Forest and economic development

--Laskar Muqsudur Rahman PhD Conservator of Forest Social Forest Circle, Bogra Department of Forest

8. Loskar

Despite the efforts that have been put into communication by the forest sector, the public is generally not aware of how essential forests are in terms of services and products for their daily life. Likewise, not much is generally known about the contribution of forests to economic development, especially in rural areas. Even forest specialists may underestimate this contribution when they just look at one side of the coin. The value of services is often hidden by wood production, which remains in most cases the main economic driver. But societies place more and more demands on forests and the value of numerous forests lies now more in the services they provide than in the wood they produce.

It is now widely recognized that a forest that has value for conservation, production, protection or recreation, and has clear user rights attached to it, is a forest that will be protected, a forest that will be taken care of. A better recognition of the full value of forests is therefore crucial. From the economic point of view, this can result in better profitability of forest management, which in turn becomes an incentive for both public and private investments in the forest sector.

There is a remarkable variety of forest types in Bangladesh. The total forestland of Bangladesh includes classified and unclassified state lands, homestead forests and tea and rubber gardens. Of the 2.53 million ha of forest land (17.49%), the Forest Department manages 1.53 million hectares (10.54%): hill forests 0.67 million hectares (4.65%), plain land Sal forests 0.12 million hectares (0.83%), natural mangrove forests 0.60 million hectares (0.97%), and mangrove plantations 0.12 million hectares (0.83%).The remaining 0.73 million ha (5.07%) of land designated as Unclassed State Forest (USF) are under the control of Deputy Commissioners. Village forests (homesteads) form the most productive tree and bamboo resources in the country and account for 0.27 million ha (1.88%). The hill forests chiefly protect soil and water against erosion and which is protected for the conservation of biodiversity and that aim to maximize wood production. Natural mangroves as well as mangrove plantations protect coastal areas from erosion and storm surges. The mangroves’ massive root systems are efficient at dissipating wave energy. Likewise, they slow down tidal water enough so its sediment is deposited as the tide comes in, leaving all except fine particles when the tide ebbs. In this way, mangroves build their own environments. Because of the uniqueness of mangrove ecosystems and the protection against erosion they provide, they are often the object of conservation programmes including national biodiversity action plans. The importance of Sal forests lies in the fact that these are the only natural forest resources of the central and northern parts of Bangladesh where the vast majority of the population dwells. Although meager, only one-tenth of the national forest area, village forest areas supply 70% of sawlogs, 90% of fuelwood and 90% of bamboo consumption of the country. In addition, there are urban forests and forests in the marginal land under various social forestry programmes throughout the country. Trees in urban areas provide many benefits and values to society, including recreation, improved air, water quality and aesthetic benefits. Forest plantations in the marginal land maximize the land use and simultaneously provide livelihoods for local community, help eradicate widespread poverty and ameliorate environment. Agriculture is the major economic activity in Bangladesh, making up 37.6% of 1990/91 GDP (constant prices) of which forestry contributed 2.5%.  This article is a snapshot of the direct and indirect influence of forest-based activities that leads economic development.

Forests create wealth and income

Earlier the policy emphasized revenue earning from the forest sector. Clear felling followed by artificial regeneration became a general practice for the country at that time. The recognition of forests as a limited resource that needs to be managed for future sustainability and environmental equilibrium lead to the eventual imposition of a government moratorium on all logging in natural forests in 1989. However, only mature plantation raised under social forestry projects are felled and sale proceeds are divided among the parties under agreement. During 1999-2000 to 2012-2013 about 23,253 hectares block plantation and 10,729 kilometers strip plantation have been felled where government received BDT 1.90 billion and 1,05,920 participants received BDT 2.08 billion. Forest Department earns about BDT 757.5 million annually as forest revenue. Estimates of earning by private plantation owners throughout the country may exceed this figure.

Most of the forest product based industries in Bangladesh used to be owned by the Government through corporations such as Bangladesh Forest Industries Development Corporation (BFIDC) and Bangladesh Chemical Industries Corporation (BCIC). Local private entrepreneurs are emerging to establish new industries in pulp and paper, composite wood, etc. mostly based on recycling of the paper and small wood from rural homesteads. Sawmills are the primary wood consumers. Though furniture making has the highest number of establishments; there are more than 10,000 sawmill operating in the country. The number of major wood based industries recorded for 1995-96 was 1,642. In general major categories of forest product based industries in Bangladesh are: sawmills, manufacture of wood products including furniture, production of hardboards, particleboards, chipboards, etc., manufacture of pulp, paper, newsprint and paper products; match factories; manufacturing of packaging paper: production of various products as handicrafts from wood, bamboo, cane, patipata, etc. in small cottage industries.

