Bungle in the jungle

  • 27/02/1994

Bungle in the jungle THE SCRAMBLE for Papua New Guinea's forest wealth has left its forests battered and bruised. Already, as much as one-third of the high priority conservation areas are reeling under timber logging agreements. PNG's environmentalists say that the timber business's modus operandi would put the Italian mafia to shame.

But things may be changing. The government wants to improve regulations regarding forest exploitation; and the people who own the forests are demanding a bigger share of the booty and becoming more environmentally conscious.

The Forest Act of 1991 allows customary landowners to sell timber only to the state, which in turn grants permits to logging companies. The benefits promised to the communities comprise royalties and development projects like schools, roads, airstrips, health centres and even aluminium roofs for huts.

In some cases, local communities interact with logging companies through a negotiating landowner company. However, the major go-between is still the forest department.

In the early 1970s, earnings from forestry were so abysmal that state expenditure on forests outstripped revenue. In 1974, prior to Independence, a national forestry policy envisaged the creation of forest estates to meet industrial demand and to increase exports of value-added forest products. However, after Independence, a severe cash crunch forced the government to use the forests for money. In 1979, a revised forest policy bent over backwards to invite companies to invest in log exports. Thus, political benevolence carried the seeds of forest exploitation (See graphs/table). By 1992, over 5.3 million ha -- about 60 per cent of the commercially viable area -- was committed to timber agreements.

Although a relative newcomer, PNG has become one of the largest exporters of tropical logs today. The sharp drop in international agriculture commodity prices has led to PNG competing with giants like Indonesia and Malaysia, which are moving towards processed goods. Ironically, it was the environmental pressure against logging in Malaysia that prompted timber companies to relocate to PNG; now a Malaysian company, Rimbunan Hijau, controls over 85 per cent of the logging in PNG.

Permits allow 8.5 million cubic metres (cum) of timber to be harvested annually, decreasing to 4.8 million cum in 2001. This frantic rate of harvesting is considered unsustainable even by the government, which fixes a sane annual yield at around 3-5 million cum.

Corruption Alarming as the official figures of forest exploitation are, they could be far from complete. Environmentalists in PNG speak of deep-rooted clandestine operations: fly-by-night operators from abroad literally pull down logs and load them on barges that disappear overnight.

Even otherwise, the forestry business has been marked by widespread corruption and fraud. The most damning indictment of the country's forest business came from the inquiry of Justice T Barnett, established in April 1987. The report was never released. Barnett was stabbed outside his Port Moresby home and finally fled the country. The prosecution of the guilty -- many in high places -- was slow.

The deep-seated and rampant corruption Barnett revealed through extensive documentation led him to say that the "forest industry was simply out of control". The timber industry used every form of enticement and bribery to get what it wanted -- from slush election funds and foreign junkets to cabbages and apples.

Barnett reported that the timber industry had walked away with large-scale financial fraud, the most serious being transfer pricing, whereby timber was undervalued to reduce tax, duty and royalty liabilities. It also became clear that though southeast Asian companies were largely involved, the real beneficiaries were the Japanese.

Barnett estimated that transfer pricing on log sales cost the country about $32 million during 1986 and 1987, about 15 per cent of PNG's timber export earnings. The United Nations Centre on Transnationals estimated that the PNG government received approximately half the average revenue of the Philippines log-felling and one-third that of Malaysia.

Barnett's report also raised the issue of low benefits for the landowners, who, in any case, rarely got them in the first place. Till mid-1993, on an average, the royalty was a measly 6 kina per cum, of which landowners were entitled to 25 per cent, even when the free-on-board price of logs was more than K100 per cum. The national and state governments cornered the rest.

A quarter of nothing
B D Brunton of the Individual and Community Rights Advocacy Forum, an NGO based in Port Moresby, says that the royalty was a "quarter of nothing" and that the landowners were "ripped off".

Brunton gives the example of the April-Salumei Timber Rights Purchase Area in East Sepik province. The nominal sale price was K20 million. However, if the quantity of hardwoods in the agreement was assessed at market rates, the price would touch K2 billion.

