Financial and ecological analysis of management options for logged-over Dipterocarp forests in Indonesian Borneo

Abstract The sustainable management of areas of logged-over tropical forests requires an understanding of the potential yield from the forest and likely financial performance of the management system. This paper describes an analytical approach that involves the linkage of a simulation model of forest growth and yield to a financial model based on data from a forest concession in East Kalimantan (Indonesian Borneo). The growth and yield model SYMFOR (silviculture and yield management for tropical forests) was linked to a financial model derived for a forest concession managed under the Indonesian selective logging and replanting system (TPTI). This combined approach was used in this study to predict the likely timber yield for contrasting management regimes and then to calculate estimates of the financial performance described as the internal rate of return (IRR) and net present value (NPV) of the forest estate. This approach was used in a study that compared the standard TPTI system with alternatives that combined reduced impact logging (RIL) techniques with alternative systems of yield regulation. The TPTI system regulates timber yield using a single diameter limit given for each type of forest (currently two categories for lowland Dipterocarp forests and one for swamp forest). The alternative systems that were evaluated included one defined by a maximum of eight harvested stems per hectare and others based on maximum volume extracted of either 50 or 60 m3 ha−1. Each of these systems was evaluated for cutting cycle lengths of 25, 35 and 45 years. These management regimes were implemented for a simulated period representing three additional cutting cycles. The impacts of alternative management regimes were compared through statistical analysis of the results from the simulations that was able to remove the effect of the very significant variability between experimental plots. The results of this analysis clearly demonstrated that the conventional TPTI management system failed to achieve criteria of sustainability for timber yield and financial performance. Average yields dropped from over 80 m3 ha−1 for the first simulated harvest from the logged-over area (second harvest) to between 35 and 40 m3 ha−1 for the third and fourth harvests. The financial analysis showed that this system was not viable after the second harvest leaving the only financially viable alternative of land conversion after clear felling of the remaining forest. The alternative management regimes based on reduced impact logging and more effective systems of timber yield regulation performed much better. The study suggested that management systems based on a cutting cycle of 35 years with yield regulated to 50 m3 ha−1 or 45 years with yield regulated to 60 m3 ha−1 were the best alternatives to the current TPTI system. Neither of these two alternatives was able to consistently achieve the desired internal rate of return of 16% unless there were also decreases in wastage associated with the harvesting and timber extraction. Optimisation techniques where used to determine the combination that would produce an internal rate of return of at least 16%. This process suggested that the concession studied would be able to achieve or exceed this criterion over all harvests when (a) a management regime involving a cutting cycle of 45 years is combined with a yield regulation system harvesting a maximum of 60 m3 ha−1 and (b) the efficiency of timber conversion increases from 52 to 60%. It is considered that this is readily achievable using existing methods and appropriate training. The methods described in this paper can be transferred to other concessions or countries and may be modified to utilise alternative growth and yield or financial models. The paper also indicates that the approach could be adapted to consider a wider range of goods and services provided by forests to extend the analysis into a more comprehensive economic analysis. A preliminary consideration of these issues demonstrated that the system of management selected on the basis of timber yield and financial performance will also provide benefits for the environment and local communities.