Value Chain Study FINAL [Web]

8/2/2019 Value Chain Study FINAL [Web]

1/68

Plantation Wood, Rattan and Bamboo in Leyte Island

Vlue Chis t Beet Ice Geerti f Frest Frers

A Case Study

EnRD PRoGRam

CASE STUDY

01


2/68

This publiction is by

the Deutsche Gesellschft

fr Interntionle

Zusenrbeit (GIZ) GbH

November 2011

Environent nd RurlDevelopent ProgrDeutsche Gesellschft fr

Interntionle Zusenrbeit(GIZ) GbH

2B PDCP Bnk Center, V.a.Runo corner L.P. Leviste Sts.Slcedo Villge, mkti City,Philippines

Tel. +63 2 892 9051Fx +62 2 892 3374

www.enrdph.org

Contact

Dr. Walter Salzer

Director nd Principl advisorEnRD ProgrEil: [email protected]

Iprint


3/68

EnRD PRogRamCaSE STUDY

01

EnVIRonmEnT anD RURaL DEVELoPmEnT PRogRam-ThE DEUTSChE gESELLSChafT fR InTERnaTIonaLEZUSammEnaRbEIT (gIZ) gmbh

Pltti Wd, Rttd b i Leyte IsldVlue Chains to Benet Income

geerti frest frers

a Cse Study


4/68

ContentsACKNOWLEDGEMENTS

FOREWORD

SUMMARY: TOP 10 FINDINGS OF THIS STUDY

PLANTATION WOOD VALUE CHAIN

THE FURNITURE VALUE CHAIN FROM PLANTATION WOOD IN LEYTE

Situationer

Enablers and Supporters

MAJOR FUNCTION OF THE PLANTATION WOOD VALUE CHAIN

Provision of Quality Seedlings

Production

Harvesting

Lumber Processing

Wholesale / Retail

Furniture Making

Trade and Consumption

ECONOMICS OF PLANTATION WOOD VALUE CHAIN AND OPTIONS FOR CBFM / PO FARMERS

ENHANCING COMPETITIVENESS OF FARMERS AND POS

Case Study: Gmelina: Value additing to Gain Income

OPPORTUNITIES AND CONSTRAINTS

RATTAN AND BAMBOO VALUE CHAINS

SITUATIONER ON RATTAN AND BAMBOO

MAPPING THE RATTAN AND BAMBOO VALUE CHAINS IN LEYTE

OPERATORS

ENABLERS AND SUPPORTERSFUNCTIONS IN THE RATTAN AND BAMBOO VALUE CHAINS

ECONOMICS AND VALUE ADDING

OPPORTUNITIES AND CONSTRAINTS

LEGAL AND REGULATORY ENVIRONMENT AFFECTING THE VALUE CHAINS

INTERVENTIONS, UPGRADING STRATEGIES AND STRENGTHENING LINKS IN THE VALUE CHAIN

CONCLUSIONS AND RECOMMENDATIONS

4

5

7

9

13

15

16

17

19

20

21

22

23

28

29

33

37

40

42

4243

45

48

51

59

63


5/68

lIST OF TABLES

Wood demand projections for 2011 to 2015, and the corresponding

additional plantation areas needed

Log production (m3) and their sources by type of timber license /

permit, from 2004 to 2006

Type of logs produced by origin, 2004-2006

Summary of possible options, costs, and prospective gains of farmers

Estimated wood recovery for different sawing systems

Price structure of Gmelina wood at different levels and locations

in the value chain (in PhP)Exports and imports of rattan materials, 2004-2006

Philippine trade in bamboo and bamboo-based products

from 2004-2006

Transactions and payments made in transporting rattan poles

from Leyte to Pampanga: An Example.

Traders cost of doing business

Production sharing system from forest plantations in CBFMA

areas in Leyte Island

lIST OF FIGURES

A basic framework of a value chain map

Furniture value chain from plantation wood in Leyte

Timber harvesting operation in Leyte Island

Processing of lumber in a resawmill in Leyte Island

Inputs, outputs, and processes in furniture manufacture

Value addition along the different functions in the Leyte Island

plantation wood value chain

Simplied value chain for Gmelina lumber produced in Leyte Island

and sold in Cebu City

Furniture value chain from rattan in Leyte Island

Furniture value chain from bamboo in Leyte Island

Value adding per pole of rattan (1-1/8) up to furniture as nal product

>> CD-ROM: ANNEXES A TO P

11

12

12

27

28

3037

39

45

46

55

9

18

10

19

22

30

31

40

41

47

1

2

3

4

5

6

7

8

9

10

11

1

2

3

4

5

6

7

8

10

9


6/68

Acknowledgements

This publication has been produced with the contribution of time, expertise and inputsfrom the Department of Environment and Natural Resources (DENR), the Departmentof Trade and Industry (DTI), Cebu Furniture Industries Federation (CFIF), the Chamberof Furniture Industries of the Philippines (CFIP), the Philippine Wood Producers

Association (PWPA), and other institutions such as the academe (Visayas State University)and research agencies (Forest Products Research and Development Institute (FPRDI),the Philippine Council for Agriculture, Forestry and Natural Resources Research andDevelopment (PCARRD).

Additional information was obtained from various websites on the internet, especially oninternational markets and trade and from related, previous value chain studies.


7/68

7

Foreword

In 2009, the Deutsche Gesellschaft fr Internationale Zusammenarbeit (GIZ) GmbH-the Environment and Rural Development Program (EnRD) commissioned a valuechain study on wood and non-timber products (rattan and bamboo). One of the successindicators of the GIZ-EnRD Program is the increase of the income of individual farmersand peoples organizations (POs) in Leyte Island that have participated in governmentsreforestation efforts through the Community-Based Forest Management (CBFM)Program. The CBFM program links the rehabilitation of degraded forest areas with theprovision of livelihood for the communities that are responsible for the development,protection and conservation of resources such as timber and non-timber forest products(NTFPs) in forestlands.

Planting fast-growing timber such as Gmelina and Mahogany, and NTFPs such as rattanand bamboo has been encouraged as one of the strategies to help restore denuded forestareas. Through time, these planted species have matured and become ready for harvest.Harvesting, processing and utilizing these resources offer farmers opportunities to benetfrom their contribution to reforestation and plantation. The harvesting particularly ofplantation-grown timber was also in line with Region 8s Wood Processing RationalizationPlan, which aims to establish a wood processing sector in the Eastern Visayas with a solidbase of sustainably supplied raw materials.

The value chains were mapped using the GIZ ValueLinks framework. The study involved

a three-month period of gathering primary and secondary data from various governmentagencies and private sector organizations.

The value chains were validated in two subsequent workshops attended by variousstakeholders representing the respective actors and enablers. The participants came up

with a set of recommended action programs that stakeholders agreed to pursue to fulllthe vision of the respective value chains within the next three (3) years. (2010-2012).

This study is an effort to help understand how farmers can benet more from plantationwood, rattan and bamboo that are processed into different consumer products, especially

furniture.It provides an overview about the industries, including local and global market,and the market demand for plantation wood, rattan and bamboo. The study also identieshow the target groups could get maximum returns for their products. It describes whichsub-sector has the most potential in terms of market demand, value addition and incomegeneration for the benet of the various operators in the respective value chains. Thestudy gives a special focus on forest farmers who are dependent upon the income derivedfrom forest and agroforestry products.

Results will be useful in enabling farmers and communities to maximize the benets theyderive from forestry activities in order to make a living and at the same time protect theresources in upland areas.


8/68

Acronyms and AbbreviationsaaC aul allwle Cuta & D aliele d DispsleACIAR Australian Centre for International Agricultural

Research

aWP aul Wrk Pld.t. brd eetC&I Criteria and Indicators

CaRP Cpreesive arri Rer PrrCbfm Cuity-bsed frest meetCbfma Cuity-bsed frest meet areeetCENRO Community Environment and Natural Resources Of-ce

CfIf Ceu furiture Idustries federtiCfIP Cer furiture Idustries te Pilippies

CIF Cost, Insurance, FreightCIM Centrum fr Internationale Migration und Entwick-luCITC Cottage Industry Technology Center

CLOA Certicate of Land Ownership Award

CNFPO Certicate of Non-Timber Forest Products Origin

CO Certicate of Origin

CRMF Community Resource Management Framework

CTPO Certicate of Tree Plantation Ownership

CTPO Certicate of Tree Plantation Ownership

CV Certicate of Verication

cu.m. Cubic meterDA Department of Agriculture

Dao Deprtet adiistrtive orderDENR Department of Environment and Natural Resources

DMC Department Memorandum Circular

Dmo Deprtet merdu orderDOST Department of Science and Technology

DTI Deprtet Trde d IdustryECC Environmental Clearance Certicate

Emb Eviretl meet bureuERD Eviret d Rurl Develpet

ENRO Environment and Natural Resources OfceEO Executive Order

ERDB Ecosystems Research and Development Bureau

fDC frestry Develpet CeterfLma frest Ld meet areeetfmb frest meet bureufob free brdFPRDI Forest Products Research and Development Institute