In many cases, promises by companies to build development projects remained illusive. Barnett reported instance after instance in which landowners were left with depleted forests and disintegrating secondary roads, disused sawmills, unusable clay airstrips, and unbuilt schools and hospitals.

If this wasn't enough, most landowner companies also showed a rotten track record. Barnett reported that landowner companies "were mere puppets created to enable foreign timber companies to gain access to the resource".

Industry and people
It is this awful legacy of greed and exploitation that confronts PNG's forest managers. The rule of the game is to "regulate" the industry and the people; and the past few years have seen moves towards this goal.

In 1990, the government launched a National Forestry and Conservation Action Programme to attract funding for environmentally sound logging practices. The next year it imposed a moratorium on new logging projects, adopting a national forest policy which stresses sustained yield management.

However, the implementation of these moves has been slow: the moratorium was breached often and the Forest Act of 1991 could not be gazetted till June 1992, when high prices in the international market spurred a frenzy of logging.

In mid-1993, minister of forests Tim Neville got tough. He issued the National Forestry Development Guidelines, which called for an extension till March 1994 of the moratorium on new projects; restriction of log exports to a maximum of 3 million cum, with subsequent reductions; limits on the amount of harvest that can be controlled by any one -- or related -- companies; abolition of the array of export taxes and the introduction of a resource rent system based on stumpage appraisal; increase forest resource rent for landowners, with a portion going directly to investments in the area; review of existing projects from an environmental point of view; and classification of forests into protection, reserve and production zones.

The industry militated en masse. Through an orchestrated campaign, the industry lamented that the guidelines would mean a loss of revenue, jobs and benefits to the landowners. It argued that the stumpage system would reduce the industry to one-third its size within three years and would hit the rural people the hardest with fewer development projects.

However, it is away from the public eye that the most important battle is being waged: Who will manage the forests -- the private timber industry and the landowners, or the private timber industry and the forest bureaucracy?

At the moment, the bureaucracy seems to be winning, contending that the illiterate landowners could end up as pawns in the hands of big business. It is repeatedly cited that their ability to make long-term choices is blinkered by the promise of "a few kina more today". Even NGOs do not categorically support the idea of landowners controlling these immensely rich forests.

When a number of landowner companies argued that the funds should be transferred directly to them, bureaucrats fought back, saying the people would splurge it on immediate consumption.

But there is no overwhelming reason to distrust the landowners or their companies: There are instances when landowners have blocked forestry operations because they feared irreparable damage. Barnett reported several cases of protests by landowners against timber barons. But they were invariably hushed with largesse, or at least the promise of it.

PNG seems to be emulating the Indian model of forest management, where the government reinvests surpluses from felling in the people's interest. The only difference is that in PNG, the people are supposed to own the forests.

However, Brunton questions the right of the state to appropriate the rights of landowners and put them into a trusts, which he says are for "infants and lunatics". The best solution, he says, would be to regulate timber purchases and pay landowners the market price.

Real fear
He asserts, "Even if some money is 'wasted', so what? In all booms, there are confidence tricksters, fools and tragedy. A more real fear would be the dead hand of the bureaucrat running a multi-million trust fund."

In fact, in the late 1980s, the East Sepik provincial government attempted to give landowners control over their forests. The Land Mobilisation programme, as it was called, viewed forestry as an essential element in rural development and not as a way to divest owners of their resources. But the attempt came a cropper in the face of intense opposition from the foresters and the collapse of the provincial government.

But this is only the beginning. For tribal Papua New Guineans, this is their first encounter with multinational exploiters. If they have been cheated and swindled, they must be forgiven their innocence. More than anyone else, the tribals have a long-term interest in their forests. They will demand their price.

In Madang province, after roughly 60,000 ha of forests were cut by Jant Pvt Ltd and shipped to Japan as wood chips, the landowners demanded that the company pay them K15 million as compensation for the environmental damage. It put re-negotiations for new logging leases in jeopardy. And, the stalemate continues.

Forestry in PNG, therefore, is at the crossroads. The problem is that further strengthening the forest management infrastructure will bring about changes that might obstinately dig in. The bureaucracy will become so entrenched that bringing about changes will become that much more difficult, if not impossible. The future is now or never.

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