from other industries, these purchases would represent partly the value added of other industries. It is estimated that such purchases would amount to about $26 per m3 of roundwood from domestic suppliers and $2-3 per m3 (roundwood) from foreign suppliers (Table 5.2). The purchases from domestic suppliers may be considered to represent backward linkage effects. 5.07 Although a detailed analysis of value added in the sawmilling industry has not been made, a guesstimate of value added per m3 of logs in sawnilling is $15-$25. B. Foreign Exchange Earnings 5.08 Referring again to the Indonesian case analyzed in Table 4.2, the FOB price of plywood is US$170 per m3 in roundwood equivalent compared with the log price of $80 per m3, which implies an additional value of $90 per in for roundwood equivalent. If the price of logs happened to be equal to the FOB price of export logs, then the extra value of $90 per m3 (r) would represent the possible increase in gross foreign exchange earnings, from which the foreign exchange cost representing the "foreign leakage" associated with plywood production should be deducted in order to attain net increase in foreign exchange revenue per m3 of logs. 5.09 In reality, however, the calculation is not so simple because various 'resource rent taxes" are imposed on export logs but not on locally processed logs in Indonesia, Malaysia and the Philippines. Differentials between taxes on export logs and locally processed logs differ in magnitude among various supplying areas such as the State of Sabah, the State of Sarawak, Indonesia and the Philippines. In Indonesia, as an example, various current governmental charges on each cubic meter of meranti logs exported amount to about US$50. Most of these are not charged on locally processed logs. As a result, there is a price spread of $50 or more between the FOB export prices of logs and the prices of logs sold locally.L/ Therefore, on the one hand, it seems that, until this kind of "subsidy" is no longer 1/ This differential tax component (which may be considered resource rent) represents a form of subsidy that the Indonesian government is offering to the local processing industry as an incentive. - 79 - needed to promote local wood processing, additional net foreign exchange,, earnings resulting from local processing will be substantially less than the value added calculations shown in Table 5.2 indicate. On the other hand, it might be viewed that, because of the resource-rent-seeking policies and consequent log export restrictions, FOB prices of logs have been raised ratlher steeply, and, therefore these policies adopted to encourage local processing have had the welcome (froim the viewpoint of the log-exporting countries) effect of raising FOB prices of logs. 5.10 Using the export unit value in 1978, some crude calculations of possible extra gross export earnings resulting from complete substitution of log exports by sawnwood and plywood exports for Malaysia, Indonesia, the Philippines and Papua New Guinea have been made; the results are shown in Table 5.3. These calculations indicate that, if all the logs had been ?rocessed in these countries, the gross export earnings based on these logs would have been 73% higher; that is, the hypothetical export earnings from these logs would have been over US$3 billion in 1978 instead of the actual $1.8 billion. For these calculations, two simplistic assumpti'ons were made: (a) that two-thirds of these logs would have been processed into plain plywood and exported, with the remaining one-third made into sawnwood and exported; and (b) that these processed products would have been exported at the average prices actually received for these countries' plywood and sawnwood exports in 1978.1/' 5.11 Admittedly, the above calculations exaggerate the potential benefit in terms of extra foreign exchange revenues to be earned. Even if the two key assuimptions made were accepted as broadly realistic, machinery and other essential input needed to expand production of sawnwood and plywood would have had to be imported. The foreign exchange costs incurred by importing these "'inputs" would certainly represent substantial "leak- ages," reducing the net effect on the balance of trade. C. Employment Effect 5.12 Estimates of direct employment effects of plywood production are given for selected locations in Table 5.4. The rather divergent estimates reflect partly the divergent assumptions made about the operations and sizes of the mills involved. Broadly speaking, it seems that the employment per annual production of 1,000 m3 of plywood ranges from about 4 to 14 persons including managerial staff. 5.13 As for sawmilling, industry sources estimate that about 3.2-6.0 persons per 1,000 m3 of annual production of sawnwood are required under current conditions in Indonesia, Sabah and the Philippines. 1/ Except in the case of plywood in Indonesia and Papua New Guinea. Table 5.3a iSTIHAFES OF EXTRA EXPORT EARNINGS (CROSS) FROM IIYY1ITIKrICAl. COHr'1TE eLSUBSTITUTION OF PLYI101) ANI) SAIJNUOOID FIIR OC EEXPORTS, MAJOR ASIA-PACIFIC CUllNTIlES, 1978 ActLai lypotbet lcal Exportt/a FOS Export Unit Value/b Valuie of lIlpuhetdcsl EarEIg,sL/c Extra Export Country Actual Lop Exports Plywood Sawivood 10os Plywood Sawnwood Log Exports Plywood Sawilwood TtAl larnings (Cros)/d 4,000 .3() - - ---1,000 m3-- --II---- -------------I--ilona of US dullars --------- Halaysia 14,713 4,010 3,030 43.0 206.5 124.4 719.4 1,005.7 371.5 1,383.2 663.8 Jndasieala 19,200 5,590 3,480 46.4 190.0 113.3 890.4 1,062.2 394.2 1,456.4 566.0 Philippines 2,200 640 400 65.9 188.0 140.1 144.9 120.8 59.5 180.I 35.4 Papua New Guinea 445 130 80 35.7 190.0 137.5 15.9 24.7 11.0 35.7 19.6 Total 31,S5 11,230 6,990 1,770.6 2,213.4 842.2 3,055.6 1.285.0 /a Based ons an arbitrary assumption tiltm two tl.l.dni of Ions would le converted to plywood at tle ratio of 2.3 to 1, thlle the remalning one third would be converted to sawuwood at tLAe ratio of 1.82 to 1. CO lb Eased on actual exports of logs, plywood amid sewiwukood as relparted In IAO Temrbook of Iorest Products, except for plywood Ja Indonecals anJ Ppua New Cuines, whici as calculated from the FA0 Yearbouk data work out to be much too hglh - 430 for Ilndonesia and 500 tor FIpuS New Guinea so that an arbitrary estimate of 190 1l substituted for both countrlea. /c FOS export unit values tifes hyputLletical *Xport volume estimates. /d Hypothetical tatal export eatrings minus actual log axport values. Sources FAO. Yearbook of forest Products, 19185 said author'a estimtes. - 81 - Table 5.4: EMPLOYMENT EFFECT OF PLYWOOD PRODUCTION IN SELECTED COUNTRIES Labor Requirements/a: Number of Persons per l,OOOm3 of Annual Capacity of Plywood Indonesia (E. Kalimantan, 1980) 10.9 Sabah/Sarawak (1980) 7.2-11.1 Peninsular Malaysia (1979) 3.6-5.2 Japan (1979) 3.9 Africa (1976) 6.2 /a Includes administration staff. Source: Indonesia and Sabah/Sarawak industry sources; Peninsular Malaysia - Michael Roemer, Report on Industrial Strategy Studies; Japan - Plywood Information Center of Japan Federation of Plywood Manufac- turers' Association, Newsletter, No. 45; Africa - A. Doffine, "FAO Portfolio of Small Scale Wood-Based Panel Plant-Plywood." - 82 -. 5.14 Estimates of the direct effects of the hypothetical substitution of exports of sawnwood and plywood fo logs (referred to in the preceding section) on the local employment of the four log-exporting countries (Malaysia, Indonesia, the Philippines and Papau New Guinea) can be made on the basis of rule-of-thumb labor requirements associated with typical plymilling and sawmilling operations in this region. Such calculations suggest extra employment for the four countries as a whole of 100,000 to 120,000 workers in plywood and 50,000 to 60,000 workers in sawnwood. It should be emphasized, however, that these figures are hypothetical and only represent the possible effects of a hypothetical complete substitution oL processed products for log exports. On the other hand, it should also be pointed out that the estimates refer only to direct employment and that there would be additional employment generated through linkage effects. D. Regional Development Effects 5.15 In view of the deliberate policies j'n the Philippines, Sabah and Indonesia to "subsidize" local log processing at the expense of foreign exchange earnings from log exports and resource rents on logs, the net benefits of local processing on value added and foreign exchange earnings are not likely to be as large as they could be if such "subsidization" is maintained for long. It is also true that the possible direct employment effects of increased local processing of logs 'in the major exporting countries in the Asia-Pacific region would look rather modest in the context of total population and total labor force in these countries. 5.16 The establishment of processing facilities, however, is likely to be concentrated in the remote areas of these countries because of the location of forest resources. This means that sawmilling and plymilling activities could have a significant impact on employment and industrializa- tion in these remote areas (Kalimantan, Sumatra, Mindanao, Sabah, Sarawak, etc.). Currently, the governments of the log-exporting states seem to attach high policitcal value to the development of such remote regions. Given the scarcity of other opportunities to develop inidustrial activities in these areas, timber processing seems to be an ideal way to achieve the politically desirable objective. VI. POLICY ISSUES AND PROSPECTS 6.01 In considering policy options for tropical hardwood producing countries in the Asia-Pacific region, there are five important features of tropical hardwood resources that must be taken into account. In summary these are: (i) The heterogeneity of the current stands, which contain hundreds of species of which only; a fraction is currently utilized commercially (sea Annex A); - 83 - (ii) The semi-nonrenewable nature of the resources (see Annex A); (iii) The strong long-term growth prospects for demand (see Chapter II, Section D, Sub-section 4); (iv) The fact that the resources are in the "remote" least deve- loped areas of the countries concerned (Mindanao, Sabah, Sarawak, Kalimantan, Sumatra, West Irian, Papua New Guinea, etc.); and (v) Most importantly, the fact that the resources are in state- owned forests. Furthermore, there are two important features of mechanical wood processing that also deserve to be hiahlighted in this context, namely, (i) that it is a relatively unskilled-labor-intensive activity; and (ii) that it is a typically weight-reducing activity, and, in the long run, a transport-cost-saving activity. 