Private Forest Management
Private Forest Management
Business Model Description
Invest in: > Commercial reforestation to develop sustainable high value timber, teak, bamboo and other agricultural assets in Cambodia > Plantation of rubber or other key tree products to expand export income of Cambodia
Grandis Timber (GT) provides reforestation to develop sustainable high value timbers such as teak, mahogany, eucalyptus and acacia plantations. Doing so, they intend to improve plant materials, track report and manage plantation data, as well as provide training and development for local staff and achieve international certifications. (9)
The Floresta Project is a large-scale venture that incorporates commercial forestry, reforestation and natural rejuvenation of forests. It aims to combine reforestation of 90% of the total project area with a community forest, and a fast growing teak plantation on 3.5% of the total project.
Leopa Bamboo has 2 lines of activities: they are helping with the management of Bamboo forests by practicing sustainable harvesting done by communities and they produce bamboo furniture, leveraging carbon credits for their activity. They target to raise ~USD 10 mn.
The Malaysian Lipp Engineering announced (in 2020) that they would build a bamboo processing plant, and plan to invest USD 750 mn to produce and export 4 products - bio-activated carbon, bamboo pulp, bio-oil and bamboo fiber. They have submitted a request for a land concession for 25,000 ha.
Expected Impact
Contribute to reforestation initiatives to protect natural resources and reduce environment degradation.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
Sector Classification
Renewable Resources and Alternative Energy
Cambodia has one of the highest rates of deforestation in the world as the economy depends heavily on wood, for timber, heat and power generation, while 80% of households use wood or charcoal for cooking. Cambodia lost 2.9 mn hectares (ha) of forest (14% of land area) from 1990 to 2010 (1), and 1.28 mn ha (3.1 mn acres) of primary humid tropical forest between 2002 and 2020 (2).
Cambodia’s Long-Term Strategy for Carbon Neutrality (LTS4CN), modelling suggests that Cambodia could achieve carbon neutrality in 2050 with the forest and land use sector providing a total carbon sink of 50 megatons of carbon dioxide equivalent (3)
Forest resources may contribute to local livelihoods through
>needs-driven forest reliance, whereby local communities, particularly low income people depend on low-value forest resources to some extent for their livelihoods, perhaps in response to shocks (“safety nets”) including source of food, medicine and building products, and as a source of materials and goods for small business ventures(4)
>because they are unable to make the transition out of this resource-dependent mode (“poverty traps”); and an opportunity-driven forest reliance, whereby local people use higher-value forest resources as a source of cash products in order to get richer (“pathways out of poverty) (5)
In 2021, Cambodia submitted a long-term strategy to be carbon neutral by 2050. Renewable energy, Forestry and other land uses plays an important role in this strategy offering many opportunities for investment.
Recurring challenges include, large capital requirement to set up business, delays in decision making, immediate profit motive encouraging short-term exploitation over long-term sustainability, and the reduction in existing subsidies.
Forestry and Paper
Growing income and economic development, intensifies the need for building material and biofuel, steadily increasing the demand for wood.(6) Causes of deforestestation primarily include illegal deforestation, large-scale agriculture and use of forest biomass for cooking. In Phnom Penh, >100,000 tons of charcoal is used annually, an equivalent of 1 mn tons of wood. (2)
National Forest Program 2010–2029
consists of forest demarcation, classification and registration, conservation and development of forest resources and biodiversity forest law enforcement and governance community forestry capacity.
Forest Law of 2002: defines the framework for management, harvesting, use, development and conservation of the forests in the Kingdom of Cambodia.(7)
Deforestation impacts the livelihood of nearby population and results in displacing and resettling them.(5) Beyond issues of livelihood, forests also have heritage, cultural and spiritual importance for many people. Many rural communities depend on forests for at least part of their livelihood, including indigenous communities in Ratanakiri, Mondulkiri and other provinces.(4)
Agroforestry is a source of income for many such indigenous communities living near forest-areas. Industrial tree plantation often induces land grabbing or forced displacement of these groups.
