Bamboo as low Carbon, pro poor economic development tool for Northeast India: Comparative studies between Indian & Chinese state of affairs Prerna Palekar Misra, CFO, Architecture & Bamboo Constructions (ABC), Jalgaon, Maharashtra, India. (email: abc.prerna@gmail.com )

Abstract:

This paper discusses how India can not only become a green superpower, but also can adopt bamboo as the solution for low carbon, pro-poor economic reforms in northeast India.

It is estimated that bamboo occupies over 1% of the tropical/subtropical forest area over 22 million hectors of the whole world. India alone has 11.36 million hectors, which is half the total area of bamboo reported for Asia. But the country taps only one-tenth of its bamboo potential and contributes only 4% share of the global market, mainly because of low productivity of around 2 tons/ha/annum; whereas China having less than half of the area under bamboo cultivation, still manages to produce 5 times more output than India. This performance gap is analysed by a comparative study of the following factors: production and supply chain, Local Public Policies and law, import-export and transportation cycles.

The bamboo industry in India is highly subsidised. In order to make sure that bamboo industry makes profit; competition at private level should be encouraged. Rural entrepreneurs face major obstacles of finance and innovation. It is observed that the rising GDP of the country doesn’t always contribute to the millions of rural, tribal and poor people, who in turn, may become outrageous and form an outlaw. This point arouses the consideration of another important aspect called Payment of Ecosystems (PES). Though all these issues may seem to be of little relevance, these same otherwise can be linked together to find a holistic solution. Brief discussion regarding investments in socio-environmental ventures as a solution is also discussed. Thus the green benefits of the low carbon, pro-poor bamboo economy can be extended to other states of India and abroad. It will also pump money in the bamboo as an industrial sector making it sustainable and popular amongst other products in the market.

Introduction: Bamboo can be used in a variety of ways ranging from little processed Culm based product to newly developed industrial products as a substitute for traditional hard woods. It has wide range of uses from low cost products such as cheap housing, eco friendly and durable handicrafts and furniture to high end industrial products such as paper, clothing and bio fuel like bamboo charcoal, oil and gas. Bamboo extracts contain valuable elements and can be used in pharmaceuticals, creams and beverages. Bamboo gas can be used as a substitute for petroleum. Bamboo charcoal is an excellent fuel for cooking and barbequing1.

It is estimated that bamboo occupies over 1% of the tropical and subtropical forest area over 22 million hectors. India alone has 11.36 million hectors, which is half the total area of bamboo reported for Asia.2 It is found in all parts of India except the cold regions of Jammu and Kashmir.3

Bamboo is concentrated in the northeast region and central regions of Madhya Pradesh and Chhattisgarh. However, while the area in North East is 28% of total area under Bamboo and for Madhya Pradesh and Chhattisgarh it is also high (cumulatively at 20%), only 12 % of the total growing stock is found in these two states, while 66% of the growing stock is found in the North East Region. This difference in productivity will be explained under the case study of the North East region. The more astounding difference in productivity however is at international levels-between China and India, where the average productivity of Chinese Bamboo industry is 5 times the average productivity in India. Though China has the largest number of species of Bamboo, with India having the second largest genetic pool, India comes foremost in the percentage of total area under Bamboo forests. Then Why China is ahead and where is India lacking? This can be analyzed by the comparative analysis of production and supply chain, local Public Policies and law, and import-export and transportation cycles. It will help us to understand & analyse the situation and come up with a holistic solution that will not just take lessons from the success of China, but more over plan an economic reform that will bypass the current benchmark.

1. Production and Supply Chain

An efficient high-value pro-poor industry includes the critical component of near-source pre-processing of bamboo. Near-source pre-processing, where farmer businesses split the culms into parts and channel these parts and residues into separate production chains, creates an efficient industrial supply chain. China, having coupled this supply chain innovation with technology and new product development processes, has led the growth of the now US $7 billion global bamboo market, which also include bamboo shoots and handicrafts4.

Government, donors and development agencies have made large investments to tackle poverty in the region. While these efforts may have contributed to development in general, the evidence shows that they have been less effective in tackling more entrenched issues in remote and upland communities. Development of integrated value chains for bamboo products, appropriate training and technology, access to capital, business development services and practical government policies are required for the poor to access markets and transform poverty.

