Forestry Securitization Scheme Eyed

Manila Bulletin, December 31, 2007 | Go to article overview

Forestry Securitization Scheme Eyed


Byline: MELODY M. AGUIBA

A forestry securitization scheme is eyed by the Department of Environment and Natural Resources (DENR) as a means of encouraging investments and jobs and livelihood generation in forestry.

A proposed forestry securitization scheme, modeled after a Japanese prefecture's securitization system, will bring in advantages even as it would require smaller amount of investments even in large plantation-type forestry areas.

It will lure investments as returns on investment can be earned over a shorter period of time due to a cutting into shorter segments or stages the traditionally long-gestating process of forest development.

Genesis J. Francisco, DENR-Forest Management Bureau (FMB) forest policy chief, said government is studying the creation of bonds or other forms of security that will create a fast turnover, maximization of technical expertise of entities and bring about cost savings and perhaps increased profitability in the forestry sector.

The securitization in a prefecture in Japan basically involves investments in different stages or segments of forestry development, according to Francisco. This includes establishment stage, growth, thinning or maintenance, harvest, and marketing.

The securities or stocks represent plants or a number of trees in a certain area.

Once a cooperative that has expertise in forestry establishment completes land preparation and seedling planting in a forestry area, for instance, this cooperative can already sell its securities at a higher price than his original investment to an agency that has expertise in another growth stage such as in thinning.

Thinning is normally done on forest trees specially if the objective is for wood security or the thickness of the trees' trunk from timber is processed. Thinning or the cutting of branches enables the showering of sunlight on the tree trunk or for photosynthesis to occur that allows for the thickening of the trunk.

Before the tree is ready for harvest, the holder of a securities can sell off his shares to a firm that has expertise and equipment in harvesting.

"Investment is smaller because a company that engages only in harvesting only needs to keep equipment for harvesting (instead of investing in other equipment such as in land preparation tractors," said Francisco in an interview.

Mechanization is a crucial part of forestry development as Japan's forestry industry itself is fully mechanized. Yet, Francisco said the Philippines may have to develop its own machines suitable for its own types of trees unlike Japan's cedar-type trees.

New incentives for investments in forest plantation is timely as DENR is reporting an increased forest cover attributable to investments in forestry by local government units (LGUs), said FMB Planning Chief Isabelita V. …

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