GDH Gifts, Dcors and Houseware

GIZ Deutsche Gesellschaft fr Internationale

Zusereit (gIZ) ghHa Hectare

Ifma Iterted frest meet areeetIfP Idustril frest PlttiISF Integrated Social Forestry

ITTO International Tropical Timber Organization

k Kil

LCCI Leyte Chamber of Commerce and Industry

LGU Local Government Unit

L Liel eterm3 Cubic meter

mao miistry adiistrtive ordermDf mediu Desity fierrdMFPC Multi-Sectoral Forest Protection Council

MNR Ministry of Natural Resources

moa merdu areeetnCR ntil Cpitl ReiNRDC Natural Resources Development Corporation

NTFP Non-Timber Forest Product

OTOP One Town, One Product

OWBMA Other Wood-Based Manufactured Articles

PCA Philippine Coconut AuthorityPCARRD Philippine Council for Agriculture, Forestry and

Natural Resources Research and Development

PCHI Philippine Chamber of Handicraft Industries

PD Presidential Decree

PENRO Provincial Environment and Natural Resources

Ofce

PfDa Privte frest Develpet areeetPFS Philippine Forestry Statistics

PLTL Private Land Timber License

PLTP Privte Ld Tier Perit

PLTPCP Privte Ld Tier Pltti Cutti PeritPO Peoples Organization

PnoC Pilippie ntil oil CpyPTC Perit t CutPWPA Philippine Wood Producers Association

RA Republic Act

RED Regional Executive Director

RfmP Revised frestry mster PlRSD Rattan Special Deposit

RUP Resource Utilization Permit

SCP Special Cutting Permit

SIFMA Social Integrated Forest Management AgreementSmf Sel mitri frSoP Stdrd operti PyetSPLTP Special Private Land Timber Plantation

SPWP Secondary Processed Wood Product

SYC Sustied Yield CutTESDA Technical Education and Skills Development

autrityTLA Timber License Agreement

UPLb Uiversity te Pilippies Ls bsUTM Universal Transverse Mercator

VC Vlue CiVSU Visys Stte UiversityWRP Wood Recovery Permit

WPRP Wood Processing Rationalization Plan


9/68

9

SummaryTop ten ndings of this study

1. Common to all three sub-sectors are the problems associated with unstable andcomplicated policies that make compliance difcult, cumbersome and costly. Thisresults in opportunities for bribe-taking and corruption. Delays in Resources UtilizationPermits (RUP) approval are also a usual occurrence because of a highly centralizedpermitting system.

2. Linkages among the different actors of the value chain are informal and tend to bedominated by the traders and processors, with the raw material suppliers having verylimited access to market information.

3. Quality standards are generally lacking. Producers do not employ advanced silviculturaltechniques to improve the timber stand while processors do not use the latesttechnologies to improve process efciency and to upgrade end-product quality.

4. Plantation wood, rattan and bamboo industries in Leyte Island are not included in anyof the priority programs of government designed to promote products and expandmarket opportunities.

5. Among the three forest-based materials, plantation wood offers the greatest potentialto improve the lives of farmers in Leyte. The more developed state of tree plantationsin Leyte is an advantage over those of rattan and bamboo as it insures long-term

supply. The wider spectrum of products from wood and their general acceptabilityto consumers provides more stable markets, and farmers can readily have access toinformation and technical assistance from government agencies and other enablinginstitutions on plantation wood.

6. Almost one third of the value generated along the wood and rattan value chainsdisappears in so-called undocumented special operational payments. This has majornegative effects on the income of farmers involved in wood and rattan harvesting.

7. Policies regarding wood and rattan harvesting and transporting are complex andcontradicting. Therefore, there is not only a lack of understanding, knowledged ofprocesses and their rights and responsibilities on the side of farmers, traders andprocessors but also on the side of the local executive authority.

8. Application and permitting process takes long which in combination with poorproduct quality (insufciently dried logs) tempts applicants to shortcut the processthrough bribes and grease money to avoid further degradation and devaluation of theproduct.

9. Peoples Organizations lack information on market prices and are sometimes restrictedto sell to traders which are recommended by the Environmental Ofcers who negotiates

on their behalf. Farmers prefer the less protable stumpages sale so that the tradershave to shoulder the permitting costs.

10. Monitoring of application and permitting processes is insufcient and no adequatereporting system is in place.


10/68


11/68


12/68

12

FIGURE 2 Furniture Value Chain from Plantation Wood in Leyte

The value chain is focused on furniture because local demand for this commodity isseen as stable and relatively unaffected by market forces external to Leyte. Leyte hashad no wood-based processing facility that produces primary wood products exceptfor lumber, which were produced by resaw mills and not by sawmills. A furnitureindustry does exist in Leyte, but is composed of micro to small enterprises thatcater mostly to the local demand for furniture. As an industry, furniture is both rawmaterial- and labor-intensive, auguring well for Leyte which does not seem to have ashortage of either resource.

Furniture is a consumer item required not only by households but also by governmentand private ofces, and businesses that are engaged as service providers like restaurantsand hospitals, educational institutions and enterprises catering to the tourism industry.

SITUaTIonER on WooD anD WooD PRoDUCTS DEmanD fRom fURnITUREmanUfaCTURIng anD hoUSIngThe Revised Forestry Master Plan (2003-2015) (FMB-DENR) projected how muchwood was going to be needed by the Philippine furniture manufacturing and housing

based on the furniture industry performance (1992 and 2002). The projected demandfor housing used as a benchmark the 232,773 housing units that are constructedannually, and factored in population growth rate, double occupancy, and the presence

Plantation Wood, Rattan and Bamboo in Leyte Island | Value Chains to benet income generation of forest farmers

Specif

cin

puts

Mainfunction

Operators

Enablers/Supporters

Production

Harvesting

Lumber

Processing

Wholesale/

RetailFurniture

Making

Trade

Consumption

Provisionof quality

seedlings

Nurseries(n=74)

POs (CBFM)(n=74)

Buyers(n


13/68

13

of unacceptable and makeshift housing units. Projections from 2011 to 2015are shown in Table 1. No attempt was made to revise the projections to take intoconsideration the apparent surge in Secondary Processed Wood Products (SPWPs),the global nancial crisis that started in late 2007, and the extremely strong typhoons

2011 2013 2015High1 Low High Low High Low

Lumber needed(m3) forfurniture(in log form)

361,139(722,278)

237,598(475,196)

436,979(873,958)

261,952(523,904)

528,744(1,057,488)

288,803(577,606)

Wood for HousingNew units 2

(m3)

1,473,068 1,473,068 1,473,068 1,473,068 1,473,068 1,473,068

Repair (m3) 199,244 199,244 199,244 199,244 199,244 199,244

Total (m3) 2,394,590 2,147,508 2,546,270 2,196,216 2729,800 2,249,918

Plantationneeded (Has)3

7,370 6,135 8,129 6,378 9,046 6,647

and oods that hit the country with increasing frequency over the last 5 years, therebyaffecting the standing timber resource and the existing housing structures.

The Revised Forestry Master Plan (RFMP) indicated that there is wood shortage andadditional tree plantations are needed, but no additional planting in private landswas projected.Developing additional tree plantations to respond to the projected wood shortage froma growing furniture industry and the backlogs experienced by the housing sector wasrecommended. The projected plantation areas to be developed included plantationsfrom the private sector in public lands covered by the following instruments:Forest Land Management Agreement (FLMA), Industrial Forest Plantation (IFP),Community-Based Forest Management (CBFM) and agroforestry. No additional

planting in private lands was projected.

Log production from private lands contributed signicantly to wood supply from2004-2006.However, annual log production in the Philippines actually increased from 2004to 2006, owing largely to substantial increases in outputs from private lands. Thisis evident in Table 2, which shows that logs issued permits on the basis of selfmonitoring forms (SMF) and/or certicates of verication (CV) have comprised thebulk of log production since 2004. The increase in log outputs from private lands

indicates that there is heightened recognition of the prot-generating potential ofprivate tree plantation development. All regions in the country have reported to haveharvested logs from private lands.

TABLE 1. Wood demand projections for 2011 to 2015 and the corresponding additionalplantation areas needed (DENR, 2003).

1 High estimates are assumed to include wood needed by the forest products manufacturing sector.2 Wood required for housing is assumed to be in the form of lumber and plywood.3 Plantation output is assumed as 200 m3 per hectare at year 10.



14/68

14

Community-based forestry contributed a small percentage in log production from2004-2006.Share of production from community-based forestry was small, contributing 5.06% ofthe total log output in 2004 to only 1.32% (2005) and 1.79% (2006). The reason couldbe attributed in part to the nationwide ban on logging in 2004 and the suspension of

Resource Utilization Permits (RUP) of CBFM beginning in 2003.

There is an expanding interest in tree plantation development as a business venture,both by the government and the private sector.Table 3 shows the type of logs produced by origin (naturally grown or planted).Planted trees contributed to more than 70% of logs produced in 2004, then increasingand leveling at more than 80% in 2005 and 2006. This is a positive development asfar as conservation of remaining forest resources is concerned, while also pointing toexpanding interest in tree plantation development as a business venture, both by thegovernment and the private sector.

