K. S. Jomo, of the Khazanah Research Institute in Malaysia, is one of the most eminent development economists in the world. It does not hurt that his primary field of study is Malaysian development. The Malaysian government has some of the most innovative and successful developers in the world. They maintain high rates of growth with home-grown strategies which are radically different from those used in the United States, Europe, Japan, Singapore or China.

That said, Malaysia is not a paradise. Jomo is even-handed about praising Malaysia’s substantial and significant achievements while calling out areas of persistent failure. One of those significant failures is their inability to prevent deforestation.

Deforestation is a significant problem globally. The world loses between 20 million and 30 million hectares of forest every year; this has led to a loss of 10% of the world’s forest area between 2000 and 2020.

Malaysia is no exception to this trend. There was a giant burst in logging and export timber production that began in the 1970’s. Most of this logging was coordinated by Japanese companies; the majority of the timber involved was sent directly to Japan. Historically, nearly all of Malaysia was forested. By the 1990’s, Malaysia had been so over-logged that the forests were close to exhaustion. Lumber interests migrated to other settings in Southeast Asia because Malaysian forests were so severely depleted. The Malaysian government banned the export of logs and commenced several programs to preserve what was left of the forest. Even allowing for that, between 2001 and 2018, nearly 175,000 hectares of forest a year were chopped down in commercial timber activities.

Overlogging was clearly destructive economically as well as ecologically. In the 1970’s and 80’s, trees were cut down at a rate that was not economically sustainable. Timber was a critical industry for Malaysia, being its second major source of export earnings after oil. In general, economic planning in Malaysia is strong. One would have expected that the Malaysian planners would have taken action to conserve some of the forest – if not for environmental reasons, then for preserving the long-term viability of the industry. Timber was a major revenue earner for Malaysia.

Why didn’t Malaysia save its forests?

K. S. Jomo suggests a number of factors, most of which apply to other settings with significant deforestation, such as the Brazilian Amazon or Papua New Guinea.

1. Lumbering takes place out in the distant frontier. Most governments in the Global South only marginally control their distant forestlands. Guillermo O’Donnell referred to such frontier areas as “brown zones”, areas where national governments actually have little power to govern.  There are no local police forces; the army is far away. So these areas are essentially the Wild West. A logger comes in with a bunch of armed pistoleiros to defend his operation, and there is not that much local authorities can do about this. It is a lot simpler for local politicians to take a cut of the action and allow themselves to be bought off than it is to try to rigorously enforce the law. Some local authorities settle for a cash payment in return for tolerating illegal logging. Others bid on the right to do the lumbering themselves. Others steer timber contracts to their family or to cronies.

2. Lumber prices go through booms and busts. When times are good, fresh cut timber is quite valuable. When times are bad, that same timber is nearly worthless. This provides a very strong incentive for lumber companies to cut down as many trees as they can during the good periods – because they will not be able to make nearly as much money during the bad periods. Worse, companies rarely make money saving trees for later and cutting them down in a later boom. The return on investments is nearly always better taking your logging profits now and just investing in something else later.

3. Timber profits are very easy to move overseas. Due to the difficulty of monitoring lumber companies, it is easy to understate the number of trees one has cut down. Satellite monitoring reduces some of the invisibility of frontier lumbering. However, finding government officials willing to tolerate and sign off on suspicious undercounts weakens the enforcement capacity of the state. Since timber is exported, many of the most important transactions occur overseas where the home government has limited ability to monitor forestry companies’ receipts. Untaxed, invisible, revenues are always attractive; delaying illicit profits rarely makes sense because the conditions that allow for “money disappearance” and money laundering may not persist into the future.

4. Politicians with timber contracts are particularly inclined towards maximizing their earnings over the short term. Politicians cannot guarantee that they will continue to keep their lumbering contracts after the next election. If they lose their seat, the opposition candidates will be hogging all of the logging rights. So politicians need to get as many timber revenues as they can before they lose their logging permits in a future election. This means maximizing cut rates.

5. Debt crises intensify the need to deforest rapidly. In debt crises, countries need to maximize their export revenues so that they can repay their foreign denominated loan obligations. The bankers and international financial organizations who are setting up repayment plans are overwhelmingly concerned about getting their money back – and are less concerned about saving the environment in debtor nations. Southeast Asia had a particularly intense debt crisis in 1997.

6. International pressures to save rainforests often work at the national level. In Malaysia, environmental activists target the Federal Government in Kuala Lumpur. However, control of forests often devolves to provincial governments in the actual frontier states where the rainforest is located. National governments may be sensitive to foreign concerns about the environment due to the need to maintain good diplomatic relations with military and trade partners. Provincial governments have few of these geopolitical concerns. Provincial governments do, however, have concerns about their own state economies – economies which may have few alternatives to serious lumbering. Insulated from pressure from foreign “greens” and dependent on the health of the timber industry for their own state revenues, provincial governments are strongly motivated to undercut any ecological initiatives that are formulated at the national level.

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Jomo writes about Malaysia. But his message is global. Malaysia is not the only place that has

a. weak governmental control of frontiers

b. corrupt politicians who are on timber companies’ payrolls

c. corrupt politicians who do lumbering on their own account

d. mad lumbering booms in response to short term spikes in global timber prices

e. shady timber interests who use lumbering as a way to shift funds overseas

f. politician-lumberers in a mad rush to sell as much timber as possible before they lose their forestry rights in a future election

g. debt crises that require nations to maximize their resource sales to buyers with foreign currency

h. state governments who are insulated from international environmental pressure

Any one of those eight could produce major deforestation. Malaysia, Brazil and Papua New Guinea have had all eight at the same time. This does not bode well for the preservation of rainforests in any of those locations.

The world needs its rainforests to be saved.

The economics and politics of nations with rainforests do not make such preservation likely.