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Short or long plantation rotation? Analysis of economic efficiency of Acacia timber production in Vietnam

¹Vietnam National University of Forestry, Finance and Accounting, Vietnam
²VNU University of Economics and Business, Vietnam National University, Economics for Social Issues , Vietnam

Abstract

Attributed to the growing global demand for timber products and considerable foreign direct investments, the wood-based product manufacturing and export sector in Vietnam has developed rapidly. The Vietnamese forest-based products are currently exported to over 120 countries, making Vietnam the fourth largest global furniture exporter and the largest woodchip exporter. Plantation forests play an important role in sustaining the material supply for the country’s wood-based sector, especially after the restriction of timber harvests from natural forests in 2014. Approximately half of the plantation area is currently under the management of small-scale producers with Acacia auriculiformis × Acacia mangium hybrids being the most popular cultivated species. Nevertheless, up to 80% of plantation wood is used for low-value woodchip production. To meet the increasing domestic timber demand and stimulate higher value uses of plantation wood, the Vietnamese government has introduced several policies, such as land tenure or long rotation timber plantation promotion. A comprehensive analysis of this sector, so far, is lacking.
This paper elucidates the economic efficiency of different Acacia hybrid timber plantation models with rotation ranging from 5 years to 12 years in Quang Tri province where the species has been cultivated for approximately 30 years. 315 household heads were interviewed, following a stratified random sampling approach. Cost benefit analysis (CBA) and Faustmann model were employed for data analysis. The findings were validated in group discussions and expert interviews.
The results demonstrated that Acacia hybrid production was financially profitable for timber producers with the 11 years rotation plantation model indicating the highest benefit cost ration of 3.96. In addition, there was an increase in net present value (NPV) as the length of the plantation rotation increased from 5 years (1124 USD/ha) to 11 years (2919 USD/ha). However, a reduction of NPV was recorded with the 12 years rotation plantation model at 2769 USD/ha. A same trend was observed with benefit-cost ratio (BCR) of 2.41, 3.96 and 3.89 at 5 years, 11 years and 12 years rotation plantation respectively, internal rate of return (IRR) of 46%, 33% and 30%, and annual equivalent value (AEV) of 312 USD/ha, 567 USD/ha and 533 USD/ha. Recommendations referring to the improvement of timber production economic efficiency were delineated.

Keywords: CBA, central Vietnam , economic analysis, long rotation, small-scale producers

Contact Address: Tham La Thi, VNU University of Economics and Business, Vietnam National University, Economics for Social Issues , 144 xuan thuy street cau giay, Hanoi, Vietnam, e-mail: lathithamvnu.edu.vn