Deforestation in the Philippines: An Economic Assessment of Government Policy Responses

In the case of a land constraint economy such as the Philippines, the efficient allocation of land to its various uses is essential. This constraint is further intensified by the growing population and increased demand for commercial land. The process of land classification is only the first step in managing land resources. A computable general equilibrium (CGE) model based on ORANI, a multi-sectoral model belonging to the Johansen class of CGE models was employed to ascertain the economy wide effects of the reduction in forestry production due to conservation efforts. The paper also attempts to show the relative contribution of population growth and trade policies on deforestation in the case of the Philippines. The study evaluated some of the forestry policies recommended by the Philippine Master Plan for Forestry Development (1991-2015). In theory, the policies formulated would be viable and effective. The problem lies in the implementation especially of reforestation activities, which is the core of the Master Plan. The Philippine forests require intensive regeneration programs to revive the domestic logging industry and conservation programs to protect sensitive areas as well as the establishment of tree plantations. The study evaluated four policies from the Master Plan, namely the implementation of selective logging, imposition of stumpage tax on the forestry sector, lowering of forestry discount rates and the establishment of set-aside areas. The study found that moving into a selective logging regime and the establishment of set-aside areas would achieve forest conservation with little reduction in economic growth. Moreover, the results show that (domestic) population per se would not significantly increase deforestation. Whilst, export taxes are ineffective tools in reducing deforestation, trade liberalisation policies are beneficial to the economy as a whole.