6.02 Now, the ultimate policy question for the producing countries is how to utilize their forest resources to the best advantage of these count- ries. In terms of current policy, the major tropical hardwood-producing areas in the Asia-Pacific region are broadly divided into two groups: (a) states attempting to reduce log exports (the Philippines, Peninsular Malay- sia, Sabah and Indonesia) and (b) states with liberal log-export policies (Sarawak, Papua New Guinea, other Pacific islands). The policies of the Philippines, Peninsular Malaysia, Sabah and Indonesia have recently been to apply quantitative restrictions on log exports, to increase government charges per unit of logs exported, and to promote local processing of logs. Their objectives are (a) to conserve the semi-nonrenewable resources, (b) to collect maximum resource rent, and (c) to secure benefits from increased local processing of logs. Increased exports of processed products would presumably result in higher export earnings, higher value added, higher employment and regional development of remote least developed areas. The radical policy measures taken in these areas seem to be making a significant impact on the market, bringing about the desired restructuring of tropical hardwood trade in the Asia-Pacific region. In contrast, the policies of the State of Sarawak in Malaysia, Papua New Guinea and other Pacific island countries have been to encourage log exports. As a result, these areas have experienced rising log exports and foreign exchange earnings, but at the same time only a slow growth in processing and low government revenues from forest utilization. 6.03 It is clear that, in this context, a distinction must be made between two objectives: (a) the objective of deriving various benefits from - 84 - local processing such as additional value added, additional foreign exchange revenues, increased employment and regional development, and (b) the objec- tive of deriving maximum resource rent from the semi-nonrenewable resources, taking into account the temporal dimension. The latter objective requires careful consideration of the projected long-term increases in tropical hardwood log prices in real terms and the fact that standing trees grow over time. 6.04 In Peninsular Malaysia and the Philippines, the appropriate policy direction to take is clear. There forest resources have been exploited Lor more than three decades and the remaining forest resources are severely limited. Wood processing industries are well-established. The appropriate policy prescription would be to phase out log exports completely and to take measures to improve the cost competitiveness of the processing industries. All this is being implemented already. In the light of the historical experience of the plywood industry in Japan, the Republic of Korea, the Province of Taiwan and Singapore, the wood-processing industries in Peninsular Malaysia and the Philippines can be strengthened if the governments adopt more decisively aggressive, outward-oriented industrial policies. 6.05 In the case of Papua New Guinea, the liberal log export policy seems to be the clearly superior policy at this juncture. The timber resources of Papua New Guinea are commercially less attractive than those of the Philippines, Malaysia and Indonesia (excluding West Irian) because of the low incidence of commercially attractive species, the difficult terrain, the long distances from the main markets, etc. At present, therefore, it is more urgent to develop a market for that country's species. 6.06 In Sabah and Indonesia, which are currently the most important log-exporting areas, have more policy options than Peninsular Malaysia and the Philippines or Papua New Guinea. The forests in Sabah and Indonesia have the highest incidence of commercially attractive species per unit area.L This means that the extraction cost per cubic meter of logs is lower than in Sarawak or Papua New Guinea. However, attracting the ne- cessary labor force to Sabah or the Indonesian outer islands is a problem. Creating the infrastructure required for the large scale growth of process- ing industries in these areas would be a heavy financial burden. Until sufficiently large exports of processed products are built up, transport cost economics works against such processing industries. Furthermore, the substantial resource rent that could be collected from log exports would have to be foregone during the period of establishment of export-oriented processing industries which is likely to take several years, or possibly even a decade. 1/ This statement does not apply to the West Irian area of Indonesia. - 85 - 6.07 However, Sabah and Indonesia may consider it politically desirable to develop some kind of industries in the "remote" regions for the sake of regional development. Given the objective, timber processing seems to provide the best chance of success. Indeed, timber processing along with agriculture could be used as the core of a regional development strategy. Since it is reasonably clear that the basic economics favors local proces- sing in Sabah and Indonesia in the long run, strong protection of the infant export industry may be justified in the light of the Korean and Taiwanese e>rpe riences* / 6,08 In order to facilitate the rapid growth of mechanical wood proces- sing industries, the governments of Malaysia and Indonesia should adopt overall export promotion strategies similar to the Republic of Korea's and, more specifically, should take steps to (a) Minimize the use of price ceilings and other interventions in the domestic market which have negatively affected the spontaneous growth of wood processing industries; (b) Improve the efficiency of domestic transport (especially shipping) and port facilities; and (c) Develop a few wood product terminals at strategic locations in order to allow smooth and efficient shipments of locally processed wood products to world markets. At the same time, the industries in these countries should improve quality control, which is critical to a successful export business. Joint ventures with experienced foreign companies can be effective in ensuring an inter- nationally acceptable quality of products and in securin market access and 2/F- they should be encouraged at this stage of development.-/ 1/ See Larry Westphal, Empirical Justification for Infant InD-ustry Protection. 2/ Joint ventures with foreign companies do not necessarily guarantee a faster mastery of technology (see Larry E. Westphal, et al. Korean Industrial Competence: Where It Came From). On the other hand, joint ventures can offer vast opportunities (see Benjamin F. Sanvictores, A Study on the Possibilities of Establishing Trade-Creating Joint Ven- tures in Wood and Wood Based Products). - 86 - 6.09 As for Sarawak, it seems that higher resource rents on log exports could be collected. The forests in Sarawak are not as commerically attrac- tive as those in Sabah or in the major forest areas of Indonesia, but in species incidence and location they are superior to those Papua New Guinea. Sarawak may be foregoing not only resource rent on logs but also the benefits of local processing. 6.10 One of the issues in plywood trade is the import duties in in- dustrialized countries, especially the escalated nature of the duties. TWhile the EC offers preferential duty-free access to developing countries under the Lome Convention and the Generalized System of Preferences, other major industrialized countries (Japan, the United States, Canada, etc.,) do not give any preferential access for tropical hardwood plywood. Further- more, even the EC's preferential duty free imports from developing countries are subject to quota ceilings, although the quotas have been steadily increased over time. Because of tariff escalation, the effective rates of protection have been very high on tropical hardwood plywood. This has distorted the pattern of trade in tropical hardwood products. 6.11 One reaction of industrialized countries to the recent changes in the log export policies of major log-producing countries has been to reduce import barriers on veneers and sawnwood, either on the Most Favored Nation basis or on a preferential basis. This is,' of tourse, a welcome trend. However, since the basic economics seem to indicate that log- producing labor-abundant countries have the competitive advantage in ex- porting plain plywood, which has been found to be a relatively unskilled- labor-intensive and transport-cost-saving activity, industrialized count- ries should, ideally speaking, reduce/eliminate import barriers on tropical hardwood plywood. Until that happens, the second best solution in terms of maximizing world economic efficiency is for log-exporting countries to offset the distortion by subsidizing the plywood industry e.g. through the two-tier pricing of logs based on government charges which are higher on export logs than on logs processed locally. 6.12 Plywood manufacturing should be the core of the development strategy for mechanical wood processing industries. Development of the plywood industry would automatically promote sawmilling and production of other wood-based panels (particleboard, etc.) because these activities compliment plywood manufacturing through improving the efficiency of raw material usage.L/ The key to a successful export-oriented sawmilling industry is superior marketing. The key to a successful wood-based panel industry is a market large enough to justify operating near full capacity because the panel industry is the most capital intensive of all the mecha- nical wood-processing activities. 1/ Logs unfit for plywood making can be sent to a sawmill nearby; wastes and residues from plymilling and sawmilling can be used for making particleboards, if other conditions justify the economics. -87- ANNEX A Page 1 MECHANICAL PROCESSING OF TROPICAL HARDWOOD IN DEVELOPING COUNTRIES Technical Characteristics of Tropical Hardwood Resources Tropical harddwood comes from the moist forests in tropical regions. There are three recions where such forests are concentrated:L/ (i) West and Central Africa (mainly Liberia, Ivory Coast, Ghana, Nigeria, Cameroon, Gabon, Congo, and Central African Republic; also Zaire, Rio Muni and Equatorial Guinea). (ii) Southeast Asia and Tropical Oceania (mainly the Philippines, Malaysia, Indonesia, Thailand, Burma, Papua New Guinea, and the Solomon Islands; also Cambodia, Laos and Vietnam). (iii) Tropical Latin America and the Caribbean (mainly the Amazon region of Brazil, but also scattered throughout tropical Central and South America as well as the Caribbean Islands). While the tropical hardwood species of these moist tropical forests are, theoretically, renewable resources, how long it takes for them to grow into sizes suitable for sawlogs and veneerlogs is not clear. Pro- fessional foresters estimate that it takes from a minimum of 40 years to over 100 years but very little is known about the natural re-generation of these commercial species. Large concession forests are "managed" on a 25-35 year cycle basis. It is assumed that in 25-35 years after the first "creaming" of the forest some of the trees that were too small to be removed as sawlogs or veneerlogs will have grown large enough to cut. Presumably in another 25-35 years more trees will be ready to be cut and so on. However, this is not much more than an assumption. In any case, it is quite likely that by the time of. the third round of cutting, the species being cut might be quite different from the species in the first round. Plantation growing of preferred species has been successful for a few species in limited locations. Under plantation conditions, some "white wood" species in West and Central Africa have been grown to a size of 50cm diameter at breast height in 20-30 years, while teak has been grown to a harvestable size in Burma and Indonesia in 40 years. However, at