FINANCIAL, ECONOMIC AND ENVIRONMENTAL PROFITABILITY OF REFORESTATION OF IMPERATA GRASSLANDS IN INDONESIA

The reforestation of Imperata grasslands is considered financially, ec onomically and environmentally important, The successful establishment of a forest plantation on Imperata grassland needs heavy investment a t the outset. It was estimated that the minimum establishment costs ar e US$840/ha. The total pulpwood production costs at the mill gate were calculated to be US$21/m(3) by water transport and to US$27/m(3) by r oad transport. During the first rotation, roundwood production in fast -growing plantations resulted in a real rate of return of 3.3% on the investment with the present pulpwood price of US$20/m(3) and a mean an nual increment (MAI) of 25 m(3)/ha. The relatively low financial profi tability is mainly due to the country's undeveloped pulpwood markets. The IRR rose to 18% when the present roadside price was applied as a s tumpage price. The support by the Indonesian government's industrial t imber estates (HTI) scheme raised the IRR to 7%. Financial profitabili ty was sensitive to the roundwood price and harvesting costs. The refo restation of Imperata grassland was more profitable economically than financially, resulting in an economic rate of return (ERR) of 21%. Whe n the environmental economic impacts are taken into account the refore station can be considered very profitable, raising the value of an are a from US$1000 to 2500/ha. In this study, the following conclusions ca n be drawn: (1) a high MAI can only be reached with intensive establis hment and management; (2) roundwood price should be allowed to fluctua te according to demand and supply; (3) reliable estimation of the harv esting costs before starting a project is recommended; (4) an adequate prefeasibility study of a forest plantation should be a prerequisite for the investor before the government's financing or other incentives are offered; (5) the government's support should be provided accordin g to the real costs; and (6) application of incentives is justified in economically, socially or environmentally profitable projects but not in financially profitable projects. (C) 1997 Elsevier Science B.V.