Timber Farming in Sri Lanka

In recent years the degradation of the Sri Lankan forests has been the country's most serious environmental issue. Due to the significant amount of land required for the production of tea in one of the major producers of the world, as well as the need for further land for agriculture and irrigation networks, deforestation has been such a key factor within Sri Lanka that it has been a major initiative within the region to halt the decline of the country's natural forests and build up a sustainable timber industry ripe for international investment.

Though historically the country could boast that nearly half of the entire island was covered by forest, between 1990 and 2000 alone Sri Lanka lost more than 1% of the land used for such purposes year on year. However, due to the tight policies and laws implemented by the Government and the contribution made by International Environmental Organisations, the rate of deforestation in the country is now declining by as much as 35% with managed sustainable forests becoming a key contributor to both the local economy and the hardwood timber industry as a whole.

Though large scale planting has only been established in the region since the early 1950's, radical changes in the processes used to grow and harvest timber within Sri Lanka have enabled the industry to benefit from environmental and economical efficiencies that have altered the face of the entire business and developed a sustainable solution that provides an attractive investment proposition that is both economically and environmentally sound.

With the majority of the forests owned and run by the National Forest Department and identified areas across the region now preserved for the production of timber, the perfect conditions in the region have enabled the production of large scale Teak plantations which is now by far the most common type of hardwood grown within this area.

As one of the most durable of the tropical hardwoods, more than 85% of teak produced across the world is used in the furniture industry however its high oil content provides a quality that makes teak equally as vital in ship and yacht building. And with such a shortfall in the supply of teak compared with the level of demand for this natural resource, the value of this timber continues to climb and provide healthy returns for those that invest.

Under the Forestry Sector Development Programme in 1990 the Sri Lankan Government introduced a blanket logging ban across all natural forests and has ensured that illegal logging is not the major issue within Sri Lanka that it has been in other timber producing companies.

And with stability now surrounding the democratically elected government, which is continuing to encourage international investment, particularly in environmentally friendly investments, and increases in population within Sri Lanka and across the globe translating into further demand for high quality teak, the hardwood grown within the region provides a range of reliable and qualified investment opportunities that are going to reap significant rewards for any long term investor.

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The Role of Trees in Climate Change

There can be no doubt amongst anyone that studies the environment as a whole that climate change is now a reality and has contributed to rising temperatures on a global scale.

As temperature increases, even by a fraction of a degree, these small but significant variances can influence natural evaporation events to such an extent that the timings and underlying nature of plant growth itself is being changed forever.

But climate change does not only alter the basis of plant life, it also changes the fundamental dynamics between pests and disease as well as the very foundations of the animals that can live and thrive in different areas of the globe.

Such changes have had huge implications for those working within the agriculture industry that have found their farms and ranches much less profitable and viable than ever before and the species and varieties of animal they are able to farm much different to those they have experienced in the past.

As the problem of climate change has predominantly been caused by burning fossil fuels and deforestation, by carefully reintroducing more trees into the areas that have been most greatly impacted, we can in fact start to reabsorb some of the CO2 that has been emitted and slow down the process of climate change that we have experienced over recent years.

However, the benefit of introducing trees into the environment is not exclusive to the CO2 absorption they provide. In addition, planting sustainable woodland on agricultural land has become a way for many to seek an alternative income source that is much less influenced by changes in the environment and can provide a stable way of living into the future.

This combination of trees and agriculture, commonly known as Agroforestry may well be the solution both in terms of environmental issues and also economic challenges that many landowners now face.

By identifying the correct types of trees that thrive in the local area and focussing on planting them in sufficient numbers, land owners not only establish protection for the environment but also take back control their personal livelihood. Furthermore, the shade of forest trees can provide habitats to a number of diverse forms of wildlife which can bring back a natural equilibrium to the land and the roots of the trees are able to trap sediments and nutrients into the soil, enabling further plant life to thrive within the canopy provided. While the trees are growing, the natural barriers that they provide can also ensure that the wild stock on the land are preserved and have a greater opportunity to thrive than ever before.

Though clearing agricultural land for forestation would be economically unviable for the farmer if they are planting for carbon absorption alone, by planting the right types of timber that provide a high sell on value to the land owner, this combination of agriculture and forestry could mean that trees themselves could be both a short term and long term solution to the challenges we now face.

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Sustainable Investments, Lasting Value. Silvinvest: Investing in Melina Timber. Forestry Investments f...

Sustainable Investments, Lasting Value. Silvinvest: Investing in Melina Timber. Forestry Investments f...: When you choose to place your money in any type of timber investment, you know that the rewards you receive from the growth of such a fund...

Investing in Melina Timber. Forestry Investments for UK investors.

When you choose to place your money in any type of timber investment, you know that the rewards you receive from the growth of such a fund are going to be solid and stable and free from the influences on general stock and shares, which has enabled timber investments to provide higher returns than a number of traditional market funds over so many years.

And at the same time that you watch your money grow, you also know that the investment you make directly contributes to cleaner air and a greener environment for the entire planet to enjoy.