this juncture, it might well be considered that tropical hardwood in general is semi-nonrenewable and that exploitation of commercially preferred species is similar to mining, 1/ Annex 1 Table 1 shows the estimated area of natural tropical hardwood forests existing in three tropical regions as of the end of 1975. Annex I Figure 1 shows the world's main vegetation zones. - 88 ANNEX A Page 2 Tropical hardwood consists of a vast number of species with an enormous range of physical properties. This has influenced the marketing and end-uses of tropical hardwood. The total number of trovical wood species is unknown. The majority of the species are indeed shrubs or small trees not usually included in the commerical definition of tropical timber or tropical hardwood. Recent FA0 studies indicate that there are about 950 "commercial species" and 840 "lesser-used" species in the tropical forests of West and Central Africa, Southeast Asia and South America. Although hundreds of species are classified as commercial and additional hundreds as potentially commerical "lesser-used" species, at present only 40 or 50 species are involved in international trade.L/ It is not likely that, even by the year 2000, the number of major internationally traded species will exceed 100, unless massive attempts are made by the industries and governments concerned to promote the use of other species. Physical properties differ greatly among tropical hardwood spe- cies. For example, comipared with temperate hardwood, tropical hardwood shows a wider range of density, the property generally considered as the best criterion of strength. The durableness of certain species also varies so that some are liable to rapid deterioration while others are considered indefinitely durable. Furthermore, mechanical characteristics differ from one group of species to another: some are easy to saw, peel or slice, while others are difficult. In addition, tropical hardwood species are diverse in dimensional stability, color and decorative quality of grainsl2/ Because of the diversity in physical characteristics, tropical hardwood is marketed in terms of species as well as quality and grade. In marketing, species identification is more important in hardwood than in softwood. It is even more so in tropical hardwood than in temperate hard- wood. 1/ All those species produced at the rate of at least 1,000 m3 per year are called "commercial" species and all other species are called "lesser-used". Information has been taken from: UNCTAD, Research and Information on Use Properties of Tropical Wood Species, UNCTAD, Con- sideration of Inlternational Measures Relative to Research and Develop- ment on Tropical Timber, p. 8. Also see: T. Erfurth and H. Rusche, The Marketing of Tropical Wood: (A) Wood species from African Tropical Moist Forests; (B) Wood Species from South American Tropical Moist Forests; (C) Wood Species from East Asian Tropical Moist Forests. 2/ UNCTAD, Consideration of International Measures Relative to Research and Development on Tropical Timber, p. 9. -89 - ANNEX A Page 3 Table 1: NATURAL TROPICAL HARDWOOD FORESTS, 1975 Productive Productive Forests and Only (closed Re_gion Inoperable and open) Tropical America 789 634 Tropical Africa 645 466 Tropical Asia-Pacific 327 215 Total 1,761 1,315 Source: J.P. Lanly and J. Clement, Present and Future Forest and Plantation Areas in the Tropics, Table 2.2a. ANNEX A Figture 1: TIlE UORID'S FOREST - MAIN VEGEITATION ZOtHES LES FORETS DANS LE MONDE - principales aires de vegAltaion ......... ... ...m..e.h .. ... ......... ..... ......... ..... ;. . ...-i9 b leIeee .. .... .Lu...........ih ud ~ Foea.eeopko.......... .....u. 1)ry Coot contiferous *7 bt 1 ;1 \%i :* g oodh Mde40.0. de climoJ 1.0poe t fookn loopkates humides sompafihenle s U ,ll** Trtopic.ll nlzolst cver'grecii f{s5I Ye E faiii lolopktxles lhuinides dAcidu^ez g C Trop|>ical niost dIci lzlloufs Vi{ Dry .P (D u--%,&".. .. fAO 1916....| > cIpe uucvl f romn: LUn I a lluiailt. "line Po I Ilujic Fuarcst Ierc, l t rianeere Pour I a. F r;ance, htti i 'l 'tcI'l 'i s -i Trop iqtuceKt, no. 191 (Mci 1-.hi lit 1 980) 7i)). -91- ANNEX B Page 1 MECHANICAL PROCESSING OF TROPICAL HARDWOOD IN DEVELOPING COUNTRIES Identification of Processing Chains The processing chain for tropical hardwood logs is illustrated in Annex B Figure 1. The first step is the removal of logs from the forests (logging, exploitation, cutting). The logs removed from the forests contain sawlogs, veneer logs and logs for sleepers. Sawlogs and logs for sleepers will go through sawmills and the processed products are sawnwood and sleep- ers. Sleepers are then ready to be used as railroad ties without further processing. Sawnwood is in a variety of shapes--e.g., boards, squared wood-- and usually kiln-dried. Sawnwood then can be used directly in construction or can be sent to molding plants, where various moldings for joinery in building construction or for furniture making are produced. The stages beyond sawmiliing are sometimes called "secondary woodworking industries." Logs suitable for peeling or slicing go into veneer plants which produce veneer sheets. Some veneer sheets are used for plywood and block- board and others are used directly as veneers in furniture making or as cladding in-construction. Plywood is used with or without further processing in furniture making and in cladding for construction and packaging. Logging,, sawing and veneer-making activities all produce residues and wastes, a good part of which are used in making particleboard, and pulp. Particleboard in turn is used primarily in making furniture and cladding for buildings. Residues are also used for making fiberboard. 1/ Blockboard is a form of plywood in which core layers are blocks of wood instead of veneers. ANNEX B Figure 1: PROCESSING OF TROPICAL HARADWOO[) LOGS PROCESSING SOURCE FACTORIES PRODUCTS END USES | SWNWOO | A I:tAILftOAD TIES SAWMILLS TRPCLMOULDINGS CONSTRUCTION TROPICAL FORESTS - BLOCKBOAHSU lS -. = Jjle WASTE AND PARTICLEBOAND | RESIDUES FIBERBOARD - PLYWOOD - FUFINI1TURE LOGGING _ _ _ _ _ _ L j P L A N T _ _ _ _ _ _VE N E E IS_ VENEER PLANTS ENRG GEER --N IPACiCAGING WOODPULP -*{-PAER AND PAPERBOAI-ID World [aiik--2317O -93 - ANNEX C Page 1 MECHANICAL PROCESSING OF TROPICAL HARDWOOD IN DEVELOPING COUNTRIES Uses of Tropical Hardwood Products Tropical hardwood is used in a variety of products, many of which compete with temperate hardwood products and, some of which compete, with softwood products. Furthermore, one tropical hardwood product often competes with another tropical hardwood product, e.g., plywood substitutes for sawnwood and particleboard substitutes for plywood. Finally, tropical hardwood products also compete with non-wood products. While there are some products that can be made of either softwood or hardwood, are generally used for different purposes, although their uses vary somewhat from country to country. Generally speaking, softwood is used for structural components, pulp and paper and hardwood is used in making furniture and joinery for construction. Hardwood is used also for pulp and paper. While tropical hardwood has its own unique end uses, it is usually put to the same end-uses as temperate hardwood and therefore is often a substitute for temperate hardwood. The residues created in the process of making sawnwood, sleepers, veneer sheets, blockboard and plywood are often used for making par- ticleboard. Particleboard is in turn used (in some cases, after further processing) in construction, furniture making and packaging. An analysis of the end uses of tropical hardwood encounters a number of problems. Information on end uses is fragmzntary; it is available only for some countries or for certain years, and the coverage of available data is often partial (only for either sawnwood or plywood but not for both). The utilization sectors are structurally fragmented, with a large number of small firms often excluded in statistical returns. The final products of the wood-using industry are diverse, ranging from household goods, art objects, games, toys and musical instruments, to joinery and structural products for building, furniture, etc. The diversity of wood products is reflected in the fragmentary structure of the industry producing them. The overall end-use pattern of sawnwood and wood-based panels in Europe is shown for 1969-71 in Annex C Table 1. Sawn hardwood in this table include both temperate and tropical hardwood, and wood-based panels include not only hardwood but also softwood. The corresponding pattern for the United States in 1962 and 1976 is shown in Annex C Table 2. Annex C Table 3 - 94'- ANNEX C Page 2 illustrates the major uses of forest products within the building sector in Europe. None of these tables gives clearcut indications of end uses of tropical hardwood, but, it is likely that most of the end uses (especially joinery items) involve processed products of tropical hardwood, except in the cases that are clearly marked for softwood. Most wooden furniture is made of hardwood.l/ Some species are considered much more valuable than others for decorative uses such as furniture making, wall panelling, flooring, etc. Thus, among the Wlest African species, apart from the prized ebony, about a dozen species are especially preferred for their decorative characteristics, i.e., acajou, aapelli, tiama, makore, mansonia, iroko, framire, dibeton, kosipo, niangon, kokrodua, etc. In Latin America, jacaranda, mahogany, virola, caoba, cedro and andiroba are examples of species preferred whenever attractive and durable wood is desired.2/ In Asia, rosewood and teak are the classic examples of decorative quality timber. Some species are pre- ferred for certain non-decorative purposes. For example, balsa, which grows all over tropical Amnerica and has a very low density and a low thermal conductivity, is useC for, among other things, aeroplane manufacture and for cores in sandwich construction. In contrast, lignum vitae and greenheart have very high densities (1.05-1.32) and are suitable for marine construc- tion and wherever extra hardness is required (propeller-shaft bearings, pulleys, rollers, furniture casters, etc.). Changing fashions affect demand in tropical hardwood. This is especially true in the "high quality" segment of the trade in which demand for certain species fluctuates with changes in fashions. Furthermore, the nature of the demand for high-quality veneer logs entails a wide variation in price which reflects not only the choice of specific species but also the differences in log quality and color among species from the same area. The best example of this is seen in the teak trade, but even in the case of okoume from Gabon, the price paid for the most superior quality logs is sometimes as much as three times that paid for the lowest quality. 1/ For more details on consumption in Europe and the United States, see ECE/FAO, "Study on the Trade and Utilization of Tropical Hardwoods," Chapter 5; and Russell C. Stadelman, The United States Market for Tropical Hardwoods. 