Significance and Challenges of Introducing a Direct Forestry Payment System

Significance and Challenges of Introducing a Direct Forestry Payment System

Published: 2023.09.14
Accepted: 2023.09.14
42
Researcher
Korea Rural Economic Instutitute

ABSTRACT

In October 2022, the forestry direct payment system was implemented for the first time in Korea thanks to the efforts of various stakeholders, including the government, forest owners, and forest industries. The forestry direct payment system aims to promote the management of private forests, which were in the blind spot of forest management. Through this, it was intended to enhance the various function of forests, contribute to achieving the national carbon target, and increase the income of foresters. The direct forestry payment system is in which qualified foresters receive a minimum of US$239 and a maximum of US$895 per 1 hectare when they produce forest products on forest land that is qualified according to the law. The direct forestry payment system would improve the various function of Korean forests.

Keywords: Direct forestry payment system, South Korea

INTRODUCTION

If there is one characteristic of Korea's forests, it is that forests account for a high proportion. It is because about 63% of the country is forested. Among OECD countries, only Finland (74%), Sweden (69%), and Japan (68%) have a higher forest ratio than Korea (Statistics Korea, 2022). Another characteristic of forests is the high proportion of private forests. In terms of ownership, the area of forests owned by individuals was the largest at 66%. The proportion of forests owned by the central government was 26%, and the proportion owned by local governments was around 8% (KFS, 2022a). As of 2021, 2.338 million people own 4.145 million hectares of private forests (KFS, 2022b). It means that 5 out of 100 citizens are forest owners.

For this reason, persuading forest owners was essential in achieving national forest policy goals. It is because the regulations related to the use of mountainous areas were relatively strong, and the Korean people had a high level of awareness of forest conservation. In addition, since the national and private forests were spatially connected, the participation of the private forest owners was essential to promote the integration project for the realization of economies of scale.

It has been argued that a system of payment and compensation for producers of timber and non-timber forest products in forests should be introduced (KFS, 1997). It is because, in the process of producing forest goods, intangible forest public functions such as absorbing greenhouse gases, preventing soil runoff, and providing opportunities for forest recreation are created and increased simultaneously. The argument that such a reward system should be introduced dates back 24 years. It is because the 4th National Forest Plan (1998-2007) suggested introducing a direct payment system in the forest sector to "establish an income safety net and discover new investment sources." (KFS, 1997). In the 5th National Forest Plan (2008-2017), a payment system for forest environmental services was proposed to "strengthen the support system for enhancing public functions of forests." (KFS, 2007).

Meanwhile, in the agriculture and fisheries sectors, the direct payment system, which is a system that stably supports producers' income and fairly compensates their contributions to the public interest, was already in operation. Discussions on introducing the forestry direct payment system were actively pursued in this background. In September 2017, National Assemblyman Jin-Seok Jeong proposed the "Act on Enforcement of Direct Payment System for Forestry"  based on some of the contents of the "Research on the Direct Payment System for Forestry and Forestry Sector" conducted by the Korea Rural Economic Institute in 2016, and in February 2019, National Assembly member Yong-soo Eom also proposed "A Partial Amendment to the Act on the Preservation of Agricultural Income", but it was ultimately rejected. It was because management information and producer statistics in the forestry sector was not prepared, and accurate production information could not be identified because forestry management was not intensively conducted in a vast mountainous area.

To introduce the forestry direct payment system, forestry workers' groups took the lead, and the Korea Forest Service prepared a space for discussion. A Task Force was formed and operated in which various stakeholders, such as industry, forestry, and researchers, participated. The rationale and method of introducing the direct forestry payment system were discussed fiercely. Various domestic and foreign cases were reviewed to derive alternatives suitable for Korea's forests. Sam-Seok Seo, a member of the National Assembly, reflecting on the results of these discussions, proposed a bill on the operation of a direct payment system to promote forestry and forest public interest functions in September 2020. After a year-long process of gathering opinions, such as public hearings, the bill was passed on November 11, 2021. November 11 is Farmer's Day in Korea. There must be a reason why the forestry direct payment system was passed on Farmer's Day. Preparing enforcement ordinances and enforcement rules for 2022 was carried out, and on October 1, 2022, the direct payment system in the forestry sector was implemented for the first time in Korea. At the end of 2022, the first year of introduction, the meaning of the forestry direct payment system will be reviewed once more, and the direction for development will be discussed.

