An Optimal Control Model of Illegal Logging by Commercial Logging Contractors in Laos PDR

Laos is an income-poor but resource-rich country heavily dependent upon its natural forest resources. This paper uses an optimal control model to analyse deforestation in Laos. Specifically, this paper analyses illegal logging by a sole commercial logging contractor within a single region in Laos. The commercial contractor aims to maximise discounted profits from commercial contracts to log government quotas and from illegal logging. Policy implications for a government wishing to sustain a target level of forest stock are derived from the model. Results show that it is likely that the steady state level of the forest stock will be lower than the government's target. In order to minimise the difference between the target and actual levels of remnant native forest, the government can consider increasing the value of contracts awarded, the duration of contracts awarded or the level of fines imposed on detected illegal loggers. The model, however, simplified what is an extremely complex problem. Game-theoretic extensions to the modelling framework are suggested as avenues that may help the model better reflect the complexity of illegal logging and deforestation in Laos.