21 T. Erfurth and H. Rusche, The Marketing of Tropical Wood: Wood Species from African Tropical Moist Forests, and The Marketing of Tropical Wood: Wood Species from South American Tropical Moist Forests. - 95 - ANNEX C Page 3 Table 1: EUROPE: ESTIMATED CONSUMPTION OF SAWNWOOD, WOOD-BASED PANELS AND VENEER SHEETS BY MAJOR END-USES SECTORS, 1969-71 (AVERAGE) Total Apparent of which: Consumption Construction Furniture Packaging Other --(3)- --------------------- Sawnwood /a 91.1 54.2 5.9 15.0 1600 of which: Sawn softwood 71.8 48.8 1.9 9.0 12.1 Sawn hardwood 19.3 5.4 4.0 6.0 3.9 Wood-based panels 21.6 10.5 8.0 - - of which: Plywood 4.8 2.4 1.7 0.2 0.5 Particleboard 12.6 5.4 5.6 - 1.6 Fiberboard 4.2 2.7 0.7 - 0.8 Veneer sheets 1.4 0.2 1.0 0.1 0.1 /a Excluding sleepers. Source: ECE/FAO, "Study on the Trade and Utilization of Tropical Hardwoods," Supplement 10 to Vol. XXX of the Timber Bulletin for Europe, July 1978. -96- ANNEX C Page 4 Table 2: UNITED STATES: ESTIMATED CONSUMPTION OF SANWNWOOD AND PLYWOOD, 1962, 1970 AND 1976 Sawnwood Plywood /a 1962 1970 1976 1962 1970 1976 - --------million m3 (product measure)--------- New Housing 32.9 29.0 39.1 3.70 5.60 7.44 Residential upkeep and improvements 10.4 11.1 13.4 0.91 2.22 2.96 New nor-residential construction 9.3 8.7 7.4 1.13 1.51 1.45 Manufacturing /b 10.0 11.0 10.1 1.66 1.47 1.37 Shipping 10.2 13.5 16.3 n.a. (0.52) (0.65) All Other Uses /c 15.2 20.0 14.5 2.97/d 4.98/d 4.97/d Total 88.0 93.2 100.8 10.37 15.77 18.20 of which: Softwoods 72.7 75.8 85.4 8.24 12.24 15.22 Hardwoods 15.3 17.2 15.4 2.13 3.35 2,98 /a Veneer is included in the estimates for manufacturing and shipping. /b Includes household furniture; commercial and institutional furniture; consumer goods (sporting goods, musical instruments, boat building and repairs, toys and games, etc.); commercial and industrial machirary and equipment; other products (pallets, prefabricated wooden buildings, containers, mobile homes, millwork, flooring, etc.). /c Includes upkeep and improvement of non-residential buildings and structures, farm construction, except housing; mining; home-made projects such as furniture and boats; made-on-the-job products like advertising and display structures; and a wide variety of other miscel- laneous products and uses. /d Includes shipping. Source: US Department of Agriculture, Forest Service, The Outlook for Timber in the United States; and An Analysis of the Timber Situation in the United States 1952-2030, Review draft. -97- ANNFX C Page 5 Table 3: P[tFSENT USES FOR FORES7 PRODUCTS V! SUILDI%' End-Use Forest products most uised Remarks Struccural Roof structure Sawn softwood Concentzated in low-rise dwelligs (25-402 of sawn sofood used in this type of building). Ouarc:ty used per roof dec'lining (lower pitch, truss rafters). Wood-based panels Sheathing material for under-roofing, Glue-laminated structures Used increasingly, espectally for spans over 2-0 a. 7loor structure Sawn softwood Joists and boards, almost exclusi7ely in low-rise dwellin2s (5-15% of sawn softwood used in chis type of building). Wood-based panels Replaci g sawnwood as floorfng boards in sone areas (especially parcicleboard). Load-bea ri ng wall nembers Sawn softwood Very importanc where used of wood frame houses is traditional, or increasing g Wood-based panels Used as sheaching (especially Plywood) with sawnwood frame. Joinerv Windows and Sawn softwood, sawn Windo%ws predoninantly of wood in residential building, competition shutters hardsood, often tropical with netal in Industrial and connercial buildings. TrQnd 'rom shutters to blinds or rollers, which use less or no wood. Doors Sawswood, wood-based Usually made of sawnwood with hardboard or -lywood face (flush panels door). Door .rane traditionally sawnwood (acw also bluckboard, veneered particleboard). Recently, strong co=petitlan from aetal and plastic for door sets. Partitioa walls Sawnwood, wood-based Major use for sawnwood in low-rise dwellings. Sawnwood, wood- or panels mineral-based panels used as facing. Trend to wood (especially particleboard) partitions in htih-rise dwellings and other coa- structions (for reasons of weight). Exterior walls Sawnwood, wood-based Tendency observable to use, in high-rise dwellings, prefabricated panels elements, with scwnwood for frames and wood-based panels as sieath- ing. Exterior wall Sawnwood, plywood, Used mostly in wood-frame buildings. facing hardboard Built-in furniture Wood-based panels, sawn- Expending sector. Much particleboard used. wood Stairs Savwvood Wood use aow confined to low-rise dwellings. Joinery trim Sawovood Little known about trends, but apparently declining. Floor surfaces Savnvood (especialIl Strong downward crend in consumprion of sawn softwood per volume hardwood), wood-based built. Possibly similar trend for hardwood, but less marked. panels (plywood, par- ticleboard) Ceiling and Sawnwood, wood-based Has decreased where purely economic consideratlont prevall. in internal wall panels decorative applications, especially in public places (courts, coverings meeting rooms, theaters, ecc.), upward, or scable crend. Temporary Site Uses Concrete formwork Sawnwood, wood-based Msjor end-use for sawnwood and increasingly for plywood, often panels treated. Scaffolding boards Sawnwood, wood-based Not enough known about use patterns in this significsat consumption Partitions on-site panels sector. Fale evo rk Other ceporary uses Source: ECE/FAO, EuroDean Timber Trends and Prosoecta 1950 to 2000, p. 34. EPDCE October 1979 -98 ANNEX D Page 1 MECHANICAL PROCESSING OF TROPICAL HARDWOOD IN DEVELOPING COUNTRIES Taxes on Log Exports in Indonesia as of April 1980 The purpose of this Annex is to show details of the official tax burden on log exports from Indonesia. Some of the export taxes are related to the levels of check prices (standard prices). As of April 1980, check prices were as follows: Grade of Logs US$/m3 (a) Premium and first grades 160 (b) Second and third grades 150 (c) Local market grade 125 Because of the prevalent practices of undergrading, only a small portion of total shipments is graded as premium or first grade. Government guide- lines dictate that only up to 10% of total export shipments is permitted to be graded as local market grade. Therefore, for all practical purposes, the average check price was US$150 per m3. The following calculations of the official tax burden on log exports are based on the price of US$150 per m3 and the current (April 1980) market price (FOB Kalimantan) of US$130 per m3.1/ 1/ Items and amounts differ somewhat, depending on the source of informa- tion. -99.- ANNEX D Page 2 "Tax" Item US$/m3 ADO (export tax, 20% of check price) 30.00 MPO EXIM (withholding corporate tax, US$ price x Rp.40) 9.60 Uji Kayu (grading fee, Rp.200/m3) 0.45 Simpanan Wajib (compulsory savings for reforestation) 3.20 Fiskal Export (PPD - 17a, withholding personal income 0.32 tax on wages) OPP (transportation tax, US$1/m3) 1.00 Bea Angkutan Langsun (Rp.50/m3) 0.08 B/veem (Rp.20/m3) 0.03 IHH (royalty, 6% of check prices) 9.00 IHH Tambahan (additional royalty, Rp.620/m3) 1.00 Bank charges (0.25% of negotiated amount) 0.38 TOTAL 55.06 Ignoring some small local taxes which are not listed above, the total taxes/ fees paid to the Indonesian government appear to be around US$55 per m3, or about 42-43% of the actual FOB price of export logs. - 100 -. STATISTICAL APPENDIX Ic - 101 - STATISTICAL APPENDIX LIST OF TABLES Page SAl WORLD PRODUCTION OF WOOD .............................,.-...........103 SA2 DEVELOPING COUNTRIES' EXPORTS OF WOOD PRODUCTS IN 1979 .. 104 SA3 HARDWOOD LOGS (TROPICAL AND TEMPERATE) - PRODUCTION BY REGION ..105 SA4 MAJOR MARKETS: IMPORTS OF TROPICAL HARDWOOD LOGS, BY ORIGIN, 1977 ....106 SA5 MAJOR MARKETS: IMPORTS OF TROPIC:-i HARDWOOD SANDWOOD, BY ORIGIN, 1977 ...107 SA6 MAJOR MARKETS: IMPORTS OF TROPICAL HARDWOOD PLYWOOD, BY ORIGIN, 1977 ............... .........108 SA7 MAJOR MARKETS: IMPORTS OF TROPICAL HARDWOOD VENEERS, BY ORIGIN, 1977 ........ .......e* ** * 109 SA8 TROPICAL HARDWOOD - EXPORTS BY CATEGORY AND DEVELOPING REGIONS ............. ............ 110 SA9 EXPORTS OF 'TROPICAL HARDWOOD LOGS, BY MAJOR COUNTRIES, SELECTED YEARS IN 1955-1979 ...........................ill..111 SA10 EXPORTS OF TROPICAL HARDWOOD SAWNWOOD, 1955-1979 112 SAll EXPORTS OF TROPICAL HARDWOOD PLYWOOD BY SELECTED DEVELOPING ECONOMIES ................. ... 113 SA12 EXPORTS OF TROPICAL HARDWOOD VENEERS BY SELECTED DEVELOPING ECONOMIES . ......... 114 SA13 TROPICAL HARDWOOD EXPORTS OF SELECTED DEVELOPING COUNTRIES: PRODUCT COMPOSITION, 1961 AND 1977 115 SA14 PARTICLEBOARD EXPORTS, VOLUME AND VALUE, 1961 AND 1979 .. 116 SA15 TROPICAL HARDWOOD CONSUMPTION-BY MAJOR REGIONS ........... 117 SA16 HARDWOOD (TROPICAL AND TEMPERATE) CONSUMPTION BY MAJOR REGIONS. ..... . . 118 - 102 -. Statistical Appendix List of Tables (Continued) Page SA17 HARDW'OOD SAIWNWOOD IN WESTERN EUROPE AND JAPAN, 1961 AND 1977 ..............................................................119 SAI8 CONSUMPTION OF HARDWOOD PLYWOOD IN WESTERN EUROPE, UNITED STATES AND JAPAN IN 1976 ...................... 120 SA19 PRICE OF LAUAN VENEERLOGS IN JAPAN, 1955-1980 121 SA20 PRICE OF MERANTI SAWNWOOD, CIF FRENCH PORTS, 1958-1980 122 SA21 PRICE OF PLAIN LAUAN PLYWOOD IN JAPAN, 1963-1980 123 SA22 US IMPORTS OF HARDWOOD PLYWOOD BY MAJOR SUPPLYING AREAS, 1950-1979 .........................................................124 SA23 SHARES OF MAJOR SUPPLIERS IN TOTAL US IMPORTS OF HARDWOOD PLYWOOD, 1950-1978 125 SA24 PLYWOOD: RATIO OF EXPORTS TO PRODUCTION IN .SELECTED. . ASIAN PRODUCERS, 1948-1979............... 126 SA25 INDONESIA--PRODUCTION, EXPORTS AND CONSUMPTION OF LOGS, 1970-1979..................e....................127 SA26 SELECTED INDICATORS FOR PLAIN PLYWOOD PRODUCTION IN JAPAN 1970-73 AND 1977-79 ..............................................128 SA27 VALUE ADDED AS PERCENT OF GROSS OUTPUT IN WOOD-PROCESSING INDUSTRY IN SELECTED COUNTRIES 1................................ 