Timber License/Permit 2004 2005 2006

Vol (m3) % Vol (m3) % Vol (m3) %

Timber LicenseAgreement (TLA)

51,001 6.64 51,930 6.17 72,717 7.02

Special Cutting Permit(SCP)

1,872 0.24 456 0.05 2,273 0.22

Community Based ForestManagement (IntegratedSocial Forestry(CBFM/ISF)

38,862 5.06 11,079 1.32 18,590 1.79

Private Land Timber

Permit (PLTP)

3,075 0.40 1,946 0.23 4,777 0.46

Special Private LandTimber Permit (SPLTP)

877 0.11 0.00 0.00

Forest Land ManagementAgreement (FLMA)

6,427 0.84 0.00 0.00

Integrated ForestManagement Agreement(IFMA)

353,012 45.98 146,965 17.48 228,051 22.01

Self Monitoring Form/Certificate of Verification(SMF/CV)

299,309 38.99 623,839 74.18 704,920 68.04

Others 13,234a 1.72 4,766b 0.57 4,706b 0.45

Total 767,669 100.00 840,981 100.00 1,036,034 100.00

Table 2. Log production (m3) and their sources by type of timber license/permit,r 2004 t 2006 (fmb-DEnR, 2004-2006).

a From MRP Muyong Recovery Permit; SPLTP Special Private Land Timber Permit; WRP Wood Recovery Permitb From MRP, WRP, FLMA, Tree Cutting Permit

Table 3. Type of logs produced by origin, 2004-2006. (FMB-DENR, 2004-2006)

Origin 2004 2005 2006

Vol

(m3)

% Vol (m3) % Vol (m3) %

Naturally-grown 217,072 28.28 96,317 11.45 171,139 16.52

Planted 550,596 71.72 744,663 88.55 864,894 83.48Total 767,668 100.00 840,980 100.00 1,036,033 100.00


annEx aDISCUSSIonS on

ThE DEmanDanD SUPPLY

of TImbER anDPRImaRY anD

SEConDaRYPRoCESSED WooD

PRoDUCTS.


15/68


16/68

16

the program does not support nor focus its attention to plantation wood developmentand wood products promotion.

LoCaL goVERnmEnT UnITS Through the Local Government Code (RA No. 7160),LGUs have been mandated to become involved in the implementation of community-based forestry projects and the management and control of communal forests and similar

forest development projects in coordination with the DENR. Thus, in the harvesting,transport and marketing of forest products, LGUs are expected to play an importantpartnership role with the DENR. Among others, LGUs are tasked with the responsibilityto conrm the existence of forest resources that are being targeted for exploitation andharvesting, through an assessment and actual inspection of the resources within theirjurisdiction. Another important role of LGUs is the policing of illegal acts and abuse ofnatural resources.

The interview with the City ENRO in Leyte revealed the desire of LGUs to become moreinvolved in the management of forest resources and to assume greater responsibility

over communities and enterprises that were dependent on the forests, but lamented thefact that mechanisms for better coordination with DENR were not yet in place. Somekey informants also believe that LGUs should be at the frontline in the protection andmanagement of natural resources. LGUs are also seen as providers of technical assistanceto local communities/constituents.

ThE ChambER of fURnITURE InDUSTRIES of ThE PhILIPPInES (CfIP) ThisChamber used to have a presence in Leyte, but this link has been inactive in recent years.

The Forest Products Research and Development Institute (FPRDI) This Institute of theDepartment of Science and Technology has recently assisted Mr. Albert Chua in settingup a kiln dryer for the latters company in Ormoc City. The Technical Education andSkills Development Authority (TESDA), the government agency whose primary functionis in management and technical skills development, has yet to be tapped by Leyteos forassistance in these areas.



17/68

17

maJoR fUnCTIon of ThEPLanTaTIon WooD VaLUE ChaIn

FindingsThe VC begins with the provision of quality seedlings of tree species. Theseseedlings are to be planted by POs, farmers, and IFMA/SIFMA/ PFDA tenureholders and private landowners in Leyte. These seedlings can be grown from seeds,as well as from cuttings and/or wildlings, and are hardened before they are out-planted inopen plantations. The growing and nurturing of seedlings are done in nurseries established

within the island, preferably in strategic areas that are accessible to most tree farmers. Inthe case of POs, nurseries are strategically located, usually near the PO meeting centerso that PO members can easily collect their planting materials. In the case of privatetree farmers, nurseries are located beside their houses. Most family members assist inoperating the farmers nursery.

Commercially important plantation wood species available in Leyte Island* Gmelina or Yemane (Gmelina arborea) Mahogany (Swietenia macrophyla) Antipolo (Artocarpus blancoi)

Giant Ipil-ipil (Leucaena leucocephala) Bagalunga (Melia dubia) Narra (Pterocarpus indicus) Bagras (Eucalyptus deglupta) Falcata (Paraserianthes falcataria) Kaatoan bangkal (Anthocephalus chinensis) Mangium (Acacia mangium)

*Identied during the interviews with farmers and validated during the workshops.

The names of the above listed planted were also in the species list provided by theDENR Regional Ofce in Tacloban and CENRO Maasin of registered certicate of treeplantation ownership (CTPO) holders in Southern Leyte.

PRoVISIon of qUaLITY SEEDLIngS



18/68

18

annEx b InDICaTES Log PRoDUCTIon bY SPECIES fRom REgIon 8, anD CoRRoboRaTES ThE PRESEnCE ofa nUmbER of ThESE SPECIES In ThE REgIon. ThE VoLUmE of YEmanE LogS PRoDUCED oVER ThE fIVE YEaRPERIoD aCCoUnTED foR a LITTLE oVER 70% of ToTaL Log PRoDUCTIon foR ThE REgIon, oUTnUmbERIng LogSfRom aLL oThER SPECIES CombInED bY a RaTIo of aLmoST 2.4:1.

Volume of the planted tree species*:1) Gmelina (78.4%)2) Mahogany (17.0%)3) Giant ipil-ipil (3.4%)4) Antipolo (0.2%)5) Bagalunga (0.8%)

*A rough estimate based on the database of marketable volume of species from CTPOs in Southern Leyte compiled by CENRO

Maasin resulted in the following ranking (annEx C): Four of the ve tree species planted in private tree plantations, with theexception of Bagalunga, have gured in the FMB-DENR data on log production in Region 8 for the period 2002 to 2006. Bagalungais a fast-growing, medium-sized tree, and the properties of its wood make it suitable for furniture, construction, and for other industrial

uses. ( annEx D: a SUmmaRY of ThE PRoPERTIES anD aPPLICaTIonS of SELECTED CommERCIaL WooD

SPECIES In LEYTE)

Government nancing of PO nursery establishments. As part of the CBFMreforestation project, the government nanced the establishment of nurseries by the POs

within their respective areas. These nurseries supplied the POs with planting materials.Apart from clearing the land on which the POs erected the nursery shed, farmers raiseseedlings, select viable germinants that are transferred into plastic bags containing the soilmedia, water regularly, and weed and maintain the seedlings before transporting them tothe planting sites.

Aside from seedlings as inputs for tree plantation establishment, fertilizers andpesticides, are the other variable inputs needed.This study has found that none of thePOs had used these inputs in planting or subsequent protection/maintenance activities.Land belongs to government as far as POs and IFMA/SIFMA holders are concerned,subject to tenurial agreements that give the tenure holder right of use over the resourcestherein for a specied period.

PRoDUCTIonThis function involves the development of tree plantations, either under the DENRsreforestation program for CBFM, or as the beginning of a long-term business activity byprivate small-hold tree farmers and by IFMAs/SIFMAs.



19/68


20/68

20

Challenges encountered by Peoples Organizations in dealing with buyers:1. They have limited access to information as to the prevailing market prices for timber.2. They are constrained to dealing with buyers who are recommended to them by the

CENRO, who negotiates with the buyer on behalf of the PO.3. In the process of disposing their logs, some farmers also deal with intermediaries

who are in the business of buying-and-selling timber. The process of transacting withpotential buyers gets even more complicated when the local government unit, from theBarangay up to the municipality, would impose additional rules that require the farmersto secure documents other than those already imposed by the DENR and to pay otherfees or local taxes.

4. Finally, the deal to transact business between the PO and the buyer, if they are ableto go this far, is sealed with a memorandum of agreement (MOA), which still needsCENRO approval. Thus, before a single board foot of lumber reaches its nalconsumer, the farmer must have paid countless visits to the CENR Ofce, conferred

with several DENR ofcers who may have varying or conicting interpretation of rulesand regulations, obtained the signatures of several government bureaucrats, and paidhundreds or even thousands of pesos in both legal and non-legal fees to consummatethe process.

fiure 3. Tier rvesti perti i Leyte Isld


Cutting into itches

Cutti titches


21/68


22/68

22

after cutting. The bandsaws were also being run by operators who were assisted by helperswho paid little attention to orderliness in the mill and the proper stacking/storage ofprocessed lumber. There was not much effort on the part of the resawmills to segregatelumber properly and to separate the trimmings, slabs, and sawdust from the nishedproducts. Predominantly 2 thick boards are produced.

