CONGRATULATIONS and WELCOME to the AIM Alumni Community!
Christopher G. Helder
Elena E. Presnedi
CONGRATULATIONS and WELCOME to the AIM Alumni Community!
Amher Abalon Ables
Peter Brian G. de Guzman
CONGRATULATIONS and WELCOME to the AIM Alumni Community!
Aprianus
Satrio Arismunandar
Widuri Diyah Astuti
Maya Johanna Budi
Shanta Curanggana
Guritno
Latif Harnoko Hadiputro
Markam Halim
Sebastianus Nicolas Handoso
Surjadi Hardiman
Achmad Ferizqo Irwan
Marjana
Herny Mulyani
Rowina Hafny Nur
Dony Oskaria
Raja Pardede
Hannibal Karunia Pertama
Hendro Prakoso
Tety Puspitawaty
Mochamad Iwan Ramdhan
Luthfi Ridwan
Muhammad Agus Riyadi
Muhammad Rizal
Rossaly Rosy
Rusli
Alya Gemma Sabil
Mira Amiranti Soenoto
Didik Supriyanto
Emil Syarif
Yuwono Waluyo
Soni Wibisono
Agustin Widyawati
Tantular Wirta Sancaya
CONGRATULATIONS and WELCOME to the AIM Alumni Community!
Sheila Grace M. Abalajen
Ronald E. Acedillo
Vikesh Agrawal
Laurice C. Alaan
Abul Khayr Amalon M. Alonto II
Sameer M. Alve
Abhinav Arora
Amber Atal
Abhijeet Bahadur
Ma. Margarita R. Banzon
Shravan V. Bhat
Jitendra B. Bhatia
Karen B. Bitagun
Joana P. Capareda
Paolo Sebastian M. Carlos
Sabyasachi Chakraborty
Rajdeep Chakravarty
Akhila Chandran
Dhruva Raj Chatterji
Akashdeep Singh Chauhan
Alvin Brian Ng Cha Cotaoco
Yuva Bharathi Damodaran
Siddhartha Das
Jez Guevarra Dela Cruz
Johan N. Diaz
Sangye Dorji
Joseph Patrick D. Echevarria
Savtanter Gadoo
Mohit Gauriar
Samit Kumar Ghosh
Shubhobrato Ghosh
Pia Marie Ysabel Flor Gonzalez
Ryan Francis S. Gudani
Subhashis Guha
Varun Gulati
Amit Gupta
Sumukh Guruprasad
Vicente Paolo L. Henson III
Shirleen Iskandar
Abhijitsinh Jogendrasinh Jadeja
Ankit Jain
Siddharth Jain
Avinash Jayaswal
Yogesh Rajaram Joshi
Satheesh Kailasam
Shruthi Kalidindi
Umesh Devkinandan Kandpal
Rahul Kathuria
Shiben Kaul
Md. Rizwan Khan
Rohan Khera
Rajesh Kirti
Kunal Kishore
Abhijit Kumar
Abhishek Kumar
Amiya Kumar
Rahul Kumar
Shalabh Kumar
Vimal Kumar
Maria Concepcion de Leon Lampa
Dan Li
John Vincent Lim
Weindrich S. Lim
Sudeep Ashok Lodh
Ma. Amparo V. Luna
Patricia Ann E. Magarro
Kumaran Mahendran
Rahul Malhotra
Enrique Jose V. Mendoza
Tomas David A. Meneses
Hari Krishna Morusupalli Venkata
Saurav Mukherjee
Ashwin Natarajan
Carmelyn R. Pacheco
Daciano David C. Palami
Jose Marciano C. Patiño
Aldirahman Pramadhana
Sonal Sanjay Premi
Ashish Ranjan
Adarsh Rathi
Pooja Rawat
Charles Salusu
Sudharshan K. Sankar
Bipasha Sarkar
Hamza Sayed
Dr. Vinod Kumar Seetharaman
Akash Senapaty
Swapnil Anil Shete
Nishant K. N. Singh
Pavaanjeet Singh
Rahul Singh
Vaidas Sukys
Musarat Ali Sulaiman Sait
Wahyu Hidayat Sulistyawan
Shiva Prasad Susarla
Katherine T. Tan
Ardhi Tartahadi
Tshering Tenzin
Amit Teppala
Ma. Theresita C. Tiongco-Quinto
Pema Tshewang
Jacqueline Yaw Tung
Arjun Varma
Gaurav Arun Vora
Carlos Virgilio K. Warren
Anjaneya Reddy Yarama Reddy
Muhammad Yusuf
1st Conference of Development Professionals: AIM Marks 20th Anniversary of CDM
Published November 9, 2009 Special Feature Leave a CommentIn celebration of the Center for Development Management’s 20th Anniversary, AIM organized the 1st Conference of Development Professionals last June 4, 2009. The Conference focused on the unique challenges faced by professionals in development work, considering the impact of the global financial crisis on Millennium Development Goals.
Participants were composed of CDM alumni, development consultants, individuals from government agencies, civil society organizations, corporate foundations and community organizations. They benefited from the professional knowledge and personal insights shared by eminent speakers such as Mr. Bert Hofman, Country Director, World Bank Philippines; Liwayway Vinzons Chato, Congresswoman, Lone District of Camarines Norte; Ashok Sharma, MDM 1995, Director, Governance, Finance and Trade (South Asia), Asian Development Bank; and Fr. Anton Pascual, MDM 1997, Director, Caritas Manila. Also featured was the IMDM BIDA Program at Camarines Norte that is building the capability of barangay officials to develop, mobilize resources, and execute development projects.
