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  FORESTRY SYMPOSIUM 1996
INTEGRATION OF THE FOREST RESOURCE INTO NATIONAL INCOME ACCOUNTING

Saliya De Silva and H B Kotagama
University of Peradeniya

    The United Nation's System of National Accounts ( SNA ), which was developed in the 1940's is still used in most countries including Sri Lanka. Development planning relies heavily on the national accounts to measure development and to set guidelines for economic policies. This traditional SNA, however, focuses only on market transactions, neglecting Total Economic Value ( TEV ) of natural resources and their degradation in the accounting process. Hence the traditional SNA is an underestimation of the true contribution of the natural resource to National Income (NI) and thereby, provides misleading indicators on true Sri Lankan income and sustainability of development. The deficiencies in traditional SNA points to the need for an improved accounting framework, in which TEV of natural resources and their degradation are taken into account.
This study proposes an Environment and Natural Resource Accounting (ENRA) framework appropriate to Sri Lanka. The applicability of the framework is empirically demonstrated using the forestry sector.
    The analysis is specifically applied to lowland rain forests, moist monsoon forests, dry monsoon forests and forest plantations. The changes in the monetary value of timber stock are computed through the estimation of economic accounts using net price method. The economic values of marketed and non - marketed commodities are estimated using various valuation techniques.
    The results show that the total depreciation of forest timber stock in 1995 is Rs. mn. 416.38. The value added by marketed products, viz timber and fuel wood, in 1995 is Rs. mn. 521 and 1120 respectively. Value of non - marketed production of non - timber forest products is Rs. mn.3893. Based on Effect on production and surrogate market technique it is found that the agro-hydrological value is Rs.mn.3095 and the domestic water value is 459.5 respectively. The shadow project method is applied to estimate the value of carbon sequestration service which is Rs. mn. 4602. The value of biodiversity based on pharmaceutical prospecting is Rs. mn. 101. Hence the TEV of natural forests and forest plantation is Rs. million 13792.
It is revealed that the true contribution of the forest resource to the NI is about 2.26% of the 1995 GDP. However, the contribution of natural forests and forest plantations as estimated through traditional SNA is reported as approximately 0.2% of the GDP in 1995 by the Central Bank of Sri Lanka. This underestimation by traditional SNA would have led to decreased investments in the forestry sector in the past. This needs to be rectified in the future national investments for sustainable development.
    This study demonstrated the possibility of applying ENRA in Sri Lanka. However, this methodology could be further improved and applied at national institutions. More exercises and studies need to be conducted to support its implementation.


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