The lumber dealers cum processors appeared to have little understanding of theimportance of moisture content in wood as a factor that affects the quality oflumber. Boards were merely left to dry in the air, although the rainy climate limits thedesirability and effectiveness of this practice in Leyte. The boards were not being piledin a manner that would facilitate air drying. Only one processor (in Ormoc City) wasreported to have a kiln dryer, which was installed less than two years ago. Local furnituremakers usually use air dry lumber, but the export industry and most high end domesticprocessors require kiln dried lumber.

WhoLESaLE/RETaILA large number of lumber dealers are located in Cebu and the NCR. Bigger companieshave their own kiln drying facilities or have agreements with other companies to kiln drytheir wood. A few processors buy directly from suppliers from other regions, especiallythose with their own kiln drying facilities. The majority of the furniture makers andcontractors buy their wood already kiln dried from lumber dealers. This allows them toclassify the lumber by quality and moisture content before buying.

FindingsIn Leyte, lumber was being sold through the lumber dealers and/or hardwarestores in Leyte. Oftentimes, lumber is sold directly to customers, contractors and

processors, mostly local buyers. One lumber dealer in Ormoc City was reported tobe selling lumber to Cebu. One of the lumber processors revealed that he had receivedinquiries about selling lumber outside of Leyte Island, (for example, Manila) but heexpressed apprehension about his capacity to supply the large volume required by bigbuyers, particularly makers of furniture. Local sales are usually in small volumes only.Local furniture makers can seldom buy bigger volumes of timber all at once. Only lumberdealers and hardware shops can be targeted for direct sales of bigger volumes. Farmers or

POs that target to sell in bulk might need to sell outside of the Region.

Heavy wood industries like the manufacturers of reconstituted panels or pulp andpaper are potential plantation wood customers. These companies typically use bigger



23/68


24/68


25/68

25

usually by walk-in buyers who directly purchase their furniture requirements from thefurniture shops. Furniture makers look forward to government contracts as these one-time purchases could comprise of substantial volume that could sustain the companysoperations in the long run.

Some furniture manufacturers claimed that their products have already reached Manila, at

least one set or piece of furniture at a time, but they do not have the capacity to producelarge quantities to supply big demands. Being able to sell their products outside of theIsland and to penetrate the export market is seen a s a long-term goal by the industry inLeyte.

1.2 Economics of PlantationWood Value Chain andOptions for CBFM/PO Farmers

A part of the present studys objective is to assess options by which POs/farmers improve

the benets they could derive from the plantation wood value chain. It looks into whichreturns that can be generated if:1. The PO or the farmer adopts different modes of disposing their timber was conducted.2. They had been given the opportunity to perform functions vertically up the value

chain, such as going into further processing like lumbering and furniture making weredetermined.

Theoretically, farmers and POs have many options with or without venturing upwardsin the processing chain. What might be realistically feasible for the farmers/POs woulddepend on their respective situations. The following analyzes some options that may helpto develop individual strategies.

STUmPagE SaLEThe baseline scenario, also the simplest, is stumpage sale. While this is no longer a

recommended practice in Southern Leyte, it appears to continue to prevail as a preferredmode by some farmers and POs due to the advantage it offers in terms of liberating themfrom tedious paper work and from the hassle of contracting chainsaw operators andhaulers. Two different versions are possible.

oPTIon 1STUmPagE SaLE



26/68


27/68

27

Pros Cons

Little work for the POs /farmers Low price per bd.ft.Farmers/PO members can often help during harvestingwith direct compensation

Buyer is not interested in high recovery but only to get thebest wood (high wastage factor)

All charges, fees and SOPs can be paid by the buyerdirectly. (Buyer negotiates with government officials)

Only flitches leaving the farm are the base for payment

The buyer might find many reasons not to pay in full

Payment is done only when or after the flitches leave thefarm

Different species often not segregated nor paid foraccording to their respective market value

Payments are possibly delayed

Farmers/POs have little to put against arbitrary measuresfrom part of the buyer when trees are felled already

Pros Cons

Further increased number of potential buyers Most charges, fees and SOPs are to be paid by thefarmer/PO (Farmer/PO has to negotiate withgovernment officials)

Farmers/PO members can work during harvesting andripping

Harvesting and ripping has to be pre-financed and/orworkers are paid only when flitches are sold

Usually better prices are paid than for logs High risk of devaluation of wood when not sold fastenough

Different species can be sold individually Moderate investments in equipment are needed (e.g. chainsaws)

Flitches can be stored at central location (reduced risk oftheft)

Farmers are paid only when flitches are sold

Farmer/POs can sell based on the best offer

oThER oPTIonSEngagE In SaWmILLIng, DRYInganD TRaDIng

The farmer or PO also has the option to organize the harvesting themselves and evenengage in sawmilling, drying and trading. Each option or processing level has someadvantages and disadvantages which are tabulated below, for purposes of comparison:

Logs sold at farm gate



28/68


29/68

29

Prot margins turn out to be more sizeable as the functions being performed, if farmers/POs have the capacity to do so, move closer to the consumers of the products. Thisshows that greater value adding opportunities occur towards the market end of the valuechain, and validates the contention that those at the supply side of the chain are farremoved from where increased revenues could be realized. This somewhat justies the

expressed desire of farmers not to be limited to the production function and to be able toupgrade their livelihood options by moving up the value chain.

Table 4. Summary of possible options, costs, and prospective gains of farmers.

SUmmaRY of oPTIonS

A summary of these options and the costs or additional investments that POs/farmers

need to make to be able to undertake them, as well as the prospective benets are shownin Table 4. ( annEx E: ThE DETaILED ComPUTaTIonS anD aSSUmPTIonS)

Particulars

Additional

costs/invest-ments forPOs/farmers

None Chainsaw,

hiring ofchainsawoperator,haulers,scaler, andhelpers

Stumpagesale

Farmer/PO willdo the harvest-ing and sellthe wood asitches

Farmer/POwill install aresawmill

Farmer/POwill install amini-sawmill

Farmer/PO willgo into furnituremanufacture

Chainsaw,

Resawmillinstallation,hiring ofchainsawoperator,resawmilloperator, scaler,and helpers, feesfor WPP, ECC,and power costs

Chainsaw,

Mini-sawmillinstallation,hiring ofchainsawoperator,resawmilloperator, scaler,and helpers,fees for WPP,ECC, andpower costs

Chainsaw,

resawmill ormini-sawmillinstallation,furniture shopand equipmentinstallation,hiring ofchainsawoperator,resawmilloperator, scaler,and helpers,furnituredesigners andassemblers, feesfor WPP, ECC,and power costs

Net receipt(Php) percubic meterof Gmelina

275.00 378.70 Ranges from600 to 1,236depending onminimum sell-ing price per

board foot oflumber

Ranges from841 to 1,667depending onminimum sell-ing price per

board foot oflumber

Ranges from588 to 5,288depending on

wood recoveryand selling price

of furniture



30/68

30

1.3 Enhancing the

competitiveness of farmersand POs

Better plantation management is important for producing good qualitylumber. In mature plantations the farmer/PO can inuence the quality of the woodby choosing the best time for harvesting. In general, the wood increment increases

with increasing tree age. Also the volume of heartwood increases with age, which

means better wood quality. Waiting as long as possible or harvesting a few trees inorder to promote the remaining trees (thinning) is advisable as long as the trees arenot prone to decay in the heart or center portion.Signicant and fast improvements and corresponding benets can be

achieved from minimizing wastage. Ripping logs by means of chain saws intoitches or even boards results in a low recovery rate and low quality of the lumber.

A bad quality raw material will result again in low recovery rates when furtherprocessed. The unnecessary wastage can be as high as 50% or more of the total

wood recovery (see Table 5). Additionally, the harvesting and hauling techniquesoften result in breakage and dirty wood with corresponding problems at the

processors level. Higher recovery means higher income. Better wood quality andclean lumber can nancially be acknowledged by the processor since he has less

wastage and tool costs.

Table 5. Estimated wood recovery for different sawing systemsFurther processing gives the plantation owner the chance to earn more buthe needs to have the funds and capacity to do so. Processing lumber should betargeted since itches and logs are difcult to store. Also, the range of customersis much broader for lumber than for itches or logs. As long as the lumber is soldlocally, air-drying is currently sufcient. When markets in Cebu or Manila are

targeted kiln drying seems to be advisable.

The question on whether further processing is economically feasible can beanswered in general with YES. Further processing is done by a large number of

System Chain Saw Chain and Band Saw Sawmill(Bandsaw)

by step Total by step Total by step TotalCutting into flitches 54% 54% 54% 54%Cutting into boards 87% 47% 98% 53% 69% 69%Furniture making

(incl. over- sizing)

49% 23% 57% 30% 61% 42%

1 Calculations are based on theoretical recovery rates from straight logs with no defects.



31/68

31

companies successfully. Further processing at the location where the wood is producedgives advantages at least up to the level of ready-to-sell lumber.