Cleared areas (after deforestation) are often managed under degrading agricultural and livestock practices. This phenomenon degrades the biodiversity in forests and increases greenhouse gas (GHG) emissions, which particularly has an adverse health impact on the nearby rural communities.
The Forest Law provides a legal basis for rural communities to use and help manage forests through community forestry (4), which is an important way to protect biodiversity and traditional rural livelihoods.(8)
Cambodia's lone Forest Stewardship Council (FSC) forestry operation proves market viability of sustainable large-scale forestry operations in Cambodia, and across the region.(6) Eco-tourism projects and other non-timber forest product enterprises (honey, rattan, resin processing) and carbon credit projects might also generate income in the future.
Small-scale illegal commercialization remains unchecked (tax evasion, labor rights, sustainable harvesting), driving the emergence of pockets of unfair competition. Market prices lack full transparency, given the floor set by illegal loggers who harm the environment and population living in forest areas.
Forestry Management
Pipeline Opportunity
Private Forest Management
Invest in: > Commercial reforestation to develop sustainable high value timber, teak, bamboo and other agricultural assets in Cambodia > Plantation of rubber or other key tree products to expand export income of Cambodia
Grandis Timber (GT) provides reforestation to develop sustainable high value timbers such as teak, mahogany, eucalyptus and acacia plantations. Doing so, they intend to improve plant materials, track report and manage plantation data, as well as provide training and development for local staff and achieve international certifications. (9)
The Floresta Project is a large-scale venture that incorporates commercial forestry, reforestation and natural rejuvenation of forests. It aims to combine reforestation of 90% of the total project area with a community forest, and a fast growing teak plantation on 3.5% of the total project.
Leopa Bamboo has 2 lines of activities: they are helping with the management of Bamboo forests by practicing sustainable harvesting done by communities and they produce bamboo furniture, leveraging carbon credits for their activity. They target to raise ~USD 10 mn.
The Malaysian Lipp Engineering announced (in 2020) that they would build a bamboo processing plant, and plan to invest USD 750 mn to produce and export 4 products - bio-activated carbon, bamboo pulp, bio-oil and bamboo fiber. They have submitted a request for a land concession for 25,000 ha.
Business Case
Market Size and Environment
USD 100 million - USD 1 billion
2002-2021: Cambodia lost 1.34Mha (32% decrease) humid primary forest (52% total tree cover loss)(10)
Rubber and palm oil, the key tree products, were the first and second biggest export products by value in 2011. The area under rubber has grown markedly, especially within economic land concessions, although the price of rubber has fallen by more than half since early 2011. In 2013, rubber plantation was conducted across 325,900 ha, and by mid-2017, this grew to 433,827 ha. (4)
Indicative Return
15% - 20%
5% - 10%
Commercial forestry, reforestation, and natural rejuvenation of forests have the potential to generate significant returns for investors, while maintaining environmental and social values. They offer a unique model to ensure both commercial returns, and a significant positive impact.(11)
The Cambodian Agriculture Ministry collected > USD 4.5 mn and >USD 2 mn in forestry revenue during 2018 and January to March 2019 (Q1-2019), respectively. (12)
Since 2016, GT planted ~4 825 ha.(13)
Investment Timeframe
Long Term (10+ years)
While mixed-species reforestation includes fast growing species that can be commercialized on an annual basis, higher quality timber takes ~10-15 years to grow and generate returns.
