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PAPUA NEW GUINEA
June 1998 GREENPEACE PACIFIC
Brian D. Brunton
First, the good news
The good news is that if you have a clapped out wokabaut sawmill somewhere near Kiunga you can get K400 a cube for rough sawn timber, and if you are really pushy you can ask for K600 a cube [one kina =50 cents US, on average ]. The high price reflects the imported price of sawn timber from Port Moresby by the mining company OTML [which is the only other source of sawn timber].
If you are in Milne Bay you can get up to K300 a cube for rough sawn timber. Elsewhere the price last year for rough sawn timber from wokabouts was between K200 and 250 a cube. If 1997 was the year that the loggers were rocked back on their heals by the downturn in raw log prices, then 1998 is the year that landholders have got the smell of money in their nostrils, and sawmilling is beginning to be seen as the way to go.
The loggers are still with us, which means that the struggle to stop the worst form of damage to the rainforest goes on. Those landholders who stick with the loggers can expect to get K10 a cube in royalties. The arrival of indigenous sawmilling presents new environmental difficulties. These are manageable, but we have to get rid of the loggers first.
Current export log prices are about $us 70 a cube, in kina about K140 a cube. Most loggers have gone into hibernation, or just stopped operations altogether. Some have started business in other fields. These tend to be the companies, or the staff within companies, who have decided to settle in Papua New Guinea. They see the down-turn in the log-market as something that has to be accommodated, and so they move into other businesses. I have heard of loggers moving into real estate, wholesale, retail, fish farming, and hotel businesses.
I am told that Japanese log imports will not pick up before the end of 1999.
PRC ( China )
A recent Reuters report tells us that China will seek to import 10 million cubes of logs between now and 2002. Here is a copy of the report: "China is forecasting a rise in timber imports as the government curbs logging and at the same time stimulates its housing sector, the China Daily reported on Sunday.
``Timber imports will definitely increase, but not inordinately,'' the newspaper quoted an Agriculture Ministry forestry official as saying. The growth rate of China's log imports will be determined predominantly by market demand, said Liu Shuren of the ministry's forestry products department. Demand would grow with China's efforts to boost the housing sector, identified last week by Premier Zhu Rongji as a target of state efforts to stimulate China's economy. Liu forecast strong demand for high-grade timber used for furniture and interior decorating, which is in short supply in China. Chinese warehouses had stockpiles of larch and other low-grade lumber, he said. China, which imported 4.0 million cubic meters (yards) of logs in 1997, would encourage timber imports and limit exports while implementing forest protection projects that would drastically cut domestic log output, he said. The ministry aims to reduce log output in state forests to 13 million cubic metres by the year 2000, 43 percent less than the 23 million cubic metres harvest in 1997, the report said. A separate China Daily report said the southern province of Guangdong had increased efforts to attract foreign investment in its forestry products sector, a source of $500 million worth of exports each year. Sixty projects in timber processing, pulp and paper-making and fruit orchards had drawn cumulative pledged capital of $850 million, the report quoted Guangdong officials as saying.
We have information that the Managing Director of the PNGFA Thomas Nen, who speaks Mandarin, will visit the PRC shortly, to encourage more log exports to the PRC.
Indonesia will seek to export 4 million cubes of logs a year as a result of structural adjustment. I could not find a reliable source for this, but environmental groups in Indonesia confirmed articles have appeared recently in the Indonesian press confirming this SAP conditionality. An extract from a recent Indonesian ngo communication says: "I have also heard that the IMF is insisting that Indonesia begin to export round logs again. The story I heard is that Indonesia had to promise to export 4 million cubic metres of round logs a year. Does anyone know anything about this ?. Indonesian NGO reply : " Today newspaper quoted that news. On April 20, 1998, the Government of Indonesia has release the new regulation - Ministry of Industry and commerce- number 85/MPP/Kep/4/1998 regarding export round logs, which has signed by the Ministry Mohammed Hasan on April 20, 1998. On the second chapter of the SK state that export round logs are free as long as the amount of the export "didn't harm or destroy" -- quote from me -- the environment. The amount which "didn't harm or destroy the environment" will be stated by the Ministry of Forestry. The round logs which could be exported are logs from forest estate and land estate."
