Hidden assets: Asia's smallholder wood resources The World Needs Wood! Stephen Midgley Sourced from: Midgley, S. J., Stevens, P. R. and Arnold R. J. (2016). Hidden Assets: Asia s Smallholder Wood Resources, and their Contribution to Supply Chains of Commercial Wood. Australian Forestry (accepted).
The Commercial Logic for Smallholdings Global demand for industrial wood to triple by 2050 Supply from regional native forests decreasing Increasing dependence upon plantations (an increase of 300% over next 30 years) Expansion of conventional plantations challenged in crowded Asian landscapes. Smallholder contribution critical to regional wood flows (and increasing)
Smallholders contribute significantly to commercial wood flows in the region: A few examples
In Guangxi, China Est. 800 000 ha eucalypt smallholdings which add an est. US$1.7 bill to rural economy
Changing technologies offer new opportunities
In Vietnam Supporting a US$7bill wood export industry Acacia plantations 1.5M ha; smallholdings est. 800 000 ha Est 300 000 smallholdings produce an estimated 12 mill m 3 wood annually Wood chips, solid wood, furniture, MDF. 4,200 wood processing companies, 90% small-scale Smallholder growers contribute >US$800 mill annually to rural earnings.
Acacias in Vietnam s Re-Greening Highway #1, Vinh 1990 Ho Chi Minh Highway, Nghe Anh, 2010 1.5M ha acacia: Landscapes transformed
In India: Wood industries based on Smallholders 80% of the wood for pulp and paper, veneer and panel products industries in India based on farm-grown timber Trees in Agroforestry Systems in India =11 mill. hectares. Est. 20 mill m 3 of eucalypt wood grown in agroforestry systems
In Thailand Smallholders support industry 95% eucalypt resource of est 1.5M ha is privately owned Double A s Paper from KHAN- NA Initiative and 1.5 million contract farmers
In Lao PDR Smallholders and Contracts Wide-spaced eucalypts and intercropping: StoraEnso Laos and Burapha Agroforestry Ltd Smallholder teak: northern Laos. Informal industry links
In Indonesia >3 mill ha smallholdings: teak, acacia, albizzia, mahogany Supporting large and small industries; supporting livelihoods and creating employment
Smallholders are not charities Smallholders represent many millions of people and many more stakeholders in a multi-billion $, regional business.
Common features for smallholdings (not excusive) Mostly fast-growing, exotic (commercial) species: casuarina, teak, acacias, mahogany, albizzia, eucalypts Grown after agricultural conversion Operate under secure land tenure Close to roads and rivers (transport) Growing and market decisions are made to maximise early returns Low-risk suppliers
4 Pillars: Common factors in successful smallholder programs 1. Clear ownership of trees 2. Attractive and reliable markets for all wood grown (e.g. sawnwood + fuelwood; sawnwood + woodchips) 3. Sympathetic legal and regulatory frameworks 4. Robust technical package
For Industries: Smallholders offer benefits and challenges Benefits BUT Expanded wood supply Contributes to a Social Licence Land costs minimised Risks for major investment Reliability of supply, Adequacy of supply Uniform (predictable) quality, Attractive prices Management of Risk
For Smallholders: Industries offer benefits and challenges Benefits. Profitable land use, asset creation Increased household incomes, livelihoods, employment, development of skills Market access Challenges Investment needs and access to finance Sustainable soil/stand management at a farm level to increase productivity and profitability. Compliance with laws, regulations changing market requirements (certification and legality). The regulatory environment for smallholdings shaped by native forest considerations Market reliability
At the end of the day: Markets and Risks Markets: Without reliable, attractive markets no smallholder system will endure Risks: Industry and smallholders share biological risk, physical and production risk Companies have corporate responsibilities. Resource availability a major potential risk
Context is Important Smallholders where established industries exist. Vietnam, China, India, Thailand and Indonesia Systems in place Choice Competition The frontiers: Smallholders where industries are limited. Lao PDR Systems evolving
Redefining the growers/ industry relationship = Management of Risk Mutual benefit: Opportunity to get rich together. BUT.. Industries: What happens to major processing investments if wood does not arrive? Smallholders: What happens to their tree sales if industry investment does not arrive The Chicken or the Egg?
Minimise risk: Means of Engagement? For the smallholder Market guarantees? Share benefits? For industry Lease private land? Contract farming? Staged investments
Examples of Innovation: Lao PDR Burapha Agroforestry Co Ltd (A Swedish investment via SilviCapital) Progressive Investment towards 40 000 ha and a bio-refinery Bottom-up/top-down approach Lease farmer lands Agroforestry model ESIA, FPIC, CSR
Step by Step Investment: Match investment to available resource 5,000 ha Veneer Mill 10,000 ha Veneer Mill + Sawmill 20,000 ha Veneer + sawmill + MDF 40,000 ha Veneer + sawmill + Bio-refinery
Value Chain Decision -makers Information, cash Land Plantings establish. Plantings maint. Harvest, Transport Process Sales Clients /Market Products, information The first 4 steps in partnership with local farmers
Who will take the risk? The farmers will not grow trees if there is no market Industry investors will not invest if there are no plantations The first industry that will be built needs to have control of the raw material (reduce RISK, create MARKET) Burapha willing to take the risk of establishing plantations When the industry is established, the growers will have a market and can grow plantations with less risks
The conundrum of SE Asia: significant areas of underutilised land BUT..
Access to land remains the major challenge to supply of plantation wood Issues of: Traditional ownership and use Trust Equity in decision-making and land-use Sharing benefits Effective smallholder engagement offers Social Licence A major risk factor
Conclusions Smallholders are critical to future sustainable supplies of commercial wood they are needed The industry/smallholder interface needs to be redefined FPIC, ESIA, CSR No single model: Core plantations + smallholders and dedicated outgrowers; contract farming, leased lands. Markets and Risks are the dominant narratives Industry & Smallholders can benefit together