Nepal’s forest resources underpin the livelihoods of rural people in important ways. During the country's "planned development" over the past 50 years, the government, donors and policy makers have viewed these resources as a key vehicle for ushering in economic growth and for meeting basic needs. They underscore the potential value of forest resources for achieving conservation and socio-economic objectives. To what extent have economic incentives been generated to effectively harness these resources to meet the said objectives is an open question. To address this question, this paper reviews briefly and broadly the economic potential of the country’s forest resources in terms of forest goods and services. Estimates of economic potential of timber and non-timber forest products and environmental services have been assessed. A number of recommendations for realizing the potential for achieving development and poverty reduction objectives is provided.

Key words: Forestry; non-timber forest products; ecosystem services; economic potential; livelihood