To share experiences and ethical benchmarks in the practice of their profession, “Conversations in Development Practice” was held in the afternoon with the following speakers: Prof. Ernesto D. Garilao, MM1982 and Mr. Jesus Alfonso Carpio, MDM 2003 (Bridging Leadership), Mr. Alberto Lim, Executive Director, Makati Business Club (Ethical Issues in Development Practice); Prof. Nereus O. Acosta, AIM Professor (Climate Change Initiatives); Ms. Maria Loreto Padua, Social Development Specialist, World Bank (Community-Driven Development Initiatives); Major Gen. Rolando Detabali and Gen. Benjamin Dolorfino, Armed Forces of the Philippines (Leadership, Peace and Development); and Prof. Maya Baltazar Herrera, AIM Professor and Mr. Noel Salazar, Director, The Development Executive Group (DEVEX) Manila Office (Managing Development Consulting Services and Career Advancement in the Development Sector).
AIM’s role as a business school in its early years eventually transformed to became a management school committed to making a difference in the lives of the poor in Asia. Through its Rural Development Management Program, an action research focused on rural communities and funded by international agencies (Ford Foundation and Konrad Adenauer Foundation) AIM became a strategic partner for the various stakeholders in development. These efforts included planning workshops and educational programs, books publication, and the writing of cases and industry notes addressing rural development issues.
In 1991, after almost a decade of the Institute’s conscious involvement in development work, CDM was born as a full-fledged academic unit. CDM’s original intent was “to build a sharp and distinct image as a center for excellence in development management as its contribution to the fulfillment of AIM’s vision.” CDM aimed to be the premier school for development managers through its world-class faculty, resource persons, and teaching materials developed out of its wealth of experiences in development. The target was the growing number of development practitioners, including public administrators, social development executives, private enterprise managers, economic planners, international funding and aid officials, and development bankers and financiers.
Providing Platforms for Growth: Insights from the 1st AIM Conference for Development Professionals
Published November 9, 2009 Special Feature Leave a CommentWords by Jesse Edep, LOB 2008
Photos by Jovel Lorenzo
Management professionals used to tell governments to fix their policies. Now they encourage them to fix their institutions. Their new reform agenda covers a long list of objectives, including reducing corruption, improving the rule of law, increasing the accountability and effectiveness of public institutions, and enhancing the access and voice of citizens.
True and sustainable change is supposedly possible only by transforming the “rules of the game” — the manner in which governments operate and relate to the private sector.
Good governance is, of course, essential insofar as it provides households with greater clarity and investors with greater assurance that they can secure a return on their efforts.
Traditional recommendations like free trade, competitive exchange rates, and sound fiscal policy are worthwhile only to the extent that they achieve other desirable objectives, such as faster economic growth, lower poverty, and improved equity. By contrast, the intrinsic importance of the rule of law, transparency, voice, accountability, or effective government is obvious. We might even say that good governance is development itself.
Bangladesh, Nepal
Unfortunately, as many people would like to assert, much of the discussion surrounding governance reforms fails to make a distinction between governance-as-an-end and governance-as-a means. The result, they say, are muddled thinking and institutional clutter.
During the First Asian Institute of Management’s (AIM) Conference for Development Professionals, Ashok Sharma, the Asian Development Bank’s (ADB) director of governance, finance and trade division for South Asia, cited Bangladesh and Nepal as countries that were “enormously at the mercy of institutional clutter.”
In Bangladesh, which has a population of 140 million, corruption has been widespread and has been a hot political and controversial issue, where feuding political parties often charged each other with being corrupt. Also, the country has poor education quality and has a per-capita income of about one-third of the Philippines.
On the other hand, Nepal, the poorest in South Asia with a high incidence of income poverty and markedly low levels of human development, experienced violent civil conflict over the past seven years.
Because of Nepal’s self-aggrandizing quest for ever-increasing control over others, the “People’s War,” which was launched by Maoist guerilla against the state, led to widespread loss of lives and livelihoods. Now, from being a monarchy, the country becomes a federal democratic republic.
Sharma, who graduated with a Master in Development Management degree at AIM in 1995, pointed out that the root cause of all problems in Bangladesh and Nepal is the government’s concentration of power. He blamed the weak level of accountability of the governments of these two countries.
To resolve these problems in Bangladesh and Nepal, he said that it requires moving away from the broad governance agenda and focusing on reforms of specific institutions in order to target binding constraints on growth.
“In the case of Bangladesh,” Sharma said, “anti-corruption commission must have teeth by starting to be independent with politics. Standards for public servants must be raised too. And no government decisions must be kept secret because it puts fear on the part of bureaucrats.”
Slowly but surely, the institution of democracy in Nepal has to be settled first by establishing government departments, civil services, legislature, local autonomy, and courts, among many others. “If we force the change, the country will be unsettled once again,” said Sharma.
“Pressure on the part of the legislature on how to divide districts has to be taken seriously. There are different ethnic groups in Nepal that, when divided irrationally, might rev up agitation to the populace,” he added.
Institutional Arrangements
Many say that broad governance reform is neither necessary nor sufficient for growth.
It is not necessary, because what really works in practice is removing successive binding constraints, whether they are supply incentives in agriculture, infrastructure bottlenecks, or high credit costs. It is not sufficient, because sustaining the fruits of governance reform without accompanying growth is difficult.
However, the governance that Sharma was telling was governance that focuses instead on those institutional arrangements that can best relax the constraints on growth. As Sharma put it, “these are arrangements that are more institutional in nature and fundamentally about governance.”
