Analysis of Tender Prices of Stateland Forest Area in Pahang

In most tropical countries, the rent capture from timber is low and have allowed the resource rents to flow as windfall profits to timber concessionaires. No policy for the sale of government forest could be soundly based unless the government knows the real value of the timber it is selling. Tendering system is the best way where government can increase revenue on forest sale. Forest possession through tender system is not new in state of Pahang as it has been practiced since the early 70's for land conversion into agricultural development. During the 80's forest individual or logging companies can obtain concessions through application. Beginning 1995, the state government announced that all applications for stateland forest should go through tender system. A study was undertaken to analyze tender price of stateland forest allocated through tendering system in Pahang. The objectives of the study were to study the trend and pattern of tender prices in stateland forest area, to compare the tender prices offered by bidders with reserved price, to examine the relationship between tender price and factors affecting it, and to estimate rent capture in Pahang. A total of 123 tender transactions of the stateland forest in Pahang from 1996 to 1999 were collected based on tender documents. A logging survey was also conducted on 10 loggers to obtain information relating to bidding behaviour. The results indicate that the average tender prices offered by concessionaires vary by district, forest type and status of tender. The average tender price offered for the period 1996 to 1999, was RM4,468 per ha. The highest tendered price occurred in the district of Bentong, averaging RM12,537 per ha. The lowest tendered price was found in Temerloh, averaging RM2,938 per ha. The average tender price for virgin forest was estimated at RM5,693 per ha compared to that of logged-over forest, estimated at RM4,090 per ha. It was also found that tender price was higher in open bidding (RM5,156 per ha) compared to closed tender (RM3,365 per ha) and sawmill scheme tender system (RM3,021 per ha). Regression results showed that timber volume of the tendered area and the numbers of bidders were two main factors affecting the bid price. The study also revealed that the rent capture by the state was estimated at 53.4 percentage of potential stumpage. Based on this study, it is recommended that the state government should revise the current tendering system in order to maximize resource rent and efficient timber harvest in the long run. The government should proceed on 'volume basis' instead of 'area basis' for maximum revenue. Future study of tendering system was also highlighted.

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