Steve Harrison

Regulating the Quality of Seedlings for Forest Restoration: Lessons from the National Greening Program in the Philippines

The use of low quality planting material is one of the major reasons for the limited success of past reforestation programs in the Philippines and elsewhere in the tropics. In the Philippines, a national policy has been in place since 2010, which regulates the quality of seedlings. As part of the policy, government reforestation programs are required to use only high quality seedlings from accredited seedling suppliers. A survey of nurseries producing seedlings for the National Greening Program in Eastern Visayas and Northern Mindanao regions was carried out to determine the effectiveness and challenges in implementing the forest nursery accreditation policy. The survey identified factors that limit the effectiveness of seedling quality regulation including lack of auditing of seedling quality in accredited nurseries, insufficient monitoring of the seedling supply chain among the network of nurseries supplying seedlings for reforestation programs, inadequate seedling production schedules, and inappropriate criteria for seedling quality assessment. The limited sources of high quality germplasm, nursery operators’ limited information on the attributes of high quality planting materials and lack of knowledge about high quality seedling production technologies contributed to the widespread production of low quality seedlings. The lack of seedling quality checks makes the government’s bidding scheme of seedling purchases prone to favouring the proliferation of low quality seedlings that are usually sold at lower prices. Nursery accreditation represents a major initiative in promoting the success of Philippine reforestation but our study found that considerable improvement of the policy and of its implementation is necessary. From our study, key lessons can be learned for the implementation of forest landscape restoration initiatives in other tropical developing countries.

Capital Budgeting: Simulation concepts and methods

The term ‘simulation’ is widely used nowadays, and most people have their own view of its meaning. In general, to ‘simulate’ means to mimic or capture the essence of something, without attaining reality. In management applications, simulation typically involves developing a model of a business or economic system, and then performing experiments using this model to predict how the real system would behave under a range of management policies. In that financial models have been used repeatedly in earlier chapters, the importance of modelling will come as no surprise here. But when discussing simulation, attention to aspects of modelling becomes even more important since simulation models are often highly complex representations of business systems. While many quantitative techniques take a well-recognized form, simulation differs in its great flexibility, variety of applications and variations in form. These features, while highly valuable for modelling complex business systems, make this a difficult methodology to explain and to comprehend. In fact, simulation has been described as ‘more art than science’. Proficiency with this technique cannot readily be gained in the classroom. Considerable hands-on experience from repeatedly designing, developing and performing experiments with a number of different models is also necessary. But even for readers who will not be engaged in developing complex models, an understanding of simulation concepts is indispensable because of the widespread use of this methodology. The financial models encountered in earlier chapters, typically developed on a spread-sheet, may be regarded as a form of simulation.

Capital Budgeting: Project analysis under risk

The previous chapter discussed project analysis under certainty, i.e. in a no-risk situation. In reality, however, the future cash flows of a project are not certain. Cash flows cannot be forecast with absolute accuracy. These are estimates of what is expected in the future, not necessarily what will be realized in the future. Sometimes, even the initial capital outlay can be uncertain and subject to high estimation errors. For example, in 1987 the cost of the Channel Tunnel (between Britain and France) was estimated to be

Capital Budgeting: Project analysis under certainty

12 billion, but later this was increased to about

Capital Budgeting: Forecasting cash flows: quantitative techniques and routes

22 billion. The Sydney Opera House is another famous example of a large cost increase over the initial estimate. In the previous chapter, one single series – the best estimate of the projects future cash flows – was used to compute the net present value. This series may be viewed as the best estimate of a range of possible outcomes. For example, in Chapters 2 and 6, the Delta Project was considered and its first years sales were expected to be

Capital Budgeting: Project cash flows

345,553. This was the best estimate. But this amount could eventually prove to have been under or over the actual sales that the project generated. This sales forecast was arrived at by estimating the sales units on the basis of past sales and assuming a unit selling price of