This means, for instance, making the central bank independent in order to reduce political meddling and changing the framework for managing fiscal policy, like setting up fiscal rules or allowing only an up-or-down legislative vote on budget proposals.
Macroeconomic policy is an area in which economists have done a lot of thinking about institutional prerequisites. The same is true in a few other areas, such as education policy and telecom regulation.
Most economists are also starting to involve institutional prerequisites in other areas, such as trade, employment or industrial policies.
Their understanding of the substantive issues, professional obsession with incentives, and attention to unanticipated consequences give them a natural advantage in designing institutional arrangements to further the objectives in question while minimizing behavioral distortions.
“Designing appropriate institutional arrangements also requires both local knowledge and creativity,” said Sharma. “What works in one setting is unlikely to work in another.”
Central bank independence, for example, may be a great idea when monetary instability is the binding constraint, but it will backfire where the real challenge is poor competitiveness.
Challenges
It is true that the Philippines has a sound state of human capital and savings after remittances, said Bert Hofman, director of World Bank in the Philippines, in the same conference.
Filipinos are probably one of the most sought after workers in the world. They work with little supervision, and they have a good command of the English language, a language used all over the world.
These jobs abroad are translated into millions of dollars sent back home. Remittances of money from Filipinos abroad constitute 12 percent to 13 percent of the gross domestic products (GDP).
Over the years, Philippine GDP has been steady. In recent years, growth rate has increased. Apart from remittances, much of this impressive condition could be credited to increase in agricultural production.
Impressive GDP growth of the country can be understood from its real growth rate statistics for the last few years. In 2003, growth rate was 4.6 percent and this rate came down slightly in the next year to 4.5 percent.
In 2005, growth rate went up to 5.9 percent, and in 2006, growth rate plummeted to 4.8 percent. However, in 2007, the rate climbed to 5.4 percent. And, in 2008, growth rate has climbed further to 7.3 percent.
This growth, said Hofman, means something to the dynamism of the country, referring particularly to the saving power of Filipinos. “Savings in the Philippines are not bad. They are relatively higher compared to a select group in Asia. Filipinos are pretty good savers,” he said.
“But the country isn’t growing rapidly because these advantages that we have aren’t efficiently transformed into jobs and poverty reduction,” he underscored.
There are certain areas of concern that still remain for the Philippine government — reduction in unemployment, reforms in power sector, management of debt, and improvement of conditions for investment in the country.
Strengthen Bureaucratic Coherence
Corruption is extensive throughout the Philippine state apparatus, from the lowest to the highest levels. Bribes and extortion seem to be a regular element of the complex connections among bureaucrats, politicians, businessmen, the press and the public.
This, for one, according to Hofman, is among the reasons why the Philippines isn’t growing rapidly. Public institutions display a weak separation between the official and private spheres, and special access to the state apparatus has been the major avenue for private wealth accumulation.
Hofman, in an earlier interview, said the struggle for good governance ultimately requires a fundamental restructuring of the political system.
He said a comprehensive reform agenda should be crafted around the challenging but essential long-term goals of strengthening bureaucratic coherence and encouraging the emergence of more institutionalized political parties.
MBM 1970 Presented with the AIM Alumni Leadership Award
Published November 9, 2009 Giving Leave a CommentFor their donation of an endowed Professorial Chair, the MBM 1970, I.B. Gimenez Securities Inc. and L.B. Padilla Professorial Chair in Entrepreneurship, the class of MBM 1970 was presented with the Alumni Leadership Award last August 11, 2009 during the book launch of “Asian Family Corporations: Governance in the 21st Century” held at the AIM Conference Center. It was this professorial chair that supported the publication of the book authored by Prof. Marivi Quintos-Gonzales, Prof. Francisco L. Roman Jr., DBA, and Prof. Grace S. Ugut, PhD.
AIM President Edilberto De Jesus acknowledged the class, noting that “the members of MBM Class of 1970 became the first 49 alumni of AIM and is the first class to establish a Professorial Chair at AIM.”
In his response, MBM 1970 Class President Alex Gaston thanked AIM for the token of appreciation, and expressed his class gratification in helping faculty development and research at the institute. “MBM Class ‘70 stands tall and proud to have played a significant role in the development and growth of Entrepreneurship in AIM,” he said. “We thank AIM again for acknowledging our modest contribution to the Institute. MBM ”70 affirms its continuing commitment to support our Alma Mater as best as we can in the years to come.”
The Alumni Leadership Award is given to all donors who support AIM’s Alumni Fund for Scholarships, Faculty Development, Research, and Learning Space.
By Shaikh Muhammed Ali, MBM 1995
As Project Director (HRD) for the Higher Education Commission in Islamabad, Shaikh shares with AIMLeader readers his personal experience with the Pukhtoons and their national dance, the Atan.
I was invited by a colleague for dinner who was blessed recently with a second male child. He being a Pukhtoon/Pashtoon (ethnic Afghans), I quickly accepted the invitation since I came to learn that his celebration would include the “Atan” as well.
The History of Atan
Dance has been an important part of most cultures from their earliest times. Throughout the world, as part of celebrations, ceremonies, entertainment and teaching, dance has social, spiritual, artistic, and emotional functions. Before the introduction of written languages, dance was one of the primary methods of passing stories and rituals down from generation to generation, of committing knowledge to memory, and of learning precision movements, such as swordsmanship (from “The Lonely Planet”, Pakistan, John King, Bradley Mayhew, David St. Vincent, 5th edition, July 1998).