Multilateral Agreement on Investment
A worrying aspect of the global scene is the effect of MAI on the trade in raw logs. In essence the MAI will seek to fast track raw logs as one of the commodities that will be free of national regulation.
Campaign to end export logging by the year 2000
The position has not altered all year. The World Bank formally will not come out and say that Papua New Guinea should not grant forest concessions that involve the export of logs from ancient forests after the year 2000. However, opinion within the World Bank is not monolithic. There are officers who can clearly see the benefits of moving away from export logging. The problem is that two senior middle ranking officers, Jim Douglas and Klaus Rohland are holding onto to outdated policies, and supporting the continuation of export logging past the year 2000. The Papua New Guinea Forest Authority (PNGFA) will certainly not agree to a moratorium, because it is a procurer and provider for the export loggers. There is strong support within the NGO movement and the community at large to end export logging. There is also support in the Prime Ministers Department and the Department of Finance and Planning.
The alternatives to export logging are now clear to see, and being practically implemented by NGOs and landholders. The logging industry is inefficient, and depends on subsidies. It currently only pays a landholders K10 m3 (in deflated/devalued kina). Wokabaut sawmills in East New Britain get K200 m3, in Kikori and Alotau they get between K250 to K300 m3, and in the Kiunga area they can get up to K400 to K450 m3. The world market in round log prices has collapsed and is unlikely to go back up before the end of 1999. Why prop-up an industry that cannot compete in the world market? Why not promote small and medium scale activities that are done exclusively by Papua New Guineans?
Campaign to stop any lowering of the log tax
The loggers have been spending tens of thousands of kina on full page advertisements trying to argue that taxes on the export of logs should be reduced. A PNGFA memorandum dated 9 March 1998 outlined the main amendments proposed by the Forestry Board: 1. decrease the rates of log export tax by an across the board 20 percent. 2. allow dispensations of timber permit conditions to allow for the selective harvesting of premium species 3. allow exemptions to timber permits holders so that they need not pay minimum levels of royalties to landowners based on the minimum level of allowable cut 4. exclude any mention of Project Development Levy implementation from the submission.
A submission has been put to the National Executive Council. We say that the log tax should not be reduced because it is primary in defense of the environment. The tax functions as a tariff, to dissuade loggers from exporting , and driving them into downstream processing. This has begun to happen, with a few loggers now trying to mill in country. In the context of the secular downturn in log prices, the tax also has the effect of driving loggers out of business ( to the extent that they are unwilling to process in country). This is a good thing for the environment. Ultimately it will be a good thing for landholders. Royalties create dependency. Smallscale is small business and soaks up informal sector labour, and spreads wealth around more equitably.
The latest information is that the NEC threw out the PNGFA submissions to decrease the log tax on at least one, or maybe two occasions. This prompted the loggers to spend tens of thousands of kina on a huge media campaign to lobby to have the tax reductions approved. We have also learnt that the World Bank is about to roll over on the log tax issue, and approve a reduction. At the time of writing the issue is in the balance.
