In many South Pacific countries, indigenous people are expressing concern that native forests traditionally used for fuelwood, food, medicines, shelter and materials for handicrafts are diminishing. This is because market forces encourage the use of native forests for commercial timber harvesting and agriculture, and there are no incentives for preservation.
The declaration of a system of forest reserves areas of native forest set aside from commercial forestry operations for traditional use by the indigenous peoplesis one way to preserve the forest ecosystem. However, determining the amount of forest to be reserved, and the specific areas of forest to be included in the system, is difficult. The appropriate basic framework for such decisions is benefit-cost analysis (BCA), but there are considerable methodological difficulties in the use of BCA in the context of environmental programs in developing countries. Furthermore, a stable institutional environment is needed to sustain such a preservation option.
In this project, Australian economists will assist colleagues in Vanuatu to establish and measure the extent of demand for preservation of native rainforest both locally and internationally. They will then explore institutional and compensation arrangements that can be set up in Vanuatu for trade-offs between preservation demands and 'development' demands. Existing forest reserves will be used as case studies.

Dr Jeff Bennett (Department of Economics and Management, University of New South Wales) is well qualified to lead the project. He is experienced in the economic analysis of forest use in Australia and the South Pacific and is currently undertaking research on the potential preservation of forests in southeastern Australia.
The project ties in closely with research already being undertaken or planned by the Forestry and the Physical Planning and Environment Departments in Vanuatu, and the level of collaboration is expected to be high. The project's research officer will spend up to 6 months of each year in Vanuatu, and the project leader will visit Vanuatu twice each year. Key Vanuatu collaborators will travel to Australia to assist with project development.
BCA will provide the basic methodological framework, but any inadequacies in this frameworknotably in the incorporation of social factorswill be identified and addressed, where possible, using supplementary techniques. Costs will focus on total community net benefits foregone from logging that does not proceed. Where commercial logging is followed by agricultural pursuits or plantation forestry, the value of these activities will also be incorporated. Markets will provide the necessary data.
The valuation of benefits requires the use of specific non-market techniques to determine dollar values. In order to do this, the collaborators will:
. question tourists in order to construct a demand curve for the visiting of forest sites (Response to questions on their likely behaviour under differing sight-seeing circumstances will provide a measure of willingness to pay for forest preservation.)
. analyse the amount of aid provided by international agencies for environmentally directed projects
. gather evidence on the demand from drug houses for preserving the gene pool of Vanuatu's native forests
. assess traditional uses, and survey commodities that substitute for forest-derived goods when logging has occurred. (The substitute commodities will be valued through local markets to provide a base-line estimate of the value of the traditional uses.)
The economists will hold discussions with landowners and government officials to establish current incentives for preservation. They will also review the literature and analyse case studies in other countries, where alternatives are in place, to provide the lead to analysing alternatives. The issue of land tenure will be explored in detail.
Information generated will enable the Government of Vanuatu to make better decisions on the use of their native forest resource. The people of Vanuatu will benefit from an improved environment, and those who suffer financially will be compensated for their losses. Benefits should flow on to other South Pacific nations.
Australians who share increasing world-wide concerns for the environment and natural ecosystems will benefit through knowledge of the conservation benefits to tropical rainforests in Vanuatu, whether or not they are tourists to that country.