1. Sandalwood in Vanuatu: A tropical forestry sector in transition
Looking to provide a background to a small but locally important wood industry, with parallels to northern Australian opportunities
Blair Freeman and Andrew Morton
Institute of Foresters of Australia 2017 Conference
Tropical Forestry: Innovation and Change in the Asia Pacific Region
Cairns, August 2017

2. Acknowledgements
This presentation is based principally on a project completed for PHAMA. The Pacific Horticultural & Agricultural Market Access Program (PHAMA) is an Australian Government Initiative, co-funded by the New Zealand Government. In 2016/17, PHAMA funded a study relating to improving market access for Vanuatu sandalwood. This study was conducted with technical support from the Vanuatu Department of Forests and involved in-country consultation with industry stakeholders.
PHAMA is designed to help Pacific island countries better manage and utilise opportunities to export primary products including fish and forestry products. Australia and New Zealand are markets of major importance, along with export markets beyond the Pacific. The core countries assisted through PHAMA are Fiji, Tonga, Samoa, Vanuatu, Solomon Islands and Papua New Guinea. PHAMA is implemented on behalf of the Australian Government by AECOM.
Further information about PHAMA is available at:
Pacific Horticultural and Agricultural Market Access Program
Been in place for over five years
Indufor personnel been involved since 2012 on various forest products and management frameworks
IFA Conference- Cairns, August 2017

3. Sandalwood in Vanuatu – Santalum austrocaledonicum
Long history of harvesting and exporting of native sandalwood from natural stands, dating back to the 1850s
During 2000s, over 80 tonnes harvested per year
Since then, harvest levels have declined significantly due to:
The impact of intensive harvesting of readily accessible natural stands over time
Industry restructuring since 2008, which has disrupted supply chains for existing supplies
New plantations established since 2000
Estimated to be around ha in total
550 ha of smallholder planting
150 ha of commercial planting
Small scale domestic processing facilities are established on Efate and Santo, but most sandalwood is exported to Asian markets
Occurs naturally across the archipelago
Harvested from the 1850’s and commonly traded through the Port of Botany en route to India and Chinese markets
ACIAR support for plantations , particularly involving Tony Page (USC)
- Extension material on growers manual
- Triggering heartwood formation
IFA Conference- Cairns, August 2017

4. Sandalwood log exports and trade
Sandalwood exports have made a substantial contribution to Vanuatu’s commodity trade and it continues to be an important crop for Vanuatu given its high value and alignment to existing lifestyles. Over the past 10 years, production and export levels have declined and are currently at a low ebb.
Vanuatu exports of sandalwood heartwood logs, 2007 to 2016
Taiwan imports of sandalwood logs, 2005 to 2016
Historical supply based
on natural stands
Vanuatu supply has represented a relatively small but substantive proportion of sandalwood trade in the Asia Pacific region
Natural stands depleted and other structural issues
i.e. licence reallocations
Volume from Vanuatu has declined as natural forests are depleted
Value to land owners has been in the range o $10,000/tonne of heartwood sold, more commonly sold as price per kilo $10/kg
Land owners sell their heartwood on an “at beach” price to parties who export
Hard to find data – Taiwan is provided to show the range of exporting nations
Globally demand continues to grow at a modest level for the traditional uses of fragrance and perfumes, worshipping at home and temples, mouthfreshers and gums, and carvings. However medicinal uses are a focus for new uses and market growth. Overall demand is buffered by the development of synthetics.
Source: Vanuatu Department of Forests
Source: Global Trade Atlas
IFA Conference- Cairns, August 2017

5. Sandalwood in Vanuatu
Plantations have become the expected future supply of Vanuatu sandalwood
Natural regeneration does occur but management of this through to a mature crop is uncertain
Young plantation grown sandalwood, Efate
Young, wild grown sandalwood in remnant vegetation, Efate
Source: Indufor, 2017
IFA Conference- Cairns, August 2017

6. Sandalwood in Vanuatu
Logs shown could be worth to the landowner around – USD
That is USD20-40/kg debarked/desapped clean heartwood
Vanuatu sandalwood is a relatively valuable sandalwood, with natural stands having an oil % less than Indian sandalwood but higher than WA spicatum and Qld lanceolatum sandalwood species.
An Efate farmer with the butt and roots from 15-year old tree grown in mixed farming enterprise
Clean (desapped) heartwood from wild grown sandalwood, sold through Port Vila
Image sources: Indufor, 2017
IFA Conference- Cairns, August 2017

