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The promotion of forestry activities is seen as a means by which to reduce poverty while protecting the environment. But if clearing of forests for agricultural activities can prove more profitable, will such efforts be effective? Through an analysis of the relative benefits of agriculture and forestry activities, this paper considers the extent to which forests can be relied on to support poverty reduction in developing countries.Through a data analysis and literature review, the study examines the empirical relationships among forest, poverty, agriculture and access to markets and services in the Indonesian Outer Islands. The data analysis is based on:vegetation cover produced from remote sensing images for 2003population and poverty estimates respectively at the village and district levelsthe national forestry land use planspatial analysisThe study finds that agriculture provides higher financial returns than forestry, and under the existing institutional, financial, and human constraints high forest cover in Indonesia is currently associated with high incidence of poverty. Therefore, clearing forests located on suitable agricultural land may have a greater potential to contribute to poverty reduction than forestry. In such areas, to conserve forests, appropriate policies to compensate the rural poor for the foregone benefits of deforestation would need to be developed.However, the authors also stress that small-scale forest management and nonagricultural activities can also have positive financial returns and could also contribute to poverty reduction. Plans should therefore take into account not only the benefits of agriculture relative to forestry activities but also the benefits of policies aimed at helping rural people move into nonagricultural sectors. The latter policies would have the dual benefit of reducing poverty and accelerating the transition from deforestation to reforestation.
