Research Reports
An Economic Analysis of Pyroligneous Liquid Utilization in Oriental Medicine Science and its Support System for Future Development
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AuthorChang, Cheolsu
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Publication Date2004.10.01
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Original
I. Title
An Economic Analysis of Pyroligneous Liquid Utilization in Oriental Medicine Science and its Support System for Future Development
2. Objectives
This research attempts to analyse economic feasibility of producing pyroligneous liquid by use of forest waste and utilizing the liquid in oriental medicine. This research also tries to suggest future policy directions to eradicate obstacles in production and sales of the liquid and its related products.
3. Research Results and Recommendations
○The forest waste produced in the forest management was estimated to be about 4 million cubic meters. Therefore, institutional supports from government are necessary in order to use forest waste for production of pyroligneous liquid. To conclude, there is no need to import wood and logs to produce pyroligneous liquid.
○The Net Present Value and Benefit-Cost Ratio were employed to make an economic analysis for production of pyroligneous liquid, and sensitivity analysis with respect to change in price and interest rates also made. The price of pyroligneous liquid per liter was assumed to be varied between 2,500 to 7,000 Won in Korean currency and interest rates between 5 to 7 percent. The price of charcoal was assumed to be fixed at 6.000 Won per bag (40 Kilograms), because pyroligneous liquid is byproduct in the process of charcoal production.
○If the price of pyroligneous liquid was 2,500 Won (excluding VAT), the benefit-cost ratio was less than 1, implying that the economic feasibility was low. If the price ranged between 3,000 and 6,000 Won, the ratio was greater than 1, indicating that the production is economically feasible. The period to achieve a break-even point required to be 2 to 8 years. Therefore, if the production were to be profitable, the price of pyroligneous liquid should be at least 7,000 Won per liter.
○The latest interest rate for the purchase of raw materials was 5.5 percent. Considering the interest rate of policy-oriented fund which is about 4 percent, there is a need to lower interest rate to 4 percent or less to the private enterprises for encouraging the production of pyroligneous liquid.
○The Carbonyls content for smoke flavors was regulated to be 2 to 25 percent in the present food-additive code in Korea, while the content was found to be 1.4 to 18.1 percent generally in other countries. In this sense there is a need to lower the present Carbonyls content. The article in the code tells that the pyroligneous liquid should be used only for smoke flavors. Therefore, this article should be eradicated and/or mitigated in order for pyroligneous liquid to be used in various kind of related products.
○The safety is not secured if the pyroligneous liquid is produced by using the waste from the construction sites and unhealthy woods. Therefore, a regulation including a heavy-metal test should be strengthened even when the pyroligneous liquid is used for non-medical purpose. On the other hand, further support for research and development should be followed and expanded for creation of new demand for the pyroligneous liquid and product development.
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