Improving wood qualitythrough plantationmanagement

a. silvicultureb. choice of most suitable

species/species mix

(including primehardwoods)

c. de-branchingd. thinninge. harvesting at an optimum

age

Reducing the wastage duringa. harvestingb. haulingc. rippingd. sawmilling

e. storagef. drying

Venturing further up thewood preparation value chain

a. felling

b. haulingc. rippingd. sawmillinge. air-dryingf. kiln-drying

Reducing or eliminatingSOPs

a. for licensesb. checkpointsc. monitoring fee

Establishing a buyersinformation system forbetter linkage of buyers andproducers

Taking over trading function

a. eliminating one or moretrading levels

b. building up direct traderelations with furtherprocessors

Box 01. A summary of how improvements can be achieved to improve the competitiveness rers/Pos.

aDDIng VaLUE To gaIn InComE

It can be seen from Table 4 that the net returnsper cubic meter of Gmelina increase as thefarmer is made to perform other functionshigher up the value chain. The benet athigher processing levels is not only higher saleprices, but increased income opportunities forcommunity members and a broader range ofpossible buyers. This is of special importancesince the supply of the most common plantationspecies like Gmelina and (Honduras) Mahoganyseems to be higher than the domestic demand.Only higher quality and well-processed lumbercan increase the competitiveness that might benecessary to operate protably in the long run.Fig, 6 shows the value added per board foot oflumber as the material moves from the supplyside to the consumer end of the value chain.These are based on the differences in pricesas the product enters into and exits from onefunction to another in the plantation woodvalue chains. For purposes of simplifying theillustration, only the average prices are shown.

Note that the closer the functions are to themarkets, the higher are the prot marginsassociated with the products.

The range of prices paid for lumber as of theend of 2008 at different levels of the chain andat different locations are presented in Table 6.

The selling prices can be represented by asimplied value chain for sales from LeyteIsland to Cebu City as shown in Fig. 7.

In the National Capital Region (NCR), pricesfor Gmelina wood are on average Php3/ bd fthigher than in Cebu City.

The plantation wood value chain often includeshidden prots. Some examples of how thesearise are through the following:

(a) The trader has fewer expenses for theharvesting operation than calculated fordetermining the farm gate price whenbuying from POs;

(b) Volumes are understated to save fees,government share, etc.;

(c) The same low price for Gmelina is paid

for all species harvested although sellingprices are usually higher for other species;

(d) Flitches are bought oversized and thelumber is sold undersized after re-

CaSE STUDY: gmELIna



32/68

32

Farmers:

P3.50 in-clusive

of

inputs

Buyer:

P3.40 foroperating

costs

Govt:

P5.10 for

fees &other

charges

P12/bf

P14/bfP2 forhauling

and other

charges

P20/bfP6 forre-

sawing

& mark-

up

P6-P10 forconversion to

furniture

component

P26-30/bf

Figure 6. Value addition along the different functions in the Leyte Island plantation wood value chain.

sawing. Sometimesone additional boardcan be gained from aitch than what hasbeen actually paid for.Oftentimes, the buyermakes deductionsfrom the farmers forvarious reasons.

These are examples on howa higher income in tradingcan be gained. The surplusresults in reducing thebenets of the farmers, thegovernment and the nalprocessor or consumer. Forplantation-grown Mahogany,POs usually get the sameprice as for Gmelina. Privateplantation and traders might

get a higher price as they arepaid at approximately 20%more than what is generallyreceived by POs.



33/68

33

During the validation workshop, some POrepresentatives mentioned that they would liketo venture into furniture making. This is tomaximize the use of the wood they own andto add more value to it. However, the decisionto establish a furniture shop should be madeindependent from owning wood supply for the

following reasons:

a) Owned wood supply might not beavailable all the time. Therefore, a biggerstock of lumber might be needed duringperiods where no harvesting takes place.The value of the stock would have to benanced by the PO.

b) If the lumber can be bought at the sameprice as the one at which the lumber theyproduce can be sold, then there is nocompetitive advantage to have their ownwood over someone who buys wood.

The decision to establish a furniture workshopshould be made mainly on basis of factors like:

Markets and market access Availability of skilled workers Availability of supplies (glues, ttings,

nishing materials, etc.) Existence of entrepreneurial skills and spirit Availability of capital Available buildings or land and funds to

erect the needed buildings Availability and security of power and water

supply.

In most cases furniture makers will look for alocation close to markets, labor and supplies.In case a PO plans to open its own furnitureshop, a location in or near to a city should beconsidered. In case a location in the municipalityof the PO is the only possible choice, then thesize of the shop and the range of productsproduced should suit the potential market atthat location.

Seldom do forest or plantation owners operatea furniture factory since forest management,harvesting, sawmilling, drying and marketingalready require much attention on the part ofthe entrepreneur to be successful. Furniture

making is also a very different trade compared toplantation management and lumber production.

In summary, being able to move vertically upthe value chain has requirements that couldpose as risks and limitations to POs/farmers.Among these requirements are the following:

a ) f i n a n c i a lresources fore q u i p m e n t ,structure, andworking capital;b ) a d d i t i o n a ldocumentationrequirements;c ) m o r es o p h i s t i c a t e d

entrepreneurial and production

management skills;d) technical and product design skills;e) access to utilities; andf) linkage with consumer markets.

It would take more than good intentions onthe part of POs/farmers to embark into, muchless become successful in, venturing into thefunctions further up the plantation wood valuechain. There is a vital need to thoroughly assessthe technical, entrepreneurial and nancialcapacity of POs/farmers to determine their

readiness to move up the value chain and toperform functions other than productionand to some extent, harvesting so as not tounduly expose the POs to risks that can spellhuge disaster on PO nances and relationshipsamong members.

This does not mean, however, that POs willforever be consigned as the lowest-incomeearning participants of the plantation woodvalue chain by merely conning themselvesto the supply end of the chain. Farmers canundertake improvements in their plantingand tree plantation management practicesto produce better quality timber that couldcommand a higher price in the market. Theycan also learn and adopt improved techniquesthat would increase the per hectare yield of theirplantations. Farmers should also gain betteraccess to updated market information so theycan bargain for more favorable prices for theirproducts. The harvesting and hauling optionsare also within reasonable reach of the farmers,

requiring only minimal investments in theacquisition of chainsaws, and perhaps, carabaosand other low-cost transport systems, as wellas skills training in harvesting and tree felling,primary log breakdown and wood handling.

Farm gate

13 PhP

Delivered Cebu

Green

17 PhP

Delivered Cebu

Air Dried

19 PhP

Delivered Cebu

Kiln Dried

23 PhP

Lumber

Yard

31 PhP



34/68

34

Main saw chosen: WoodMizer LT28; price USD 12,000.-; capacity 200 bd.ft ./hr 35,200 d.t./t

Assumptions: Increased recovery rate from logs by 25% Sales price of PhP 18 instead of PhP 12 (harvesting and hauling included) Capacity utilization of 75% = 26,400 bd.ft./month

Box 02. Brief economic estimate for a mobile or semi-mobile band-sawmill

(A WoodMizer Bandsaw was chosen as example since the DOST at the Forest Products Research and DevelopmentInstitute (FPRDI) avails of a similar model. Training could possibly be provided by DOST).

The main advantages are reduced transport costs and reduced costs for land and labor.The success of a venture depends less on calculated possible prots but more on factorslike management, skills, manpower, and market access.

However, to illustrate how fast investments could be recovered, an example is presentedin Box 02. In here, the main benet is gained from higher recovery rates. Sales prices andoperational cost were conservatively assumed.

Box 02 shows that the return of investment seems possible in 1 year time, providedcharges on the part of the government remain the same based on the raw material inputin currently used system. If the higher recovery rates would result in additional chargesfor government share (30% based on 12 PhP/bd.ft.) and monitoring fee (1.5 PhP/ bd.ft.),then the additional cost would be 402,390 PhP/year The return in investment would beapproximately 4 months longer.

This scenario is estimated for conditions where logs for cutting are available all the timeand all lumber produced can be sold. Stand still times are maximum 25% (at 8 hours/day).Based on experience, the reality looks usually different with many delays and stand still

times as well as management faults. To expect a double or even longer time for the returnof investment seems to be advisable.

Investment cost PhP

Sawmill 576,000

Support equipmentand import

384,000

Storage building for airdrying, etc.

440,000

Total investment 1.4 M PHP

Operational cost PhP

Milling, handling, petrol,overhead

2-4 PHP/ bd.ft.( used 3 PhP)

Total operational costs 3 PHP/bd.ft.

