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Forestry to be looked at as a lucrative investment

Ongoing campaigns for growing trees countrywide, strategically meant for combating adverse impact of climate change particularly increased global warming causing frequent drought conditions in major parts of Sindh, Balochistan and Khyber Pakhtunkhwa, are also aimed at promoting investment in forestry. No doubt investment in forestry is a long term investment with globally established rate of return of 10 to 12 percent, no doubt lesser than returns from other avenues for investments, but seems more viable in a volatile global economic environment because of negligible or much lesser risk involved in this business.

Globally March 21st is observed as Forest Day. The United Nation has linked this recognition to Sustainable Developmental Goals to be achieved by 2030. Under this agenda efforts are on for planting trees in urban areas to reduce global warming for creating carbon stocks.

Although forests or tree plantation comes within the purview of crops, but in case of other agriculture crops drought and flood conditions completely destroy the crops, but in case of trees loss is much low. secondly forest owners can wait for a decade before felling or cutting them and earning a profit. During waiting period forests gain value as the trees further grow. Similarly in case of decline in demand of wood, owners can wait and meanwhile trees further grow and when market is favorable owner can get better price.

Presently investors in economically rich countries and emerging economies have embarked on greater diversity of their investments. Investments in equity involving high risk promise on the average 12 to 15 percent return, but return of 12 percent from forest industry in USA and 9 percent in UK ensures stability of return on their investments. Besides that investment in forestry in these economically rich countries is tax free. Forests owners of UK do not pay capital gain tax for growing timber and no income tax for selling it. Inheritance income tax also does not apply to forests owners.

According to World Bank’s information regarding collection of development indicator acquired from officially recognized sources, share of Pakistan’s forestry is hardly 1.20 percent of total global forests. Forest development is still being overlooked in the sense that it should be part of the agenda for government to vigorously combat climate change, which results in frequency of natural disasters like pollution, drought conditions and intensity of glacial meltdown due to rising temperatures, which in turn results in massive floods as happened in 2010 and onward.

In view of very low percentage of land covered under forests , which is only 4.28 million hectares out of total area of 87.98 hectare. In the scenario of sizeable amount of wood taken from forests and plantation each year, country may need to triple forest growth by 2050 despite increased efforts towards recycling, reuse and efficiency. But according to WWF Pakistan ‘experts this growing market for wood can motivate good stewardship that safeguards forest with a more sustainable plan to utilize the bounties of forests. In this regard the organizations and Federal Ministry of Climate Change (MOCC) through its office are implementing Reducing Emission from Deforestation and Forests Degradation (REDD+), for which UN Framework convention on climate change recognizes any forestry initiative that reduces emission eligible for incentives in the form of financial grants. In this regard Pakistan has already won a grant of US$3.8 million to be utilized by all provincial forest ministries to meet the criteria set by REDD!+.

Previous government during February 2018 had announced Green Pakistan program , which aimed at planning 100 millions indigenous tree species to consume and promote flora all over the country with an investment of Rs 3.7 billion. Similarly Punjab government also made sizeable allocations of funds for promoting forestry over 134,995 acres of land in six districts of South Punjab namely Bahawalpur, Dera Ghazi Khan, Rahim Yar Khan etc as a part of the sustained Development Program, which advocates for conserving and promoting sustainable use of terrestrial ecosystem and to raise plantation to meet the wood need of wood based industries particularly housing and furniture making, which in turn will create employment opportunities for skilled and non skilled workers.

 

Khyber-Pakhtunkhwa government’s billion trees tsunami project was to be completed by 31st December 2017, but due to some hang ups it is yet to complete. However progress so far achieved is quite satisfactory. It is the fourth biggest initiative of afforestation in the World. By now a little more than 2 percent of KP’s total area has been covered under this forest project. Apart from tackling environmental and climate change issues like reducing greenhouse gas emissions and controlling land degradation etc, these forests will become a rich source of energy, supply of quality wood for housing and furniture industry and also fodder for animals and above all source of employment to large number of people.

Forestry in Sindh, despite covering 2,858,748 acres of forestland continue to be underutilized or rather misutilized. It is mainly due to large piece of forests land leased out to private property developers as has been reported.

Due to growing market volatility at global level, people are inclined to make diverse investment portfolio. In this regard Raymond Henderson, a forestry expert at Bidwells Scotland an agribusiness and property consultancy states it is not investing in stocks and shares. There is actually a massive chunk of solid land with trees growing on it, which lot of people find attractive.

In economically rich countries private equity managers in present scenario of their stagnant economic growth rate find investment in forestry giving 8 to 10 percent return acceptable as compare to higher return from investment in equity involving high risk. Even in developed and developing countries investors are not aware of forestry as an accessible assets category or how they would go about investing in huge forestry projects with limited funds. In almost all economically rich countries and in some of the emerging economies presence of Timber investment Management Organizations (TIMOs) who act as brokers for forestry investment are helpful to individual investor also who can put their small funds with such firms operating globally providing access to worldwide forestry markets.

In case of Pakistan particularly along the river Indus forest growing has declined considerably due to construction of both big and small dams like Tarbela-Mangla and few small dams and also construction of proposed dams does not promise growth of natural forests. However, man made irrigated forests need attention, which are only 5 percent of the total forests grown. These are grown as farm forests side by side on one after other on the same piece of land and it is the most viable approach to promote forestry.

In view of growing demand of wooden furniture in local as well as international market due to high quality handmade furniture there is need for earnest efforts on the part Pakistan Trade Development Authority to help furniture manufacturing companies and individual entrepreneurs explore markets of their products.

According to World Trade Organization’s statistics world’s total furniture export market amounts to US$23.2 billion, whereas Pakistan’s share does not exceeds US$ 51 million during the year 2010-011. However, Pakistan’s local furniture market is 50 times stronger than its share in foreign market. Therefore in order to ease up trade deficit position export volume of wooden furniture is also need to be expanded on priority basis.

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