TROPICAL FOREST CONSERVATION 493
biodiversity are largely missing, and obtaining reliable estimates of existence and option values is problematic. While contingent
valuation and other methods of imputation promise some progress in the assignment of monetary values to conservation benefits,
these exercises are costly, and not without their limitations.
2
For these reasons, we do not attempt to measure those offsetting
conservation benefits that would accrue to Malaysian residents, nor do we measure those benefits whose incidence might be more
widely felt.
In the next section of the paper, we describe the contribution of lumber resources to Malaysian economic development. In Sec-
tion 3, we motivate our approach to the analysis of forest conserva- tion, and describe the main features of the general equilibrium
framework that we use in our calculations. We explain the design of our stimulations in Section 4. Section 5 discusses the main
results of our paper, and tests their sensitivity to key assumptions. The concluding section briefly considers some of the policy issues
raised by our analysis.
2. MALAYSIA’S LUMBER RESOURCES AND ECONOMIC DEVELOPMENT
The FAO 1993 estimate that 60.2 percent of the land area of Malaysia was forest in 1990. Of this, 53.5 percent was natural
forest and the remainder plantations. Between 1981 and 1990, the FAO estimate that the natural forest area of Malaysia was being
depleted at an annual average rate of 2 percent, which is high by both regional and world standards. If deforestation were to
continue at this rate, the half-life of Malaysia’s remaining tropical forests would be only 35 years.
Alarming as these figures may seem, estimates of the rate of deforestation may not fully account for changes in the stock or
quality of forest resources. Often, the degradation of forest re- sources may be more severe than the loss of forest area suggests
Burns, 1986. Between 1980 and 1990, 2.6 percent of Malaysia’s forest area was logged annually, and the vast majority of this log-
ging was in previously unlogged areas FAO, 1993. The annual lumber harvest in Malaysia doubled between 1971 and 1989, and
lumber stocks could easily have halved over the same period.
2
Economists Plan to Evaluate the World’s Rainforests . Sydney: Reuters, April 18, 1995.
494 F. Harrigan
Logging, however, is only one of many sources of tropical defor- estation. In Malaysia, land settlement, shifting cultivation, fuel-
wood consumption, natural fires, the conversion of native forest for commercial agricultural, and in earlier years tin mining have
all contributed to deforestation. Unfortunately, it is impossible to accurately identify the share of deforestation attributable to these
and to other causes. Nevertheless, it has been estimated that the reduction in the stock of Malaysian lumber due to nonlogging
sources may be between two to three times that caused by logging itself Gillis, 1988. But while land settlement and the conversion
of forest area for commercial agriculture were responsible for much of Malaysia’s deforestation in earlier decades, their rate of
encroachment on forest areas has since fallen. Today, lumber extraction makes a larger contribution to deforestation than in
the past.
The environmental impact of deforestation depends on how it occurs. Some sources of deforestation have more benign environ-
mental effects than others.
3
There can, however, be little doubt that, in general, deforestation has degraded animal and human
habitats, interfered with nutrient cycles, resulted in a loss of biolog- ical diversity, threatened water resources, caused the loss of non-
lumber forest outputs such as rattan, foodstuffs and potential medicines, eroded educational, recreational, and tourist amenity,
and contributed to the accumulation of carbon in the upper atmo- sphere.
To an extent, deforestation in Malaysia has been the result of a cocktail of market and institutional failures that have led to
stumpage values
4
that do not adequately reflect the nonlumber use and other nonuse including option and existence values of
tropical forest resources. For example, ill-defined property rights and insecure tenure have created incentives for timber to be
“mined” in a context of slow growing stumpage values see, e.g., Vincent, 1992. However, deforestation has also been a conse-
quence of policies that have consciously traded off the value of
3
For example, the conversion of forest area for commercial agriculture, if it involves land clearance through burning, is unequivocally bad for CO
2
concentrations in the upper atmosphere. If, however, lumber is felled and is used in durable wood products, carbon
sequestration can continue for some time. Natural tropical forest fires are a particularly damaging form of deforestation. They are often aggravated by earlier deforestation that
has eroded forest moisture. In 1994, tropical forest fires covered much of the of Borneo, West Malaysia, and Singapore in a haze for several months of 1994.
4
Stumpage values are essentially the net price of lumber.
TROPICAL FOREST CONSERVATION 495
forest land area against other uses. The transfer of forest land to permanent tree crop agriculture palm oil and rubber has
undoubtedly generated substantial income for Malaysia. Equally, concession royalties and other taxes extracted from lumber and
tree crop sectors have long provided an important source of fi- nance for the Malaysian government. Nor should it be overlooked
that land settlement has made a significant contribution to en- abling Malaysia’s rural poor IBRD, 1993. But the benefits of
other policies are in doubt. For example, Vincent 1992 concludes that attempts to foster the development of local wood-based indus-
tries through log export bans and other measures have been costly. For every sawmill job created in Peninsular West Malaysia be-
tween 1973 to 1989, the economy sacrificed both value-added and export revenue Vincent, 1992. Also, by reducing the local price
of lumber, and subsidizing inefficient producers, log bans may have accelerated deforestation Braga, 1992.
Our objective in this paper is not, however, to determine whether Malaysia has managed its tropical forest resources pru-
dently, or to suggest how they ought to be managed in the future. Dasgupta and Ma¨ler 1991 explain the complex nature of “sus-
tainable development” and identify its relationship to renewable resource exploitation. And when preferences vary widely within
or between societies, the identification of a socially “optima” pro- gram for resource use may not even be possible. In isolating the
income repercussions of tropical forest conservation, we provide information that policy makers may weigh against the nonlumber
value of tropical forests. But, in the absence of complementary information about conservation benefits, no welfare inferences
can be drawn from our analysis.
3. THE MODELING APPROACH
