Economic Returns from Conserving Natural Forests in Sekong Province

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1 Economic Returns from Conserving Natural Forests in Sekong Province Among Asian countries, the Lao PDR is noted for its high forest cover (41.5%). However, this is currently decreasing at the rate of 100, ,000 hectares per year. A major reason is that some decision makers, monoculture commercial farmers and loggers consider only the forest's commercial value (e.g. timber), and not its importance for biodiversity and local livelihoods (e.g. NTFPs). There is a growing recognition that protecting watersheds secures local livelihoods. Some efforts to increase forest cover (e.g. reduced slash-and-burn agriculture and reforestation programmes) are being undertaken. Given the dependence of local communities on NTFPs, there is an ongoing debate about whether degraded forests should be transformed into plantation forests to increase long-term national and provincial income, or whether they should be allowed to regenerate naturally thereby favouring biodiversity and protecting the livelihoods of current and future generations. Economic Returns from Conserving Natural Forests in Sekong Province 191

2 To demonstrate the links between biodiversity and current sectoral priorities and development needs, a joint study was carried out by the Lao National Mekong Committee, the Ministry of Agriculture and Forestry, and the National Economic Research Institute to calculate the economic returns from conserving forests in Sekong Province. The objective was to persuade development and economic sectors to integrate biodiversity issues into their policies, plans, and budgets by highlighting the economic value of maintaining naturally regenerating forests. Rural poverty and abundant natural resources Most of the pristine forest in Laos is located in the south. The provincial government estimates that 66% of Sekong's households are poor and GDP per capita is estimated at US$120, well below the national average. In 2001, the population was 71,386 (35,987 female) over 7,665 km 2, making Sekong the second smallest province in Laos with the lowest population density in the country (9.5 persons/km 2 ). 192 Improving Livelihoods in the Uplands of the Lao PDR

3 The Annamites are a significant source of livelihoods, providing: Watershed protection for flood prevention and urban water supply Biodiversity-based activities e.g. agriculture and aquaculture Hydropower and associated activities Non-timber forest products (NTFPs) Timber Sekong is part of the Central Annamites, a mountain chain that runs along the Lao- Vietnamese border down into Cambodia and is one of five priority regions in the World Wildlife Fund's Ecoregion Conservation Programme. Of particular importance is the presence of rare, endemic and threatened taxa, including large mammals such as Tiger, Clouded Leopard, and Asian Elephant. Biodiversity is high, with 178 species identified including three of international importance - Crested Argus, Green Peafowl and Spotbellied Eagle Owl. With Sekong's high level of poverty, many rural communities have difficulty meeting subsistence needs, especially at the end of the dry season, when NTFPs become an important component of their diet. The incidence of acute malnutrition and chronically energy deficient children is high in Sekong compared to in other provinces. Economic development is high on the provincial agenda and given the relative good state of the forests, the provincial government has put forward a strategy to increase income by harvesting its natural resources. In compliance with national strategies, a vital component of the five-year socio-economic development plan for Sekong is to stop slash-and-burn activities and forest degradation. To meet national and provincial quotas on timber harvesting while simultaneously increasing the forest cover, certain degraded forests are being allocated for tree plantations. Measuring forest economic values The economic value of Sekong forests includes direct and indirect use values derived through Economic benefits and beneficiaries of Sekong forests Economic Returns from Conserving Natural Forests in Sekong Province 193

4 the following study sub-objectives: a) Direct use values in terms of their contribution to livelihoods. b) Financial returns from sustainable uses, mainly sustainable timber harvesting. c) Indirect use values in terms of their contribution to watershed protection, biodiversity conservation and carbon sequestration. Two methods were used to calculate NTFP values. The first took the market prices of goods together with the estimated harvest. Focus groups in three villages discussed specific species and quantities harvested. The second was the Participatory Environmental Valuation technique whereby local villagers expressed NTFP Economic benefits from forests 194 Improving Livelihoods in the Uplands of the Lao PDR

5 values within the context of their own perceptions, needs and priorities rather than through conventional cash-based techniques. Cash measurements are of little relevance in subsistence economies, and worth is better expressed through a product that is accepted and accorded a high value in the village. It is important that the product has a market value, even if the respondents are not aware of how much that may be. In this study, rice was used. Villagers were asked to rank all the products extracted from the forest by placing counters on each product harvested. The number of counters signifies the importance placed on that particular product. The value of each product was then expressed relative to the value placed on rice. Results of the Participatory Environmental Valuation and the focus groups were compared to validate each other. Ideally, surveys should be random to include more respondents. The indirect values were watershed protection, biodiversity conservation and carbon sequestration. Watershed protection considers the forest as protecting downstream users from irrigation facilities, micro-hydropower, lowland agricultural production, and against floods and sedimentation. The production value of fisheries, agriculture and hydropower are estimated. The avoided costs from these damages represent the value of watershed protection. Biodiversity conservation was estimated using the revealed willingness to pay of the government, as expressed by its expenditure on forest Economic Returns from Conserving Natural Forests in Sekong Province 195

6 conservation. The benefit-transfer method was used to calculate carbon sequestration. This is an approach that involves taking the results from one or more primary economic studies with estimated values for similar impacts, and modifying them to the area being studied. Sekong forests - how much are they worth, and for whom? Estimates of direct use values show the annual value of NTFPs to be between US$398 and $525 per household, well above the provincial average income of $120. NTFPs are an important source of non-cash income for Sekong households, particularly for the poorest. Their value can be correlated with knowledge of the forest and its resources. As households move out of poverty, so the relative contribution of NTFPs towards their livelihoods declines. Sekong forests provide considerable earnings for the provincial government. In 2003, revenues were $520,000 plus tax earnings of $85,000. However, history has proven that unsustainable logging leads to significant economic and environmental costs. Short-term gains brought by continuous logging can be wiped out by the long-term negative impacts it causes. Indirect use values emphasise the importance of natural forests to people's lives, and watershed protection allows enormous economic costs to be avoided. Judging from the findings, conserving natural forests in Sekong is a worthwhile undertaking and it is imperative that goals the provincial government set out to pursue (e.g. improved livelihoods, sustainable development and natural resource use), translate into the promotion and conservation of natural forests. This case study is adapted from Rosales, R., Kallesoe, M., Gerrard, P., Muangchanh, P., Phomtavong, S. & Khamsomphou, S The Economic Returns from Conserving Natural Forests in Sekong, Lao PDR. IUCN / The World Conservation Union Asia Regional Environmental Economics Programme and WWF Lao Country Office, Vientiane. For further information contact: pauline.gerrard@wwflaos.org Improving Livelihoods in the Uplands of the Lao PDR was produced in 2005 by NAFRI, NAFES and NUOL. 196 Improving Livelihoods in the Uplands of the Lao PDR

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