Profitability Analysis of Tectona grandis and Chukrasia tabularis: Evidence from Smallholder Forest Plantations in Northwest Vietnam
2024
Hsu Yemon Kyaw | Aruna Kainyande | Tran Van Hiep
Despite Vietnam’s policy to expand forest plantations to meet the increasing demand for sawlogs, there still exist concerns about the profitability of these plantations for smallholders. Strategies to endorse this policy seek to encourage smallholders to increase the rotation age of their plantations. To bridge this gap of limited information on the profitability of smallholder forest plantations, we compared the land expectation value (LEV) of two major plantation species under long rotation of 25 years. We calculated the LEV based on the Faustmann model using plantation establishment and management-related costs obtained from a survey of 30 households in Yen Chau District, Northwest Vietnam. This data was complemented by in-depth key informant interviews (n=7) for triangulation. Our results found that both plantations, namely Tectona grandis and Chukrasia tabularis, were profitable under long-rotation conditions because the land expectation values were positive. However, Tectona grandis was more profitable with a much higher land expectation value than Chukrasia tabularis. The impacts of changes in timber prices and interest rates on the profitability of the plantations were also reported. Both plantations exhibited significant levels of sensitivity to variations in interest rates and timber prices. However, quite striking, these fluctuations did not reduce land expectation values to zero or negative, implying that the plantations were still profitable when subjected to market risks. Our results bear implications for policy that promotes long-rotation plantations by providing empirical evidence of the profitability and resiliency of long-rotation plantations under the socio-economic contexts and scenarios investigated in our study.
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