Net Benefit of Managing Forested Catchments
Attributes
Medium: Land
Country: Malaysia
Analytical Framework(s): Economic Analysis
Study Date: 1997
Publication Date: 1998
Major Result(s)
| Category | Resource/Environmental Good | MYR (1997) |
MYR (2014)1 |
USD (2014)2 |
|---|---|---|---|---|
| Total Protection | NPV of treated water net benefit3 | 7,694,320.00 | 10,818,598.64 | 3,134,326.67 |
| Total Protection | NPV of hydroelectric power net benefit | 2,736,920.00 | 3,848,246.37 | 1,114,900.52 |
| Total Protection | NPV of total net benefits4 | 10,431,200.00 | 14,666,788.76 | 4,249,210.89 |
| Reduced Impact Logging | NPV of timber net benefit | 16,692,400.00 | 23,470,349.02 | 6,799,747.66 |
| Reduced Impact Logging | NPV of treated water net benefit | 7,694,320.00 | 10,818,598.64 | 3,134,326.67 |
| Reduced Impact Logging | NPV of hydroelectric power net benefit | 2,211,640.00 | 3,109,676.42 | 900,924.61 |
| Reduced Impact Logging | NPV of total net benefits | 26,598,400.00 | 37,398,680.32 | 10,835,015.23 |
About the Inflation Adjustment: Prices in Malaysia (MYR) changed by 40.61% from 1997 to 2014 (aggregated from annual CPI data), so the study values were multiplied by 1.41 to express them in 2014 prices. The study values could be expressed in any desired year (for example, to 2025) by following the same inflation calculation and being sensitive to directional (forward/backward) aggregations using your own CPI/inflation data.
Study Note: Forested catchments provide various goods and services. These include commodities like water, timber, and rattan; and environmental services such as carbon storage, climate regulation, nutrient cycling, flood control, and biodiversity conservation. Not all of these goods and services are being extracted on an industrial scale to create a significant impact on the economy. Others either have not reached the prospecting stage, or are of global importance but with their benefits not realized locally. Timber and water, and their respective uses and benefits, appear to be the two most important goods and services from forested catchments that have a significant impact on the economy. Forested catchments are important sources of water supply for both consumptive and nonconsumptive uses. In fact, they supply virtually all of the fresh water used for agriculture, industry, households, and recreation in Peninsular Malaysia. Water catchment forests, covering a total area of 270,000 hectares (ha), play a crucial role in sustaining major dams and reservoirs in three states: Pedu and Muda dams in Kedah, Kenyir Dam in Terengganu, and Temenggor Dam in Perak.. Smaller forested catchments scattered throughout the country also play an important role in protecting downstream areas from flooding and sedimentation.
Study Details
Summary: This project attempts to estimate the costs and benefits of managing forested catchments in Peninsular Malaysia. Two land use options are simulated in four selected catchments in the Hulu Langat Forest Reserve (HLFR), Selangor. The land use options considered are total protection (TP) or no logging in the catchment and reduced impact logging (RIL). The project computes the potential sedimentation impacts of each option on the dam and water intake ponds in the catchments. It then estimates the benefits derived from logging, hydroelectric power (HEP) generation, water regulatory dam for water treatment, and costs associated with sedimentation under the two options. The estimation made use of data collected from previous studies conducted in adjacent areas with similar hydrological characteristics, and secondary data from published reports by various departmental agencies and personal surveys in the study site. The findings highlighted the substantial external costs from increased sediment yield caused by logging. The RIL land use option in combination with water utilization is the more efficient economic use of forested catchments in the HLFR. It is recommended, however, that efforts be made to internalize the costs of increased sediment yield.
Site Characteristics: In 1990, the total water demand in Malaysia was estimated at 11.6 billion cubic meters (m ). Continuous provision of water supplies to domestic users in both urban and rural areas is an important objective of the government. Rapid economic growth also implies an increasing demand for water by the industrial sector. Other non-consumptive uses such as irrigation and hydroelectric power (HEP) are important and will continue to increase. The total growth in demand for water (for domestic and industrial uses) in Peninsular Malaysia is estimated at about 10 percent per annum. 3 Forests are also sources of timber. The government forest conservation policy calls for a reduction of the annual logging coupes in the productive forest reserves and an intensive agricultural management program whereby the clearance of state forests would decline (Mohd Shahwahid 1995). Areas available for logging are expected to become scarcer as logging areas in state forests are rapidly exhausted and the annual logging coupes from the productive forest reserves are reduced. The official annual logging coupes have been reduced from 71,200 ha per year in the Fifth Malaysia Plan (1985-90) to 52,250 ha per year in the Sixth Malaysia Plan (1991-95). Yet, log consumption in the peninsula does not seem to show any sign of declining. In 1985, the two major consuming industries - sawmills and plywood manufacture - consumed 7.4 million m . In 1992, their consumption increased to 9.9 million m . With the more accessible forests within and outside the productive forest reserves being exhausted, it is expected that pressure to log in the forested catchments will increase.
Comments: The findings of this study cannot be directly extended to other forested catchments owing to the unique setup of the water regulatory dam and three HEP water intake ponds at the study site. Furthermore, the study did not consider the impacts of the two land use options on other attributes of forested catchments, such as biodiversity conservation.