REASONS FOR INTRODUCING THE FORESTRY DIRECT PAYMENT SYSTEM

Since 2016, I have been researching the introduction of the forestry direct payment system at the Korea Rural Economic Institute (Seok et al., 2016; Koo et al., 2020; Koo et al., 2021; Koo et al., 2022a). Public interest and equity within the primary industry have always been put first as the basis for introducing the forestry direct payment system. The first rationale for introducing the forestry direct payment system is to enhance the public interest function of forest resources. As of 2018, the National Institute of Forest Science, an institution affiliated with the Forest Service, revealed that the economic value of the public function that forests express in one year is KRW221 trillion (US$165 billion). As shown in Figure 1, it is composed of various forest functions. It corresponds to 43% of the 2020 national budget. Dividing this by the benefit per person, it comes to about US$3,192. It is ten times more than the US$298 emergency disaster relief fund paid to single-person households due to COVID-19.

It is a huge benefit, but we will have to wait and see if it is for the best. First, let us compare some countries and forest conditions. There are indicators used at this time. It is "wood accumulation." It is the sum of all standing tree volumes per unit area. As of 2021, Korea's average forest stock is 168.7㎥/㏊. Although the stock of forest has been steadily increasing, it is half of Germany (321㎥/ha) and Austria (299㎥/ha)[1], which are called forest-advanced countries, and is also different from neighboring Japan (195㎥/ha)[2]. It means that there is still much work to be done, and there is room for more than KRW4.28 million per person. Private forests are where we have much work to do. As of 2020, the accumulation of trees in private forests was 158㎥/ha, only 87%, and 91% of national forests (182㎥/ha) and public forests (173㎥/ha).

The reason why the stocks in private forests are low is that there are many unmanaged forests. The current situation of forest management plans can be shown in the Forestry Statistical Yearbook published by the Korea Forest Service. Only 51% of the forests established a management plan. Moreover, there are significant differences in the ratio of the establishment of forest management by ownership. National forests account for 99%, but private forests account for only 33%, one-third of national forests. At the end of 2019, the area of ​​private forests without a forest management plan reached about 2.7 million hectares. The reason why the rate of establishment of forest management plans in private forests is low is that the owners of private forests are not interested in management. Also, planning is a recommendation, not an obligation. In order to raise the average of the country's total tree stock, it is urgent to allow neglected private forests to be managed.

Various attempts have been made to narrow the distance in forest management between private forest owners and national forests. Representative examples include subsidy support for private forest owners who participated in forest management and the operation of a forest carbon offset system (KFS,2007) However, many private forests have yet to be included in the framework of the current forest management plan. 42% of the total and 64% of the private forest area are not managed. However, it is not possible to unconditionally force forest owners who own neglected forests to engage in less profitable forest management. A completely different plan is needed to harmonize forest owners' interests with national goals. I suggested the forestry direct payment system as the alternative to letting them participate in forest management.

There is one more reason to manage neglected forests. It is to contribute to achieving the national greenhouse gas reduction target by 2030. This goal includes reducing 22.1 million tons by utilizing forest sinks through strengthening forest management. The National Institute of Forest Science predicted that 16 million tons of greenhouse gases could be absorbed when forest management is done and wood products are used in the usual way. The remaining 6 million tons can be absorbed with additional efforts. Additional forest management is a necessary condition for achieving national greenhouse gas targets. It can be most effectively achieved through the management of neglected private forests. I argued that direct payment for forestry is necessary to meet the greenhouse gas target.

The second rationale for introducing the forestry direct payment system is to improve equity within the primary industry. In the Constitution of the Republic of Korea, Article 123 Paragraph 1 stipulates that "the state shall establish and implement necessary plans, such as comprehensive development of rural and fishing villages and their support, to protect and foster agriculture and fisheries." In Korea, forestry is included in agriculture according to the Framework Act on Agriculture, Rural Community, and Food Industry. The Forest Service is also affiliated with the Ministry of Agriculture and Forestry. Given these circumstances, there is no reason why the same primary industry should be treated differently.