Furniture industries traditionally developed in Bangladesh during the 1990’s have transited from cottage based industry to mechanized mass production oriented industries. The main varieties of products are engineered or composite wood, rattan and bamboo. The export of furniture products from Bangladesh started from 1995. It is estimated that by 2015 Bangladesh has export potential of crafts furniture accessories worth of USD 10 million along with furniture worth USD 40 million. The Government has declared the furniture industry as a ‘Thrust Sector’. The sector’s contribution to GDP is 0.29% on an average.  In both local and international market, the growth of Bangladesh furniture market is evident. While the industry is growing at a rate of 9.55%, the demand for furniture is increasing by 20%. Local production for furniture of USD 958 million along with USD 16.84 million imports. Bangladesh earned USD 19.26 million from exports of wooden furniture in fiscal year 2009-2010. Local manufacturers export to the US, Canada, Australia, UK, Middle East, Gulf countries, and other Asian countries, like India, Japan, Taiwan, Singapore, Thailand and Vietnam.

Bangladesh has some 871 known species of amphibians, birds, mammals and reptiles according to figures from the World Conservation Monitoring Centre. Of these 1.1% is endemic, denoting species which is only found in Bangladesh and nowhere else in the world. Bangladesh is home to at least 5000 species of vascular plants. There are 17 wildlife sanctuaries and another 17 national parks developed and managed by the Forest Department. Apart from these there are good few numbers of eco-parks, botanical gardens developed and managed by Forest Department. The protected area covers nearly 10.72% of total forest area and about 2% of total area of Bangladesh. All these contribute to national economic activity. But monetary value for all these has not been determined.

Nature-based tourism provides revenues and employment in many countries. Tourism in Bangladesh is a developing foreign currency earner. The country was listed by Lonely Planet in 2011 as the “best value destination”. Apart from, historical archaeological sites and monuments, resorts, beaches, picnic spots, Bangladesh’s major tourist attraction is its lush natural beauty including the mangroves, a unique wilderness of the world, forest hills with beautiful landscape and splendid natural beauty and wildlife of various species.

In Bangladesh, 19% of total expenditure incurred by overnight tourists accrues to the poor in different sub-sectors (Katalyst 2010). As of 2008, the Tourism Industry’s contribution to GDP was 3.9% according to the World Travel and Tourism Council (WTTC). It is estimated that real GDP growth for the travel and tourism direct industry and economy in Bangladesh is 2.6% and 1.7% as of 2010 and it is expected to average 6.3% and 6.4% respectively per annum over the next 10 years (WTTC 2010).

The forest sector provides employment and livelihoods

In government owned production forestry forest workforce, for their subsistence and income, increased from 78000 in 1990 to 93000 in 2005, continuing a trend apparent since the 1970s. Non-wood forest products (NTFPs) are all forest plants and animal products except timber. The harvesting and processing of NTFPs provide major employment opportunities worldwide. In Bangladesh, this amounts to a contribution of about 1.3 billion BDT annually to the economy and employment for nearly 300,000 people. These figures do not include the increasing number of people who work in other sectors, such as tourism, forest industries, research and education whose activities are dependent, in one way or another, on forests and also employees responsible for forest management and conservation.

The furniture industry is comprised of around 41,560 enterprises and employs nearly 0.20 million skilled and semi-skilled people. There are a total of 9,913 wooden and 2,628 non wooden furniture manufacturers in Bangladesh employing around 1,19,810 workers (Khan 2011). Further there are around 74,926 carpentry households employing another 1,54,285 workers. Adding to this, there are 1,20,000 craftsmen producing soft furniture and 200,000 suppliers supplying raw and semi-processed materials. Out of this huge employment, almost 1,00,000 workers are women. Among the employees working in furniture sectors, 20% are working in large industries and 80% are working in small and medium enterprises (SMEs).

The World Travel and Tourism Council (WTTC) reported in 2013 that the travel and tourism industry in Bangladesh directly generated 1.2 million employments in 2012 or 1.8% of the country’s total employment, which ranked Bangladesh 157 out of 178 countries worldwide. Direct and indirect employment in the industry totalled 2.7 million employments, or 3.7% of the country’s total employment. The WTTC predicted that by 2023, travel and tourism will directly generate 1.79 million employments and support an overall total of 3.9 million employments, or 4.2% of the country’s total employment. This would represent an annual growth rate in direct employment of 2.9%. According to Bangladesh Parjatan Corporation (BPC) employment opportunity is growing 1.5 times faster in tourism than in any other industrial sector and present estimates suggest that the total employment in this sector (direct and indirect), is 3.2% of total employment in the country. Thus, it has a huge potential to generate employment, both male and female. Currently Tour Operators Association of Bangladesh (TOAB) includes 84 members.

