Forests and Economic Development

August 28, 2013

Flore de Préneuf / PROFOR

Managing forests for sustainable growth

Forests are one of the most mismanaged resources in many countries. This is partly because forests are seriously undervalued and many of their environmental benefits are not captured by market values. Uncoordinated policies (for example agriculture, energy, mining and transportation policies) also affect forest cover. And poor governance has fueled corruption, rent-seeking and illegal activities.

At the same time, forests have a critical role to play in green growth. Forests can help meet the growing demands for food, fiber, biofuel, shelter, and other bio-products as the world population increases to 9 billion people by 2050. Because forest resources are solar-powered,renewable, and store carbon as they grow, they also have the potential to reduce greenhouse gas emissions and mitigate climate change by taking the place of nonrenewable materials andsubstituting for fossil fuels. The forest sector is also an important source of both formal and informal jobs, particularly in remote areas where there are few economic alternatives.

The World Bank and the Program on Forests, housed at the Bank, help governments steer economic policy in a “forest-friendly” way. Improving the governance of the forest sector so that it is more transparent and accountable is also a priority. Because private sector investment in the forest sector in developing countries is seven times greater than the total official development assistance (about $US1.5 billion) for the forest sector, it is essential to engage the private sector – including small and medium forest enterprises – to achieve inclusive green growth.

Economic development in World Bank forest projects:

In Gabon, a country richly endowed with forest resources, the government considers forests a strategic economic resource. Reforms supported by the World Bank have helped make the award processes for concessions increasingly competitive and transparent. Forest taxation recovery has been strengthened, rising from a 40 percent to an 80 percent tax collection rate from 2005 to 2010. About 85 percent of productive forest areas now engage in sustainable forest management. As a result of these reforms, the contribution of the forestry sector to Gabon's GDP grew from 2.5 percent in 2004 to 4.7 percent in 2009.
In India’s Andhra Pradesh, support for small and medium forest based enterprises increased real cash income amongst forest users groups by 53 percent over the project period. Seasonal outmigration declined by 23 percent, and the quality of dense forest cover in these areas increased as well.