Financial and economic profitability of reforestation in Thailand

Abstract

It is commonly acknowledged that the economic profitability of reforestation differs considerably from financial profitability if market prices include price effects of distortions due to market or policy failures. Although these failures are common, especially in developing countries, few studies exists where the economic and financial profitability of reforestation are assessed separately. In this study, the financial and economic profitability of industrial, community- and agroforestry-based reforestation were assessed in Northeast Thailand. The profitability was evaluated for single species plantations using Eucalyptus camaldulensis Denhn. and Tectona grandis L., and simple-formed agroforestry-based reforestation where cassava Manihot esculenta Crantz. was intercropped for three years together with the tree species. With the assumptions made in this study, it was more profitable to invest in reforestation from the point-of-view of the society, than from the point-of-view of a private investor. The economic land expectation value (LEV) in reforestation, for example, was 12–52% higher than the financial LEV. Planting teak was more profitable than planting eucalypt. Cropping of cassava between tree rows decreased the financial and economic profitability of reforestation. The decrease in the LEV in intercropping was mainly due to a poor—although rather common in Northeast Thailand—selection of agricultural species for cultivation. As expected, the LEVs were highly sensitive to the changes in the growth and yield and stumpage prices, which may vary in real circumstances.