Wood is an important renewable raw material and fuel

Fuelwood and charcoal consumption increased from 31.77 million m3 in 1993 to 35.01 million m3 in 2010.During the same period industrial roundwood consumption increased from 0.74 million m3 to 0.85 million m3. Seventy five percent of total energy consumption in Bangladesh was derived from fuelwood in 1985-86.The general upward trend of fuelwood and timber consumption is heavily influenced by population growth. That is so because fuelwood is the dominant source of energy in Bangladesh. Some researchers concluded that easy technology of woodfuel use and easy access to forests make the wood-fuel as a means of major source of energy, while majority of researchers have showed the large scale consumption of woodfuel is related to poverty. Planting more trees for cooking and heating will give tens of millions of employment, hundreds of millions energy and it will take away the need of illegal cutting of the last forests.

Forests for eco-tourism

Eco-tourism is a new concept in Bangladesh though it has developed in the last 15 years in different countries of the world. The marketing of eco-tourism in the world today has reached maximum sophistication and supply of goods and services has exceeded than its present demand. Now a day more and more people want to spend leisure time for nature, so it is an important window of the hospitality industry. The eco-tourism creates opportunities in areas having unique features or attributes in natural scenic beauty, wildlife and wilderness. Local communities have maximum opportunities to be benefited from the eco-tourism, which shall generate income for them that shall also help to conserve the nature. So it is believed that eco-tourism is a sustainable hospitality industry that shall benefit the nature and the community as well. By and large Bangladesh has tremendous potentialities of development of eco-tourism opportunities in the country, as there are numerous sites for the same. Apart from 17 National Parks and another 17 wildlife sanctuaries , major potential eco-tourism sites in the country include National Botanical Garden, Dhaka: Baldha Garden, Dhaka; Sitakunda Botanical Garden and Eco-park, Chittagong;  Madhabkunda Eco-park, Moulvibazar; Jaflong Green Park, Sylhet; Rajeshpur Eco-park, Comilla; Bangabandhu Shetu Eco-park, Sirajganj; Mithapukur Eco-park, Rangpur; Kuakata Eco-park, Patuakhali; Bangabandhu Safari Park, Cox’sbazar and Bangabandu Safari Park, Gazipur.

Forest goods and services contribute much more to society and sustainable development than their reported value

Forests supply a wide range of non-timber goods and services, which are given high priority in forest sector policy and strategy papers. However, their real importance is not reflected in the revenue they generate; indeed most of the services and many non-timber goods are supplied free of charge, with all costs of providing the services absorbed by the forest owner (i.e. subsidised by wood sales). In Bangladesh, on the basis of empirical data collected from final harvest of plantations under social forestry, the value per hectare of marketed wood was estimated at BDT 1,35,960, while non-timber products accounted for BDT 23,240 per hectare. The true value of all the goods and services supplied is certainly much higher than the marketed values.

Many of the non-marketed non-timber goods like fallen leaves in the forest floor, dry branches, dead and moribund trees are usually collected by local people free of costs. Where there is effective demand of such non-timber goods can generate significant revenue, often more than wood at the local level. Ownership of the non-timber product may also be a complex problem: honey for instance is often linked to forests, and considered a non-timber forest product, but the bees find pollen both inside and outside forests, and the honey belongs to the bee-keeper in rural Bangladesh. Services pose even more complex problems of valuation, marketing and revenue: it is often impossible to identify an individual supplier or consumer, even though both are necessary if a service is to be marketed. The forest owner receives no specific compensation for his costs or for any opportunity cost in terms of foregone revenue from wood, and the services are not included in conventional measures of GDP. Forest owners are frequently justified by a reference to the non-marketed goods and services they provide. Besides, under government led social forestry programmes all the interim income through selling or consumption of agricultural crops, fruits and wood from pruning and thinning of plantations goes to local beneficiaries under. Though physical volume and monetary value of such interim returns can be measured but excluded from forest account in accordance with the principle of social forestry. One of the most successful programmes which aimed to alleviate poverty of rural community is social forestry.

