ESTIMATING THE INVESTMENT RETURNS OF FOREST INDUSTRY ORGANIZATION LOGGING AT KHAO LAEM HYDROELECTRIC DAM PROJECT

Abstract

Investment returns from logging at the Khao Laem Hydroelectric Irrigation Dam Project in Thong Pha Phum district, Kanchanaburi province were studied. This covered the period 1981 to 1985. The logging operation in the project area was carried out by the Forest Industry Organization (FIO), a government enterprise under the Ministry of Agriculture and Cooperatives. The study aimed to find the logging method, the estimated investment returns from logging and the obstacles to the logging operation, the results of which can be applied to other similar projects. In this study, data concerned with the logging method, benefit, cost, and the obstacles to the logging operation, were collected from the Khao Laem Hydroelectric Irrigation Dam Project and the Western and Southern Timbes Work Division, FIO. The major steps of the logging operation at Khao Laem Hydroelectric Irrigation Dam Project were almost the same as are applied to general logging operations of the Royal Forest Department (RFD). Eventhough clear cutting was employed for all species, all the trees over 100 centimetes girth at breast height were marked and licenses for undersize and allowable size of timber were processed at different times, causing difficulty in the logging operation in the same unit area. The felling operation was started immediately after receiving the license instead of waiting for the rainy season in June as is allowed in general operations. The timber marking for hauling in-forest was done by FIO's official instead of waiting for the official from RFD. There was a special committee consisting of the Director of the Regional Forest Office or representative, the Provincial Forester or representative and the FIO's official to consider timber marking for royalty evaluation at the log yard. After gathering the logs at the log yard and the royalty mark had been made, the logs were ready for auction or sent to the Timber Sales Division and the FIO's sawmill in Bangkok for processing by truck. The logging output over 5 years was 200, 123 trees or 214, 594 logs, volume 273, 126.68 cubic meters or 57.72 percent of all the marked trees were taken out from the project area. The benefit-cost estimation, benefit-cost ratio, net present value and internal rate of return were calculated and the results are as follows: At an interest rate of 9 percent, total benefit, total cost and net pre sent value were 226, 101, 062.20, 185, 804, 587.60 and 40, 296, 474.60 baht respectively, and benefit-cost ratio was 1.22. At an interest rate of 12 percent, total benefit, total cost and net pre sent value were 208,568,387.62, 174,501,050.19 and 34,067,377.43 baht respectively and benefit-cost ratio was 1.20. At an interest rate of 15 percent, total benefit, total cost and net pre sent value were 192, 955, 819.29, 164, 309, 643.63 and 28, 646, 175.66 baht respectively, and benefit-cost ratio was 1.17. The internal rate of return of this project was calculated to be 45.846168 percent, which is rather high. The obstacles encountered in logging, operations in this project were many, but those worth mentioning here are the tree-marking process was quite unneccessary, because all trees should have been cut if they have commercial value; a license should have been issued for each cutting area for all size of trees for ease of logging operations, then size classification could have been made at the log yard royalty evaluation; the cutting process for poor quality logs should have honored the officials of FIO which is in need of logs for sale if they are worth processing; the red tape preventing coordination between the FIO's officials and the RFD's official should have been corrected or minimized to reduce the logging operation time, which means less expenditure and more profit could have been obtained from the project.