129 - 103-- Table SAl: WORLD PRODUCTION OF WOOD Annual Growth Rate 1961-1979 1961 1970 1978 1979 % -------------(Millions of cubic metors)---------- Industrial Wood Logs/a 638.3 756.8 856.9 868.0 1.6 Softwood/b 478.6 549.7 614.7 624.6 1.4 Hardwood/c 159.7 207.1 242.2 243.4 2.2 Temperate 112.3 123.5 124.7 122.5 0.5 Tropical 47.4 83.6 117.5 120.9 5.1 Pulpwood/d 213.9 314.2 324.9 346.1 2.6 Softwood/b 175.4 234.5 232.0 249.3 1.9 Hardwood/c 38.5 79.7 92.8 96.9 5.0 Other Industrial Wood/e 167.4 203.5 207.1 206.8 1.1 TOTAL INDUSTRIAL WOOD 1,019.7 1,274.6 1,388.9 1,420.9 1.8 Fuelwood/f 1,209.5 1,338.9 1,565.9 1,599.7 1.5 GRAND TOTAL 2,049.2 2,613.5 2,954.8 3,020.6 4.1 /a Sawlogs, veneer logs, and logs for railroad ties. /b Conifers. /c Non-conifers, or broadleaved wood. /d Includes all forms--roundwood, chips, etc. /e Includes pitprops, telephone and power transmission poles, roundwood for scaffolding and construction formwork, etc. /f Includes all firewood and charcoal. Source: FAO, Yearbook of Forest Products, various issues. - 104 - Table SA2: DEVELOPING COUNTRIES' EXPORTS OF WOOD PRODUCTS IN 1979 SITC Code iMillion US$ Fuelwood and charcoal 245 11 Industrial roundwood 246/247 3,177 SofLtwood logs 247.1 59 Hardwood logs 247.2 3,069 Pulpwood (incl.) 246 16 Pitprops, poles, etc. 247.9 31 Sawvnwood 248 1,676 Sleepers 248.1 36 Softwood sawnwood 248.2 283 Hardwood sawnwood 248.3 1,357 Panel Products/a 634/641 1,458 Plywood/a Ex. 634 1,282 Veneer Sheets 634i1 110 Particleboard 634.32 17 Fiberboard 641.6 48 Pulp and Paper 666 Woodpulp Ex. 251 400 Paper and paperboard Ex. 641 266 Total 6,988 /a Includes plywood exports of the Province of Taiwan. Source: FAO, Forest Products Yearbook, 1979 Table SA3a HARDWOOD LOGS (TROPICAL AND TEHPERATE) - PRODUCTIOU BY REGION Anniual Z Sliare In Growthl Rute World Productlon 1961 1965 1970 1975 1977 !978 (1961-76T7a 1961 1971 -millIon W3(r)----------- ---------------- -------- Developd CoulintrIes 49.7 61.3 84.7 97.1 114.8 122.1 5.6 31.1 48.8 Asia and Pacific 27.0 36.7 53.6 60.5 75.2 82.7 6.8 17.0 32.0 Tropical 26.9 36.3 53.6 61.7 74.1 80.9 6.8 17.0 31.5 Temperate (Rep. of Korea. Israel) 0.1 '0.3 0.0 1.2 1.1 1.8 9.1 1 ).1 0.5 Africa - Tropical 9.1 11.3 14.8 14.6 17.4 16.4 4.0 5.7 7.4 Latin America and Caribbean 14.7 14.7 17.3 21.7 23.6 24.4 3.4 9.3 10.0 Tropical 12.5 12.3 15.2 20.0 22.0 22.6 4.0 7.9 9.4 Temperate (Argentina. Chile, Uruguay) 2.2 2.4 2.1 1.8 J.6 1.8 1.5 1.4 0.7 Subtotal - Tropical 48.5 59.9 83.6 93.3 113.6 119.8 5.5 30.6 48.3 - Temperate 2.4 2.8 2.1 3.0 2.7 3.6 2.4 1.5 1.1 * indeastrialized Cotuitries (all tewpera~e) 67.9 79.1 77.5 64.3 71.7 74.3 n.1 42.8 30.5 Canada 2.4 3.9 4.4 4.2 5.1 6.6 3.2 1.5 2.2 United States 31.0 37.8 34.6 27.9 32.5 32.5 -0.4 19.5 13.8 Japan 7.2 6.5 5.9 4.0 4.0 3.9 -3.2 4.5 1.7 AlatirallJ, New Zealand 7.4 7.4 7.0 6.5 6.5 6.3 -0.9 4.7 2.8 Western Europe 19.Y 23.i 25.2 21.3 23.1 24.6 1.3 12.5 10.0 SSotiht Africa 0.2 0.4 0.4 0.4 0.3 o.4 2.7 0.1 0.1 Harket Econoal*a Total 117.6 140.4 162.2 161.4 185.5 196.4 3.1 74.1 79,3 of uwlicla, temperate 70.2 81.8 79.6 67.3 74.4 77.9 0.6 44.3 31.6 femacral1y Plaued Economies (all tea rate) 41.0 39.6 43.6 48.4 40.7 48.7 1.0 25.9 20.7 WORi.D lTOTAI 158.6 180.0 207.1 210.0 t 235.2 245.1 2.5 110.0 100.0 HEM;lOAlJ)lH IfTPHS (a) Iurael (all temperate) 0.0 0.0 0.0 0. 0 0i. 0 0.0 0.0 0.0 0.0 (4.) W0I1 Developing 54.3 67.7 9o.7 103.3 122.0 13i).2 5.4 34.2 51.9 of 6ldla41, temperate 7.2 8.9 7.1 8.2 8.8 10.3 1.1 4.5 3.7 (c) MIR ltIndustrialized (all temperate) 64.4 74.0 72.5 59.1 66.0 67.6 -0.3 40).6 2).1 /a P-amseJ uui ta0enJ growth rates. Sotirce; FAU, Yearbook of Forest Productfi Standlar Tapen - 106 - Table SA4: MAJOR M-ARKETS: .IMPORTS OF TROPICAL HARDWOOD LOGS, BY ORIGIN, 1977 Asia- Latin Africa Pacific America Total Destination Origin ---------thousand m3 (roundwood)--------- Asia Japan 50 21,054 2 21,106 Republic of Korea - 6,616 - 6,616 Provi.nce of Taiwan - 5,956 - 5,956 Singapore - 351 - 351 Hong Kong - 491 - 491 Total 5 Asian Countries 50 34,468 2 34,520 Europe France 1,188 298 - 1,486 Italy 1,120 172 - 1,292 Germany, F.R. 797 84 1 882 Spain 775 35 - 810 Netherlands 182 35 12 229 Portugal 311 99 10 420 United Kingdom 121 3 4 128 Belgium 128 5 - 133 Greece 257 11 - 268 Total 9 European Countries 4,879 742 27 5,648 TOTAL MAJOR IMPORTING 4,929 35,210 29 40,168 Source: FA0, Yearbook of Forest Products, 1977. - 107 - Table SA5: MAJOR MARKETS: IMPORTS OF TROPICAL HARDWOOD SAWNWOOD, BY ORIGIN, 1977 Asia- Latin Africa Pacific-a America Total Destinaton Origin - ------thousand m3 (sawnwood)--------- Japan - 250 3 253 Europe (Major Importing Countries) 583 1,898 98 2,579 of which: United Kingdom 108 270 46 424 France 93 359 6 458 Germany, F. R. 100 343 21 464 Netherlands 45 - 482 7 534 Italy 143 236 2 381 Belgium 11 156 4 171 Spain 83 52 12 147 North America 37 290 309 636 of which: United States 34 260 271 565 Canada 3 30 38 71 Australia 376 - 376 TOTAL 620 2,814 410 3,844 /a Includes exports of 255,000 m3 from Singapore. Source: FAO, Yearbook of Forest Products, 1977. - 108 - Table SA6: MAJOR MARKETS: IMPORTS OF TROPICAL HARDWOOD PLYWOOD, BY ORIGIN, 1977 Exporters Log Producing In-Transit Africa Asia-Pacific Asian/a Latin Total Destinatio> Origin Producers America ----------------------thousand m3--------------------- Japan - 1 39 - 40 Europe (major 7 importers) United Kingdom 16 93 224 14 347 Denmark - 1 24 - 25 France 28 32 59 - 119 Belgium 3 17 24 3 47 Netherlands 15 18 119 3 155 Sweden - - 11 - 11 Germany, F.R. 3 16 48 5 72 Subtotal Europe 65 177 509 25 776 United States - 107 1,792 14 1,913 Canada - 2 245 - 247 Australia - 12 65 - 77 Total Major Importing Countries 65 299 2,650 39 3,053 /a Includes Japanese exports. Source: FAO, YearDook of Forest Products, 1977. - 109 Table SA7: MAJOR MARKETS: IMPORTS OF TROPICAL HARDWOOD VENEERS, BY ORIGIN, 1977 Exporters Asia- Latin Importing Countries Africa Pacific America Total -----------------thousand m3----------------- United States 7 151 38 196 Germany, F.R. 29 2 9 40 United Kingdom 11 9 - 20 France 40 2 42 Netherlands 17 - - 17 Total Major Importing Countries 104 164 47 315 Source: FAO, Yearbook of Forest Products, 1977. Table SA8: TROPICAL MU34IIWilI) - EXPORTS BY CATEGORY AtlD DEVELOPING ItEGION:i Actual Growth Ra ce Reg I ona I Sha res 1961 1965 1970 1975 1977 1978 196-78 1961 1977 1978 - ---------------- Z per annmIII- ------percent------ LOGS 12.8 19.5 36.6 34.0 44.1 45..1 8.1 =100.0 O.() 100.0 Tropical Asia-Pacific 7.7 13.3 29.4 28.7 37.6 39.1 10.3 60.2 85.3 86.7 Tropical Africa 4.7 5.6 6.8 5.3 6.5 6.0 1.8 36.7 14.7 13.3 Tropical Latin America 0.4 0.5 0.4 0.0 0.0 0.0 -13.1 3.] 0.0 0.0 Other developing /a 0.0 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 SAWNWIOOD 1.8 2.6 3.9 4.7 7.0 7.1 9.0 100.0 100.0 100.0 Tropical Asia-Pacific 1.0 1.1 1.8 2.6 4.1 4.3 10.4 55.6 58.6 bO.6 Tropical Africa 0.6 0.7 0.8 0.7 0.8 0.8 1.6 33.3 11.4 11.3 Tropical Latin America 0.2 0.3 0.5 0.6 0.7 o.6 8.2 11.1 10.0 8.5 OthIer developin,g /a 0.0 O.5 0.8 0.8 1.4 1.4 20.9 0.0 20.0 i9J.7 PILYWOOD 0.3 0.8 2.2 3.0 4.0 4.5 17.1 100.0 1(0.1) 100.0 Tropical Asia-Pacific 0.1 0.2 0.4 0.4 0.7 0.9 14.0 33.3 17.5 20.0 Tropical Africa 0.0 0.1 0.1 O.i 0.1 0.] -0.5 33.3 2.5 2.2 Tropical Latin Amlerica 0.0 0.0 0.1 0.1 0.1 0.] 10.2 0.0 2.5 2.2 Other developing /a 0.l 0.5 1.6 2.4 3.1 3.4 21.8 33.3 77.5 /5.6 VENEER SIIEETS 0.] 0.2 04 0.5 0.5 o.5 9.0 100.0 100.0 10.,.0 Tropical Asia Paciflc 0.0 0.1 0.2 0.3 0.2 0.2] 9.8 0.0 40.0 4/0.0 Tropical Africa 0.1 0.1 0.2 0.1 0.2 ('. 2 5.9 100.0 40.0 40.0 Tropical Latin America 0.0 0.0 0.0 0.1 0.1 0.1 11.9 0.0 20.0 20.0 Other developing /a 0.0 0.0 0.0 0.0 0.0 0.0 n. i. 0. 0.0 0.0 PROCESSED TOTAL (raundwood eqtilv.) 4.2 6.9 12.8 16.3 23.0 24.3 1o.9 10(.0 100.0 100.( Tropical AsIa-IPacific 2.0 2.7 3.5 6.2 9.5 10.3 lO.] 41.6 41.3 42.4 Tropical Africa 1.5 1.7 2.0 1.6 2.0 2.1 2.0 35.7 8.7 8.6 Tropical Latin America 0.4 0.5 1.1 1.5 1.7 1.5 8.] 9.5 7.4 6.2 Otiher developing /a 0.3 2.0 5.1 7.0 9.8 10.4 23.2 7.2 42.6 42.8 LOGS AND PROCESSEI): lTO'TAL (round, equlv.) 17.0 26.4 49.4 50.3 67.1 69.4 8.6 100.0 100.0 100.0 ... (..- 7.2-- Tropical Asia-Pacific 9.7 16.O 34.0 34.9 47.1 49 10.0 57.1 70.2 71.2 Tropical Africa 6.2 7.3 8.8 6.9 8.5 8.1 1.6 36.5 12.7 11.7 Tropical Latin Amuerica 0.8 1.0 1.5 1.5 1.7 1.5 3.8 4.7 2.5 2.1 Othier developing /a 0.3 2.1 5.1 7.0 9.8 10.4 23.2 1.7 14.6 15.0 /a Includes [long Kong, Singapore, Rep. of Korea, I'srael and Prov. of Talwan. Expjorts of temuperate 1.ath, Amuerican developing countries, Southiern Europe and SouLtI Africa are not included as thieir exporLs art, largely based un tilelr own temperate htardwood material. Source; Yearbook on Forest Prodticts Standard Tapes, 1978; World Bank, Ecunomic Analysis and Projections Department. Table SA9; EXPORTS OF TRtPICAL HARDWOOI) 1.0CS, &iY HAJ0l (OIINTIt4IES,. SELECTEDI YEARS IN 1955-1979 1955 961 970 973Crovthk Rate 1955 1961 197- 1973 1975 1978 1979 1961-79 ---1,0 ------------------------- -------- X per anolx Asia Pacific 2,930 7,778 2. 40, 28,713 38,821 8.6 B urma 10 73 58 172 66 77 135 3.,1 Indoneala o 105 7,834 18,500 12,532 19,200 19,407 31.6 H * lllaysla 126 2,754 11,353 12,876 10,792 16,713 16,084 H Papaaa New Guinea 6 3 193 425 372 445 445 30.1 * Plll Ippones 1,898 4,581 9,606 7,759 4,596 2,200 1,248 -6.6 Jfri a 2,533 4,726 6,842 8 801 56 286 6 096 6_536 1.7 Cam.eroon 88 165 511 703 472 654 843 9.0 Cabol 800o 1,224 1,6.34 1,749 975 1,200 1, 20) -0.1 G.hana 479 775 601 1,387 560 310) 124 -9.2 Ivory Coast 241 1,019 2,511 3,497 2,419 2,700 3,199 6.2 I.lberia - 14 144 364 220 311 311 17.7 Nigeria 523 733 219 328 91 27 27 -15,5 Latin America 395 389 362 524 34 64 78 -8.1 Colombia 52 53 78 43 7 7 7 -10.1 Parapiuay 171 171 166 1 - - - -32. 7/ Brazl'1 62 54 84 426 5 10 13 -7.2 T'otal Developing 5,858 12,792 36,675 49,612 340)70 44LSj 4410-5 6.7 /a baseft on annual percent growtia rate, 1961-73. Soire:e FAil, Yearbook of Forest Produocts, varioius xissues. - 112 - Table SAlO: EX?ORTS OF TROPICAL HARDWOOD SAWNWOOD, 1955-1979 Annual Growth Race 1955 1961 1970 1973 1975 1978 1979 1961-79 - - u tsousand m3 (sawnwood)-- LOG-?RRODCC ' !00INS 1,:70 1,766 3,094 4,942 3,933 5,395 6,367 7.o Asia-?acific, lo?-roduci±g 741 988 1,786 3,184 2,645 5,240 5,256 9.2 3urma 23 80 116 105 104 56 106 1.5 indonesia - 11 44 330 394 756 1,21 ' .7 Malaysia 540 557 1,356 2,139 1,763 2,787 2,356 9.0 Papua 'ew Guinea - 3 3 . 18 16 36 36 14; .0 Philippines 132 191 185 427 254 573 91i 3.6 Thailand 153 123 38 93 75 16 7 -1'4.0 Africa 382 569 760 896 717 593 679 0.9 Cameroon 11 99 17 27 38 31 10.8 0.5 Cabon - 10 2 4 4 20 20 3 .7 Ghana 218 246 241' 305 165 69 54 -7.7 Ivory Coast 1 39 .183 238 212 318 293 11.2 Libezia - 1 4' 23 17 17 32.7 /a * lgeria 43 62 1.7 34 13 1 1 -19.3 tatin America 147 210 548 862 571 4fi2 432 3.9 Colombia -a 5 38 157 100 23 23 29 -1.4 Paraguay 8 31 86 149 149 145 145 8.5 Brazil 38 16 147 367 187 i55 s8 8.8 LOG-IMORTIYCG 2ET."PITG COTUNTRIZS 10 33 784 1,257 8:2 1,423 1,664 22.9 Singapore - - 721 1,111 66 1,6l03 1,438 7.2 /a Taiwan, Prov. of 1 17 40 160 133 178 178 13.2 Hong Kong 9 17 19 15 16 0 0 -0.4 /b TOTAL DEVELOPING 1,280 1,831 3,883 6,278 4,746 6,818 8,031 8.1 /a Annual percent growth rate, 1970-79. 7b Annual percent growth race, 1961-75. Source: FAO Yearbook of Forest Products, various issues. Table SAIlI IXPORTS OF TROPICAlI IIARDWOI)1 PLYUOOiO BY SLLECTED DEVELOPING ECOtHOIES Annual X Growitlh Rate 1955 1961 1970 1973 1975 1978 1979 1961-79 - -~~~-~--------------tliouaai Man3 (plywood) ---- - -- LOG-PRODUCINC REGIONS - 196.4 635.8 1,045.4 601.4 1,140.0 1,214.0 10.1 Asia-Pacific, 1og-producIn 6.3 87.6 443.9 826.1 439.6 910.0 979.0 13.6 Indonesia 0.0 0.0 0.0 0.0 0.6 85.0 116.0 186.6 /a Phllipp1nes 7.3 72.6 260.8 388.0 157.0 383.0 406.0 9.5 Papua New Guinea 9.2 9.71 11.9 13.0 12.4 6.0 6.0 -2.5 Waysla 1.5 2.4 143.7 355.1 232.5 410.0 432.0 31.4 Africa 47.8 84.6 131.2 129.4 98.4 80.0 79.0 -0.4 UIgerIa 15.1 18.0 21.o 10.0 1.0 0.0 0.0 -17.5 lb CIaana 3.3 4.1 .21.7 46.9 17.7 1.0 1.0 -7.2 Ivory Coast 0.0 0.2 7.3 12.6 10.8 19.0 19.0 27.1 Cabott 10.5 13.7 11.9 15.5 10.1 12.0 13.0 -0.3 1 Latin America 18.8 24.2 60.7 89.9 63.4 150.0 156.0 10.3 H Brad! 0.0 2.7 29.1 43,(o 31.6 79.0 96.0 20.7 Surinam 10.5 13.7 11.9 15.5 10.1 12.o 13.0 -0.3 1OG-1til'ORTING DEVELOPING COUiNTRIES 8.$ 93.71 1,587.1 2,765.0 2,439.3 3.431.0 3,139.0 20.3 IIluog gon-a 0..8 o.6 O.5 1.8 0.5 0.0 1.0 2.7 Korea, Rep. of 0.0 11.7 02'1.6 1,321.6 1,258.0 1,605.0 1,27.0 2d.1 Slnagao)re- 0.0 0.0 131.9' 435.7 379.9 553.0 568.0 15.7 /c Taiwan, Prov. of 0.3 60.7 589;2 953.0 768.0 1,240.0 1,240.0 17.2 Israel 7.7 20.7 4.3.9 52.9 33.0 33.0 33.0 2.5 TOTAIL DEVElO.0PINIG 81.7 290.1 2,222.33! 3 9!3. 4 4 71.o 4 L353. 0 15.3 Hemordiau k tea Japian /d 234.0 344.9 322.3 155.4 115.8 105.0 105.0 -6.1 /a Agnuiall percent growlv rate, 1975-79. lb Annual percent growth rate3 1961-75. /c Aitaial percent grawtl' rate, 1970-79. 