Benefit PhP/year

25% higher recovery = 78900bd.ft./year at 18 PhP

1,420,200

Higher sales price of the remaining75% of lumber produced: 236,700bd/ft. 4 PhP

946,800

Gross additional revenue 2,367,000

Operational costs 316800 bd.ft . 3PhP

950.400

Total gain in return 1,416,600



35/68

35

1.4 Opportunities andConstraints in the Plantation

Wood Value ChainMany POs had undertaken tree plantation establishment activities within the island ofLeyte. The EnRD Program has been assisting 30 POs in the provinces of Leyte andSouthern Leyte. All of the POs have established, and were in fact already nurturingmature tree plantations. Most of them were in the process of securing RUP while some

were currently engaged in harvesting activities.

Constraints

POs mentioned several constraints that they encountered in treeplantation establishment, management, harvesting, transporting,and marketing of wood products. Considered as most signicantconstraints were the following: (1) difculties in obtaining/securingpermits to harvest and transport their forest products; (2) notechnology/ lack of equipment/ no capital for furniture processing;(3) limited number of buyers controlling the price of wood; (4) lack ofinformation of buyers and traders regarding the marketing of products;and (5) the poor quality of plantation grown timber that makes themdifcult to process into furniture.

POs claim that they lack linkages to and information on otherpotential buyers. For marketing they are mostly dependent uponbuyers recommended to them by CENRO personnel. Often, thesebuyers offer to buy timber at very low prices. This situation leaves POs

with no choice in terms of where they could get the best returns fortheir plantation timber.



36/68


37/68

37

opportunities to improve the disposition and marketing of forestproducts from CBFM areas. As a group, the federation can try toinuence the DENR to simplify the permitting and marketing systemof the POs products. Another possible responsibility of the federationis to oversee the local and regional market for timber and other nishedproducts. The federation can help link the POs with different local and

domestic buyers of timber. A PO federation would also be in a betterposition to initiate liaison and create partnerships with local and nationaldevelopment institutions that can provide assistance in improving thePOs performance and delivery of their functions along the plantation

wood value chain.

POs engaged in Gmelina production have yet to overcome biasesand perceptions that the wood of Gmelina is of

poor quality. There are some consumers who thinkthat Gmelina wood is t only for low-cost scaffolding

material that can be substituted for coco lumber when thelatter is in short supply, and for other low-value products.Box 03 below explains the issues involved in harvestingand processing Gmelina timber and how the perceiveddefects in quality and working properties, which result inthe poor image of the species, could be overcome.

Many of the opportunities and constraints identied bythe value chain operators were also conrmed by theenablers, which had a longer list than the real actors in thechain. Enablers contradicted the traders and processorsin their assessment of the availability of updated productdevelopment and design.

The group also believes that current policies encourage more planting of trees, not tomention availability of funds, seedlings, technology and areas for planting. They also thinkthat Leyteos have the skills required to promote the value chain. But constraints tothe value chain exceeded the opportunities. They view farmers as indifferent to qualityrequirements, using very little or no good practices to ensure quality of logs, sustainableplanting, maintenance, and harvesting. Farmers were also seen as lacking in skills to access

funding for plantation establishment.

Enablers also deride the unharmonized policies that result in difcult and cumbersomepermitting process and other hidden transaction costs associated with harvestingplantation timber. On the processing and marketing aspects of the chain, enablersconsider as constraints the inefcient lumber process technology in use which results inpoor quality products. This would make it more difcult for the local industry to compete

with imported products that are viewed as cheaper apart from being better in qualityand design. The marketing system is considered as largely unsynchronized, making theindustry prone to unfair trade practices and market price distortion. The enablers also

wondered why some furniture makers still prefer banned species as their raw materials. annEx f: ThE SUmmaRY of ThE oPPoRTUnITIES anD ConSTRaInTS IDEnTIfIED bY ThE DIffEREnTSTaKEhoLDERS Who PaRTICIPaTED In ThE VaLUE ChaIn VaLIDaTIon WoRKShoP



38/68

38


39/68

39

2. Rattan and Bamboo ValueChains

SITUaTIonER on RaTTan anD bamboo

Rattan

Rattan is considered the second most important forest product after timber.The amount of forest charges collected from Non-Timber Forest Products (NTFPs) canbe attributed largely to rattan, indicating not only the volume and value collected, but the

importance that can be attached to this resource among forest-dependent individuals andcommunities.

Export-based rattan furniture is declining, while import of it as raw material isincreasing. The Philippines has targeted the high end market for furniture in westerncountries, and rattan-based products would easily t into this category. The Philippinesis known worldwide as a design leader in rattan-based furniture, with the likes of Cebu-based designer Kenneth Cobunpue becoming renowned for the functionality and aesthetic

value of his creations.

Rattan-made furniture products were once the dominant furniture export, but its sharefrom 2004 to 2006 has been on the downtrend. The export of rattan furniture has beenon the decline in recent years, which Aquino et al. (2004) (Table 7) have attributed to theinux of cheap rattan furniture from China that were unfairly copied or patterned afteroriginal Philippine designs.

Despite its rich rattan resources, the Philippines had been transformed to become anet importer of rattan, both in split and unsplit forms. Importing the raw material wasdone to meet the countrys requirements for furniture products that were largely beingexported. According to the Philippine Forestry Statistics, imported rattans were sourcedmainly from the trading ports of Hongkong and Singapore, although China has made

inroads into exporting the semi-processed derivatives consisting of rattan splits and core.

Tle 7. Eprts d iprts rtt terils, 2004-2006. (fmb-DEnR, 2004-2006)

Particulars 2004 2005 2006

Quantity(net kg)

Value(US$)

Quantity(net kg)

Value(US$)

Quantity(net kg)

Value(US$)

Rattan pole exports (FOB) 60a 196 4,052 8,789 13,663 49,702

Rattan pole imports (CIF) 202,040 749,845 102,796 325,314 28,344 89,844

Rattan splits and coreimports (CIF)

167,690 420,055 228,791 585,576 209,350 530,539

a In 2004, the Philippines was also able to export 7,314 (net kg) of split rattan valued at US$1,380 (FOB), mostly to Vietnam.



40/68

40

The value of different types of furniture (including those made from rattan) that areexported from and imported by the Philippines

The Revised Master Plan for Forestry Development (2003) projected that thecountry needs between 8,799 to 12,462 hectares of rattan plantation to meet export

requirements for rattan furniture by 2015. According to Aquino et al. (2006), thePhilippines has an estimated 17,395 hectares of land planted to rattan. With this gure,the Philippines has more than enough rattan plantations to supply current and futuredemands for rattan poles up to 2015.

Rattan may still be being harvested from vast forest areas not entirely devotedto rattan growing. Based on the 2005 Philippine Forestry Statistics, the allowable cutapproved for rattan cutting contracts was for 10,948,312 lm, which accounted for onlyabout 22.4% of the projected volume (48.79M lm) needed that year (RFMP, 2003). The2005 rattan cutting contracts were approved for 8 regions in the country, covering an areaof 190,994 hectares, which suggests that rattan was still being harvested from vast forestareas not entirely devoted to rattan growing. In Region 8, rattan cutting contracts wereapproved for two provinces in the Island of Samar only.

Rattan species that are planted or existing in CBFM areas in Leyte Island: Palasan (Calamus merrillii) Kalapi (Calamus ornatus) Pudlos/ Arorog (Calamus javensis) Saha-an* Pagiti* Bagay*

Ilisi*

*Vernacular names. These do not appear in known lists of rattan species. However, Pagiti has a similar sound to Tagiktik and Ilisicould be Ulasi or Ulisi.

The species Tumalim (Calamus mindorensis Becc.), which is highly sought after by the furniture industry because of its favorable workingproperties, is not being planted by Leyte farmers.

annEx g: LIST of CommERCIaLLY ImPoRTanT RaTTan SPECIES In ThE PhILIPPInES

Bamboo

Globally, the demand for traditional bamboo products has uctuated in recentyears, but trade in technology-intensive bamboo products is increasing. Bamboo,from its pole to its shoots, is a material that is versatile. Bamboo products are now generallygrouped under two categories: traditional (low-tech, usually hand-made items) andmodern. Engineered bamboo, fabric and/or textile, chemicals, medicinals and cosmetics,and canned bamboo shoots, has been reported to be gaining and is projected to continueto further increase in the next decade, while traditional products from bamboo is declining.

The Philippines lags behind its Asian neighbours with respect to engineeredbamboo products. Engineered bamboo products (e.g. oor panels made from glue-

assembled bamboo slats) and chemical process-derived products (e.g. textile and medicinalproducts) are mainly supplied globally by China, Vietnam and Taiwan. Recognizing theneed for the country to catch up in this area in view of the increasing potential of theseproducts in the global market, as well as the relative ease and short gestation period of



41/68

41

growing bamboo, The Philippine Council for Agriculture, Forestry and Natural ResourcesResearch and Development (PCARRD) has funded the Bamboo Industry DevelopmentProgram to help fast-track the development of an engineered-bamboo industry in thePhilippines.

From 2004 to 2006, the export of raw bamboo has increased steadily in value

along with the exports of other NTFPs, while imports of it had declined. In 2004,bamboo accounted for only 5.42% of the value of NTFP raw material exports, but thishas increased to more than 21% in 2006. This is an interesting development, consideringthat there has not been an ofcial lifting of the ban exporting bamboo poles from thecountry. Imports primarily from China and Vietnam, were declining.