7. Planted sandalwood resource in Vanuatu
Potential heartwood production from Vanuatu’s planted sandalwood resource
There are high expectations in Vanuatu for its sandalwood plantation resource to continue to mature and come on stream over the next years.
The projected harvest level in 2030 equates to around 10-15% of the average harvest of Western Australia (WA) sandalwood (S. spicatum) from Crown lands over the past five years.
Perhaps more significantly, the Indian sandalwood (S. album) plantation resource in WA may generate substantially larger harvest volumes over this period; but is yet to come on stream.
Plantation developments were initiated around 2000, and expected heartwood yields are forecasted to increase significantly as the crop matures from 2020 onwards
Some uncertainty exists at the grade of log that will be produced from these plantations, and the concentration of key oils formed in the heartwood
Source: Page et al Opportunities for the smallholder sandalwood industry in Vanuatu
IFA Conference- Cairns, August 2017

8. Key challenges for the Vanuatu sandalwood sector
Key challenges for sector
Strategies to address challenges
Limited industry coordination
Establish and industry forum to actively engage on market access issues
Limited scale and supply relative to producers in other countries
Support ongoing development of plantation resource base, via extension to farmers and log grading guidelines
Consider initiatives to aggregate harvest volumes in ways that capture more value from growers, via:
centralised auctions
domestic processing
Lack of producer understanding of downstream markets and value chains
Facilitate industry forum on market access (refer #1)
Facilitate initiatives to aggregate harvest volumes (refer #2)
Establish linkages between potential buyers and Vanuatu industry representatives, e.g. trade missions
Lack of market understanding and appreciation of resource features
Develop a shared industry ‘brand’, through industry forum
Conduct sandalwood oil testing using international standards
Lack of capacity to establish market access for sandalwood exports
Provide business support functions or industry enterprises
Challenges are
Limited industry coordination
Scale of supply and supply continuity
Understanding of the supply chain, and transparency in respect to prices and market uses
The potential value of the resource as reflected by the current and future market requirements
Routes to market
IFA Conference- Cairns, August 2017

9. Addressing the scope for domestic processing
Given the routes to markets, domestic processing of heartwood does occur, and results in the production of essential oils. This example is the still located on Efate island producing differing end products
Clockwise from top left: Sorting of ‘clean heartwood’ sandalwood logs in Vanuatu; The Summit laboratory distillation apparatus, Efate; The Summit sandalwood and tamanu products, Port Vila; Sandalwood essential oil products sold in Australia; Pure oil.
IFA Conference- Cairns, August 2017

10. Domestic processing: benefits and limitations
Aggregation of resource base for processing
Supply chain efficiencies by processing logs in- country and ‘exporting’ higher value products (including tourist sales in country)
Building a brand for the industry (or leading enterprises), by producing (value added) products for wholesale or retail customers
Local employment and upskilling, associated with domestic processing investments and operations
The primary challenge of demonstrating the financial and socio-economic returns match or exceed returns from exporting the wood products
The lack of transparent market data on which to develop and test business models
The (limited) scale of production and how this would compare to other producers
The (lack of) continuity of supply required to support ongoing costs of ‘being in the market
Upfront financial capital requirements
Benefit sharing arrangements with producers
Prima facie domestic processing can look like a compelling option for value adding for countries like Vanuatu; however, there can be substantial structural and cultural challenges to establishing substantial processing operations in developing countries or other settings in which forestry enterprises are relatively small scale.
In this context, other approaches such as an centralised auction (as seen in India for Indian sandalwood) may be more feasible option to support further industry development for high value wood products.
IFA Conference- Cairns, August 2017

11. Key success factors for small scale forestry programs
Consolidate the resource base
Carefully consider capacity for domestic processing to aggregate resource and add value
Consider alternative pathways, e.g. auctions to facilitate aggregation and strengthen seller positions
Continue developing plantations to support scale and continuity of supply
Select and focus on target markets
Invest in understanding supply chains and downstream markets
Select target segments based on particular strengths, e.g. capacity to supply essential oils compared to pharmaceutical products
Align operations and standards with requirements of the target market segments
Establish or link to strong brands
Facilitate industry engagement and collaboration through industry forums
Determine scope to identify generic branding elements that would strengthen whole industry
Where feasible, align branding directly with requirements of target market segments
Through these types of strategies, there is potential for small-scale and community forestry to complement larger, industrial-scale plantation operations, in niche or boutique markets.
IFA Conference- Cairns, August 2017