PNG govt/environmentalists

at loggerheads over forests

By Sam Vulum

THE Papua New Guinea government has again been caught in the fray, this time over its efforts to rescue the forest industry after months of struggle against the severe impact of the Asian economic crisis.

With Asia being the country’s largest log market, PNG exporters found them selves scratching to survive since buyers started refusing their logs in July 1998.

Many have been forced to shut down while others reduced their operations.

There were also reports of companies leav ing PNG for other countries.

However, with the implementation of new tax breaks and improved prices on the Asian market, things are beginning to pick up. The tax breaks require logging compa nies to be exempted from paying tax on any logs exported at a price of under K 125 per cubic free on board (FOB). This enables companies to save K 25 per cubic metre in taxes.

The Forest Industries Association, which represents 85 per cent of logging companies in PNG, said the introduction of the export tax breaks saved many opera tions from permanent closure.

The FlA’s executive officer Robert Tate told PIM that the current export markets for both logs and sawn timber were improving slowly as the worst of the Asian crisis eases.

Tate said that they were expecting the current average 30 per cent tax to' be reduced to between 10 and 15 per cent. He said average prices for logs have improved from the low SUSSO per cubic metre to the high SUS6O per cubic metre over the past five months.

He said buyer demands remained fairly weak due to uncertainty in the Japanese economy, the US dollar/Yen exchange rate and a reluctance by all buyers to get caught with large forward stock holdings.

Tate said, in the current climate, the FIA was only forecasting log exports of between two and 2.5 million cubic metres

in 1999. “This is a reduction of about 20 per cent on 1997 exports and is only about half the annual log harvest volume for PNG,” he said. But, in its haste to further improve the industry, the government has been accused of going too far by imposing the tax breaks. The move has re-ignited debate over what appears to be the most controversial industry in PNG.

Environmentalists, in particular, have joined forces in condemning the govern ment’s actions, mainly regarding the taxes.

Greenpeace forest’s specialist Brian Brunton says there are already signs that the forest minister was taking short cuts with the legal process.

“Project options studies are not being done properly,” Brunton said, “there is great danger that the government will

Government under fire

again for “interfering” in

legally required

processes in the forestry

industry, but forestry

minister says he wanted

to push Forest Authority

staff whom, he said,

have been sitting on

projects which are ready

for development

avoid the competitive tendering process, mandated by the Forestry Act, and give concessions to political mates”.

Brunton also questioned the SUS3S million said to be allocated to a trust account for the protection of trees and the environment.

“This money will not address the ques tion of export logging, which is the main cause of forest loss in PNG. The increase in export logging is a result of tax breaks granted by the government”.

While Brunton welcomes conservation aid, he says it is too late.

“It’s like pouring funds for conservation into a bath, while export logging allows

taxes, revenue and trees to rush out the

plug hole”.

Greenpeace also rejects the FlA’s claim that tax concessions have saved the indus try. “Whose industry are they talking about? The Asian loggers? The reduction in the export log tax concessions is only saving loggers’ profits,” he said.

Another environmental group, the Pacific Heritage Foundation, also expressed similar sentiments about the government activities.

Foundation spokesman, Benedict Killian, said no government or authority or person could assume to exercise any power that they do not have in the pretence of securing 50,000 odd jobs, which, ultimate ly, would be exported with the next export of round-logs or “downstream processed” kwila slabs.

“The directive of the prime minister is a far cry from the general intent of the forestry laws and environmental regula tions which seek to ensure that, while there is a need for economic prosperity, environ mental accountability and full landholder participation is maximised. It is simply not government policy to fast-track projects to the detriment of the nation’s other constitu tional directives,” he said.

Killian said there are clear constitution al directives seeking environmental sus tainability. What was more important, he said, was that PNG’s laws, including the Forestry Act, sought to ensure that landowners were properly consulted and informed in a manner whereby they were able to make free and independent deci sions.

He said the PFMCs should not be deterred by threats that were not supported by law nor politically sustainable.

The activists were reacting to reports that prime minister Skate and forest minis ter Peter Arul were trying to fast-track multi-million kina timber projects in the country.

Industry sources were reported as say ing that it was practically impossible to get developers into the 14 major timber areas in a hurry without following proper legal procedures and forestry guidelines.

They were referring to a letter by Arul dated December 9, 1998, titled “Prime Minister’s Directives”, addressed to the chairman of Provincial Forest Management Committee (PFMC) and copied to Skate, the National Forest Board chairman Gabriel Smol and PNG Forestry

Authority managing director Thomas Nen.