The need to renovate the PNG Forest Authority
The position of the PNGFA is becoming such that it cannot be reformed. It must be renovated. The PNGFA is a logging instrument, that does not appear to be able to move with the times, and is now playing a destructive role with the rainforests in PNG. It needs complete renovation and downsizing. It is part of a huge subsidy by landholders taxpayers and future generations that economically props up and facilitates export logging. It does not have either the will or the ability to engage in small-scale and medium scale indigenous processing. The PNGFA should be turned into a completely commercial body, with full real cost fees for services levied on customers on a user-pays basis. Its stock of unallocated timber rights should be auctioned off, and harvested using FSC principles. That part of the stock which falls-in at auction should be handed back to landholders. Recently, despite the log market collapse, the PNGFA has approved forest working plans for Rai Coast TRP Madang, Edevu TRP Central Province, Bewani LFA Sandaun, Wawoi Guavi TRP Western Province, Passismanua LFA WNBP, Lolo Block 1 LFA ENBP, Kapuluk and Kapuluk Extension WNBP, Sogeram TRP Madang, Gogol TRP Madang, Ulamona TRP WNBP, Watut West TRP Morobe,
Ok Tedi Mining Limited (OTML)
After the settlement of the river pollution case OTML began to dredge the Ok Tedi River to relieve flooding in the worst affected area. The dredged-sand is being dumped into retention cells about 1km x 1km. This involved a clear-fell operation that was used to train landholders in the use of wokabaut sawmills. This is a positive development. Another wokabaut in the same area is able to get K400 m3 for rough sawn timber [this high price is a result of OTML having to import sawn timber from Port Moresby for similar prices]. As more wokabauts come into operation competition will drive the price down. Several other mills have been purchased in the lower Ok Tedi area. They are advised by a former member of the Village Development Trust, who is now employed by OTML. OTML have shown a positive commitment to promoting small and medium scale downstream processing.
The long-term difficulty is that both OTML and Placer have mines that are due to close in the year 2010. There are now real problems of economic sustainability after mine closure. Oil palm and rubber are seen by some as an option, but there are divisions within OTML as to whether or not oil palm should be supported. At present the view appears to be that OTML will not get into the promotion of oil palm. These are difficult decisions...watch this space
Placer Placer operates a mine at Porgera, but flush their waste down the Strickland River. The effect of the waste goes as far as Lake Murray. Placer have so far not promoted small/medium-scale along the Strickland River.
RH have begun to assemble their veneer mill at Emeti. They have started by extracting massive reductions in import duties from the Government, on the machinery. RH has been granted relief from import duty on machinery needed in this expanded project. Reports are that the project is underway. We have been informed that there has been an NEC [cabinet] decision to grant to RH a concession of 1 million ha. to supply this mill. By law, all timber concessions are subject to competitive bidding.
Landholders from block 3 of Wawoi Guavi complain of environmental damage and breach of timber permit conditions.
There is no activity in Makapa. Some landholders are still seeking to have the TRP invalidated. The case is stuck in the Supreme Court. There are persistent rumors that RH will take over this concession.
Reports have it that the PNGFA will allocate about 1 million ha. to RH, and open up this vast area of rainforest. It is being consider under the name of Kamula Doso, and there is some suggestion in the PNGFA that the area could not maintain a 35 year cycle. But this should not be a problem to the loggers as our information is that the NEC has promised this area to RH.
This pathetic little project, most of which was under water, has stopped. The logger Dienbese No3. Pty Ltd decided it was not commercial. The area is so small it could only manage 11,000 m3 per annum. The PNGFA will now try to interest another logger, most likely Rimbunan Hijau. The project is a good example of the unsustainable logging practices of the PNGFA. It should never have been treated as an export logging project. But the mind-set of logging in the PNGFA is so firm, that it cannot do anything else.
Aiambak- Kiunga Road
This logging project/access road has stopped about 30km out of Kiunga. There are a number of interest groups pushing for the roads completion and upgrading. There is a letter which purports to indicate that K260,000 was paid to a local consultant to obtain a rebate for tax exemption. We understand that that the relevant minister signed the reduction in export duty of 50% on the log tax. But the Solicitor General has given an opinion that minister's decision was unlawful.
We are informed that steps are being taken to enlarge the log-base township at Aiambak. we believe that this is to facilitate the logs that will flow from the East Awin FMA
East Awin FMA
This project has been advertised. We are informed that the FMA will contain an agricultural clear-fell component for a rubber scheme. The rubber scheme will cover 60,000 ha.
The Forest Research Institute has prepared a report on Tapila Wapim, an area of high biodiversity priority. The PNGFA is proposing to amalgamate Tapila Wapim with the existing Oriomo TRP. There should be an investigation into this move to establish connections behind this deal.