1t( linelides donestic liardiwood specles at an estlated rate of 10,000 n3 a year dulrilig the 1970a.. Stitrcea FAO, Yearhook of Forest ProdUctu, various issues. FAt), Yearbmok of Forest l'rothaacis Standard lapea ~~~~~I. .. .... Table SA12: EXPORTS OF TROPICAL HARDWOOD VENEERS BY SELECTED DEVELOPING ECONOMIES Annual % Growth Rate 1955 1961 1970 1973 1975 1978 1979 1961-78 ----------------------thousand m3 (veneers)--------------- LOG-PRODUCING REGIONS 0.0 112.0 387.2 675.4 440.9 485.0 4J1-0 7.1 Asia-Pacific, log-producing 0.0 42.1 170.5 382.7 284.9 242.0 163.0 7.4 Philippines 16.4 36.5 121.9 169.3 99.0 31.0 5040 1.7 Malaysia 1.5 4.3 45.4 204.4 169.5 185.0 88.0 17.2 Africa 0.0 57.3 168.9 212.2 102.3 152.0 166.0 5.8 Zaire 0.8 30.7 31.0 7.8 1.7.9 4.0 4.0 -10.2 Cameroon 0.0 0.0 24.0 19.1 4.1 ]4.0 14.0 -5.4 /a Congo 1o0.6 9.0 66.7 70.7 41.0 45.0 45.0 8.8 Ivory Coast 0.0 0.3 25.3 86.0 19.9 36.0 46.0 30.3 Gabon 9.9 15.8 20.5 14.0 8.5 37.0 37.e 4.6 Latin America 0,0 12.6 47.8 80.5 53.7 91.0 82.0 10.4 Brazil 2.8 9.1 33.3 57.0 41.6 47.0 36.0 7.5 LOG-IMPORTING DEVELOPING COUNTRIES 0.0 0.0 32.0 39.4 26.0 30.0 15.0 -7.3 /a Singapore 0.0 0.0 31.4 33.4 24.3 26.0 11.0 -10.0 /a Total Dreveloping Regions 0.0 112.0 419.4 714.9 467.0 515.0 426.0 7.3 /a .Based on annual percent grow'tl rate, 1970-79. Source: FAO, Yearbook of Forest Products, various issues. FAO, Yearbook of Forest Products Standard Tapes Table SA13: TRLOPCAL RARDWOOD EXPORTS OF SF.LECTED OEVELOPNIG COUNTRIES4 PRODUCT COMPOSETION, 1961 AND 1977 1961 1977 Z of Z Tocal o of Total '000 o3 Total Processed '000 M3 Tocal Processed Indonesia Logs 105 84.0 - 18,560 94.5 - Sawnwood 11 - 100.0 594 - 99.7 Plywood - - - 1 - 0.3 Veneers Total processed /a 20 16.0 100.0 !,072 5.5 100.0 Total /a 125 100.0 - 19,632 100.0 - MalavsiaL Logs 2,754 73.1 - 16,099 72.2 - Sawnwood 557 - 98.8 2,910 - 34.5 Ply-ood 2 0.5 331 - 12.3 Veneers 4 - 0.7 105 - 3.2 Tocal processed /a 1,015 26.9 100.0 6,199 27.8 100.0 Total /a 3,768 1OO.O - 22,298 100.0 - Philipop' es Logs 4,581 88.7 - 2,047 58.0 - Sawnwood 191 - 59.1 455 - 55.2 Plywood 73 - 28.8 260 - 40.3 Veneers 37 - 12.1 36 - 4.5 Total processed /a 582 11.3 '00.0 1, '85 42.o 100.0 Total /a 5,163 100.0 - 3,532 100.0 - Brazil Logs 54 50.5 - 4 0.5 - Sawnwood 16 - 54.3 305 - 73.9 Plywood 3 - 13.0 44 - 13.6 Veneers 9 - 32.7 49 - 12.5 Total processed /a 53 49.5 100.0 743 99.5 100.0 Total /a 107 100.0 - 747 100.0 - Colombia Logs 53 43.8 - 7 - - Sawuvood 38 - 100.0 23 14.0 96.3 Plywood - - - - - - Venters - - - 1 - 3.7 Total-processed /a 68 56.2 100.0 43 86.0 100.0 Total /a 121 100.0 - 50 100.0 - Ivory Coast Logs 1,019 93.6 - 3,255 81.5 - Sawnwood 39 - 100.0 332 - 80.7 Plywood - - - 29 - 9.0 Veneers - - - 40 - 11.3 Total processed /a 70 6.4 100.0 740 18.5 100.0 Total /a 1,089 100.0 - 3,995 100.0 - Ghana Logs 775 63.1 - 620 79.6 - Sawnwood 246 - 97.5 73 - 82.6 Plywood 4 - 2.0 2 - 3.1 Veneers 1 - 0.5 12 - 14.3 Total processsd /a 454 36.9 100.0 159 20.4 100.0 Total /a 1,229 100.0 - 779 100.0 - Gakbon Logs 1,224 87.6 - 1,139 92.7 - Savnwood 10 - 10.5 7 - 14.0 Plywood 54 - 72.1 26 - 66.4 Veneers 16 - 17.4 9 - 20.6 Total processed /a 172 12.4 100.0 90 7.3 100.0 Total /a 1,384 100.0 - 1,229 100.0 - Liberia Logs 14 100.0 - 315 78.2 - Sawnwood - - - 49 - 100.0 Plywood - - - - - - Veneers - - - - - - Total processed /a - - - 88 21.8 100.0 Total /a 14 100.0 - 403 100.0 - Papua New Guinea Logs - - - 370 85.5 - Sawnvood /b - - - 16 - 46.0 Plywood - - - 9 - 32.9 Veneera - - - 7 - 21.1 Total processed /a - - - 63 14.5 100.0 Total /a - - - 433 100.0 - /s In thousand cuibtc seters of roundwood equivalent. JS (To be ,ovLdedl Source: FAO, TPArb'ook of Foresc Products, 1977. - 116 - Table SA14: PARTICLEBOARD EXPORTS, VOLUME AND VALUE, 1961 AND 1979 1961 1979 Volume Value voolume Value ('000 m3) (million US$) (000 m3) (million US$) Developing Economies 25 2 104 16 Asia 3 - 71 7 Africa 7 - 3 - Latin America 15 1 30 9 Industrialized Countries 355 22 4,880 841 Western Europe 342 21 4,647 812 United States - - 178 20 Japan - - - - Other 13 1 51 8 Market Economies 381 24 4,984 857 Centrally Planned Economies 28 1 601 44 WORLD TOTAL 409 24 5,585 901 Source: FAO, Forest Products Yearbook, 1972 and 1979. Table SAISa TROPICAL MAPDI0OD CONSUHPTION RY MAJOR RIGCIONS Growth Rate X Share In Total 1961 1965 1970 1973 1975 1977 1978 1961-78 1961 1977 (2 per anaut) --- -million ,3 roundwood equlvalent------ Developing Countries 33.8 38.5 43.5 54.5 61.0 68.7 76.7 4.9 69.7 60.3 prdicinregons 33.0 36.8 40.1 50.7 55.1 60l.2 66.3 4.2 68.0 53.0 Tropical Asia-Pacific 17.6 21.1 20.3 21.8 27.3 29.0 34.3 3.4 36.3 25.5 Tropical Africa 3.6 4.5 6.7 7.3 8.5 10.0 9.4 6.9 7.4 8.8 Trupical Latin America 11.8 11.2 13.9 15.6 19.3 21.2 22.6 24.3 24.3 18.7 linportIn4 countrJes In tranisit processor 0.8 1.7 2.6 3.8 5.9 8.5 10.4 1.6 1.6 7.5 Indostrialized Countries 14.7 21.3 37.6 52.2 34.2 43.2 45.2 6.8 30.3 38.0 o - - Unilted States 2.3 3.3 5.4 6.7 r.B 5.9 6.0 5.8 4.7 5.2 -2 Japani 5.0 8.5 20.2 28.2 17.6 21.2 22.6 9.3 10.3 18.7 Uesterai Europe (including Sositlwerii Europe) 6.9 8.2 10.3 15.3 9.7 13.7 14.1 4.3 14.2 12.1 Webterai Elrsope (txclulding SowtiLhern Europe) 6.P 8.1 9.3 13.3 8.4 J1.7 12.1 3.4 14.0 10.3 Saiti hern Eurolpe (excluding Isr-ael) 0.1 0.1 1.0 2.0, 1.3 2.0 (Ost) 2.0 19.3 0.2 1.8 )ther iii1autrialized 0.4 1.3 1.7 2.0 2.1 2.4 2.5 11.4 0.8 2.1 Statistical Discrepagy - - 2.5 3.2 -0.2 1.5 2.3 - - 1.3 llarh±z Ectnomies Total 48.5 59.9 83.6 109.9 95.0 113.4 119.6 5.5 100.0 99.8 Centruily Llanedi Econiomie - - - - 0.1 0.2 0.2 - - 0.1 JOPJI TrOIAl. 48.5 59.9 83.6 109.9 95. 1U13.6 119.8 5.5 100.0 100.0 tIL iioragidumin ltems Isrirad-0.0 0.01 0.08 - - - - - 0.1 - Soathi Africa 0.34 0.55 0.68 0.83 0.58 0.19 0.19 3.4 0.7 'O1 8-tarre: FAO, Yearbook of Forest Prodlacte Staaitlari_Taes. Table SA16; HARDWOOI) (T'P^IICAL AND TEHPEIATE) CONSIJIPI'ION BY MHIOR RECIONS GrowtIh Rate X Share tn Total 1961 1965 1970 1973 1975 1977 1978 1961-78 1961 1977 (;t per annlum) ---------------------------------------nil l1 on id rou ndwood ---------------------- Pleveloplng Countries 36.3 41.3 45.9 56.7 63.8 70.4 78.5 4.6 22.9 29.9 Tropical prodiucing regions 33.0 36.8 40.9 50.7 55.1 60.2 66.3 4.2 20.8 25.6 Otlier developing 3.3 4.5 5.0 6.0 8.7 10.2 12.2 8.0 2.1 4.3 Industr1alized Countries 82.1 100.1 117.6 135.7 98.3 117.() 119.5 2.2 51.8 49.7 Western Europe (including Soutliern Europe) 26.9 31.4 36.7 43.0 31.3 38.1 41.2 2.5 17.0 16.2 - WJestern Furope (excludirig 0° Soutciern Europe) 24.0 27.2 31.7 36.6 25.8 32.0 34.6 2.2 15.1 13.6. Soutilern Europe (excluding Israel) 2.9 4.2 5.0 6.4 5.5 6.1 6.6 5.0 1.8 2.6 llolted States 33.0 41.4 40.1 43.2 31.6 37.3 37.0 1.7 20.8 15.9 Japan 11.8 14.9 26.0 34.0 21.6 25.4 26.0 5.7 7.4 10.8 Oclher indtustrialized 10.4 12.4 14.8 15.5 13.8 16.2 15.3 2.3 6.6 6.9 Market Economaies 118.4 141.4 163.5 192.4 162.1 187.4 198.0 3.1 74.7 79.7 Centrally Planned Econoilesi 40.2 38.6 43.6 44.6 47.9 47.8 47.1 1.1 25.3 20.3 WORLD T'OTAL 158.6 180.0 207.1 237.0 210.0 235.2 245.1 2.4 o1.0 1o0.'0 Menioratidum I tems Tsrat l 0.05 0.12 0.13 0.25 0.46 0.47 0.47 14.5 0.03 0.2 Sothli Africa 0.51 0.92 1.08 1.24 0.97 0.58 0.63 1.2 0.3 0.2 Notes (nianbers represent country codes In jrtntout); Westerai Euraoe (excluding Southiern Europe) - I1R RLeg 13 - plywood Uaaports fron (IS aiad Caooada. Southern Europe (excluding Israel) - I)K Reg 12 - Israel. Otlier Industrialized Canada, Auetralia, New Zealand, SoutLh AfriCia (deriveil as residtials). Tropical Producing Reglons - A8la-Paciftc, Africa, Latin Amertea (287,200,227). Otlier bwveloping - Processors and Temop. Latin America 286 + 284. Soilrce: FAO, Yearbook of Forest Prodaacts SIddald 'd'Tapes.' - 119 - Table SA17: HARDWOOD SAWNWOOD IN WESTERN EUROPE AND JAPAN, 1961 AND 1977 1961 1977 in million m3 Western Europe Production 9.36 13.39 of which, tropical n.a. 1.78 /a Imports (gross) 2.03 5.52 of which, tropical 1.10 /a 2.71 Exports (gross) 0.94 2.73 of which, tropical n.a. 0.19 Net Imports 1.09 2.73 Apparent consumption 10.45 16.18 of which, tropical n.a. 4.30 Japan Production 5.02 9./if of which, tropical 1.94 /a 4.a6 /a Imports (gross) - 0.26 of which, tropical - 0.24 /a Exports (gross) 0.25 0.05 of which, tropical - - Net Imports -0.24 0.21 Apparent consumption 4.78 9.67 of which, tropical 1.95 4.60 /a Estimated on the basis of the percentage share of tropical log imports in sawnwood making. Source: FAO, Yearbook of Forest Products, except for the figures footnoted a which are World Bank estimates based on the share of tropical log imports in sawnwood production. The data on such shares as well as on tropical sawnwood imports have been taken from the following sources: - ECE/FAO, "Study on the European Trade in Tropical Hardwood", Supplement 10 to Volume XXX of the Timber Bulletin for Europe, Geneva, July 1978; - Japan Forestry Agency, Ringyo Tokei Yooran (Forestry Statistics Summary), Tokyo, 1970. - Nanyozai Kyogikai, "Nanyo-zai Tookei (South Sea Timber Statis- tics)". - 120 - Table SA18: CONSUMPTION OF HARDWOOD PLYWOOD (INCLUDING VENEERS) IN WESTERN EUROPE, UNITED STATES AND JAPAN IN 1976 /a (million m3 roundwood equivalent) million m3(r) /a Western Europe (including veneers) Production of all hardwood plywood 6.5 of which, tropical 3.1 Net imports of tropical hardwood plywood 2.1 Apparent consumption of tropical hardwood plywood 5.2 United States (including veneers) Production of all hardwood plywood 2.7 of which, tropical - Imports 5.2 of which, tropical 5.1 Exports 0.3 of which, tropical - Apparent consumption of tropical hardwood plywood 5.1 Japan (plywood only) Production of all hardwood plywood 13.9 of which, tropical 12.6 Imports 0.2 of which, tropical 0.2 Exports 0.3 of which, tropical 0.3 Apparent consumption of tropical hardwood plywood 12.5 /a Figures given refer to the volume in roundwood equivalent. These figures may be roughly converted to plywood volume figures by dividing by 2.3. Source: FAO, Yearbook of Forest Products 1977 and lWorld Bank estimates based on information available from ECE/FAO Timber Committee and Japan Forestry Agency. Estimates for Western Europe and the United States include veneers while those for Japan are for plywood only. - 121 - Table SA19: PRICE OF LAUAN VENEERLOGS IN JAPAN,/a 1955-1980 In Current In Constant 1980 Dollars Def lated by: Dollars World Bank IPI /b US GDP Deflator - ---------------------US$ per m3(r)---------------------- 1955 25.3 105.4 74.8 1956 24.4 99.5 69.3 1957 23.5 91.5 64.2 195u 22.4 82.6 60.0 1959 26.4 102.4 68.2 1960 29.0 109.8 76.3 1961 30.0 113.2 77.5 1962 32.9 125.4 83.4 1963 32.1 121.5 80.0 1964 27.4 102.0 67.1 1965 31.7 115.3 76.3 1966 33.3 118.5 77.5 1967 35.6 125.0 80.2 1968 36.5 136.8 79.7 1969 35.2 131.0 72.4 1970 37.2 125.5 73.4 1971 38.0 118.2 71.0 1972 37.6 106.3 67.6 1973 65.6 155.6 112.2 1974 78.6 150.6 122.7 1975 59.3 99.2 84.2 1976 79.6 130.9 107.6 1977 89.8 135.9 114.9 1978 91.8 117.5 109.5 1979 160.2 178.9 175.0 1980 192.9 192.9 192.9 /a National average. /b World Bank International Price Index. Source: Forestry Agency of Japan, MokAizai Shikyo Geppo, various issues. - 122 - Table SA20: PRICE OF MERANTI SAWNIWOOD,/a CIF FRENCH PORTS, 1958-1980 In Current In Constant 1980 Dollars Deflated by: Dollars World Bank IPI /b US GDP Deflator --US$ per m3(s) -------------------- 