Asia-Pacific Network: 2 January 1999
FORESTRY: ASIAN LOGGERS 'LAUGHING ALL THE WAY TO THE BANK'
Greenpeace Pacific forests specialist Brian Brunton brands the recent lifting of logging export taxes in Papua New Guinea as "scandalous" and his damning paper about the loss of the country's forests was gagged at a regional seminar. Newspapers say Asian loggers are now "laughing all the way to the bank".
By DAVID ROBIE in Port Moresby
PAPUA NEW GUINEA'S Government is under fire over "scandalous" tax breaks given to
logging companies and a threat to provincial forest management authorities over
an order to fast-track multimillion dollar timber projects.
Forests Minister Peter Arul has instructed provincial forest authorities to
immediately facilitate selection of a "developer of your choice" to meet timber
permit requirements and enable operations to begin in January.
The minister warned that failure to comply with this directive would mean
projects would be approved by the cabinet.
Arul cited Prime Minister Bill Skate as saying "downstream processing and export
of logs will create 50,000 jobs and boost infrastructure" in rural areas.
But Greenpeace Pacific's forests specialist Brian Brunton has warned that the
minister's letter to provincial forest management committees, dated December 9,
"contains an unlawful threat".
"The National Executive Council has no power under the [Forestry] Act to approve
any forestry or logging project, unless the procedures it uses comply with the
Act," he said.
In a statement, Brunton has called on the Skate government to abolish the tax
cuts, impose a moratorium on logging concessions and ensure sustainable
development of the nation's "most precious resource".
Skate has branded the claim as "mere allegations", but he has reportedly called
for a detailed brief on the tax cuts and their implications from the PNG National
Forest Authority managing director, Thomas Nen.
The Greenpeace call has received wide coverage in the national press and inspired
an editorial in the influential Post-Courier newspaper which condemned the
government for backtracking on logging export taxes on the Malaysian-dominated
industry.
"This government came in on a promise to safeguard Papua New Guinea's resources.
It introduced huge tax levies on log exports which slowed down logging
operations, giving those concerned about the destruction of our forests hope that
we have finally found leaders who are serious about the future of the industry,"
the newspaper said.
"That hope was stillborn as the logging lobby in the middle of the year forced
the government to review its rates because it was claiming depressed Asian
markets had cut their operations to shreds.
"The government relented because the industry laid off workers to prove their
point and closed down operations.
"Now what to do we see? A flurry of activity in the industry where logging
operations have resulted in nearly double the amounts of logs being exported in
three months compared to the first nine months of this year...
"Loggers have been given an open ticket again and they are laughing all the way
to the bank."
Brunton described the tax cuts and the resurge of logging exports as
"scandalous".
"Log exports in November were up about 150 per cent over the previous month's
average - from about 100,000 cubic meters exported per month prior to November,
to about 250,000 cubic meters exported in November," he said.
"We believe this is a direct result of the dramatic tax breaks that the Skate
government quietly pushed through in October."
The new tax breaks require logging companies pay absolutely no tax on any logs
exported at a price of under 125 kina per cubic meter FOB.
According to Brunton, these changes see on average, companies saving 25 kina per
cubic metre in taxes.
In fact, a recent study by Australian National University researchers Theodore
Lavantis and John Livernois found that the PNG government captured only 2.75 per
cent of total value under the recently reduced tax rates compared to around 33
per cent under the previous regime.
"Not only do these rates increase the incentive for companies to mislabel and
undervalue logs, but the government is now getting almost no income, landholder
royalties have declined to pre-Barnett Inquiry levels, and the nation's trees are
being exported at a furious pace.
"We are giving away one of the PNG's most precious resources.
"We have reached a point where it is better to leave the trees in the ground
rather than make logging companies rich at the expense of future generations,"
said Brunton.
However, Prime Minister Skate told the National newspaper his government had
secured donor-funding of US$35 million from the United States, Japan and the
Netherlands and had opened a trust account to "protect trees and the
environment".
"We're doing everything within our laws to protect our trees and our people,"
Skate said.
A damning paper by Brunton about the state of the industry, entitled "Forest Loss
in Papua New Guinea", was gagged at an Oceania regional workshop on deforestation
and forest degradation held in Nadi, Fiji, in September.
In a preface to the paper, Brunton explains: "Representatives of the United
Nations Development program, the PNG government and other Pacific Island
governments attempted to suppress this paper.
"On the basis that they had not read the paper and had not been given a chance to
respond, they took a position that unless [it] was withdrawn, they would not
participate in the meeting. They claimed the paper contained inaccuracies."
The Australian government also demanded that a paper presented on forest loss in
Australia be dropped.
In the end a compromise was reached in which all papers were formally withdrawn
and then discussed informally after regular workshop sessions.
Brunton's paper claims: "[Papua New Guinea has] about five to 10 years to bring
forest loss under control. After that time population growth will make forest
planning and management very difficult.
"Current policies and practices point to us losing this struggle. It is likely
that during the lives of our children, the accessible production forests will
vanish.
"Our children will be left with forests on mountains, in wetlands, in parks and
in a few other inaccessible places."
Brunton was critical of the International Monetary Fund and World Bank support
for logging exports: "The World Bank does not see Papua New Guinea as a producer
of manufactured timber products.
"One of the most pernicious structural adjustment program policies, indirectly
linked with forest loss, is the user-pays principle [which] forces rainforest
people to pay school fees and fees for health services.
"Anecdotal evidence from rainforest landholders suggests school fees are a prime
motivator for people to sell their timber rights."
Another factor was the free-fall of Papua New Guinea's kina currency.
Brunton also suggests that over the next few decades China will overtake Japan as
the major importer of PNG's round logs. Skate has just returned from a visit to
China.
"China must be counted as a likely major underlying cause of future forest loss
in Papua New Guinea. The Chinese government and provincial governments within
China actively encourage overseas Chinese to return and invest in China," he
writes.
"Hiew King Tiong, a member of the Fuzhou family originally from Fujian province,
is chairman of the Rimbunan Hijau group, based in Sarawak.
"Rimbunan Hijau is a major force in the logging industry of Papua New Guinea [and
the] group owns timber-processing plants in China."
As Brunton points out, the decision by the Chinese government to stop harvesting
logs from domestic forest reserves, and to import 10 million cubic metres of logs
over the next two decades "is a major event - and indicative of future trends."