Supply responses in tropical forestry: A Malaysian case study

The rapid exhaustion of Malaysia's commercial primaeval forest base has raised questions regarding the management and economic responses in the sector. The article assesses the institutional and management structure of Malaysian forestry which, together with the social and political barriers at work, prevent an orderly programme of harvesting and reforestation. The supply is then set out in terms of an econometric model, formulated both in static and dynamic terms to measure, among other things, the responses of output to price changes. The model, which is the first of its kind to be tested for the Malaysian forestry sector, is applied on three wood-based commodities — sawlogs, sawnwood and plywood. To learn of possible regional variations, the model is also applied to data of the country's three principal components — Peninsular Malaysia, Sarawak and Sabah. The results indicate that short-run price elasticities of supply are low, and in some cases, even contrary to expectations based on economic theory. Allowing for data inconsistencies, the slow responses of output to changes in price may be attributed to the method of wood disposal, its timing as well as the social and political barriers to entry at work in the sector.