Analysing the feasibility study, which was composed of contributions by more than 20 consultants from 14 organisations, who carried out component studies in Vietnam, Lao PDR, Cambodia, China and globally during the first half of 2006 will help us draw an outline. The study explored the potential of the sector through analyses of bamboo resources and farming systems, technology processes, global and domestic product markets and business environments. This paper presents a selective re-analysis and main conclusions of the study in Indian context, including:

• Recent developments in the bamboo industry. • The global bamboo market. • Potential for the growth of bamboo sector in Northeast India. • Lessons from China.

Recent developments in the bamboo industry:

Many people’s experience of bamboo products is limited to sitting on bamboo furniture and matting, using bamboo baskets or using bamboo chopsticks to eat some bamboo shoots. The last 15 years have seen a dramatic growth in the variety of commercial bamboo products such as flooring, laminated furniture, building panels (similar to timber-based plywood, chipboard or MDF), high quality yarn and fabrics, activated carbon and bamboo extracts,. The emergence of bamboo as a timber substitute has coincided with a growing demand for timber. Bamboo’s appearance, strength and hardness combined with its rapid growth cycle and capacity for sustainable harvesting make it an increasingly attractive wood substitute. The market outlook for bamboo is stronger today owing to these reasons. The emergence of real estate markets in rapidly growing cities of the world have also added ample scope for bamboo as a construction material.

These recent developments have created new opportunities for bamboo markets to be targeted for rural development and poverty reduction. In particular, the emergence of near-source value-adding in modern supply chains increases the sector’s potential economic impact on poor rural communities The feasibility study shows that in Vietnam today, every ton of bamboo used for producing bamboo flooring has almost 5 times the pro-poor financial impact than if it were used to make paper.

It is useful to divide the sector into three stand-alone sub-sectors:

1. Handicrafts: characterized by manual processing and extremely high value-adding to relatively small volumes of raw bamboo.

2. Bamboo shoots: a high-value agricultural food crop that can also be grown in parallel with the production of culms.

3. Industrial processing: semi-mechanized and mechanized processing of large volumes of bamboo culms. The industrial processing sub-sector offers many opportunities for major growth and pro-poor impacts on rural farming communities. Industrial processing can be further divided according to the value of the processing and the grade of material used:

• Premium processing (eg. flooring, laminated furniture) • Medium value processing (eg. chopsticks, mat boards) • Low value and bulk processing (eg. charcoal, paper & pulp) • Unprocessed culms (eg. scaffolding and traditional construction)

Premium processing requires the highest value parts of the bamboo, typically the middle lower part of large culms. Lower value products can be made with upper and residue parts. So modern bamboo supply chains now comprise different businesses producing a variety of products, with premium bamboo parts going for high value usage such as flooring, laminated furniture, mid quality parts going to medium value-added processing such as blinds, mats, and chopsticks, and the leftover or residue parts, such as the use of sawdust in paper, charcoal or chipboard.

The pre-processing revolution in bamboo in China:

The revolution in the industrial bamboo sub-sector began in China 15 years ago when it was forced to innovate in response to scarce timber resources. Previously, factories would purchase whole culms for production and were forced to deal with mountains of culm residue and waste. This led ultimately to technical and supply chain innovations which produced the critical supply chain step of pre-processing. At, or near-source, pre-processing workshops with specialized but simple machinery separate bamboo culms into various parts and direct these parts into different supply chains. This creates industry-wide efficiency and greater value-addition at the local level.

The revolution in industrial bamboo practices permitted transportation and waste handling savings, the potential for 100% utilization rates and literally zero wastes, in short, resulting in a model for achieving maximum resource utility. Business, research institutes and government, all contributed to the technology development driving this innovation.

The new premium processing industries generate the highest rates of pro-poor development of all the industrial bamboo processing industries. However, they cannot exist in isolation and must operate within a diversified industrial environment for maximum industry-wide value and value creation. A practical support to this conclusion comes from Zhejiang province in China that now has more than 20 industrial plant and equipment suppliers providing the specialised equipment required for all levels within the industrial supply chain from pre-processing to production lines for premium end products.

The global bamboo market:

Overview

The Study estimates that at present, bamboo markets have a combined annual value of approximately USD $7 billion. Traditional products account for almost 95% of this value. Newer industries offer growth potential and are expected to rival traditional bamboo-related markets over the medium-term.