Most environmental goods and services, such as clean air and water, and healthy fish and wildlife populations, are not traded in markets. The only option for assigning monetary values to them is to rely on non-market valuation methods. A major service provided by forests is carbon sequestration. Bangladesh’s forests contain 80 million metric tons of carbon in living forest biomass. The Sundarbans can capture 56 million tons of carbon worthing at least BDT 150 billion. Bangladesh has the potential to benefits worthing billions of dollars from a carbon trading regime. Forestry is one of the potential sectors for Clean Development Mechanism (CDM). Reducing Emissions from Deforestation and Forest Degradation (REDD) is an effort to create a financial value for the carbon stored in forests, offering incentives for developing countries to reduce emissions from forested lands and invest in low-carbon paths to sustainable development. “REDD+” goes beyond deforestation and forest degradation, and includes the role of conservation, sustainable management of forests and enhancement of forest carbon stocks (REDD+). REDD+ is a climate change mitigation solution that many initiatives, including the UN-REDD Programme, are currently developing and supporting. Other multilateral REDD+ initiatives include the Forest Carbon Partnership Facility (FCPF) and Forest Investment Program (FIP), hosted by The World Bank. Bangladesh became a partner country of UN-REDD in 2010. According to FAO data, 0.40% of greenhouse gas (GHG) emissions in Bangladesh came from land-use change and forestry in 2010. Furthermore, the credit that a Party can claim from Land Use, Land Use Change and Forestry (LULUCF) projects under the CDM is 1% of the Party’s base year (1990) emissions times ?ve. The inventory of GHG emissions and sinks for Bangladesh, with 1990 as the base year shows that and land-use change emitted about 43,963 Gg carbon dioxide. On the other hand, reforestation has served as a carbon sink by sequestering some 45,173 Gg carbon dioxide (Ahmed et al. 1997).

The public budget for forest management

Government used to meet bulk of the demand for finance. Taungya system was first introduced in 1912 for establishment of plantation in the Chittagong Hill Tracts by the Forest Department to supplement the cost of plantation. In taungya system, forest plantations are established in government land by local tribal community. The government provides planting materials and tools whereas, community members provide their labour. Necessity of large scale financial support was felt in the 1950s with the establishment of forest based industries vis-à-vis massive felling in the natural forest followed by afforestation of cleared areas.

Till the 1970s forest was one of the major revenue earning sectors of the government. In those days financing in forest sector did not appear as a major problem as demand for finance was reasonably small. Nowadays, as the emphasis has been shifted to conservation than revenue earning in forest sector this sector gradually losing its importance to national planners in getting resource allocation. Most of the important fields of forestry and the forest sector as a whole, has been suffering owing to inadequate financing.

Bangladesh has stable and effective forest sector laws and institutions, along with national forest programmes and the setting of long term objectives for forest management. As part of the arrangements underlying these regimes, the public funds flow into the forest sector, intended to stimulate progress towards the objectives. Forestry activities are financed from the government budget, with forest derived income being paid directly into the government treasury. Although national circumstances and priorities vary widely, the importance of public funds in financing forestry in Bangladesh is not ignored. However, the amount of public budget in forestry sector is inadequate.

Forestry Sector Master Plan (1995 to 2015) projected BDT 80,000 of million (USD 1958.86 million) investment programme for the implementation of National Forest Policy, 1994. One of the major targets of National Forest Policy, 1994 is to bring 20% land of the country under tree cover by the year 2015.  During 1995-96 to 2010- 11, a total amount of BDT 14920.1 million (USD 267 million) has been invested in forestry sector development budget, which is only about 13.6% of the Forestry Sector Master Plan requirement.

Although National Annual Development Programme (ADP) has been increased over the years 1991 to 2011, ADP in forestry sector has been declined significantly Out of BDT 3438.98 billion (USD 60.77 billion) forestry sector received an allocation of only BDT 18.54 billion (USD 360 million) which is only 0.6 % of National ADP. Forestry sector ADP allocation has been gradually declined and reached to BDT 3310.6 million (USD 44 million) during 2006-2011 five year plan as compared to BDT 4530.3 million (USD 114 million) in fourth five year period (1991-1996).

One most important supplementary financing mechanism has been developed in Bangladesh in the form of Tree Farming Fund (TFF). Ten percent of sale proceeds of social forestry (SF) final harvest constitute TFF. This fund is operated by a committee of SF beneficiaries made under SF Rules, 2004. From 1999-2000 to 2012-2013 an amount of BDT 451.9 million have so far been has been deposited in different TFFs throughout the country. TFF play an enormous role in sustainable social forestry management reducing the dependence on external financing,

Recently the Government of Bangladesh issued a circular for sharing 50% income out of royalty from NTFP harvest from Sundarban Reserved Forest (SRF) with forest dependant people living around the SRF. This is expected to help conserve the SRF reducing the prevailing pressure on it.