In the letter, Arul threatens to have the National Executive Council approve the timber projects if the PFMC couldn’t find a developer by that week.

The Forest Minister issued the warning while reminding them of Skate’s concern about the continuous delay in getting some of the major timber projects off the ground.

Forestry sources said the directives cannot be met with out passing set guidelines and laws, which involved the con sultation and approval of landowners.

A PNG Forestry Authority source confirmed that the task was impossible but meetings had been held with PFMCs.

In an attempt at damage control, Arul assured the pub lic that government plans to encourage investment in the forestry sector would not be done outside the prescribed legal procedures and set forestry guidelines.

“The National Forest Board and the National Forest -Service are required by law to ensure that timber resources are allocated, managed and developed on a sustainable basis and in compliance with the allocation and develop ment procedures under the Forestry Act 1991 (as amend ed),” he said.

The minister’s office said the deadline to find develop ers, which expired in the first week of January, had “natu rally” been extended. He did not give any new dates.

Arul said the intention of

the letter was to push Forest Authority staff - who were sitting on projects ready for development - into action. He said the let ter followed a meeting between the com mittee, Skate and himself, and was a clear indication that the government was serious about getting all the projects off the ground by adhering to set forestry laws.

“I am pressured by various landowner groups in most of the timber project areas to speed up their projects as the Forest Authority was unnecessarily delaying their timber projects. The resource owners too want to benefit and take part in developing

their resources,” he said.

“My follow-up letter is the right step taken in the right direction to get partici pants of timber resources, the landowners, PFMCs, the Forest Authority and the developers to seriously look at where the set-back is and encourage timber resource owners to participate in their respective timber projects”. Arul said it was impor-

Part of a letter from PNG’s forest minister to the Provincial Forest Management Committee

“The Prime Minister has emphasised the importance of getting these projects moving at this crucial economic situation in the country.

“He {Skate} has emphasised the fact that downstream processing and export of logs will create 50,000 Jobs and boost infrastructure and other development taking momentum in the rural areas. “ The kick-off of the projects will also bring in much-needed foreign currency to further boost the weak Papua New Guinea currency.

“As per the Prime Minister’s direction, you are directed to immediately facilitate PFMC meetings to select a developer and recommend to me, through the National Forest Board, a developer of your choice who will fulfil all Timber Permit Requirements before December 20, 1998, so that the developer will start operating in the first week of January 1999.

“I must warn you all that failure to comply with this instruction will make me have no choice but to have all these projects approved by the National Executive Council”.

tant that ordinary villagers were not lured by developers with tinned fish and rice.

“They have to be encouraged at the initial stages to fully participate on a 50-50 per cent or 60-40 per cent equity basis in favour of the landowners with the develop ers,” he said.

He claimed that critics, including envi ronment and conservation groups, did not offer any alternatives or proposals, but continuously wanted to discourage and

deprive village people from advancing

economically, politically and spiritually in their natural environment. FIA executive

officer, Tate, said the forest industries had greatest potential for long-term sustainable rural development in PNG. This develop ment, he said, would not be achieved if the viability of the industry was put at risk by excessive levels of taxation.

A recent World Bank funded study of July 1998 stated that the existing log export tax runs the risk of distorting returns

from log export because it failed to recognise the differ ences in costs of logging in various regions around PNG.

“The log export tax was introduced at a time of very high export prices and has been effective in capturing a significant share of the eco nomic returns from log exports. However, the com bined effects of falling world market prices for logs and setting the log export tax based on the kina value of logs, at a time which has seen significant devaluation of the kina, has had adverse impacts on the viability of loggers,” the report said.

The World Bank-funded study recommended that the export tax be reassessed to make it “more attuned to pre vailing conditions” in PNG.

Tate questioned whether “some environmental organi sations” were concerned for the rural population or “only serving the interest of their

foreign-based organisations”.

He said the FIA saw no evidence of unnecessary min isterial interference in the functions of the national for est board.

PNG’s forestry industry is aiming at a log harvest of within the 4.9 million cubic metre range. Rapid resource appraisals, carried out several years ago, indicated that PNG could fell 4.9 million cubic metres a year.

The industry says it is part of a shift rec ommended by consultants who prepared the World Bank report. Tate said the export of processed forest products was now PNG’s largest manufactured export. Its value in 1994 was K 11.4 million, increas ing to Kl 3 million in 1995, K 15.5 million in 1996 and K 24.3 million in 1997. ■