Costs and Benefits Analysis of Aquilaria Species on Plantation for Agarwood Production in Malaysia

By
Mohd Farid Mamat
Forest Research Institute Malaysia 52109 Kepong Selangor paridms@frim.gov.my

Both options, whether planting Aquilaria spp. integration with banana (Musa spp.) or planting Aqualaria spp. as a single crop for agarwood production are viable.

An investment return for planting Aqualaria spp. integrated with banana (Musa spp.) is much higher with an IRR of 54.85% compared with 38.49% for a single crop plantation.

The NPVs of investment at 10% discount for a 1,000 hectares integrated planting are RM185.6 million while the option involving single crop plantation for agarwood production is RM153.6 million.

The better present value of return of the option involving integration planting is attributed to the added and earlier revenue contribution from agriculture crop. The good demand and encouraging banana price over the years would make this option the preferred choice.

However, the establishment of Aqualaria spp. plantation solely for agarwood production also has its attraction. The option is not labour intensive. This speaks well for a rapidly developing country like Malaysia, where labour is no more a luxury relative to neighboring countries.