Role of the oil and gas industries
The Gulf Provincial Forest Management Committee has finally presented its Provincial Forest Plan . It proposes to log the whole of the Gulf Province that is not otherwise subject to inundation, mangroves or too mountainous to log. It does not take account of the Kikori Conservation and Development zone set up by WWF/Chevron in the Kikori Valley.
Chevron has been named as one of the prime movers to promote a road from the Southern Highlands down the Kikori Valley, to Kikori. The other partners in the road are the Gulf and Southern Highlands Provincial governments, the National Government, the National Provident Fund, and the PNG Banking Corporation. The road will compete for resources with the Trans-Island Road currently being implemented by JIACA ) Japanese Aid ), which goes from the Gulf province over the Bulldog pass to the Morobe Province. Reading between the lines, the road will facilitate logging in the upper Kikori Valley and threaten Mount Bosavi.
A new FMA has been signed over Turama Block 1, an area previously the subject of an FMA in 1995 which was an extension to the original Turama TRP. It appears that the new FMA is an attempt to regularize the irregularities in the 1995 FMA. As a result of the 1995 FMA a huge timber permit was given to Turama Forest Industries. However there has been recent landholder resistance and TFI has had to move its base camp. The promises of downstream processing do not appear to be materializing.
It is not clear to us whether a timber permit was awarded in 1997 to the Yeung Corporation of Hong Kong. The last information we had was that the Timber Permit was not issued. The Hekiko concession will depend upon road access. The Chevron-approved road from the Southern Highlands will open up the Hekiko area to loggers.
WWF and small-scale
The latest maps coming out of the PNGFA show no signs of recognizing WWF's conservation and development zone in the Kikori Valley. Although WWF has facilitated some good work with small scale timber development, it appears to be completely out-maneuvered by Chevron and the loggers. Chevron is using the good name of WWF, but Chevron's oil development is facilitating logging proposals.
Mount Bosavi (along with the Hunstein Ranges) is an icon of biodiversity priority. After four years of pressure and threats by loggers and the PNGFA, the landholders in the Bosavi are still holding out, and have refused to sign any FMA with the PNGFA unless it conserves Mount Bosavi, is a downstream processing project, with 49% landholder equity, and an access road to the Highlands markets. The PNGFA refuses to sign anything other than its own standard-form-take-it-or-leave-it contract.
Ioma Block 5
The PNGFA wants to advertise this project but is being blocked by a court order.
Oil palm development
There are reports that the World Bank is promoting oil palm extensions in the area that is the habitat of the World Bank/Austaid sponsored Queen Alexander Birdwing Butterfly.
The Managlas Plateau
The landholders of the Managlas Plateau have so far resisted logging contracts. In conjunction with Partners with Melanesia and the Rainforest Foundation they are trying to build alternatives to logging. One initiative is that they are exporting betel nut by air charter to Port Moresby.
The PNGFA and the Oro PFMC still have not recognized the boundaries of Maisin people of Collingwood Bay. The PNGFA is trying to get at the Maisin peoples huge forest reserves by going through the back door, of East Collingwood Bay, in the Milne Bay Province.
Milne Bay Province
East Collingwood Bay
The PNGFA has approved the FMA for East Collingwood Bay. The landholders are split on the FMA issue and instructions to sue have been received. The project is a back door to the Maisin land in Oro Province see above.
The Sagarai Gedaisu TRP timber permit is in the hands of the receiver for Ulabo Timbers, Stinton Spence. The contractor Saban, an RH affiliate, has stopped logging. Stinton Spence and PNGFA lawyer Maurice Coglan are trying to persuade landowners to take over the timber permit. Ulabo has not yet traded its way out of its debts. The landowners are split. At least two groups in the Sagarai Valley want to do sawmilling themselves.