A study of an investment in a Eucalyptus plantation for timber purposes in Paraguay in 2014 concluded that - although significant financial income is generated in the second and fifth year, investment can be fully recovered in year 10. (14)
Ticket Size
USD 1 million - USD 10 million
Market Risks & Scale Obstacles
Market - Highly Regulated
Capital - Requires Subsidy
Impact Case
Sustainable Development Need
Controlling deforestation can help reduce environment degradation. In 2010, Cambodia had 7.22 mn ha of natural forest, covering 42% of its area. By 2021, it had lost 141,000 ha of natural forest, equivalent to 83.2Mt of CO₂ emissions. (15)
There is a need to control forest crimes such as, illegal logging, land grabbing and destruction of forest which impact the biodiversity, thereby resulting in destruction of natural habitat for various trees, plants and animals. (16)
Replacing wood charcoal has a direct impact on deforestation as the wood is obtained mostly from unsustainable sources. Each ton of charbriquettes replaces the use of ~10 mature trees (7 tons of dry wood), resulting in saving of ~6,500 trees as of 2014.(1)
Gender & Marginalisation
Rural communities' dependence on forests should be reduced by providing them with sustainable alternative livelihoods. This would help limit the practice of land clearing and low-intensity cultivation, along with the elimination of forest cover which increases the risk of GHG emissions.
Women and vulnerable communities should be provided with safe living conditions. Degraded landscapes damage ecosystems and increase women's drudgery to collect water, fuelwood, or food in such areas.
It is imperative to control illegal land grabbing and forced eviction of indigenous people (who depend on the forest) to limit the detrimental impact on their social and economic lives.(16)
Expected Development Outcome
Reduce the usage of wood charcoal for cooking, which contributes to the country’s rampant deforestation and air pollution. (1)
Ensure uninterrupted maintenance and development of plantations to increase storage, at maturity, of ~1 mn tons of CO2 emissions. (6)
Safeguard bio diversities of the country by reducing deforestation caused by forest crimes. (16)
Gender & Marginalisation
Provide alternative and participatory pathways out of poverty through employment and business opportunities which would promise improved income and livelihood for vulnerable communities (including women) living around forests. (5)
Ensure improved income for indigenous population to make them more resilient and less prone to suffer from forced migration (due to land eviction or other economic reasons).
Ensure greener environment and more sustainable income for bamboo growers who can harvest bamboo products all year round, thereby also contributing to the growth of the sector.
Primary SDGs addressed
15.1.1 Forest area as a proportion of total land area
15.1.2 Proportion of important sites for terrestrial and freshwater biodiversity that are covered by protected areas, by ecosystem type
15.3.1 Proportion of land that is degraded over total land area
The baseline forest area as a percentage of total land area is 48.8% (2016) (17) The baseline percentage of important sites for terrestrial and freshwater biodiversity that are covered by protected areas and fisheries observation areas-protected by law is 10% (2016) (17) Proportion of land that is degraded over total land area- 20%
The target forest area as a percentage of total land area is 48% (by 2030) (17) The target percentage of important sites for terrestrial and freshwater biodiversity that are covered by protected areas and fisheries observation areas-protected by law is 70% (by 2030) (17) Proportion of land that is degraded over total land area- 70%
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Public sector
Indirectly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Public sector
Outcome Risks
Some plantations (such as Eucalyptus) can deplete the quality of soil by absorbing all the moisture, thereby rendering it unfit for further production. (18)
Bamboo that spreads beyond one's yard may cause ecological problems. Many spreading bamboo species are categorized as invasive exotic plants that crowd out native plants and threaten biodiversity.
Limited capacity for implementing and coordinating work related to forest land, water and forest protection could limit operations.
Considerable effort is required to educate people (rural and urban) about the correlation between wood usage for cooking and deforestation, which in turn results in loss of their livelihood.
Gender inequality and/or marginalization risk: Communities could be reluctant to allow for private investors to enter their communities if their expectations are not taken into account.
Impact Risks
Excessive privatization of forest area may interfere with natural habitats and ecosystems that go beyond concession areas.
Frequent forest fires may ruin plantations. In Cambodia, the peak fire season starts in early January and lasts ~14 weeks (total of ~138,312 VIIRS fire alerts between 2019 & 2022) (15)
Climate change, urbanization and industrialization are adversely impacting natural resources, as well as the ecological system.