1958 74.3 273.9 199.1 1959 68.0 263.7 175.6 1960 84.9 321.5 223.3 1961 68.6 258.9 177.1 1962 71.8 273.7 182.2 1963 76.5 289.7 190.6 1964 82.5 307.2 202.0 1965 81.4 296.2 195.9 1966 73.1 260.0 170.2 1967 76.9 270.1 173.3 1968 84.1 315.2 183.7 1969 90.2 335.8 185.6 1970 92.9 313.5 183.2 1971 92.5 287.8 172.8 1972 109.5 309.6 196.8 1973 156.1 370.2 267.1 1974 143.1 274.2 223.3 1975 166.4 278.2 236.3 1976 168.1 276.5 227.3 1977 154.1 233.2 197.1 1978 205.4 262.8 245.1 1979 339.1 378.8 370.4 1980 365.1 365.1 365.1 /a Dark Red Meranti, standard density, Malaysian. /b World Bank International Price Index. Source: Marches Tropicaux et Mediterraneens (L!Exportateur Francais, Paris), various issues. - 123 -. Table SA21: PRICE OF PLAIN LAUAN PLYWOOD IN JAPAN,/a 1963-1980 In Current In Constant 1980 Dollars Defl.ated by: Dollars World Bank IPI /b US GDP Deflator - -----------------(US cents per sheet)----------------- 1963 83.3 315.4 207.5 1964 64.7 240.9 158.4 1965 61.1 222.3 147.1 1966 73.6 261.8 171.3 1967 80.0 281.0 180.3 1968 79.4 297.6 173.5 1969 84.4 314.2 173.7 1970 103.1 347.9 203.3 1971 81.8 254.5 152.8 1972 195.4 269.8 171.5 1973 188.8 447.7 323.0 1974 152.7 292.6 238.3 1975 121.6 203.3 172.7 1976 147.8 243.1 199.9 1977 165.1 249.9 211.2 1978 189.5 242.5 226.1 1979 262.5 293.2 286.7 1980 273.8 273.8 273.8 /a Three-ply, extra, 91 cm x 182 cm x 4 mm, wholesale price in Tokyo, spot price. /b World Bank International Price Index. Source: Forestry Agency of Japan, Mokuzai Shikyo Geppo, various issues. - 124 - Table SA22: US IMPORTS OF HARDWOOD PLYWOOD BY MAJOR SUPPLYING AREAS, 1950-1979 Prov. of Rep. of Other Total Japan Philippines Taiwan Korea Sources Imports -----million m2 surface measure /a--------------- 1950 0.5 - /b - /b - /b 5.4 5.9 1951 1.2 - /b - /b - /b 5.3 6.5 1952 1.6 - /b - /b - /b 6.3 7.9 1953 9.8 -b - /b - /b 10.7 20.5 1954 26.8 0.1 - /b - /b 13.4 40.3 1955 39.8 0.9 - /b - /b 17.6 58.3 1956 49.0 1.4 - /b - /b 15.2 65.6 1957 63.2 3.1 0.3 /b 12.0 73.6 1958 62.2 9.4 2.2 - /b 10.9 84.7 1959 75.3 19.8 3.5 - /b 25.0 123.6 1960 63.9 11.0 4.2 - /b 15.1 94.2 1961 61.4 14.2 10.1 1.5 14.7 101.9 1962 68.8 19.9 19.7 4.8 20.5 133.7 1963 68.7 22.9 25.4 11.2 22.4 150.6 1964 63.2 33.0 42.9 19.1 22.7 180.9 1965 71.3 28.6 43.5 31.3 23.4 198.1 1966 72.8 37.0 49.1 53.3 25.1 237.3 1967 58.7 43.8 45.1 65.2 22.5 235.3 1968 85.6 55.9 77.1 108.4 29.9 356.9 1969 74.5 53.1 87.0 147.7 36.3 398.6 1970 57.9 53.0 87.3 166.0 23.0 387.2 1971 55.6 55.0 129.6 209.1 31.6 480.9 1972 48.2 59.8 187.8 266.2 35.1 597.1 1973 31.7 64.6 127.0 227.0 28.4 478.7 1974 22.7 25.9 87.0 157.4 18.1 311.1 1975 22.3 20.8 94.0 212.7 13.1 362.9 1976 29.0 32.8 110.5 258.8 14.6 445.7 1977 33.1 21.5 106.8 248.7 16.4 426.5 1978 23.7 29.0 162.8 231.6 24.5 471.6 1979 /c 17.9 33.9 147.7 176.5 14.2 390.2 1980 /c 13.9 20.0 89.2 94.8 4.1 222.0 /a Converted to 0.092903 m2 per square foot. /b Less than 30,000 m2. -c Preliminary estimates. Source: US Department of Agriculture Forest Service, "An Analysis of the Timber Situation in the United States, 1952-2030", Review draft. US Department of Commerce, Forest Products Review, Spring 1981, vo. xxxvii, no. 1, p. 47. - 125 Table SA23: SHARES OF MAJOR SUPPLIERS IN TOTAL US LMPORTS OF HARDWOOD PLYWOOD, 1950-1978 Prov. of Rep. of Asia Japan Philippines Taiwan Korea Total/a Caniada ----------------------------percent------------------------------ 1950 8.1 0.5 - - 8.5 79.0 1951 18.3 0.1 - - 18.7 67.2 1952 20.3 0.1 0.1 - 20.7 67.2 1953 47.6 0.2 ot2 - 48.3 23.1 1954 66.6 0.3 - - 67.2 16.4 1955 68.2 1.6 - - 70.0 15.8 1956 74.6 2.1 0.1 - 76.9 11.5 1957 80.3 3.9 0.4 - 84.8 7.6 1958 73.5 10.7 2.6 - 87.2 4.7 1959 61.0 16.1 2.8 - 81.4 4.5 1960 67.9 11.7 4.5 - 84.5 4.2 1961 60.2 14.0 9.9 1.4 87.7 3.8 1962 51.4 14.9 14.8 3.6 88.2 3.9 1963 45.6 15.2 16.8 7.4 88.1 4.4 1964 34.9 18.2 23.7 10.5 89.7 3.5 1965 36.0 14.4 22.0 15.8 90.6 3.0 1966 30.7 15.6 20.7 22.5 91.2 2.5 1967 25.0 18.6 19.2 27.7 93.0 1.9 1968 24.0 15.7 21.6 30.4 94.2 1.4 1969 18.7 P3.3 21.8 37.1 94.3 0.9 1970 15.0 13.7 22.5 42.9 95.9 0.9 1971 11.6 11.4 27.0 43.5 96.4 0.9 1972 8.1 9.5 21.5 44.6 96.7 1.1 1973 6.6 13.5 26.6 47n5 96.4 1.4 1974 7.3 8.3 28.0 50.6 96.4 1.4 1975 6.2 5.7 25.9 58.6 97.4 1.3 1976 6.5 7.4 24.8 58.1 97.3 1.1 1977 7.8 5.0 25.0 58.3 96.8 1.5 1978 5.0 6.2 34.5 49.1 97.0 1.5 1979 4.6 8.7 37.9 45.2 n.a. n.a. 1980 6.3 9.0 40.2 42.7 n.a. n.a, /a Includes "other Asia" not separately shown. Source: Statistical Appendix Table SA22. - 126 - Table SA24: PLYWOOD: RATIO OF EXPORTS TO PRODUCTION IN SELECTED ASIAN PRODUCERS, 1948-1979 Prov. of Rep. of Japan India Taiwan Korea Philippines N;alaysia ------------------------------ 1948 1.8 - - - 1949 6.1 - - - 1950 10.7 - - - - 100.0 1951 21.0 - - - - 100.0 1952 7.4 - - - - 20.0 1953 14.2 - - - 40.0 1954 30.7 - - - (5.3) 16.7 1955 34.3 - - - (11.1) 33.3 1956 30.5 - 8.3 - (22.2) 40.0 1957 33.5 - 14.3 - (25.9) 28.6 1958 32.3 - 45.5 - (60.5) 16.7 1959 32.9 - 48.5 3.7 (72.7) 100.0/a 1960 27.5 - 55.6 6.9 (36.7) 100. 1961 23.0 - 80.0 26.7 65.2 28.6 1962 19.5 - 81.8 21.4 61.8 30.0 1963 16.5 - 87.5 54.5 69.2 16.7 1964 14.7 - 91.6 70.3 73.3 50.0 1965 14.5 - 88.8 79.1 56.4 35.7 1966 12.2 1.0 88.9 78.5 55.5 30.5 1967 8.9 1.0 89.7 70.7 41.7 55.6 1968 9.0 1.8 86.5 85.3 84.5 59.2 1969 6.7 4.5 94.6 86.4 60.4 62.2 1970 4.7 7.8 89.7 97.0 40.0 73.1 1971 4.5 4.2 88.9 loo.oia 43.3 82.7 1972 3.5 4.6 84.3 ioo1.oa 43.3 82.1 1973 1.7 18.3 83.2, 89.3 55.0 94.7 1974 1.7 20.3 73.0 8A<.6 62.4 69.1 1975 1.9 11.8 73.0 87.6 37.1 57.7 1976 1.9 23.4 70.3 97.1 62.5 77.5 1977 1.7 10.1 74.4 74.4 69.5 60.9 1978 1.3 8.5 77.2 45.1 78.2 88.2 1979 1.3 3.9 74.3 55.5 80.7 88.2 /a Over 100.0 Source: See Tables 3.3 and 3.4, - 127 - Table SA25: INDONESIA--PRODUCTION, EXPORTS AND CONSUMPTION OF LOGS, 1970-1979 Net V,olume Estimated input into Loas Available Local Processing Discrepancy For Local Production Exports Processing Sawmills/2 PlIwoodŽb Total x3)-(o) (1) (2) (3) (4) (5) (7) ------------------million m3(r)------------------------------- 1970 10,78 7.83 2.95 3.40 0.'D2 3.42 -0.47 1971 13.81 10.82 2.98 3.41 0.02 3.43 -O.45 19-72 16.92 13.35 3.57 3.41 0.Oi 3.42 0.15 1973 26.30 18.50 7.80 2.76 0.02 2.78 5.02 1974 21.73 16.87 4.86 3.84 0.05 3.89 0.97 1975 16.70 12.88 3.81 3.45 0.24 3.69 0.12 1976 23.80 18.11 5.70 3.84 0.44 4.28 1.42 1977 23.49 18.93 4.56 4.02 0.61 4.63 -0.07 1978 27.81 19.46 8.35 5.00 1.05 6.035 2.30 1979 27.50 17.58 9.92 6.21 1.33 7.54 2.38 /a Assuming 50% recovery. /b Assuming 45% recovery. Source: FAO for Log production 1970-1977 and log exports 1970-1978; production 1973- 1979 Indonesian Timber Association for log. - 128 - Table SA26: SELECTED INDICATORS FOR PLAIN PLYWOOD PRODUCTION IN JAPAN, 1970-73 and 1977-79 (A) (B) (C) (D) Production Gross value volume per Wood Wages/salaries 3-year added to logs employee recovery per employee Average per m3of logs (4mm basis) rate per year (1979 US$)/a m2 (plywood) % (1979 US8)/a 1970-73 154.74 34,836 53.33 6,757 (index) (100.0) (100.0) (100.0) (100.0) 1977-79 68.13 59,419 64.43 10,687 (index) (44.0) (170.6) (120.8) (158.2) /a Deflated by the World Bank Index of Inflation. Source: (A) - Table 3.8 (B), (C) and (D) - Plywood Information Center of Japan Federation of Plywood Manufacturers' Association, "Nichigooren Jihoo," News- letter No. 45, June 30, 1980. - 129 Table SA27: VALUE ADDED AS PERCENT OF GROSS OUTPUT IN WOOD PROCESSING INDUSTRY IN SELECTED COUNTRIES Peninsula Republic of _l_alaysi_a Indonesi_b Philippines/C Korea/d 1959 38.7 1960 40.6 1963 37.0 34.7 1966 22.7 1967 23.5 1968 37.8 30.6 1969 20.5 1970 35.6 38.6 1971 28.4 1972 34.6 1973 36.9 1974 34.2 37.8 1975 /a MIC (1972) Industrial Group Code 331, "wood, and wood and cork prod- ucts". /b "Wood and wood product" in 66 order Input-Output Table. /c "Wood manufacturing" (excluding furniture and pulp/paper). /d Plywood and veneer panels. Source: Malaysia - Vinod Prakash, "A Study of Growth Performance and Outlook of Manufacturing Sector in Malaysia," p.152. Indonesia - World Bank, "Problems and Prospects for Industrial Development in Indonesia," vol. 1, p. 96. Philippines - World Bank, "Industrial Development Strategy and Policies in the Philippines," vol. III, p. 13. Korea - US Agency for International Development, "Survey of the Korean Plywood Industry and International Plywood Markets". - 130 Ref erences Balassa, Bela, "Export Incentives and Export Performance in Developing Countries: A Comparative Analysis," Weltwirtschafliches Archiv, Vol. 114, No. 1, 1978. , A "Stages" Approach to Comparative Advantage, World Bank Staff Working Paper No. 256, May 1977. , The Process of Industrial Development and Alternative Development * Strategies, World Bank Staff Working Paper No. 438, October 1980. Baldwin, R.E., Foreign Trade Regimes and Economic Development: The Philippines, National Bureau of Economic Research, New York, 1975. , Foreign Trade Regimes and Economic Development: The Philippines Philippine Institute of Development Studies, Manila, 1979. Bautista, Romeo M., "The Development of Labor-Intensive Industry in the Philippines," School of Economics, University of the Philippines, July 1979, (mimeographed draft). Bhagwati, J.N., T. Srinivasan, Trade Policy and Development in International Economic Policy: Theory and Evidence, Baltimore, 1978. Bhalla, A.S., Technology and Employment in Industry, International Labor Office, Geneva, 1975. Bollmann, Elizabeth, B., The Timbering and Wood-Processing Industries of Indonesia, US Embassy, Jakarta, April 1980, (mimeographed). Cheetham, R.J., E.K. Hawkins, The Philippines: Priorities and Prospects for Development, World Bank, 1976. China, Republic of, Council for Economic Planning and Development, Industry of Free China, Taipei, monthly (in English), various issues. Commercial Advisory Foundation, "A Brief Review with Statistical Figures on Export Prospects of Sawn Timber From Indonesia," DKI Jaya Forestry Service Circular Jakarta, No. 207, May 7, 1980. - 131 References (Continued) DeVries, Barend A., Transition Towards More Rapid and Labor-Intensive Industrial Development: The Case of the Philippines, World Bank Staff Working Paper No. 424, 1980. Doffine, A., "FAO Portfolio of Small Scale Wood-Based Panel Plant Plywood," Doffine Consult GMBH, 1977. ECE/FAO, "European Timber Trends and Prospects 1950 to 2000," Timber Bulletin for Europe, Vol. 29, Geneva, 1976. ECE/FA0, "Study on the Trade and Utilization of Tropical Hardwoods," Timber Bulletin for Europe, Supplement 10 to Vol. 30, Geneva, July 1978. Erfurth, T., H. Rusche, The Marketing of Tropical Wood: Wood Species from African Tropical Moist Forests, FAO. 1976. ,_ The Marketing of Tropical Wood: Wood Sources from East Asian Tropical Moist Forests, FAO Misc./76/8, April 1976. , The Marketing of Tropical Wood: Wood Species from South American Tropical Moist Forests, FAO, 1976. EC, Official Journal of the European Communities, L342, Vol. 22, Dec. 31, 1979, Brussels. FAO, "Forest Products Prices 1961-1980," FAO Forestry Paper No. 23, 1981. FAO, Yearbook of Forest Products, various issues. FAO, Yearbook of Forest Products Standard Tapes, 1961-79. FAO/World Bank Cooperative Programme Investment Centre, "Draft Report of the Indonesia Forestry Project Identiication Mission", 1979, (mimeo- graphed). Forestry Agency of Japan, "Mokuzai Shikyo Geppo" (Monthly Wood and Wood