Markets for bamboo can be grouped into ‘traditional’ and ‘non-traditional’ or ‘emerging’ markets. Demand remains strong in traditional markets such as handicrafts, blinds and bamboo shoots with profitable opportunities despite moderate growth. Other traditional markets, such as chopsticks, are highly commoditized with low growth and low profit margins. Emerging bamboo markets include flooring, building products and laminated furniture. These represent the largest growth opportunities for bamboo.

Strong international demand coupled with export growths registered in countries like, China, India, Brazil & other Amazon-basin countries and existing bamboo-based industries has produced a growing bamboo sector within wood-based product & process industries. Supply problems, including the high demand for certified timber, create a positive market outlook for bamboo. Overall prospects for a diversified bamboo sector look strong.

Growth and future global bamboo markets

Current demand is heavily concentrated in traditional bamboo markets. But growth for bamboo products is highest in the emerging wood product substitute-based markets. The scale of future demand for bamboo products will be driven by:

• Global market growth rate: Growth in global markets in which bamboo products compete, and are linked to global GDP growth.

• Penetration rates of bamboo into these global markets: Driven by attitudes of buyers and the price versus performance competitiveness of bamboo products compared to alternatives.

Various growth scenarios have been explored, and conservative ‘mid-level’ scenarios are reported. The ‘mid-level’ scenario estimates that by 2017 the total market for bamboo products will be around US$ 17 billion, with much of this growth coming from the non-traditional segment of bamboo products including laminated furniture, flooring and panels.

Potential for the growth of bamboo sector in Northeast India:

Two approaches have been used to develop scenarios for the Indian sector:

• Demand Driven: through analysis of the potential share of the global bamboo markets that could be captured by the Indian norteast region.

• Supply Driven: through analysis of the development of the sector under different industrial models.

Demand driven scenarios:

The annual bamboo production in India is estimated at 3.23 million tons. India has 30% of the world’s bamboo resources with largest growing area of 11.36 million hectors, but the country taps only one-tenth of its bamboo potential and contributes only 4% share of the global market mainly because of low productivity of around 2 tons/ha/annum. The Government of India has planned to diversify its usage to reap the benefits in the $7.5 billion global bamboo product market. India’s current demand for bamboo is estimated at 27 million tons. However, only 50% of that demand can be met because of lack of facilities for value addition and transportation5.

Though India has bamboo resources in about 11.36 million hectare, the yield is low at 3 tonne per hectare per annum as the cultivation is not intensively managed. Comparatively, China has opted for intensive commercial cultivation of bamboo and has increased the average yield to 25 tonne per hectare per annum over the past 15 years. Within almost two decades of the initiatives, China has been able to convert their traditional bamboo-based handicrafts sector into a mechanised one6.

India’s bamboo based industries are likely to make a quantum jump if proper policies are put in place and implementation procedures are streamlined. Country’s bamboo economy is expected to grow by over 15% to touch Rs. 2, 60,000 million by2015. The National Mission on Bamboo Technology and Trade Development under the Planning Commission, has estimated that if proper encouragement is given to bamboo cultivation and it’s use, it can replace the projected import of timber to the tune of Rs.3,00,000 million in the next 15 years i.e., by around the year 2025.The market size for bamboo plywood is to grow to Rs. 5,000 million from Rs. 2,000 million in 2001.The country exports about Rs. 1000 million bamboo flooring materials and another flooring materials of Rs. 1000 million is consumed domestically. It has been estimated that the total market size of bamboo flooring materials will rise to Rs. 19,500 million by 2015. The demand for bamboo pulp is expected to grow to Rs. 20,880 million by 2015 from Rs. 1,000 million in 2001. The demand for bamboo furniture is expected to grow to Rs.32,650 million in 2015 from Rs.3,800 million in 2001.By 2015 bamboo scaffolding requirement will rise to Rs.8,610 million and for housing purposes, the demand is expected to rise to Rs.11,630 million. The demand for road construction will rise to Rs.2,740 million and for bamboo grids the demand will be Rs. 1,000 million. The demand for miscellaneous industry viz, ice cream sticks, fire crackers, bamboo sticks and ladders has already risen to Rs. 6,000 million by 20047.

