Are portable sawmills a financially viable option for economic development in tropical forests?

Micah G. Scudder, John Herbohn and Jack Baynes

Forest Policy and Economics, 2019, vol. 100, issue C, 188-197

Abstract: Community forest enterprises facilitated by non-governmental organizations (NGOs), using portable sawmills to produce rough-sawn lumber is one approach being pursued by tropical forest indigenous communities to improve their livelihoods. To investigate the profitability of portable sawmills operated by community forest enterprises, we developed a discounted cash flow model with a Monte Carlo risk analysis simulation. We populated this model using forest inventory data from six forest sites in Papua New Guinea, combined with cost and revenue data collected in country. We found that the application of this small-scale native forest management model has a high likelihood of producing a negative net present value (NPV). The cash outflows to produce the lumber are found to be consistently greater than the cash inflows from lumber sales, resulting in a probability of achieving a positive NPV of 0.04. If only the most valuable species are harvested the probability of achieving a positive NPV increased to 0.56. However, the communities would be at risk of overexploiting or high-grading their forests. We recommend that future community forestry projects utilizing portable sawmills explore value adding opportunities for rough-sawn lumber to overcome the high costs of portable sawmill operations and reduce the potential occurrence of forest high-grading.

Keywords: Capital budgeting; Community forestry; Financial analysis; Native forest harvesting; Small-scale forestry (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:forpol:v:100:y:2019:i:c:p:188-197

DOI: 10.1016/j.forpol.2018.12.011

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