Products Report), Tokyo, various issues (in Japanese). Haeruman, Herman, Indonesian Forestry Development and Foreign Investment, UN Economic and Social Commission for Asia and the Pacific, Bangkok, Dec. 1978. - 132 - References (Continued) Hong, Wontack, Factor Supply and Factor Intensity of Trade in Korea, Korea Development Institute, Seoul, 1976. , Trade Distortions and Employment Growth in Korea, Korea Development Institute, Seoul, 1979. Hsing, Mo-Huan, Taiwan: Industrialization and Trade Policies, Oxford University Press, London, 1971. Indonesia, Investment Coordinating Board, Timber and Timber Based Industries, Jakarta, 1979. Indonesian Plywood Producers Association (APKINDO), Plywood Industry in Indonesia, Jakarta, 1977 and 1979. Indonesian Plywood Producers Association, Brief Notes on Investment Environ- ment in Indonesia, presented at FAO Committee on Wood-Based Panels, Rome, April 1980. Indonesian Sawmillers' Association, Directory of Indonesian Sawmil-lers, Jakarta, October 1977 (revised edition), and Sept. 1978. Ismail, Harun Bin, Some Issues in the Development of Integrated Timber Complexes in Peninsular Malaysia, for FAO/SIDA Workshop in Forestry Development Planning, August 16-September 4, i976, Manila; prepared at Forestry Department, West Malaysia, Kuala Lumpur, (mimeographed draft). Japan External Trade Organization, Kankoku no Goohan (Plywood in Korea), Tokyo, 1977, (mimeographed) in Japanese. Japan Lumber Importers' Association (Nihon Mokuzai Yunyu Kyokai), Niju-nen no Ayumi (Progress of Twenty Years), Tokyo, 1970. Japan Lumber Journal, "Nanyozai Freight Agreement", June 30, 1980, Tokyo, (in English). Japan Tariff Association, Customs Tariff Schedules of Japan, Tokyo, 1979. Karger, H.J., Development Prospects and Investment Opportunities in the Wood Working and Wood Processing Industries in Indonesia, HWWA-Report No. 50, Hamburg, Dec. 1978. Keesing, Don, "'Outward-Looking Policies and Economic Development," Economic Journal LXXVII, June 1967c - 133'- References (Continued) Keil, C.E.M., Logging and Log Processing in Indonesia - Forestry Sector Input Study for Basic Economic Work, World Bank Working Document, April 1978, (mimeographed). Kim, Kwang Suk, "Outward-Looking Industrialization Strategy: The Case of Korea," Wontack Hong and Anne 0. Krueger (eds.), Trade and Development in Korea, Korea Development Institute, Seoul, 1975. ,_ Industrialization and Structural Change in Korea, Korea Development Institute, Sept. 1978, (mimeographed draft). Kitamura, Kazuo, Mokuzai-Gyokai (The Wood Industry). Industry Series No. 49 Kyoikusha, Tokyo, 1976, in Japanese. Koehler, K.G. "Wood Processing in East Kalimantan - A Case Study of Indus- trialization and Foreign Investment in Indonesia" Bulletin of Indonesian Economic Studies, Vol. VIII, No. 3, Canberra, Nov. 1972. Korea Development Bank, Industry in Korea 1980, Seoul, 1980. Korea Trade Association, The Current State of Korea's Competitiveness of Major Manufactured Exports and Policies Thereof - Shoes, Plastics, Plywood, Tires and Toys, Research Report No. 81-5, Seoul, Feb. 1981, (mimeographed, in Korean). Krause, Lawrence and Sueo Sekiguchi. "Japan and the World Economy", in H. Patrick and H. Resovsky (eds.) Asia's New Giant: How the Japanese Economy Works, Brookings Institution, Wash., D.C., 1976. Krueger, Anne 0., Foreign Trade Regimes and Economic Development: Libera- lization Attempts and Consequences. Cambridge, Mass. Ballinger for National Bureau of Economic Research, 1978. Lanly, J.P. and J. Clement, Present and Future Forest and Plantation Areas in the Tropics, FAO, Rome, Jan. 1979. Lary, Hal B., Imports of Manufactures From Less Developed countries, Columbia University Press, New York, 1968. Lee, T.H. and Kuo-shu Liang, "Incentive Policies and Economic Development in Taiwan", in Bela Balassa (ed.).Development Strategies in Semi- Industrial Countries, Johns Hopkins University Press, Baltimore (forth- coming). - 134 - References (Continued) Lin, Ching-Yuan, Industrialization in Taiwan, 1946-72: Trade and Import- Substitution Policies for Developing Countries, Praeger Publishers, Inc., New York, 1973. Little, Ian M.D., Tibor Scitovsky and Maurice Scott. Industry and Trade in Some Developing Countries: A Comparative Study, Oxford University Press for OECD, London, 1970. Marches Tropicaux et Mediterraneens, monthly, Paris, various issues. Munang, M., Forest Resources Base, Policy and Legislation of Sabah, 7t-h Malaysian Forestry Conference, Penang, Sept. 1979, (mimeographed). Nanyozai Kyogikai, Nanyo-Zai Tookei (South Sea Lumber Statistics, 1977 edition, Tokyo, 1978, (mimeographed) (in Japanese). Paauw, Douglas S., Frustrated Labour-Intensive Development: The Case of Indonesia, ILO Asian Employment Program Working Paper, June 1979, (mimeographed draft). Papua New Guinea Office of Forests, Compendium of Statistics 1978, Boroko, 1979. , White Paper - Revised National Forest Policy, Hohola, 1979. , Facts and Figures, 1980 Edition, Boroko, 1980. Philippine Chamber of Wood Industries, Wood Industries, 1971, Manila, 1972. Philippines Ministry of Natural Resources, Bureau of Forest Development, Philippine Forestry Statistics, 1978, Quezon City, 1979. Philippine Forestry Statistics, 1979, Quezon City, 1980. Plywood Information Center of Japan Federation of Plywood Manufacturers' Associations, Nichigooren Jihoo, Newsletter No. 45, Tokyo, June 30, 1980, (in Japanese). Power, John H., Gerado P. Sicat, The Philippines: Industrialization and Trade Policies, Oxford University Press, London, 1971. Prakash, Vinod, A Study of Growth Performance and Outlook of Manufacturing Sector in Malaysia, World Bank internal document, July 1980, (mimeo- graphed). - 135 - References (Continued) Pringle, L.S., The Role of the Tropical Moist Forest in World Demand, Supply and Trade of Forest Products, FAO-DOK, No. FO/FDT/76/lO(a), Rome, Aug. 1976. Ranis, Gustav, "Industrial Development," in Walter Galenson (ed.), Economic Growth and Structural Change in Taiwan, Cornell University Press, Ithaca, 1979. Revilla, A..V., Jr. and M. L. Bonita, Directory for Development of the Philippine Forest Resources, Philippine Forestry Congress, 1978. , Land Assessment and Management for Sustainable Uses in the Philip- pines, presented at the Conference on Forest Land Assessment and Management for Sustainable Uses at the East-West Center, Honolulu, June 1979. , Critical Issues in Forest Resources Management in the Philippines. Inaugural lecture for the SEARCA Professional Chair in Forest Resource Management, Laguna, Aug. 1979. Roemer, Michael, and Malaysia Economic Planning Unit, Report on Industry Strategy Studies, Malaysian Economic Planning Unit, Kuala Lumpur, Jan. 1980. (mimeographed). Rola, Bienvenido R., The Philippine Forestry Economy: Moving Towards Regional Supply Rationalization, UNDP/ESCAP, DP/STH/5, Bangkok, Oct. 1977. Sadikin, Djajapertjunda, Information on Tropical Hardwood from Indonesia, UNDP/ESCAP, Jakarta, Sept. 1977, (mimeographed). Sanvictores, Benjamin F., A Study on the Possibilities of Establishing Trade-Creating Joint Ventures in Wood and Wood Based Products, UNDP/ ESCAP, Bangkok, July 1980. (mimeographed). Schmithusen, Franz, Handbook on Forest Utilization Contract on Public Land, UNDP/FAO, Rome, 1963. Song, Son, The Growth of Plywood Industry, Korean Development Institute, Seoul, June 1978. (mimeographed). Soo, Ann Lee, Industrialization in Singapore, Longman, Australia, 1973. - 136 - References (Continued) Stadelman, Russel, C., The United States Market for Tropical Hardwoods, seminar on the Utilization of Tropical Hardwoods, sponsored by ECE Timber Committee, Amsterdam, May 1979, (mimeographed). Tack, P.E. Particleboard Production for Developing Countries, UNIDO: ID/WG.200/7, Vienna, 1975. Taiwan Bank for Small and Medium Enterprises, Research Department, Taiwan's Plywood Industry, Taipei, Jan. 1981, (in Chinese). Takeuchi, Kenji, Tropical Hardwood Trade in the Asia-Pacific Region, World Bank Staff Occasional Paper No. 17, 1974. Tan, Augustin H.H., and Ow Chin Hock-, "Incentive Policies and Economic Development in Singapore" in Bela Balassa (ed.) Development Strategies in Semi-Industrial Countries: John Hopkins University Press, Baltimore (forthcoming). Timber Committee of the United Nations - ECE, Wood-Based Panels in the 1980s, The Finnish Paper and Timber Journal Publishing Company, Helsinki, 1980. Tuolumne Corporation, Market Study for Forest Products from East Asia and the Pacific Region, San Francisco, July 1971. UNCTAD, Consideration of International Measures on Tropical Timber, report prepared jointly by the secretariats of UNCTAD and FAO, TD/B/IPC/TIMBER 2, Geneva, May 1977. , Consideration of International Measures Relative to Research and Development on Tropical Timber, Preliminary Report TD/B/IPC/TIMBER/7, Geneva, Dec. 1977. _, Research and Information on Use Properties of Tropical Wood Species, DOC. TD/B/IPC7TIMBER/19, July 18, 1978 (prepared by FAO). UNDP/FAO, Sabah Timber Industry - Royalty Appraisal and Market Study, Malaysia, FO:DP/MAL/77/016, FAO, 1980. UNIDO, Wood Processing for Developing Countries, Report on a workshop ID/180, Vienna, Nov. 1975. - 137 References (Continued) US Agency for International Development, Office of Economic Analysis and Reporting, (1972), Survey of the Korean Hardwood Plywood Industry and International Plywood Markets, Seoul, 1972, (mimeographed). US Department of Agricultuire, Forest Service, The Outlook for Timber in the United States, Forest Resource Report No. 20, Wash., D.C., 1973. -..,. The Demand and Price Situation for Forest Products, 1969-70, Wash., D.C., 1971. US Department of Commerce, Bureau of Census, Softwood Plywood, Current Industry Reports Series No. MA-24H, (annual). i U.S. Exports: Schedule B Comoodity by Country, Ft 410, (monthly). , U.S. Imports for Consumption and General Imports: TSUSA Commodity by Country of Origin, FT 246, (annual). , Hardwood Plywood, Current Industrial Reports, Serial No. MA-24F, (annual). Valdepenas, Vicente B., The Protection and Development of Philippines, Manufacturing, Ateneo University Prross, Manila, 1970. Vernon, Raymond, The Technology Factor in International Trade, Columbia UJniversity Press, New York, 1970. Westphal, L.E., and K.S. Kim, Industrial -olicy and Development in Korea, World Bank Staff Working Paper No. 263, Aug. 1977. , Yung W. Rhee, and Garry Pursell, Korean Industrial Competence: Where it Came From, World Bank Staff Working Paper No. 469, July 1981. , Empirical Justification for Infant Industry Protection, World Bank Staff Working Paper No. 445, March 1981. Wood Industry Development Study Group and Atlanta Industrie und Inter- nehmemsberatung Gmbh. Philippines Wood Industry Study Base Survey I: Forest Resources Base Study, Hamburg, Oct. 1980. World Bank, Commodity Trade And Price Trends, Aug. 198O0 - 138 - References (Continued) , Philippines: Appraisal of the Smallholder Treefarming and Forestry Project, Restricted internal document, 1977. _ Industrial Development Strategy and Policies in the Philiopines, Confidential Report No. 2513-PH, 3 volumes, Oct. 1979. _ Problems and Prospects for Industrial Development in Indonesia, Confidential Report No. 1647-IND, 2 volumes, May 1978. ,_ Philippines: Samar Island Rural Development Project, Restricted internal document, Nov. 1979.