Supply based scenario:

In Assam, the major industrial use for bamboo is still for pulp and paper. The paper mills in the State have a capacity of 8, 00,000 tonnes per annum, which is met largely through bamboo produce from Assam, but to a lesser extent from the neighbouring States. Much of the bamboo utilized in these spheres comes from the forests through a system of contracts, leases and departmental operations. According to a survey report of the State Forest Department of Jharkhand state, for example, 75% of bamboo is used for pulp and paper, 23% for household and constructional needs, and 2% for bamboo based Cottage industries8 Large segment of Indian manufacturing, thanks to high entry costs as well as labour limitations, is dominated by smaller, local firms which face problems such as communication barriers and lack of awareness of international quality standards and processes. Also, there is a dearth of availability of data on the size and potential of the bamboo industry; the exact economic scale of the bamboo trade is barely known. Tracking the international trade is difficult because of the lack of customs codes for bamboo, and large differences between local and international practices. Information available on national markets is incomplete and controversial.

The Demand and supply scenarios thus show a huge gap between demand and supply; also the vast scale of opportunities, which are not tapped as yet.

Lessons from China:

Low-value and bulk processing industries, such as charcoal, paper and pulp, have low rates of both pro-poor financial impact and employment creation. They achieve only marginally higher levels than selling unprocessed raw bamboo culms to the construction industry. This lower impact is partially offset by the fact that the industry can utilize low quality bamboo, leftovers and processing waste from other industries and from various other wooden species. Medium-value processing industries, such as chopsticks and mat boards (panels), create similar levels of employment as the premium processing industries, but only half the pro-poor financial impact per hectare of bamboo. However, they are able to use lower grades of bamboo than premium processors. Premium processing industries, such as flooring, have the highest rates of pro-poor financial impact and employment creation of the industrial processing industries, but require premium quality bamboo produce as raw material. Their rate of economic impact is twice the level of the medium-value processors and five times the level of the low-value and bulk processors, as per estimates based on Chinese market studies. Similar results are demonstrated in China for laminated furniture industries. The experience from China shows that under the right conditions, bamboo can be a lead sector for rural industrialization and large-scale poverty reduction. The major difference that bamboo industry makes that it has least possibility of non-biodegradable waste generation, which is great favourable factor for rural areas, especially in Asia, where they have got much of an under developed rural waste recycling system. Bamboo industries have been a key driving force in rural industrialization and widespread poverty reduction in Anji county, Zhejiang province, one of China’s 10 bamboo homelands. The benefit has been distributed across the whole population, with average household incomes for the population increasing by 220% in the first ten years of the bamboo boom4.

2. Public policies and law:

The India case: It is then important to analyse our public policies and laws to find out the loop holes. Government of India has initiated The National Bamboo Mission. It is a centrally sponsored scheme, in which the contribution of the Central Government will be 100%. The Scheme shall be implemented by the Division of Horticulture under the Department of Agriculture and Cooperation in the Union Ministry of Agriculture. The structure of the mission is such that the National Level Apex committee will comprise of the minister of various state level departments like Forests and Environment, Textiles, Science and Technology, Commerce, Rural Development, Panchayati Raj, Tribal Affairs, Urban Development and Poverty Alleviation, Development of North Eastern Region, Small scale Industries. The Union Minister of Agriculture will be the chairman.

But the paradox is that Indian Forest Department never identified bamboo under grass species. It was earlier consider a minor forest produce and sold to paper mills in order to ban timber cutting. Also the rights to do so are restricted only to the department. The local communities had no rights over the cultivation of bamboo and selling it privately. Although in recent developments, the government has taken account of this situation and given rights to these communities to sell their bamboo produce without any permit. But again, this development has been only seen in Maharashtra’s Menda Lekha village. There too, the hurdle remains of possessing a permit to transport the bamboo from the village.

That means that though one can buy the bamboo from the rural community, but is legally not allowed to transport it outside the local administrative limits. Other states, especially north-eastern group of states, do not even enjoy this. The China case: To promote the development of the bamboo industry, China has encouraged technological innovations. It is said that Nearly 200 patents have been applied to develop more uses of bamboo, which has greatly assisted in the development of the industry.