Understanding forest transition in the Philippines: main farm-level factors influencing smallholder's capacity and intention to plant native timber trees

0.50. However, the actual selling price might be different to this forecast value.

Capital Budgeting: Property investment analysis

In the previous chapters, we have discussed the identification and estimation of project cash flows and illustrated the mathematical formulae essential for project evaluation. This chapter now uses these elements for investment analysis. There are two groups of project evaluation techniques: discounted cash flow (DCF) analysis and non-discounted cash flow (NDCF) analysis. The first group includes the net present value (NPV) and the internal rate of return (IRR). The second group includes the payback period (PP) and the accounting rate of return (ARR). Generally, DCF analysis is preferred to NDCF analysis. Within DCF analysis, the theoretical and practical strengths of NPV and IRR differ. Theoretically, the NPV approach to project evaluation is superior to that of IRR. The NPV technique discounts all future project cash flows to the present day to see whether there is a net benefit or loss to the firm from investing in the project. If the NPV is positive, then the project will increase the wealth of the firm. If it is zero, then the project will return only the required rate of return, and will not increase the firms wealth. If the NPV is negative, then the project will decrease the value of the firm and should be avoided. In spite of the theoretical superiority of the NPV technique, project analysts and decision-makers sometimes prefer to use the IRR criterion. The preference for IRR is attributable to the general familiarity of managers and other business people with rates of return rather than with actual dollar returns (values).

Small-scale and Community Forestry and the Changing Nature of Forest Landscapes, Proceedings from the IUFRO Research Group 3.08 Small-scale Forestry Conference

Forecasting is important in all facets of business. A supermarket needs to forecast the demand for different types of cleaning agents, soft drinks and meat products. A car manufacturer has to forecast the demand for the different types of cars it produces. A farmer must forecast the demand for a variety of crops when deciding what to plant next spring. A government must forecast its tax revenue in order to design its budget each year. A business corporation needs to forecast the future requirement of different types of labour inputs, raw materials, machines and buildings as an integral part of its business processes. All business firms have to plan for the future. The success of a business firm is closely related to how well management is able to anticipate the future and develop suitable strategies. No business organization can function effectively without forecasts for the goods and services it provides and the inputs it purchases. In project evaluation, the ‘cash flows’ of a proposed project refer to expected future cash flows of that project. The reference is not to past or historical data, but to future data expected from the proposed project. Perhaps the most critically important task in project appraisal is the forecasting of expected cash flows. The cash flows form the basis of project appraisal. If the cash flow estimates are not reliable, the detailed investment analyses can easily lead, regardless of the sophisticated project appraisal techniques used, to poor business decisions.

Forest Certification in Collectively Owned Forest Areas and Sustainable Forest Management: A Case of Cooperative-Based Forest Certification in China

An important part of the capital budgeting process is the estimation of the cash flows associated with the proposed project. Any new project will cause a change in the firms cash flows. In evaluating an investment proposal, we must consider these expected changes in the firms cash flows and decide whether or not they add value to the firm. Successful investment decisions will increase the shareholders wealth through increased cash flows. Valuing projects by estimating their net present values (NPV) of future cash flows is a means of gaining an idea of their expected addition to shareholder wealth. Correct identification of the relevant cash flows associated with an investment project is one of the most important steps in the calculation of NPV or in the project appraisal. Cash flow is a very simple concept, although it is easily confused with accounting profit or income. Cash flows are simply the dollars received and dollars paid out by the firm at particular points in time. The focus of project analysis is on cash flows because they easily measure the impact upon the firms wealth. Profit and loss in financial statements do not always represent the net increase or decrease in cash flows. Cash flows occur at different times and these times are easily identifiable. The timing of flows is particularly important in project analysis. Some of the figures in standard financial statements, such as income statements or profit and loss accounts, may not have a corresponding cash flow effect for the same period; some of their actual cash flows may occur in the future or might already have occurred in the past.