Gender inequality and/or marginalization risk: In the absence of adequate regulations, rural communities, as well as land area maybe exploited.
Impact Classification
What
Promote forest management to reduce the impact of deforestation on natural resources and the communities that depend on forests for their livelihoods.
Risk
Longer investment horizons or unfair competition from illegal logging or commercialization of uncertified wood may impact investor interest.
Contribution
Large-scale plantation forestry income accounted for USD 390 mn in 2011 or 3.2% of GDP. (4)
Impact Thesis
Contribute to reforestation initiatives to protect natural resources and reduce environment degradation.
Enabling Environment
Policy Environment
National REDD+ Strategy (NRS) 2017 – 2022: This policy established an inter-ministry platform for combating climate change effects through the improvement of natural resources and forest area. (19)
National Forest Program 2010–2029 consists of forest demarcation, classification and registration, conservation and development of forest resources and biodiversity forest law enforcement and governance community forestry capacity (20)
Cambodia’s National Environment Strategy and Action Plan, 2016–2023 (NESAP) aims to ensure that environmental protection and sustainable natural resource management are pillars of the country’s socioeconomic development. (21)
Regulatory Environment
Sub-Decree No. 131 (RGC) on the specification of forest products and sub-products permitted to be exported and imported (November 2006) states that all imports and exports of forest products are only permitted if the product has a license from the Ministry of Commerce. (22)
Article 73 of The Law of Forestry (2002) states that the license for export/ import of Forest Products and By-products shall be issued by the Ministry of Commerce, after the issuance of a Visa by the Head of Forestry Administration. (23)
Forest Law of 2002 defines the framework for management, harvesting, use, development and conservation of the forests in the Kingdom of Cambodia (24)
Marketplace Participants
Private Sector
Grandis Timber for reforestation. Big project ongoing (Floresta Management) For bamboo, Bambuza Global Ventures, Leopa Bamboo, Phea Pimex Asia Forestry Investment Group Co. Ltd.
Government
Forestry Administration, under the supervision of Ministry of Agriculture, Forestry and Fisheries, Ministry of Economy and Finance
Multilaterals
United Nations Development Programme, United States Agency for International Development, Food and Agriculture Organization, EU Forest Law Enforcement Governance and Trade (FLEGT) Voluntary Partnership Agreement (VPA)
Non-Profit
Peace Bridge Organization (annual tree planting) Prey Lang Community Network made of people fighting against illegal logging, Centre for people and forest, World Wide Fund for Nature, Naturelife Cambodia, Indigenous People and Forestry Network
Public-Private Partnership
Forest Investment Program/ Investment Plan, Forestry Rights Project
Target Locations
References
- (1) Ashden. (2014). Ashden Winners. https://ashden.org/winners/sustainable-green-fuel-enterprise/
- (2) Carruthers, M. (2021). Green Charcoal Could Curb Deforestation. https://nowthisnews.com/earth/green-charcoal-could-curb-deforestation
- (3) Royal Government of Cambodia. (2021). Long-term Strategy for Carbon Neutrality. https://unfccc.int/sites/default/files/resource/KHM_LTS_Dec2021.pdf
- (4) Open Development Cambodia. (2016). Forests and Forestry. https://opendevelopmentcambodia.net/topics/forests-and-forestry/
- (5) Clements, T; Suon, S; Wilkie, D; and Gulland, E. (2014). Impacts of Protected Areas on Local Livelihoods in Cambodia. https://www.sciencedirect.com/science/article/pii/S0305750X14000746
- (6) USAID. (2020). How USAID Green Invest Asia Facilitated Acquisition of Cambodia's First and only Sustainably Certified Plantation. https://greeninvestasia.com/wp-content/uploads/grandis-timber_sept-15-2020.pdf
- (7) Royal Government of Cambodia. (2010). National Forest Programme 2010-2029. http://cambodianbudget.org/files-tinymce/New_Pic/Development_Policies/Sectoral_Policies/National_Forest_Programme_2010_2029_Eng.pdf
- (8) Grant, H & Billon P. (2021). Community-level Respondes to 'Forest Violence' in Cambodia. https://www.iucn.org/news/commission-environmental-economic-and-social-policy/202109/community-level-responses-forest-violence-cambodia
- (9) Grandis Timber Limited. (2022). Mission, Goals & Objectives. http://www.grandistimber.com/vision-objectives/
- (10) Global Forest Watch. (2010). Primary forest loss in Cambodia. https://www.globalforestwatch.org/dashboards/country/KHM/#:~:text=Cambodia%20Deforestation%20Rates%20%26%20Statistics%20%7C%20GFW&text=In%202010%2C%20Cambodia%20had%207.22,83.2Mt%20of%20CO%E2%82%82%20emissions.