While many other art forms—music, painting, and poetry—can be traced through human history through physical artifacts, dance is less easily defined. And like oral history and storytelling, dance relies on the direct communication of the ‘vocabulary’ of movement and stories from person to person. This vocabulary of movement is used by dancers and choreographers to describe or imitate the natural world (both living and inanimate objects), or to express common themes and emotions. Some movements are universal and recognized by people around the world, while others are unique to the region or people to which it belongs.
Pukhtoons possess a rich culture with all the ruggedness on the one hand and all the softness, romance and beauty on the other. The Pukhtoon dances have been defined as a symbol of courage and heroism and present the desire and readiness of a tribe to go into a battlefield for Jihad. With heavy and insistent drumming, the dancers who are usually male move with uniform rhythm and steps. They dance usually in circles or columns holding different items of daily life (swords, guns, handkerchiefs, etc.) in their hands and mix the crude sounds of their possessions with the rhythm of drums and surnayi (flutes).
Both sexes dance the Atan in which dancers with arms raised twist from side to side at the waist as they step in a slow, rhythmic pattern around a circle. It is danced in same-sex groups during weddings and other celebrations. I have come to learn that there are about 32 variations of the Atan.
Dancing their Hearts Out
My love for Atan started when I was young. I would see Pathans dance in ecstasy during celebrations. This love came close to fruition when I accompanied a second battalion of medical students (mostly Pathans) to Cuba in mid-2008. I accompanied them to Jose Maria Aguillar School of Medicine in Matanzas City, Cuba.
For all the three nights I was in Cuba, the Pukhtoon scholars would gather during Mirianda time and dance their hearts out on the Atan. There were about 14 boys who would do this while two were exceptionally good and would outperform all the others. Their timing was as good as professionals, and they would swim their way through the dance. Their movements were as smooth as silk and would flow like pure water in lush springs.
In photo: The writer with Mohsin and Kausar, the Atan Duo in Matanzas, Cuba
And now I get back to the real story of the invitation that took me down memory lane. Yes, I was too excited to reach the venue where I did around 9:00 p.m. Incidentally, it was almost a full moon that night and a few friends of the host were already there sitting on qaleens (rugs).
It was a typical all male affair as is seen in any Pukhtoon party or wedding gathering, women being the fairer sex remain indoors. They hailed from far and wide northern borders of Pakistan including Zhob, Chaman, Muslim Bagh, Quetta, Loralai, Peshawar, Waziristan, Bannu, Hangu, Kohat, Malakand, Darra Adam Khel, Charsadda, to name a few. They belonged to the Afridi, Kakar, Achakzai, Wazir, Dawar, Bangash and Khattak tribes. Soon after, typical Pukhtoon music started and a few of the boys got up and indulged in the Atan. Clapping by the rest of the crowd followed, and slowly and gradually more and more boys took part in the dance. It was as if they were all born with it. The movements came natural to them and they danced with compassion and serenity. Surprisingly, the Pukhtoons, being classified as a warrior race were not aggressive, and they all were as civilized as they could be. Or was it because most of them were M. Phil or PhD students at the university?
Dinner was served around 12:15 a.m., which of course was comprised of a goat sacrificed earlier, and Nan (Pakistani bread baked in tandoor). About 40 of us sat down and ate in harmony. As soon as dinner was over, they all rose and were ready to dance again. It was already 12:45 a.m. when I had to beg to leave with a question in my mind—I happened to be the only non-Pukhtoon among these fierce yet extremely hospitable people who can even die while defending the honor of their guests. I was just wondering if the Western world is right in condemning these people who hailed from the tribal areas, associating them with Al-Qaeda and the likes. All I saw was a happy bunch who knew how to enjoy life, and enjoy they did.
By Former Pres. Fidel Valdez Ramos
Chairman, Ramos Peace and Development Foundation
(RPDEV) and the Boao Forum for Asia (BFA)
The Management Profession Being Put To Doubt
This year—as you realize more than I do—the very profession of “manager” is being put to doubt and disrespect. The “immoderate” greed, “overweening” arrogance, and “unbelievable” recklessness of a relatively few investment bankers, financiers, insurance executives, and corporate managers in key centers of the global economy have visited upon our increasingly-interdependent world a recession of such a magnitude—and such an intensity—as mankind hasn’t seen since the Great Depression of the 1930s.
Some of the largest investment houses, banks, and insurance companies like Lehman Brothers or AIG—and even iconic industries like General Motors and Chrysler— have gone bankrupt, In the process, they are devastating the life-savings of millions of middle-class families and throwing out of their jobs millions more of work-people.
Consequently, governments all over the world are stepping into the breach opened by the failure of corporate management—abetted by the criminal neglect of regulatory authorities. Forecasts about the end of the free market are—in my view— greatly exaggerated. But the balance of power between state and market has certainly tilted decisively in favor of government—and corporate managers will likely labor under different circumstances henceforth.
For we now know the market by itself is not enough. Capitalism’s natural drive is to maximize returns. It has no internal governor to check its social behavior. Left to itself, the market remains indifferent to the ethical dimensions of what its workings do to vulnerable people.
Raising the Quality of Management in East Asia
That Asian management methods are generally more conservative than Western methods is probably responsible for the relatively milder effects that the recession has had on our own economies so far.
Another factor favoring conservative management methods is that we have more closely-knit family corporations than joint-stock ones run by professional managers.
This Institute can reasonably claim credit for a great part of the modernization in our management methods so far.
But, in my view, the global recession should start off a spell of soul-searching among management schools—and the undergraduate colleges that feed into them.
And I believe this self-examination should focus on what changes in their teaching philosophies and methods the Wall Street meltdown indicates as needed.
