The industry’s view

PNG CABINET has deferred discussion on the controversial National Forestry Devel opment Guidelines because they did not include input from the Forest Industry Association, according to Forest Minister Tim Neville.

While agreeing the Forest Industry Association had raised valid points in its submission, Neville expressed disappoint ment it did not make any input on two major issues downstream processing and revenue. He said the FlA’s input had been “a long time coming” and it still had not made a satisfactory contribution. “Their outcry is only associated with the export of raw logs, nothing about downstream pro cessing or revenue. The Forestry Industry Association basically represents log export ers.”

The FIA has made a submission to Neville in which it discusses the proposed guidelines. The submission says there is much in the proposed guidelines that is good, and in accordance the National Forests Policy, but the association opposed any attempt to unilaterally and detrimentally alter existing rights held by its members and. Other matters which, in its view, will assist the development of an ongoing and viable forest industry and should be reconsidered and perhaps recast in a different form. On government at tempts to alter existing rights, the FIA states some of the proposals are “illegal as well commercially devastating”.

“These items are strenuously opposed and members have indicated they will take legal action under the Investment Promo tion Act for compensation for any expropri ation,” the submission states. It was concerned existing rights negotiated in good faith over many years and agreed to by many parties would be unilaterally changed. “As you see, it is not the industry’s view that the guidelines ... maintain a reasonable investment climate.

We note your comments that infer the industry is still ‘out of control’.

The FIA presented statistics it said show the state of affairs in the industry has been exaggerated. The overall industry base of investors and resource owners warranted more respect and consideration than just to be treated as a convenient whipping post for somebody else’s problems.

Firstly, it estimated the accessible, com mercial timber volume of PNG on areas not previously harvested was 170 million cubic metres on a net production forest area of 12 million hectares. This is from a total forested area of some 32 million hectares.

Other area and volume estimates have placed the volume as high as 950 million cubic metres on an area of 19.1 million hectares.

The statement said the total annual permitted cut was about five million cubic

metres, however, in 1992 only about two million cubic metres was harvested. “This year would see a harvest of a little more than three million cubic metres, still well below the alloted target production grant ed by the state through issue of timber permits.

“The association notes the 1992 annual figure from the Central Bank show annual export of logs at 1.601 million cubic metres, having an average value of K87 per cubic metre, giving a gross value of K140 million.

The FIA said, according to the Bank’s break-up of the gross f.o.b (free on board) were ; government export tax — K24.5 million; landowner royalty — K8 million; landowner company return — K16 mil lion; operating cost — K83.5 million and profit for operator — K8 million. “This can hardly be a situation investors could get enthusiastic about, particularly from the risk/return point of view, and it will be noted there are not “hundreds of millions” of profit. Any claim that industry operators are profiting by ‘hundreds of million of kina’ are wild exaggerations and do not give a fair recognition to committed operators in a difficult industry, nor do such comments generate credibility for govern ment.”

The Association acknowledged log prices had risen dramatically this year, and that it was in a position to enjoy good profit margins while the market situation re mained buoyant. But it added that in PNG the industry was a follower of market trends, not market leaders. It said PNG’s log products represent only about five per cent of the regional log supply. n