Nevertheless, there was no direct payment system only in the forestry sector. The direct payment system in the agricultural sector was introduced in 1991 and has continued to develop until now. Agriculture also changed its nature to a public interest type and reflected the growing needs of society, strengthening farmers' compliance in the fields of environment, ecology, community, food safety, and institutional infrastructure. The fishery industry is also subject to a direct fisheries payment system from March 2021.

With the revision of the "Act on the Preservation of Agricultural Income" in 2015, direct payment for agricultural products has become possible regardless of the category. However, due to the revision of the "Enforcement Decree of the Agricultural Land Act" in 2016, forest lands that have not received ‘permission for conversion to mountainous land’ are not recognized as farmland even if crops have been cultivated for more than three years. In addition, cases that do not require transformation, such as wild greens and wild ginseng, were not considered. The specificity of crops requiring shade was not considered, and direct agricultural payments were not received. Above all, it is not reasonable for the crops to be eligible for direct payment to be divided just because the category is different, even though the crops are the same. It is why a separate direct payment system for forestry is necessary.

Because of these inequalities, support for forestry was relatively weak compared to agriculture and fisheries. As shown in Table 1, it is relatively inferior when household income is compared to farm and fishing household income. In particular, the difference in transfer income, including public subsidies such as direct payments, is significant. It has been confirmed that the gap between farm households has gradually increased over the past seven years (Table 2). Therefore, it is necessary to increase the income of forestry households by introducing forestry direct payments.

THE REALITY OF THE FORESTRY DIRECT PAYMENT SYSTEM

The forestry direct payment system is applied when a qualified person performs legitimate forestry work in a legitimate mountain area. In order to obtain the legality of the land, the agricultural management body (forest) must register the mountain area by September 30, 2022. Only privately owned lands are targeted at this time, and mountainous areas unsuitable for forest management are excluded. Areas scheduled for development or areas designated as protected forests cannot be the target area.

Qualifications for forestry workers are based on the appropriate production area and number of production days. Currently, eligibility is limited if the income outside of forestry is too high or the person lives outside of a mountain village. Since the primary purpose is to improve the forest's public function, the applicant must take good care of the forest and preserve it. It should be managed according to the forest management plan, and the number of trees should be maintained appropriately. In order to promote the public function of forests through forestry, education must be completed compulsorily. Compliance requirements for forestry direct payment are shown in Table 3. If the applicant forester fails to comply with this obligation, the payment amount will be reduced.

The direct payment system for forestry is divided into forest product production (Type I) and forest management producing timber (Type II). It is because the cultivation characteristics of timber and non-timber forest products are entirely different. Therefore, the section and unit price are applied differently, as shown in Table 4. US$895 is paid as a flat rate for small-scale households regardless of the size of the area that they manage. However, the unit price decreases as the area increases and the payment area cannot exceed 30 ha. It is to strengthen payments to small farmers rather than large ones.

The forestry direct payment bill presented by Seo Sam-Seok, a member of the National Assembly, included a compensation system for forest protection areas under the "Forest Protection Act" but was excluded from the legislative process. It was because property rights infringement due to the designation of protected areas differs from the direct payment system related to production. It is more effective to utilize the existing compensation system suggested by the existing laws. However, a compensation system for forest protection areas should also be established in the near future. It is because those who own forest protection areas are deprived of opportunities for traditional forestry. It is not because the owners of forests in protected areas are not forestry but because forestry opportunities are deprived. According to Koo et al., (2022b), the forest protection area designated as a private forest is 92,000 hectares, with about 30,000 owners. They proposed annual earnings of KRW200,000 to the owner of the forest based on the public interest value of the forest protection area. They insisted that the requirement should be set at a minimum level considering system acceptance for the user.