Changes The Wall Street Meltdown Suggests
An immediate question suggests itself: “Has the process of education in our time been too preoccupied with the teaching of marketable skills, to the detriment of learning and understanding?”
Certainly the Wall Street meltdown suggests that we need to grow managers who know the “whys”, of business, as well as “how” to get things done.
The point to which we have come suggests we need business leaders who are well-versed not only in the basic business skills — of marketing, finance, project management, and so forth—but also in the needs, wants, and hopes of the human community of which they are prominent parts.
Since the rise of industry, people have been beguiled by the ethic of productivity and efficiency.
And this pragmatic focus has affected our schools and their approaches to teaching. Less and less do universities seek to develop “value systems” or teach the so-called “higher learning.”
Less and less do teachers cultivate insight and inspiration in their students; more and more they simply deliver the information and the skills necessary for their pupils to gain employment.
Are We In Danger of Losing “Impractical” Learning?
As a result of this trend, fields of learning that have no direct connection with jobs and markets — the “impractical” fields such as philosophy, art, history, and literature — will soon disappear from university curriculums because they are increasingly regarded as both useless and unaffordable.
AIM is, of course, a technical school with a clear purpose and a “special focus,” but it has wide influence in national society as well as close connections with the colleges that send their best and brightest to its graduate studies. Certainly AIM can initiate an informal inquiry into the ethical gap that seems to have opened up in the education of managers—particularly those schooled in the Western tradition, I have no prescription for what seems to ail our managers, I plead only that you, like doctors, adopt as your first rule the dictum of “Do no harm” to the larger community in which you function.
And the second is simply to be more caring, sharing and daring for others and for our country. Caring and sharing are easy enough for Filipinos to do, because we as a people are naturally friendly, hospitable, compassionate, helpful, generous, and even forgiving.
But daring to give more than to take, daring to enhance the environment than to abuse it, daring to reform and to transform to make a difference, daring to take conc6rted action to overcome crises, daring to sacrifice for the common good—these are among the commitments and resolutions that have worked for us in the past, and will again hopefully care us toward a better and sustainable future.
This is the continuing challenge to all of us and the younger ones after us. Whatever be our shared endeavors, we must ensure that these will be undertaken through shared responsibilities, shared burdens, shared values, and shared benefits toward a higher quality of life for all.
Only through our total commitment to such a principled way of living can we hope to achieve sustainable economic development and social harmony for our one and only country.
Speech during the 2009 AAAIM Board of Directors Induction Ceremonies held at the Asian Institute of Management on June 4, 2009.
Illustration by Rommel Joson
The Greenest Investment: The Age of Wood Will Be Back
Published November 9, 2009 Insights Leave a CommentBy Oscar A. Gendrano, MBM 1974
Wood is a Part of our Lives
As life has existed on Planet Earth, trees and forests are key elements of human survival. They are the constant source of oxygen which they release to the atmosphere, as they absorb carbon dioxide to build up plant tissues. These tissues become wood that mankind has used, to meet its needs, literally from the cradle to the grave. Million of babies are put to deep slumber in wooden rockers. Beautifully carved pieces of furniture and elegant homes have made for gracious living. And wooden caskets provide dignified transport to everyone’s last trip on earth.
For more than fifty years now, the extensive use of plastics appears to have considerably replaced wood in our daily lives. But as plastic bags and broken furniture and toys begin to clog rivers and sewage systems, with no hope of biodegrade in the next fifty years, authorities have began to encourage the use of organic materials that will more quickly recycle in nature. Even with the use of plastics in construction and consumer products, wood continues to be a major component of buildings and a tool of creature comfort and convenience. Nature has ensured that the human species will survive with a sustained supply of basic food and wood from the photosynthetic (sun-induced) process.
Scientists have predicted that towards the end of this century, key minerals (such as oil and iron ore) will be more difficult to extract. Human technology will then have to focus on creating wood-based products, which, though not direct substitutes, could lessen heavy dependence on these minerals. When the earth’s reserves become very costly to extract, we have to turn to renewable wood resource to help meet our needs. For instance, when fossil fuel becomes less available, methanol (wood alcohol) can be used in motor vehicles. And for long-haul transport, we can revert back to good, old-fashion railway trains, that run on steam from water boiled by burning fuelwood.
The world’s tropical forests have been under intense pressure from advancing and rapidly growing populations. The push for land to settle and till for food, is such a strong force that threatens to compress the lungs of the earth. The Amazon jungles are the last remaining vast track of forest cover, and they are under constant pressure from all sides to be cleared for agriculture and other non-forest uses. Just as valuable are the tropical virgin areas of Indonesia, Papua New Guinea and Borneo, which continue to suffer from slash-and-burn tillers who hardly make provision to restore forests. In the decades to come, the drive of the world’s rural population to clear land for food will lead to a massive retreat of natural forests to pint-sized wildlands and watersheds.
Poorly implemented policies on land use and exploitation of the natural timber stands, have only led to the total annihilation of vast tracks of virgin areas. The sensible concept of selective logging for Philippine Dipterocarp forests never really meant anything to the privileged few, who were given the licenses to extract the timber. The onslaught of well-equipped loggers, who first cut the large timber, and then followed by the slash-and-burn settlers, who finish off whatever vegetation was left after heavy logging, ensured that no trees were left in those areas. This lethal “teamwork” eventually resulted in extensively eroded landscape dominated by hardy grass (e.g. cogon or Imperata cylindrica) that burns in the heat of every summer and effectively prevented other plants from bringing back a more diverse green cover.