Forests and investment by financial institutions

Investment in forests differs from normal investment in several important ways. It has a number of peculiarities which often make it unattractive for large financial institutions. In particular: long rotation periods increase exposure to risk and make profitability forecasts  uncertain; many of the goods and services produced in forests have no monetary value and generate no revenue, but incur costs or at least opportunity costs; many forest owners have management objectives other than maximising profit. Forests are mostly publicly owned, or the holdings are so small as to make profit maximising management impossible; above all forest management is highly regulated, which may increase costs and reduces the choices of the investor. Most investment in forestry is by the forest owners themselves, private and public. Since the 1980s, there has been a strong increase in investment in forest plantation programmes in rural areas. This type of investor focuses on intensely managed, privately owned marginal land, aimed primarily at wood production. The total value of this type of investment in forest plantation is not known. Even investment by institutional investors is not known, most of it is by individuals owners of forest plantations.

In brief, rural people invest in forest plantations to meet the demand of forest products, maximize the use of marginal land and help ameliorate the environment. Moreover, forests are important safety nets for communities, helping them cope with climate shocks. Many forest products are more resilient to climate variability and extremes than crops, and so are crucial to the resilience of local livelihoods. If crops fail due to drought or assets are lost because of floods, communities can sell forest and tree products – timber, fuelwood and NTFPs – for income. In addition, fodder from trees can help ensure the survival of livestock for months at a time if drought strikes.

Forests and international finance

Remarkable official development assistance in the country to support forestry programmes were available only after independence of Bangladesh in 1971. Pioneer international financial organizations those came up to support forestry sector in the country were the World Bank, SIDA, ADB, UNDP and FAO. Ford Foundation, USAID, EU, UNESCO, ODA (DFID), CFC and GEF have also been the potential source of foreign finance in forestry sector of Bangladesh.


Development Project Aid (DPA) in forestry sector has been declined. The amount of DPA was USD 77 million in the fourth five year plan period of 1991-96 and USD 67 million in the fifth five year plan period of 1996-2001. During 2006-2011 it has been declined to only USD 12 million. Contrarily, national DPA has been raised from 5478 million USD in first five year period (1991-96) to 7184 million USD in the five year development plan period (2006-11). Forestry sector ADP ratio with national ADP has also been declined from 0.975% in the period of 1991-96 to merely 0.236% in the period of 2006-11.

Bangladesh is the worst victim of natural calamities owing to climate change. Deforestation and forest degradation is responsible for nearly 18% emission of GHGs and thereby global warming is also recognized. Paradoxically this has not been depicted in forest financing scenario of Bangladesh. As mentioned above in the 1980s and 1990s forestry sector used to get external aid for afforestation and reforestation, capacity building, infrastructure development, forest inventory, management plan preparation and training etc., remarkable development was achieved in the forestry sector at that time. In the changed perspective since lot many other fields has come up to compete for assistance with forestry, scope of fund access has also been reduced. Overall financing in the forestry sector of Bangladesh has been decreasing gradually and considerably in last two decades. After the Rio convention in 1991, remarkable awareness regarding climate change has been developed around the globe.  Forest ecosystems can act as a tool for mitigation and adaptation to climate change. Despite financing in this sector is steadily becoming a low priority sector to the national planners and also unable to get due attention of overseas financing institutions.


The forests’ contribution to the economic development in Bangladesh, even if its weight in the GDP is relatively modest, remains significant with potential for development especially in the context of a green economy. Forests provide revenue for their owners, public or private.  Forest based activities provide direct and indirect employment opportunities. Many of the goods and services supplied by forests are not assigned a monetary value. Forests recycle carbon dioxide and convert it to oxygen. They clean the air and make it breathable, as well as providing shelter for animals. They provide food, shade and shelter for countless species of wildlife. Forests in general prevent wind erosion, regulate water regime and prevent disaster of natural catastrophes such as cyclones and tidal surges. Decomposition of trees, their leaves, and undergrowth ameliorates the soil and make it more fertile. Role of forests in food security cannot be overemphasized. Forests are carbon stores and help mitigate climate change. Intrinsic value of forests is immense and its listing is not exhaustible. The intrinsic values of forests do not enter the systems of national accounts. Therefore forestry sector requires priority during national budget process to support the overall development of the sector and fulfill the target of VISION 2021 in increasing the forest cover of the country up to 20% of its total land area by 2020.