The total export value of bamboo baskets and basketware from 2004-2006 hasconsistently been larger than that of bamboo furniture.With regard to manufacturedarticles from NTFPs, baskets and basketware account for more than 98% of the exportsin this product category. The other items that were listed in this group were buri and

pandan placemats, and sawali from bamboo, but their volume has been small comparedwith baskets and basketware. However, the latter comprise of products made from othermaterials such as rattan, reed, and rafa, so the exact contribution of bamboo to thiscategory cannot be ascertained. It should be noted further that the total export value ofbaskets and basketware has consistently been larger than that of bamboo furniture, atabout 4.8 to 5.6 times the value during the 3-year period.

Bamboo stands in the Philippines cover an area of 48,403 has.of which 368 hectares canbe found in Region 8, or approximately 1.4% of the total. There are about 70 species ofbamboo occurring in the Philippines, 45 of which are erect, while the rest are climbing.

Bamboo species found in Leyte: Kawayan tinik (Bambusa blumeana) Kayali (Gigantochloa atter) Lunas* Patong**Vernacular names

annEx h : PRoPERTIES anD USES of CommERCIaL bamboo SPECIES

1 This product category includes those made from materials other than bamboo, such as rattan, reed, rafa, etc.)

Product 2004 2005 2006

Quantity Value(US$,

FOB)

Quantity Value(US$,

FOB)

Quantity Value(US$,

FOB)

Bambooexports

(net kg)

39,473 23,859 74,587 73,334 66,264 128,997

Bamboo

imports(net kg)

107,271 79,140 95,628 132,699 77,997 77,826

Woven bamboostrips (number)

1,043 2,863 251 660 2,147 11,729

Baskets &basketware1

(number)

7,805,998 20,173,101 7,026,674 15,539,285 5,603,143 12,392,920



42/68

42

maPPIng ThE RaTTan anD bamboo VaLUE ChaInS In LEYTE

The value chains for rattan and bamboo, showing the different functions, the variousoperators and their interrelationships, as well as the chain enablers and supporters, areshown in Figures 8 and 9, respectively.

For rattan, the value chain comprises the main function production and harvesting,primary processing, pole trade, furniture making, furniture trade and consumption. Mainoperators are Peoples Organizations, non-formal collectors, island traders, tradercum processor, rattan furniture makers and buyers outside from Leyte.

For bamboo, the value chain comprises the main functions: production and harvesting,primary processing and sale, furniture making, furniture trade and consumption. Mainoperators are farmers or People Organizations, bamboo furniture makers and directbuyers.

For both value chains, the enablers are almost the same: Academe, NGOs, Cooperatives,PNOC, CFIP, CFIF and PCHI, Bahandi and the DTI.

FIGURE 8 Furniture Value Chain from Rattan in Leyte


POs (CBFM)

(n


43/68

43

FIGURE 9 Furniture Value Chain from Bamboo in Leyte


Visi r te Rtt d b VlueCis

The following vision statement for therattan and bamboo furniture value chains

was formulated and nally adopted during

the Strategic Planning Workshop heldMarch 9-10, 2009 in Tacloban.

By 2011, the rattan and bamboo industriesin Leyte shall have developed new high-quality product lines that will promotecreativity, enhance craftsmanship, sustainforest resources, and respond to the socio-economic and ecological needs of farmers.

Farmers with plantation /

stands

n=1,000

Bamboo furniture makers

n100

POs (CBFM)

(n


44/68

44

oPERaToRS (STaKEhoLDERS) In ThE RaTTan anDbamboo VaLUE ChaInS The operators in the rattan value chain consist of POs engaged in rattan plantingand harvesting, Leyte Island traders, rattan furniture makers and traders, as well as theconsumers of rattan-based furniture products.

At least one trader also has his own furniture/handicraft-making facility.

In addition to these stakeholders who are legally performing their respective functions inthe rattan value chain, an undocumented number of illegal gatherers are involved. Theseare people who gather and sell rattans without the necessary permits, who encroachupon areas planted and/or managed by POs, or gather naturally-growing rattans fromareas outside of CBFM.

Less than 10 POs reported that they are legally engaged in planting and harvestingrattans. There are also less than 5 legal traders of rattan poles and about 10 enterprisesare engaged in rattan furniture making and trade.

The bamboo value chain in Leyte Island is less complex than either the plantation woodor rattan value chain as the chain is considerably shorter and there are no raw materialtraders involved. Farmers who have bamboo stands sell directly their bamboo culms tobuyers who need the poles for house construction or to bamboo furniture makers.

Less than 10 POs are actively planting bamboo, but an estimated 1,000 or so farmersmaintain bamboo stands. An estimated 100 individuals, scattered all over the Island,but concentrated in some towns that have identied bamboo as their one town, oneproduct (OTOP) such as Tanauan, are engaged in bamboo furniture making and trade.Customers include local buyers, some bamboo furniture traders from the neighboringIsland of Samar, and from time to time, buyers from as far as Manila and Cebu.

EnabLERS anD SUPPoRTERS of ThE RaTTan anDbamboo VaLUE ChaInS

The rattan and bamboo value chains involve almost similar groups or organizations assupporters and/or enablers.

oPERaToRS In ThERaTTan anD bamboo VaLUEChaInS

EnabLERS anDSUPPoRTERS of ThE RaTTananD bamboo VLaUE ChaInS



45/68

45

The Department of Environment and Natural Resources As in plantation wood, the mostvisible enabling organization is the DENR since both rattan and bamboo are classied asnon-timber forest products. The land where the POs plant their rattans had been handedover to them by the Government through the DENR.

The latter is also involved in the grant of permits, inspection and checking of rattan polesthat are in the process of shipment to their respective destinations.

Bamboo does not attract as much attention as rattan in terms of regulatory control bythe DENR.

PNOC They support POs that are within areas under their jurisdiction by providing themrattan seedlings and through the extension of assistance in getting rattan cutting permitsfrom the DENR.

DTI has no long-term program for rattan and bamboo although some rattan and bamboo-based products of BAHANDI members are among those that are promoted in tradefairs and exhibits. Nationally, research organizations such as ERDB, FPRDI, PCARRDand the academe have done a number of research projects on bamboo and rattan butno direct engagement nor assistance have so far been provided to bamboo and rattangrowers, processors, and traders in Leyte. Trade organizations such as CFIF and PCHIcould also potentially support the rattan and bamboo sub-sectors in Leyte, but so far,these organizations activities and programs have not reached the Island.

fUnCTIonS In ThE RaTTan anD bamboo VaLUEChaInSRattan

The functions in the rattan value chain, as shown in Figure 7, include the provision ofspecic inputs, production and harvesting, primary processing, pole trade, furnituremaking and trade, and consumption. Farmers and POs generally undertake all of the rstthree functions. Traders buy the rattan poles and sell them to furniture makers within andoutside Leyte, Furniture makers process rattan. Their workshops also serve as their displayareas. Homeowners and commercial establishments buy rattan-made products.

Not all POs in Leyte plant rattan. There are some who do have members who were engagedin rattan pole collection in the past as a source of livelihood income. Collection has notbeen limited to planted rattan poles, since it would require several days for them to return

fUnCTIonS In ThE RaTTan anDbamboo VaLUE ChaInS



46/68

46

from rattan collection expeditions. Rattan collection is difcult and risky, and gatherers areequipped only with the most basic tools such as a bolo or hatchet when harvesting rattans.Falling from trees around which the viney rattan stem clings is not uncommon. Farmerspull the rattan poles away from the trees, remove the leaf sheathes and the spines aroundthe poles, and then cut them to length for easier hauling, which is usually done by carryingthe forest product on their backs as they return to the rattan depots in the center of the

Barangay on foot.

In the Barangay center, primary processing of the pole is done such as scraping, piling, airdrying, and bundling. Scaling (inspection) and pricing is done in the presence of the buyeror trader. Scaling serves as the basis of payment to the gatherers, who would normallyreceive only the balance since payment in general, had already been made in advance bythe buyers. Traders have their own trucks that are used to haul the bundled rattans to acentral storage area or directly to rattan furniture or handicraft makers or to buyers fromother provinces.

Rattan furniture makers process the rattan into chairs, sala sets, tables and other high-endtype of furniture. Rattans are cut to length and bent to the desired conguration as per thedesign of the product. Weaving of furniture components is a time-consuming operationin rattan furniture making. The nished products are applied with varnish, stains and othernishing materials and then are put on display for potential buyers to see. There is littlemarketing effort on the part of furniture makers to advertise their products.

BambooThe bamboo value chain is more straightforward than the plantation and rattan valuechains. Like rattan, there is negligible input in bamboo production as the plant tendsto grow naturally with very little human intervention. Bamboo clumps occur in patches

along the banks of rivers, creeks or streams and can also be found surrounding backyardsor as hedges around farms. There are two modes in which farmers sell their bamboo. Oneis by direct selling to furniture makers or consumers. In this mode, the farmers do thecutting, harvesting, transport, and directly deliver them to the furniture maker. Anothermode is through the pakyaw system, where the buyer, usually the furniture maker ora consumer planning to build a house, negotiates with the farmer for the price of thebamboo poles in a clump or several clumps in a stand. The buyer then takes care of hiringpeople to cut, remove branches and thorns, haul, and transport the bamboo poles to thefurniture workshop.