The “Greenest” Investment
Many forestry experts agree that the only effective solution to slowing down decimation of natural forests, and still meet the world’s wood demand, is the massive establishment of forest plantations, to serve: (a) as buffer zones to stem the tide of the advancing armies of hungry tillers; and to (b) meet the increasing wood demand; (c) provide protection against soil erosion and consequent siltation of rivers; (d) provide employment to the rural population; (e) restore the wildlife population; (f) keep a wholesome micro-climate in surrounding communities; and (g) maintain stability of watersheds. In the past six decades, the country has had extensive experience in developing plantation forests. But their systematic expansion in many tropical countries, where such opportunities exist, have been hampered by restrictive laws and rules. Despite fiscal and other incentives, very few entrepreneurs have gone into massive tree plantation ventures.
In a free enterprise economy, private sector involvement is a key to the successful restoration of timber resources of a country (or countries) where there was excessive exploitation of forests. The creation of well-managed forest plantations, will require massive capital investments, and have relatively long gestation periods (8-15 years for many timber species). The years needed for the trees to mature to harvestable sizes, expose the investment to risks of fire, wind, disease, and human encroachments. But, there are ways to mitigate the impact of these risks.
The aim for profit is at the core of any human economic activity. There is, therefore, no greater stimulus to achieving the goals of a project or a program, than the prospect of added value or making a profit. Diversification of an investment portfolio is a common strategy to spread risk, adopted by firms or people who want to see their cash reserves grow (e.g. insurance, pre-need firms, pension funds). People who strive to be richer invest in diverse enterprises, rather than stash their cash in treasure chests or under mattresses. Buying both blue chips (slow but sure growth in value) and fast-moving mining/oil stocks, is a common combination. Similarly, funds could be used in productive enterprises, such that a portion goes to short-gestation crops (e.g. vegetables, sugar, corn, biofuels) and longer-gestation crops (e.g. coffee, cocoa, mango, rubber, and durian orchards), while another portion could be devoted to fast-growing timber trees. No sane investor puts all his money in one basket. He has a better chance of getting ahead in a diversified portfolio, specially if he can correctly and carefully assess his opportunity loss.
No investment is risk-free. The probability of quick windfall gains, is usually coupled with the probability of heavy losses, such as in speculative stocks and Ponzi schemes (scams?), which promise atrociously high earnings. On the other hand, productive land-based enterprises are subject to weather extremes, pest, diseases, and steep price falls. When agricultural crops do not suffer from adverse weather or pest and disease and harvest is bountiful, they could face a steep fall in prices. In the case of mature timber, when faced by unfavorable prices, cutting could be postponed for a relatively longer time than crops.
There are pundits who can give “expert” predictions in the stock market, and provide good guidance to investors on where to bet their money. There are also many specialists in productive enterprises to teach how to profitably raise commercial crops. But specialists to advise on how money can be made in longer-gestation crops, such as timber, are rare. This may be due to the fact that it is very difficult to convince investors that a timber venture could be enormously profitable. The long wait (at least eight years) to generate revenue from trees, could just turn off conventional and very risk-averse investors. A concrete demonstration, no less, could be the only way to convince these investors on the viability of tree plantations.
Evaluating Opportunities
There are investors who bravely face the risks, take steps to reduce them, and are prepared to steadily and patiently await the positive revenue flow. Oil and mining ventures are also risky and have many years of gestation periods. But trees are above-ground and have easily measurable volumes. Oil and minerals are underneath the earth’s surface, and their quantities could be roughly assessed only through seismographic data.
In nature, all living things go through varying rates of accelerating growth that eventually tapers off into maturity and decay. The process is evident in tree plantations. In countries where plantations are well-developed (e.g. New Zealand, USA, Chile), the decision to harvest the trees could be (ideally) based on financial maturity. The concept dictates that, if additional volume and value to be gained by postponing the cutting for, say, a year, will be lower that the cost of waiting, then it is time to cut and sell the timber.
In the case of fast-growing timber species, growth accelerates in early years and full maturity could be achieve in 12-15 years. There was evidence of heart rot when two commonly grown species (i.e. Gmelina arborea, Acacia mangium) reach these ages. Without the benefit of a conclusive study on the financial maturity of fast-growing trees, the expected diameters at breast height (DBHs), heights of usable trunks attained, and volume per hectare, are deemed adequate to evaluate the viability of a tree plantation. Experience in planting the fast-growing timber species, has shown that at an early age of 8-10 years they can attain DBHs, usable heights, and volumes per hectare, that could generate attractive returns to the investors.
Evaluating business opportunities is made easier by looking hard at the prospect, and level of profits to be made, and by examining risk-mitigating measures that could be implemented. In the case of a timber venture, wherein the gestation period is longer that many others, managing risk-reduction efforts, is crucial to profitability. The impact of strong wind and fire can be mitigated by windbreaks and firelines. Diseases and pests can be avoided by planting tree species that have proven to resist such scourge. Human encroachments can be prevented by alert guards. But, of course, no mitigation measure will work against a true force majeure (act of God) that can totally annihilate any land-based project.
At current prices, money put into timber trees is expected to have a return of at least eight to ten times the invested funds. Even with the numerous risks facing such a project, the venture could be attractive to savvy investors. But venture capital for timber plantations has been very hard to come by, despite the prospect of very high returns on investment, assurances that risks can be mitigated, and the social and environmental benefits. Funds may come from firms which have plenty of cash and need to diversify their investments. Funds may also come from investors who are already involved in forest plantations in the temperate countries, and have recognized that tropical trees grow and mature very much faster than temperate ones. They are quick to see that enormous profit can be had with such fast growth.