New processing techniques have led to a variety of new bamboo products, such as raw bamboo, daily-used goods, artefacts, plates, and bamboo charcoal, which are widely used in different sectors ranging from construction, packaging, transportation, medicine to tourism.

A further opening up of the international market also helped to boost the industry. Health care products and artificial plates made of bamboo were well received in Southeast Asia, Europe and America9.

3. Import export and transportation:

There is no concrete data on the exact quantity of import and export of bamboo products. Also transportation is a major problem when it comes to domestic transport of the bamboo products from northeast India to rest of the states.

Analytical outcomes:

The experience from China shows that under the right conditions, bamboo can be a lead sector for rural industrialization and large-scale poverty reduction.

Some researchers have suggested that the greatest impact was the catalyzing effect that bamboo had on the diversification of income opportunities (Ruiz-Pérez and Belcher 2001).

Features for success

Several features were crucial to the dynamic growth of the sector in Anji:

• Strong demand and favourable market conditions: o Located in the heart of the Yangtze Delta region, close to the major Yangtze

Metropolis around Shanghai and Hangzhou, Anji is ideally located to meet market demand.

o China’s logging ban in the 1990’s created additional demand for timber substitutes and led to a 10% -15% jump in bamboo prices over a single year;

• Consistent, sustained leadership from the Chinese Government targeted the development of the bamboo sector as part of economic development planning;

• Parallel development of processing industries and bamboo resources created a “virtuous circle” of demand for farmers products, increasing value-addition and capital in the local economy, as well as reinvestment and diversification of income opportunities;

• Local development of specialist processing technologies and equipment ensured appropriate, affordable equipment was available;

• Minimum scales of production suited to the resources of farmers, SME’s and local enterprises [e.g. typical area of bamboo in Anji was 0.6 hector per household (Ruiz Pérez, et al., 2004)];

• Lower perceived market risks due to diversity of uses of culms and shoots, leading to greater attractiveness of bamboo for farmers and processors; and,

• A readily available existing bamboo resource and a tradition of growing bamboo enabled exploitation of emerging market opportunities.

In addition, there were three pre-requisite policy reforms that paved the way for the rapid development of the bamboo sector in China, and will also be an important consideration for the India.

• Land tenure systems: Clear land ownership and usage rights, characterized by 30-50 year land leases that allows for the transfer of rights to family and others.

• Supportive business environment: creating the conditions for a vibrant private (and collective) sector, especially small and medium enterprises.

• Market liberalization: Opening up of the economy to allow access to international markets and investors.

At the local level, several further points are worth noting:

• Heavy public investment in the development and dissemination of local processing technologies greatly increased their affordability and accessibility to local enterprises.

• Intensification of raw material production was critical to output growth with yields rising to 8.9 ton per ha from 4.9 ton per ha between 1978 and 1998. The area of bamboo cultivation increased by 16% while production of culms increased by 98%.

• Bamboo shoot production generated sufficient value for farmers to be a standalone industry driving poverty reduction, as happened in Li’nan County, but it also provided opportunities for diversification for bamboo farmers.

Recent developments and emerging lessons

Recent developments that have contributed to the growth of the industry, while also presenting new challenges, include:

• Emergence of a pre-processing industry, which greatly assists in achieving very high “added value” utilization rates of the bamboo harvested;

• “Nieyou”, a traceability system in Anji allows for easy identification of the age and source of culms and is linked to harvest quotas and regulated by the Forestry Bureau. It has the potential to form the basis of an effective “Certification” or “Chain of Custody” system;

• Quality is becoming an increasingly important requirement in the global market. Anji, and China as a whole, have not yet established a reputation for providing this;

• Raw material shortages and rising bamboo prices (USD$ 85 per ton for “moso” culms in early 2006) are squeezing profit margins and limiting the output of individual businesses that are unable to secure enough raw material;

• Decreasing profit margins and excessive competition in several markets have driven increasing commoditization of some products; and

• Bamboo demand is driving an increasing risk of monoculture development and adverse biodiversity impacts, and requires attention to land use management policy.

Why and how to invest in bamboo?