Bamboo poles are air-dried before they are processed into furniture. The lower portionsare made to stand on end, while the top portions are laid in a horizontal position untilthey are dry and deemed t for processing. The poles are cut to length, the skin scrapedoff, and then worked depending on the part of the furniture they would be put into. Thebamboo furniture components are assembled according to the design, sanded to makethe surface smooth, then exposed for some time prior to application of varnish or soldas is without any nish. Customers are generally walk-in buyers who want a set for theirhouse, or buyers from Tacloban City or nearby Province of Samar, who have their ownbamboo furniture stores.



47/68


48/68

48

part, this explains why locally-sourced rattan is an expensive raw material, and why therattan furniture industry in the Philippines can hardly compete with those of China and

Vietnam.

With respect to return to labor, if each gatherer could only carry a maximum of about 40poles on the way home from a rattan collection expedition, he would only receive P560

per trip as payment (for labor and materials taken together). Scrapers receive P1 each perpole (usually done by female community members). Other payments received for labor(not shown in the table) are for piling the rattan in a wigwam fashion to dry in the sun,storage, bundling, and for hauling onto trucks.

The breakdown of the traders cost for getting into the business of buying and sellingrattan is as shown in Table 10 below (for 1 shipment of rattan poles). Note that the traderassumes most of the cost of permitting as well as other costs such as dealing with theBarangay, the PO, the DENR and the inspectors at the checkpoints. Thus, the trader mustmaintain a good cash ow position to provide the outlays required in the business. This

explains why he cannot afford delays in transporting the poles, which could happen ifcheckpoints are encountered that would arbitrarily nd aws and additional requirementsin transport documents, no matter how complete. Risks are higher for improperly driedmaterials, which could suffer from fungal stains or even deterioration during shipmentunder hot, humid conditions leading to signicantly lower market price, if not totalrejection of the shipment.

Table 10. Traders cost of doing business

Cost Center Amount(PhP)

Comment

12,000 poles from cutters (1&1/8 @ 14

Pesos/pole)

168,000.00

Scrapers (1 Peso/pole) 12000.00

Payment to PO for 7/8 up only (0.5Pesos/pole)

6000.00

Payment to Barangay captain (7/8 up) (10-(20)-25) Cent

2400.00 Securing cash advances

Forest charges 40320.00 Volumes understated

Reforestation fund (to DENR) (details of thisregulation not yet well understood) (0.9

Pesos/pole?)

10800.00 Understated too?

Permit to transport (estimate) 1000.00 No info yet

SOP permit to transport (PhP5,000 (?), PhP1,500Brgy.)

6500.00

SOP on the way (PhP500+ (?), PhP100-300others), up to PhP25,000 or even PhP30,000reported

20000.00 Reason for DENR:Understated volume



49/68

49

Fig. 10 shows value adding along the rattan value chain. Poles 1&1/8 or bigger deliveredto the Barangay center cost PhP14 each, which covers the price of the material andall of the inputs of the gatherer (walking to the site, actual cutting, removal of spinesand leaf sheaths, cutting to size, and hauling on their backs). The payments are usuallyreceived in the form of cash advance, with the farmer getting some extra payments forpoles delivered over and above the respective quota. After basic processing and material

handling in the Barangay, more or less PhP6 is added to the cost per pole, part of whichalso goes to payments to the Barangay and the PO. Transport, handling and traders mark-up would add another PhP8 to the poles value, inclusive of undocumented payments.Processing into high-end furniture would result in an increase of between PhP8 to 12 inthe price of each pole.


Farmers:

P14inclusive

ofinputs

P14/pole P1.55for scraping,

drying,

storage,

bundling

P20/pole

P36-40/pole

P0.85

50 - PO

35 - Bgy.

P4.80 - fees

P2.40 w/ rcpt.

P2.40 undoc.

P4.00 broken down asP1.70 - SOPs

P2.30 transport

& other

operating

costs

P4.00 mark-up

P28/pole

P8 - 12

for conversion

to furniture

Figure 10. Value adding per pole of rattan (1-1/8) up to furniture as nal product

Speciciputs

Production &hrvesti

PriryProcessing

PleTrdi

furituremki

Trde Csupti


50/68


51/68

51

list of primary commodities to be developed and supported. The commodities that arethe focus of research and development efforts in Region 8 include coconut, abaca, andjackfruit, but not rattan nor bamboo.

The low price for rattan that is almost being unilaterally imposed by traders/buyers of these products. Farmers do not consider such a low price as fair return fortheir labor after investing considerable time and effort to bring rattan canes down fromthe forests where they are gathered.

There is lack of access to product development. They feel it makes it even moredifcult for them to compete given the lack of modern facilities and other factors thatmake their products outdated and more expensive than what foreign competitors couldoffer. Processors also consider as a constraint their inability to access the latest rattanprocessing technologies, such as in the drying and treatment of rattan poles. They alsond the industry as lacking in appropriate tools and equipment and skilled workers. Themarket is largely domestic (i.e., conned to Leyte), and production volumes are still

very low.

While traders believe that there is enough rattan in the Island, the supply of rattanpoles remains unstable. Enablers concede that available harvestable stocks of rattan

are still largely an untapped economic resource. One are of development noted by theenablers is the presence of organized POs which they also consider as an opportunity forthe rattan value chain. These POs could easily avail of training opportunities provided by

various government agencies and development organizations. Leyte is in close proximityto Cebu, a processing center for rattan furniture. Some Cebu manufacturers make useof the so-called Big Brother scheme for sub-contracting materials and componentsneeded for their products.



52/68


53/68

53Plantation Wood, Rattan and Bamboo in Leyte Island | Value Chains to benet income generation of forest farmers

3. Legal and Regulatory

Environment Affecting theValue ChainsPLanTaTIon WooDHarvesting, transporting, and marketing of planted wood are key hurdles amongCBFM agreement holders (POs) and private plantations within Leyte Island, andcould mirror what might be happening nationwide. The processing of permits forharvesting/cutting and transport are considered bottlenecks that negatively affectmany of the functions along the wood value chain. The harvesting, transporting and

marketing of planted wood are primarily governed by DENR Memorandum Circular(DMC) Nos. 1997-09 and 1999-20, DENR Administrative Order (DAO) Nos. 2000-21 and 2004-04 for trees planted in private lands. For CBFM areas, the guidelines wereinitially provided for by DAO Nos. 1996-29 which were subsequently amended byseveral administrative orders thereafter, such as DAO 1999-29, 1999-35 and 2000-29. annEx I: ThE TITLES anD bRIEf DESCRIPTIon of ThESE PoLICY ISSUanCES. annEx J: a SUmmaRY of ThEREqUIREmEnTS foR REgISTRaTIon, haRVESTIng, TRanSPoRT anD DISPoSITIon of TImbER, naTURaLLY-gRoWnoR PLanTED, foR PREmIUm anD non-PREmIUm haRDWooDS anD foR faST-gRoWIng PLanTaTIon SPECIES).

DMC 1999-20 governs the registration, harvesting, transport and marketing of woodand by-products coming from tree plantations within private lands. Tree registration is

encouraged for all private tree plantations, although in reality, it has become almost arequirement that all tree plantation owners who intend to sell and transport their logsoutside of their respective plantations must comply with. Tree registration was presumedto make the processing of documentation requirements for future harvesting andtransport of timber/lumber from private lands much easier (DMC 1997-09). To registerthe tree plantations, the following documents are needed (DMC No. 97-09):

(1) Letter of intent,(2) Certied photocopy of either certicate of land Ownership Award (CLOA), Land

Title or Tax declaration of untitled alienable and disposable (A&D) lands with

pending application for titling,(3) Certication of tree plantation ownership from the Barangay Captain or MunicipalMayor, and

(4) In cases where tree planter/applicant is not the sole owner of the land, anauthorization to do so from his/her co-owner.

Registration can be done for newly established, fully established and mature plantations.According to DAO 2000-21, the harvesting of registered non-premium tree species didnot require a cutting permit except for the planted premium species for which a specialprivate land timber permit (SPLTP) is prescribed. However, the non-requirement of acutting permit for all tree species, even in private lands, has been suspended under theadministration of the current DENR Secretary (as per March 10, 2009 dialogue with theRED of Region 8). In the case of naturally-grown trees in private lands, their cutting,gathering and utilization were also previously governed by DAO 2000-21 and a special


54/68

54

permit was issued to the landowner known as the Private Land Timber Permit (PLTP).

The transport of harvested forest products required documents as stipulated in DMC99-20. Before transporting, the owner of forest products must secure and accomplishthe self-monitoring form (SMF) wh

Value Chain Study FINAL [Web]

Documents