EXPECTATIONS AND CHALLENGES

According to a press release by the Korea Forest Service, an average of US$1,245 will be paid to 28,000 foresters, increasing income by 4.5%. The forestry direct payment system will continue to act as a stabilizing net for wage income. With the introduction of the direct forestry payment system, it will be possible to expand the actual forest management area. It is said that the region's demand for forest management, such as thinning, has increased. As shown in Figure 3, the public function and multidimensional value of forests expressed in managed forests are higher than those in neglected forests. It has also indeed imposed more compliance matters, such as environmental preservation obligations.

The Korea Forest Service has established a particular organization, the "Forestry Direct Payment Emergency Response Team," to operate the forestry direct payment system effectively. Since the first year of introduction, all complaints have been collected and put into a database to prepare for amending and improving the system. They developed accessible applications for verifying the number of days worked, and sales are developed and operated. It is because the user's age is high. In addition, a long-term evaluation system was also established to measure the changes in income and public interest functions, which are the ultimate outcomes of the forestry direct payment system (Koo et al., 2022a).

After the introduction of the forestry direct payment system, the role of private forest owners participating in forest management should also be strengthened. They should be immersed in forest management so that the pluralistic functions of forests can be expressed even a little more. It should be able to detect even small changes in the forest and record them. As in the past, it should continue agreeing to the basic forest plan established by local governments or simply writing documents to establish a forest management plan. It is because only then can the deserved compensation be received from the consumers of the public function of forestry. The voices of criticism for not doing anything in the mountains should no longer come out.

As of 2022, the number of beneficiaries of the forestry direct payment system was 28,000. According to the Census on Agriculture, Forestry, and Fisheries, the number of farm households is about 100,000. Only about 30% were subject to the system. The applied forest area is also about 70,000 hectares, less than 2% of the private forest area of ​​about 4.2 million hectares. Developing a plan to expand the area under the current system is necessary. It is to ensure that the efforts of forestry workers who held pickets in front of the National Assembly in the cold winter and called for introducing a direct forestry payment system were not in vain. Efforts should also be made to raise the unit price of the forestry direct payment system. Currently, 70% of field farming outside agricultural promotion areas is applied to type I. It is necessary to increase the unit price because forest land where trees coexist has higher public value in the production process than farmlands without trees.

REFERENCES

Climate Action Reserve (2019), Key Accounting Principles for Improved Forest Management Projects with the Forest Protocol.

European Environment Agency. (2023, June 20). Forest growing stock increment and fellings. [Data and maps]. Retrieved from https://www.eea.europa.eu/data-and-maps/indicators/forest-growing-stock-increment-and-fellings-3/assessment

Forestry Easy. (2023, June 20). Forestry Easy. Retrieved from https://www.forestryeasy.com/

KFS (2022a)., Statistical Yearbook of Forestry. Vol(52).

KFS (2022b)., 2021 Status of forest owners nationwide.

KFS (1997) 4th National Forest Plan(1998~2007)

KFS (2007) 5th National Forest Plan(2008~2017)

Koo et al., (2020), Introduction of the forestry direct payment system linked with the forestry business registration system. Korea Forest Service.

Koo et al., (2021), Detailed implementation plan for forestry and forest public interest direct payment system. Korea Forest Service.

Koo et al., (2022a), System improvement measures through monitoring of forestry and forest public interest direct payment projects. Korea Forest Service.

Koo et al., (2022b), Preparation of guidelines for forest conservation payment system. Korea Forest Service.

Korean Statistical Information Service. (2023, June 20). Forest area and growing stock. [Statistics]. Retrieved from https://kosis.kr/statHtml/statHtml.do?orgId=101&tblId=DT_2KAAF16_OECD

Ministry of Agriculture, Forestry and Fisheries of Japan. (2023, June 20). Forestry. [Policies]. Retrieved from https://www.maff.go.jp/e/policies/forestry

National Institute of Forest Science(2020), The results of economic evaluation for Korean forest public interest service.

Seok et al, (2016), Introduction of a direct payment system in the forestry and forestry sector. Korea Forest Service.

Statistics Korea (2022) Agriculture, Fishery and Forestry Economy Survey Report.


[2] State of Japan’s Forests and Forest Management (https://www.maff.go.jp/e/policies/forestry/attach/pdf/index-8.pdf)

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