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ECONOMIC VALUATION ANALYSIS
i. Timber resources
The economic value of timber resources will be determined based on their stumpage value. This is the value of standing timber in the forest, whether dead or alive. One of the methods used to value timber resources is residual value technique. The value of standing timber is calculated as the difference between the selling value of the products made from it and the stump-to-market processing costs (including margin for profit and risk). The formula to calculate timber value using residual value technique is:
SV = (Price – Cost – Profit Margin)*Volume. Data required include timber volume, log prices by diameter and species groups, logging costs and profit margin.
ii. Valuation of medicinal plants
The market-based technique is used to determine the economic value of medicinal plants. The technique involves several steps which include inventory of the forest area, productivity study, industrial/market survey and social survey. A structured questionnaire will be prepared to obtain required information from the industries and local collectors involved in harvesting activities. The economic value of medicinal plants will be estimated using the formula:
NB = (Price – Cost – Profit Margin)*Quantity.
iii. Valuation of Biodiversity or other nonmarket forest resources
The method used will depend on the types of biological diversity and other resources (wildlife, water, aesthetic value) which are considered important and significant for the country and local community. The most popular method to value biodiversity and other nonmarket resources is contingent valuation method (CVM). This method is used to estimate service or ecological functions of the forest, option value and passive or existence value. The method involves personal interviews with the direct and nondirect users of the forest using a structured questionnaire. The information required include general questions on forest biodiversity, role of forest, willing to pay, socio-economic background and perceptions on forest biodiversity. The data collected are analysed using logit model to compute the mean willingness to pay and consequently the net benefit of forest biodiversity at an appropriate rate of interest.