Valuation of services:

The idea of Payment for ecosystem services (PES) gained momentum worldwide with the release of the Millennium Ecosystem Assessment (MEA) in 2005. The MEA recognized that benefits accrued from natural ecosystems were widely recognized but poorly valued. “Increasingly it is becoming clear that traditional economic concepts like GDP only reflect economic values leaving out the state of natural resources. One might know the rate of growth of a country’s economy, but still have little idea about whether this growth is sustainable”, agrees Rajeev Semwal, ecologist, consultant with a non-profit organisation, and proponent of PES. Payment for ecosystem services is calculated using a variety of methods by ecologists and economists. One way is Net Present Value (NPV) calculator. NPV assigns value to the forests in India. It is calculated by counting timber and non-timber products and the forests other services, calculating the value today and applying a discount rate. This value must be taken into account when destroying forests due to the construction of a dam or a forest. It is an additional cost to be paid for the diversion of forest land. An important tool for making users pay for natural resources is mandatory compensation for projects converting forestland as per the Forest Conservation Act. All of this money is collected in a central fund called Compensatory Afforestation Management and Planning Authority (CAMPA) There is at present over Rs 6,000 crore (1 crore is 10 million rupees) lying unused in this fund. Clean development Mechanism (CDM) as another vehicle for PES. This discussion however, highlights a very important fact. CDM does not consider standing forests and excludes the community by entering into an agreement with formal institutions like the government. PES is clearly a positive development, but one that requires clear community rights over resources to succeed.

Global trends: There is another way to value the environmental services. Investment in the private ventures who create social and environmental impacts. Such finance sparks and leads a major transformation to more efficient capital markets for social and environmental change, thus directly resulting in the expansion and replication of powerful models which solve society's most critical problems. This will encourage more social and environmental entrepreneurs to find creative solutions. Such entrepreneurs will then give a tough competition to the existing market and give end users a choice to stop pollution and conserve the environment which by default helps in poverty alleviation.

Bamboo Finance is one such example, which has successfully implemented this idea. Bamboo Finance is a Switzerland-based, commercial global investment advisory firm specializing in the financing of social entrepreneurship. Their goal is to support innovative, commercially viable enterprises which are designed to generate significant social impact and solid financial return. These are companies which deliver essential goods and services that directly benefit low income communities by providing access to affordable housing, healthcare, education, energy, livelihood opportunities, water, sanitation and the like10 Aavishkaar India Micro Venture Capital Fund. Aavishkaar is a micro venture fund in India focused on investing in early stage commercially-sustainable social enterprises. The fund is focused on supporting social enterprises operating in rural India in the following sectors: handicrafts, technology for development, renewable energy and waste management, agro-business, rural innovations, healthcare and education. Some examples: Eco Planet Bamboo (UK) is part of US based Eco Planet Group LLC. The group was established in order to mange some of the largest Bamboo and high value crop plantations in Central America. As with all Eco Planet Group companies Eco Planet Bamboo (UK) is a triple bottom line business focussed on people, planet and profits; returning degraded tropical land to productive plantations and providing clients with exceptional returns, both financially and ecologically. The Eco Planet Bamboo team, has unrivalled experience in plantation management, agro-forestry, carbon resource management, investment management and investor relations along-side deep and broad ranging

regional experience. Eco Planet offers investors a unique opportunity to invest in their bamboo bonds and gain returns and investment yields.

Conclusion: It is clear from the analysis that India have to adopt a policy reform as soon as possible to organize it’s bamboo sector in a effective way. Some points should be considered while doing this –

• Community rights to harvest and sell bamboo at standard rates ( National Bamboo mission can standardise the rates depending on the species and various bamboo parts considering the usage)

• Near source pre processing units workshops with specialized but simple machinery separate bamboo culms into various parts and direct these parts into different supply chains.

• Premium Processing industries should be promoted by encouraging new entrepreneurs as they generate the highest rates of pro poor development. Low value bulk processing and medium value processing should be the allied industries situated near the source to optimize the energy and labour.

• Transportation of the finished product should be made easy by lifting the strict permits and duties.

• National and International trade should be given importance and a separate department should be established to keep the track of the trade and update periodically.

• Biotechnological and Technological innovations should be encouraged to come up with low cost local machinery for variety of bamboo industries.

• Financial investment in low carbon bamboo industries should be promoted by making various public and private proposals.

India can thus not only become a green superpower, but also can adopt bamboo as the solution for low carbon, pro-poor economic reforms in northeast India.