- (11) Floresta. (2021). The Smart Reforestation Initiative and What if Reforestation was a Viable. Business Model? http://www.florestaproject.com/
- (12) Timber Biz. (2019). Cambodia Collects More Than $2m Forestry Revenue. https://www.timberbiz.com.au/cambodia-collects-more-than-2m-forestry-revenue/
- (13) Grandis Timber Ltd. (2022). http://www.grandistimber.com/
- (14) Instituto Forestal Nacional. (2014). Rentabilidad de la Inversion en Plantacion de Eucalyptus con Fines Maderables. http://www.infona.gov.py/application/files/8514/3204/8894/Rentabilidad_de_la_inversion_forestal_220414.pdf
- (15) Global Forest Watch. (n.a.). Global Forest Watch: Cambodia. https://www.globalforestwatch.org/dashboards/country/KHM/
- (16) Global Initiative. (2021). Forest Crimes in Cambodia.https://globalinitiative.net/wp-content/uploads/2021/03/Forest-crimes-in-Cambodia-Rings-of-illegality-in-Prey-Lang-Wildlife-Sanctuary-GITOC-2021.pdf
- (17) Royal Government of Cambodia. (2018). Cambodian Sustainable Development Goals (CSDGs) Framework (2016-2030). https://data.opendevelopmentmekong.net/dataset/3aacd312-3b1e-429c-ac1e-33b90949607d/resource/d340c835-e705-40a4-8fb3-66f957670072/download/csdg_framework_2016-2030_english_last_final-1.pdf
- (18) International Labour Organization (2020). Consejo de Administración. https://www.ilo.org/wcmsp5/groups/public/---ed_norm/---relconf/documents/meetingdocument/wcms_757266.pdf
- (19) Royal Government of Cambodia. (2017). National REDD+ Strategy 2017-2026. https://redd.unfccc.int/files/20180813_national_redd__strategy_cambodia.pdf
- (20) Royal Government of Cambodia. (2010). National Forest Programme 2010-2029. https://server2.maff.gov.kh/parse/files/myAppId5hD7ypUYw61sTqML/9e2a9ee0a42614ea91ffb90b2eae1441_1605051195.pdf
- (21) Royal Government of Cambodia. (2023). Cambodia: National Environment Strategy and Action Plan 2016-2023. https://policy.asiapacificenergy.org/node/3283
- (22) Royal Government of Cambodia. (2006). Sub-Decree on Forest and Non-timber Forest Products Allow for Export and Import. http://www.cambodiainvestment.gov.kh/wp-content/uploads/2012/03/Sub-Decree-131-on-Forest-and-Non-Timber-Forest-Products-Allow-For-Export-and-Import_061128.pdf
- (23) Royal Government of Cambodia. (2002). Law on Forestry. (24) Royal Government of Cambodia. (2023). Cambodia: National Environment Strategy and Action Plan 2016-2023. https://policy.asiapacificenergy.org/node/3283
- (24) Timber Biz. (2019). Cambodia Collects More Than $2m Forestry Revenue. https://www.timberbiz.com.au/cambodia-collects-more-than-2m-forestry-revenue/