When it comes to Melina timber, you are investing in one of the fastest growing species of forest-based hardwood tree in existence which has enjoyed average rises in sales value of 17.83% in the past six years. Melina Trees are best grown in Tropical areas, with Costa Rica a major centre for cultivating this species.

Widely used in both furniture production and construction, Melina can reach up to 95 feet tall during its 12 year life cycle and has out performed a significant proportion of standard stocks over the last century including some of the most fundamental of commodities such as oil, gas and gold.

As part of an established but expanding market, demand for hardwood timbers such as Melina is only set to increase as the population continues to expand, creating a fantastic opportunity to take advantage of strong and stable investments in a sustainable and environmentally friendly resource.

And your investment couldn't be more personal than if you were growing the trees yourself. When you start to invest in a Melina fund all contributions you make are used to directly purchase Melina trees which are then grown on your behalf to create a sustainable long term investment opportunity that is ideal for pensions, savings plans or even family trust funds which can make financial planning for the future so much easier and more secure.

The income generated from all trees sold is reinvested over the period of your plan so that by the time the final harvest starts to take place, you may have thousands of mature plants ready to provide you with a stable and substantial income which can be used to repay your mortgage, create wealth for your retirement or even to support younger generations as they start off in the world.

With a twelve year growth cycle before the Melina tree reaches maturity, there is no short term win with this type of investment but as the trees are thinned every four years to make room for the stronger specimens to flourish, you may find your first payments are available a lot sooner than you may have initially thought.

And as your fund and your trees reach maturity, a Melina investment can enable you to enjoy regular and reliable income generated from an investment that offers stable and steady growth for you and you family while you are safe in the knowledge that you have invested in a product that is completely sustainable and renewable; this means that a method of plantation management is used that ensures profitability for investors, while preserving the environment.

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What Are The Potential Benefits of a UK Self Invested Personal Pension (SIPP)?

Before discussing the potential benefits of a Sipp, it is worth briefly describing when Sipp's came into being and who are eligible to have a Sipp.

Self invested personal pensions started in 1999 as a product available to UK consumers. The Self-Invested Personal Pension (SIPP) is essentially a pension wrapper that is capable of holding investments and providing you with tax efficient savings for when you retire. As a form of personal pension scheme they differ in several ways from a standard Personal Pension product. Presently, there are over 600,000 SIPPS in force in the UK. Anyone is eligible to have one, even Children can benefit from receiving Tax Relief.

The benefits of a Sipp highlight the main differences when compared to a Standard Personal Pension.

SIPP Benefits: Children

A Sipp is held in Trust and forms part of Estate upon death so in effect any residual fund value in retirement can be left to your beneficiaries, on death. Personal Pension plans finish on death in retirement and the Annuity provider (Insurance Company) benefits from the pension finishing.

Nomination of Beneficiaries can take place when applying for a Sipp and can be changed if needed by altering the trust form.

SIPP Benefits: Cash

25% Cash Lump sum can be taken from the age of 55. Though this also applies to Personal Pensions, it does not apply to most Final Salary schemes which are taken from 60-65 years of age. However, a major difference when compared to a standard Personal Pension is once a lump sum has been taken, a SIPP allows the remaining fund to remain invested. What this means in effect is the remaining fund can continue to grow and provide increased retirement benefits going forward.

The level of income taken is also flexible so allowing greater choice. This is a really big difference that can benefit a retired person. Standard personal pension funds have to purchase an annuity and set conditions on how much income will be received in retirement and annuity rates are correlated against interest rates. Therefore, if retiring in an era of low interest rates this can have a massive effect on income received.

SIPP Benefits: Control

Most pension funds are correlated which means they are linked to the stock market. In recent times this has meant volatility and reduced returns. A dear friend of mine has recently received his annual statement and having paid in £1,500 gross over the last 12 months has seen his investment worth £592 taking into account charges and performance. The funds invested within are not high risk, just the general funds made available for pension investing.

A SIPP offers control over investments. Most alternative investments offer potential for higher growth than other "Standard Products". Though generally deemed high risk, investment returns are the single most important aspect of pension planning. The alternative to low returns is to pay greater contributions.

SIPP Benefits: Charges

Most people are not fully aware of the charges levied against their pension. With a SIPP the charges are transparent, with fixed costs and highlighted on annual statements. Charges against a SIPP can be seen to be high when applied to a small pension fund (<£20,000) but competitive when applied to a decent pension fund value (>£30,000+).

It is worth considering alternatives to standard pension products especially if you are concerned with the amount of contributions you would be required to make to achieve a reasonable pension pot prior to retirement. Preserved or Frozen pensions can be used to fund a SIPP and countless people have pensions from previous employers or previous personal pensions that are not working hard enough to achieve a retirement aim. Existing Personal pensions plans can also be used to fund a SIPP compliant investment.

Here at Silvinvest we can offer, via our partner firms, a free full pension review. We can also make you aware of how to track an old pension if you have lost track of any plans. Contact details can be found on our website.

Lastly, it is worth looking at the DirectGov site and take a look at the pension credit facility. This will allow you to gauge how much you are likely to receive at retirement from your own pensions and benefits provided by the UK Government.

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