Impact of Forest Plantation Development in Laos: A Dynamic General Equilibrium Analysis

Abstract

Over the past decade, the world has observed a major growth in the development of forest plantations. Despite the considerable number of studies that have been undertaken to examine the impact of forest plantation development, there has been relatively little investigation of the economic impact of plantations. Lao People’s Democratic Republic (hereafter Lao PDR or Laos) has implemented policies to expand plantations based on their contribution to economic development. This paper examines the economy-wide impact of forest plantation development in Laos using a recursive dynamic computable general equilibrium model. Analysis focused on the Government of Laos’ forest policies to promote the development of forest plantation by the year 2020. Simulation results show that this forestry policy is likely to have a positive impact on the Lao economy by increasing the production of forestry and forestry related industries and by stimulating exports and household income. Impacts are more significant for the forestry and forest-related sectors. Despite prompting a relatively higher growth in the production of various other industries, some undesirable impacts are also likely on sectors that do not have strong interactions with the forestry sector. The results also indicate that the government tax revenue is likely to experience some growth.