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Tropical forests are biodiversity-rich but are dwindling at a rapid rate, not only in Southeast Asia but elsewhere also. The result is a loss of natural ecosystems, a reduction in carbon sequestration, and increasing global extinction of wild species, including iconic species. While several developments contribute to the destruction of tropical forests, the main threat comes from their clearing for the purpose of agricultural production, for example in the Amazon Basin for the expansion of the beef industry and soya bean cultivation. In Borneo and Sumatra, the principal threat to tropical forests comes from the expansion of oil palm (Elaeis guineensis) cultivation. This is expected to result in significant biodiversity loss and is a danger to the continuing existence of the iconic orangutan (Pongo pygmaeus). The preferred route for oil palm expansion is by the conversion of lowland tropical forests to plantations. Lowland tropical forests are the prime habitat of the orangutan and this species is especially at risk as a result of oil palm expansion. Two supply-side policies have been suggested in the literature as ways to reduce this expansion and reduce pressure on species such as the orangutan. It has been recommended that Imperata cylindrica grasslands be used to help accommodate future oil palm expansion in Borneo and Sumatra and that emphasis be placed on raising the yield of oil palms. It is hypothesised that this will reduce the demand for clearing tropical forest for the purpose of oil palm expansion. Both of these hypotheses are critically evaluated by means of economic analysis. It is concluded that neither of these policies are likely to be very effective in reducing the clearing of tropical forests in Borneo and Sumatra in order to grow oil palm.

The future of the orangutan (Pongo spp.) is far from secure despite the species’ high profile and media attention. The traditional threat to the orangutan has been widespread logging, but the continuing conversion of remaining habitat for oil palm (Elaeis guineensis) cultivation is hastening its extinction in the wild. This situation is driven by a robust global market for palm oil as a vegetable oil and biofuel. In tackling this conservation problem, therefore, economic factors cannot be overlooked. This article analyses these factors and how they curtail effective orangutan conservation. Of significance are the high opportunity costs of orangutan conservation and market failures associated with the public-goods nature of the orangutan’s forest habitat. Conservationists should consider these constraints when formulating remedial action. This article assesses strategies that reduce the opportunity cost of conserving habitat (via supply-side approaches that divert oil palm cultivation away from forests) and enhance the realisable value of orangutan habitat (by capitalising on the demand for non-market values such as carbon storage). It is concluded that the former group of strategies are likely to have limited effect on curtailing deforestation, but with the right institutional policies in place they can act as stopgaps while strategies involving carbon financing and payments for biodiversity develop sufficiently to render habitat retention financially competitive.

Concentrating on their presence in Borneo, the ecology and conservation of two large Southeast Asian primates, the orangutan Pongo pymaeus and the proboscis monkey Nasalis larvatus are reviewed. The former species occurs only in Borneo and Sumatra and the latter only in Borneo. The comparative threats facing these two endangered primates and their approximate numbers in the wild are put into perspective. The long-term survival of both species is adversely affected by the degradation and conversion of their suitable forest habitat by logging and agriculture, the occurrence of hunting, poaching and forest fires. The effectiveness of measures to conserve these species are discussed and evaluated from the standpoint of economics. It is concluded that informed assessment of the opportunity costs of conserving these species and their habitat is required and better incentives for law enforcement must be created. Properly regulated ecotourism may draw the necessary attention to the plight of these species and may even help fund conservation research. Economics can help identify least, or low, cost opportunities for conserving species as is demonstrated in this article, even if it is not always possible to demonstrate their economic value convincingly.