In the last five decades, the Philippine Government has carried out extensive planting of at least 25 timber species in various sites. A site-species matching study to ensure suitability of certain species in given locality and in each of the country’s four climatic zones, was conducted, and has come up with a list of recommended species for each zone. Following the recommendation will minimize the mismatch of certain species with the soil and moisture conditions in the planting sites. Through years of experience in planting, it has been shown that fast-growing sawtimber trees (e.g. Gmelina and Acacia spp.) could be harvestable in 10-12 years. In good sites, Falcata (Paraserianthis falcataria) trees for pulpwood or plywood core can be harvested in 6-8 years. These species can yield 180-220 cubic meters per hectare of useful timber.
When trees attain the harvestable timber volume in 8-12 years, the internal rates of return (IRR) of the plantation ventures could range from 25% – 30%. These rates would obviously be acceptable, and even attractive, to a lot of investors. If a venture is able to avail of superior planting stock produced through a cloning technique, the volume growth could at least double (400 cubic meters per hectare) in a shorter maturity period (1-2 years less). The plantation establishment cost could increase by 15% – 20%. But the volume growth and shorter maturity period, plus superior form of the trees, will more than compensate for the increased cost. It is estimated that IRRs of the venture could be much higher than those of conventional plantings today.
The nascent cloning technique to enable raising of superior (in form and volume growth) trees, offers hope that more capital can be attracted to timber plantation ventures. The increased attractiveness of this type of investment and its favorable environmental impact, offers a good prospect of restoring the country’s timber wealth, and reviving the moribund wood-based industry. The over-all economic impact of restoring the timber industry will be enormous, and will surely merit the attention of policy-makers.
Corporate, Social Responsibility
Many land-based crops to which investments can be made, have only employment and profit as main benefits. Intensive cultivation of sugar and corn, wherein tons of inorganic fertilizer are used, will even harm the soil and pollute the air with nitrous oxide. But tree plantations have stronger social and environmental benefits that responsible investors should consider. Flower cultivation produces a fragrant air that all passersby enjoy. Poppy, cocaine and marijuana plantings support addicts of the world. Tree plantations anchor on precious topsoil that holds rainwater for regulated release downstream. As they grow, the trees absorb much more carbon from the atmosphere than most other vegetation, and release oxygen in the process. Birds and other wildlife flourish among trees, much more than in commercial croplands (e.g. coconut, sugar).
Corporate social responsibility (CSR) is a buzz word in the corporate world. It is not a commodity to be traded, but a term used to measure the level of awareness/involvement that a corporate citizen has, to help mitigate a social ill (e.g. poverty, sanitation, environmental degradation, poor health services, etc.) in the communities where it is doing business. For a firm to be considered doing its CSR, it can be a member of the Philippine Business for Social Progress (PBSP), whereby it pledges a portion of its net profit for use in many social projects of the organization.
A firm can also go it alone, and do a project that benefits the community, but which will also have long-term benefits to its own viability. An example of this is the reforestation and forest protection project in the La Mesa Dam watershed area. This watershed provides water to the dam that supplies the need of more than 10 million Metro Manila residents. Funds for the project could come from the profits of the firm that owns the water supply franchise. The public perceives the reforestation project to be very commendable and is a shining example of CSR. But whether what the firm does, is adequate to ensure that water continues to flow to the dam over the long term, is another matter. The main watershed includes the upper reaches of Umiray River Basin, a virgin forest area of the eastern Sierra Madre range which has been in constant threat from settlers and illegal loggers.
PBSP has been around for more than 30 years, and has probably amassed enough funds to carry out numerous projects that reflect a good CSR. If its resources will allow, it should perhaps consider a soil-erosion control project that will prevent degradation of the hillsides. Planting timber trees on the degraded hills and watersheds will mitigate soil erosion and reduce siltation of rivers. When the hillsides become erosion-free, the benefits to the rural poor and farmers downstream, become evident. Such an accomplishment will speak eloquently of PBSP’s commitment to doing a true CSR project.
Climate Change is a Global Concern
Drastic climate change is a problem, not only of one country, but of the entire planet. Scientists have predicted that as earth’s temperature rises, many dire consequences can occur, such as long droughts, massive flooding and accelerated melting of glaciers in both the North and South poles. The average global temperature has risen by more than 1º Celsius, and, slowly but surely, continues to rise. If not mitigated by effective measures, such as control of carbon emission from factories and motor vehicles, the temperature could reach 6º Celsius by the end of this century. This unusual phenomenon will cause a few meters of rise in sea levels, submerge coastal areas, and could displace up to two billion people (about a third of the total population) around the world.
Countries’ authorities, scientists, and communities have accepted the likelihood of unprecedented warming of the earth and its disastrous consequences. Hydrogen-fueled, electric and battery-operated cars are being seriously experimented on, to reduce dependence on fossil fuel, which is a major cause of carbon emission into the atmosphere. Windmills are sprouting in many sites, to generate power to reduce reliance on diesel-fueled generating sets.
A Nobel Prize-winning scientist (Dr. Pachauri, head of the Inter-Governmental Panel on Climate Change, or IPCC) said that one of the best ways to sequester carbon is by growing trees. In many tropical areas of the world, tens of millions of hectares of land lay bare, and in need of forest cover. Recent studies in UPLB revealed that fast-growing timber trees could sequester as much as 20 tons of carbon per hectare per year. There is, in the country, an estimated six million hectares of public land that need honest-to-goodness reforestation. If only a million hectares of this land is fully planted to trees, they will reduce atmospheric carbon by 20 million tons per year. Even if these trees mature for harvest in, say, eight years, the stump and branches will remain as sequestered carbon, as long as they are not burned. The sawn timber, when used as furniture or construction material, will keep the carbon in its tissues. Coppice growth from the stumps will be vigorous and, therefore, will be more capable of sequestering carbon from the atmosphere.
