Policy Options for Conserving Sri Lanka's Natural Forests

Forest cover in Sri Lanka has declined drastically during the last century. Some of the remaining forests, which are under protection, harbor high levels of biodiversity and endemism. Illegal timber extraction is the most important cause of deforestation at present. The illegal logging now occurring in unprotected forests may extend to protected forests, if necessary policy measures are not implemented. The main policy currently employed to limit deforestation is a timber permit system. This study assesses that policy and four alternative policy measures: legislative approaches; establishment of forest plantations; improvements in the technical efficiency of saw-milling; and liberalization of the timber market. The study finds that the timber permit system has failed to protect Sri Lanka's forests. It has instead resulted in higher timber prices for consumers and lower prices for producers, allowing most of the timber rents to be extracted by timber traders. Furthermore, it has not promoted conservation: low producer prices provide a disincentive for growing trees, while high consumer prices encourage illegal timber extraction from natural forests. Despite the profitability of commercial forest plantations, the private sector does not invest in forestry because of the uncertainty created by the excessive regulatory system.