The latest information has The Nature Conservancy going back on its previous undertakings not to export log in this concession. TNC and Bill Ginn ( Sustainable Forest Resources ) are now saying that they will need three years of logging to make the project viable. This is exactly what other loggers say. The TNC proposal would only be acceptable if it could get FSC certification, and that is unlikely with export logging. This project appears to be stalled with solid landowner support for Komajo Pty Ltd, a Korean company and its "landowner company" the Josephstaal Development Corporation. The viability of the proposals favor SFR/TNC because they have US dollar assets and access to credit. The Korean company appears to lack asset backing. At present the PFMC is saying that SRC/TNC has the best bid, but the contract should go to Komojo for political reasons. The PNGFA is saying that is unacceptable, and is asking the PFMC to reconsider. Because of the landholder conflicts, involved this project should be cancelled.
Far North Coast Block 3
The PNGFA is pushing this project with three options, one of which is ecoforestry.
East Sepik Province
The Hunstein Ranges and the April Salumei FMA
The PNGFA has instructions to advertise this project, but it is awaiting an environmental assessment by the Office of Environment and Conservation. That assessment is likely to say that much of the FMA area cannot be logged, because it is part of a conservation area, it is swamp, or it has slopes over 30 degrees. These factors are unlikely to impede the PNGFA and there will be a court case.
This project has stopped.
Lower Sepik LFA
There is a dispute. The original contractor Musko Lumber stopped work, and a new contractor Heybridge Pty Ltd is said to be ready to take over.
There are signals that the proposals put forward by Eastern Era and San Kung are still current. These proposals involve logging huge areas of the Sandaun Province around Amanab and across to Lumi and Aitape.
Vanimo and WTK
These projects have come to a standstill because of the collapse of the log market.
There have been recent adjustments to the performance bond held by Damansera. This is a series of agricultural clearances in very doubtful circumstances. At present only 30 ha of oil palm have been established. The Government lifted any real controls over clear fell agricultural clearances last year. There are no controls at present. There are also signals that the Lou Project in the catchment area of Sissano Lagoon may go ahead.
East New Britain
The Warongoi case is still before the Supreme Court
Mukus Tolu FMA
It looks like that Gasmata Holdings, the company who got control over this pathetic concession ( garden land, logged out, too steep, etc. ) is in trouble. Gasmata has not signed the Project Agreement and was given 14 days to show cause in May 1998.
West New Britain
There are pressures from groups of landowners, and Sebulon Kulu of the WNB PFMC to establish an FMA and log on the Nakanai Plateau. This involves an over-lap between the East and West New Britain provinces. The overlap of jurisdictions between the two provincial forest management committees appears to be holding the logging up. This is an area of high biodiversity priority. The PNGFA has approved FMAs for Vanu Tamu, Aria Vanu Block 2. It has directed that the two FMAs be amalgamated with Rottock Bay. The Asengseng FMA is to incorporate some of the areas in these other blocks and the whole lot are to be advertised. This is really the Timber Supply Area scheme revisited. More logging for the logged out WNB province at a time when the market has gone. Irresponsible.
Asirim - Gasmata roadline project
A timber authority was granted to Gasmata Holdings to build a 110 km road in March 1998. The corridor width is 40 metres. It has a total resource volume of 11,000 m3 of logs. At current prices that grosses about K1.2 million. The cost of the road is said to be K20 to K30 million. Unless Austaid provides K20 to K30 million in aid the project looks unsound. Gasmata Holdings is associated with formwer forest Minister Andrew Posai, and his brother Peter Arul, the current Minister for Corrective Institutions.
The PNGFA has agreed to extend the West Kaut timber permit. This includes a clear-fell operation to make way for a rubber scheme. The contractor is the Neville family's South Pacific Timber Exporters.
There are also proposals to amalgamate the Lenai, Lak and Danfu TRPs. More logging for logged out New Ireland.
Export logging on Manus has stopped and Seal an RH affiliate has ceased operations. Landowner initiatives supported by GTZ a German Government development agency are progressing with a sawmill project.
Source: Brian Brunton, Greenpeace Pacific
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