It was reported that, during the 20-year period of 1976-1996, Philippine Government’s reforestation efforts have planted 420,000 hectares of various species in the hillsides. There should then be trees already absorbing about 8.4 million tons of carbon every year. If the stands are fairly intact, there is now an estimated growing stock of about 12 million cubic meters of harvestable timber. Many of the 20-30-year-old trees could now be cut to meet the ever-increasing local demand for timber, and will substantially reduce wood imports (now reaching about $200 million per year). But where are these extensive reforested areas?
The Age of Wood
Sound forestry, when implemented through tree plantations, will serve both the profit motive and social and environmental values. Other positive aspects are that: (a) forest need not be planted in prime food crop land, but in degraded hilly areas; and (b) once established, trees and forests will prevent flash floods and protect the integrity of watersheds and precious topsoil. In the Philippines, and in the rest of the tropical world, there are enough uplands, as well as expertise, to develop forests that will have very substantial favorable impact on t the socio-economic conditions of millions of people.
An effective investment strategy that will bring together a good combination of the basic factors of production (land, labor, capital, technology, management) is needed. Supported by correct and effectively implemented policies, private entrepreneurs will be able to do the task of strategic thinking. A forward-looking Government should harness the talents, expertise, and resources of the private sector to achieve key national development goals of increased rural employment (hence, poverty reduction) and a flourishing forest-based industry. Given the task, and enough freedom to implement an effective strategy, the private sector will also have the opportunity to show how strong is its sense of responsibility as corporate citizens.
Perceptive pioneer entrepreneurs know that starting a timber plantation is like casting a line in murky waters. The fish may not see the bait at all. But in one to two years of toil, when the initial plantings, especially of superior (cloned) trees, show good potentials for rapid growth, the investors will be encouraged to plant more areas. By the time of first harvest of mature trees, the cycle of planting and harvesting would have started, and the enterprise becomes a going concern. By then, investors, who had earlier grave doubts, may want to jump into the gravy train of timber plantation ventures.
To achieve major goals of national economic development, policies should be re-directed towards making full use of the bountiful natural endowment–land resources. Countries that have judiciously and deliberately used their land resources (e.g. Malaysia, Netherlands) have impressive Gross Domestic Products, which are much higher than those of many other countries. A determined Government that is honestly and seriously concerned with a country’s development, can encourage the successful implementation of a strategy that will use massive fund and land resources to restore the timber wealth, and which will also truly contribute to mitigating the impact of a drastic climatic change. There is no shortage of people in the private sector who can do this crucial task.
The timber harvesting research carried out in Eastern Mindanao, through funds provided by the International Timber Trade Organization (ITTO), has conclusively shown that benefits can continuously flow from natural tropical forests, without extensive damage to the environment. But the fact and knowledge have come only when most of the Philippine forests were almost completely decimated due to grossly improper use. Now, as in the past, people still see that harvesting the mature timber in a natural forest, and even in plantations, is naked exploitation that only exacerbates degradation of the forestlands.
The cloning technology alone promises to revolutionize the way people look at the forest business, based on tree plantations. In the 1960s to the 1980s, logging the natural forests was a key industry that made a lucky and influential few enormously wealthy. The surge in the concern for the deteriorating human environment in the 1980s, has badly stigmatized this activity, and for that matter also cutting mature planted trees, as directly harmful activities. Despite the successful research (ITTO’s) that showed careful extraction of mature Dipterocarp from the natural forests, hand-in-hand with preventing encroachers, can keep the forest forever productive, the public is still squarely against all forms of timber harvest. The distorted view is a backlash from the massive destruction of virgin forests, in those decades when the timber industry had to meet the needs of countries rising from the ravages of World War II. It has become an uphill fight for foresters to convince people that sensible forest management can still revive forest-based industries that have provided rural jobs to millions of people in the hinterlands. Showing good results of tree cloning on the ground, will open the public eyes to the great opportunity to recoup the lost forest wealth.
As progress marches on in this century, the competition for minerals and other resources becomes fiercer and may even lead to war. In a few more decades, new technologies would have been developed to more effectively use wind, ocean, and sun, to generate energy for human comfort. But still the less complicated way to keep such comfort, is to revert to intense and wise use of land resources to produce renewable goods. In addition to more efficient use of the land to produce food, it should also produce wood to meet other basic human needs.
In past centuries, before fossil fuel became an energy source, and steel as a basic construction material, wood was the main source of both energy and construction. In those centuries, there was an Age of Wood, when humans relied much on forests and trees for their energy and construction needs. In the not-so-distant future, when much of the fossil fuel and iron ore would have become too costly to extract from the bowels of the earth, we will again turn to these trees and forests, to survive. Forward-looking investors could start developing strategies to use land resources for sustained timber production. Demand for wood-based products will rise, as current utilization technologies improve. More people will need more wood. The Age of Wood will soon be back!
Oscar A. Gendrano retired from Asian Development Bank as a Forestry
Specialist. He belongs to AIM’s MBM Class 1974. He authored a book
entitled: OSCAR: A MAN OF THE FOREST; Memoirs of a Forester, which was
launched at the Philippine Consulate in New York City, USA in May 2008. His
email address is ocagendrano@yahoo.com.
Illustration by Brian Vallesteros
