By DAVID ROBIE in Port Moresby
Multinational logging companies have stepped up a defiant campaign to force the Papua New Guinea government to scuttle its current timber policy and scrap new royalties to landowners. The strategy has drawn angry accusations of "corporate blackmail" from environmentalists and bitter opposition in Parliament from former Prime Minister Sir Michael Somare and the outspoken onetime Forest Minister Tim Neville.
Top executives of the "big six" Asian-dominated logging companies which control most of the industry in July refused to pay an extra 10 kina (NZ$11.30) a cubic metre royalty on top of current taxes imposed by the government at the beginning of that month at the insistence of the World Bank. Forest Industries Association president Francis Tiong, whose Malaysian company Rimbunan Hijau dominates the industry and owns a fast-growing daily newspaper as well as growing media and timber interests in New Zealand, declared an unanimous decision had been reached not to pay the royalty.
"There is just no more money," he told his own paper, The National. "You think if there is money to be made, we are going to go to this extent to confront the government? The truth is we are losing money. We are going to close down."
The FIA executive officer, Jim Belford, warned the government might have planted the "kiss of death" on its dream of establishing a downstream timber processing industry in PNG. Belford also accused the World Bank of being arrogant towards forestry investors in the country and badly misreading the industry rates, timing and distribution. He said that in 1990 the government had collected almost NZ$16 million in export tax while in 1994 the amount had soared to almost $192 million.
"Since then markets have fallen, costs have increased and the government continues to ignore the plight of the sector," he said.
However, non-government organisations have boosted their own campaign, launched in mid-July with a fullpage advertisement in the influential weekly newspaper The Independent, declaring: "All forest landholders -- you are losing millions of kina!" The advertisement accused the government of not honouring its promise to pay landowners $26 a cubic metre on existing prices.
Placed by the landholders legal group Individual and Community Rights Advocacy Forum (ICRAF) and funded by Greenpeace, the advertisement pointed to Deputy Prime Minister Chris Haiveta's budget speech last November 21, 1995, when he said: "I am introducing a new tax and landowner royalty system which will go into effect immediately." But, said the advertisement, while the government had already started imposing the new export tariff taxes, the graduated royalty for landholders had been delayed under pressure from the logging companies.
Under the budget¹s new graduated royalty system, landholders were promised up to $26 a cubic metre plus 7.5 percent royalties. But Forest Minister Andrew Baing refused to implement the new system. It is understood that the Prime Minister, Sir Julius Chan, wrote to him to sign the necessary papers to ensure the country abided by its conditions for the World Bank¹s structural adjustment program. However, Baing announced at a press conference that only a partial implementation of the budget promise would take effect from July 1, 1996. And there would be no back payment.
Currently royalties paid to landowners amount to between $4.50 and $5.65 a cubic metre. Baing has increased that amount to between $6.8 and $11.30 (10 kina). The market value of logs is about $180 a cubic metre.
Environmentalists quickly attacked the new national forest policy, tabled in Parliament late in July, claiming it is really "a business brochure to tell everybody what remains to be logged". Instead, they have drawn up an "alternative NGO forest policy" which calls for the major emphasis to be shifted to small and medium scale community forest projects. It also emphasises the need for women to be involved in all aspects of forest-related development.
The policy also sparked bitter condemnation in Parliament from provincial governors Sir Michael Somare of East Sepik -- the "father" of the nation -- and Tim Neville of Milne Bay. Somare and Neville claimed the amendments, presented along with the National Forest Plan and the PNG Logging Code of Practice, would thrust Papua New Guinea back to the days before the mid-1980s inquiry by Judge Tos Barnett found widespread corruption and that the forest minister had too much power at his disposal. Somare added that the amendments were designed to enable the minister to appoint "yes minister" people to the Forest Board.
Nevertheless, the Forest (Amendment Bill) 1996 was passed in late July with an overwhelming 42-19 vote after the government gagged debate for the third reading. This restored total ministerial control after Forest Minister Baing had earlier sacked authority managing director Jean Kekedo apparently because her board had blocked too many government-backed logging concessions. Attempts by former Attorney-General Bernard Narokobi, a human rights lawyer and opposition MP, and outspoken Lae MP Bart Philemon to challenge the government before the final vote on the Bill were silenced by the government.
Over the past 18 months there has been a slowdown of log exports from Papua New Guinea because of changes in the export market, political setbacks for the loggers and a protracted wet season. An estimated 15 million hectares, worth $113 billion, of lowland rainforest remains. More than half of this is already allocated for logging.
Brian Brunton, an ICRAF lawyer and former National Court judge who is also a forest specialist for Greenpeace Pacific, says government activity remains centred around continued export logging. Politicians, officials and loggers have close alliances.
"Forest regulation is politicised, with honest and professional administrators too frightened to speak out," he said. "Information and statistics are hard to come by. The sole concern of the government is logging and planning future logging. No attention is being paid to conservation needs, biodiversity priority, and non-timber use of the forests."
Brunton had been a highly effective NGO representative on the Forests Board. But he was dumped by Forest Minister Andrew Baing in a shake-up that favoured the pro-logging lobby. Among the newcomers is Francis Tiong, head of the Rimbunan Hijau group of companies in Papua New Guinea whose Sarawak-based parent company also has media and timber interests in New Zealand.
Since the powerful head of his parent company, Datuk Tiong Hiew King, told a world forestry forum in Dublin last month that the "combined forces of anti-logging activists and organisations" had distorted the economies of developing nations, Francis Tiong's campaign has become more high profile.
"The industry, the FIA, is saying that there is no more affordability for the operators,""Tiong said, speaking for the six major operators -- Cakara Alam, Open Bay Timber, Rimbunan Hijau, Stettin Bay Lumber Company and the WTK group -- and smaller FIA members. "If the government wants to give more to the landowners, then it must come from the government's portion."
Francis Tiong warned that if loggers were forced to close down, the country would lose some $450 million to $565 million. The flow on from this loss would mean two or three times this figure and more than 10,000 jobs would be lost.
FIA executive officer Jim Belford claimed the royalty increase was the straw that would break the industry's back. He argues that the industry is being asked to pay an average of more than 50 per cent of income in tax revenue -- 36 per cent to government and 15 per cent to landowners.
After operating costs, most companies were operating at a loss, Belford claimed. He said some companies had the financial background to make a go of major timber processing plants "but the right conditions are not in place". Belford said it was uncertain when the policies would be changed as had been promised.
"Nobody will put one kina into processing because it will be a kiss of death," Belford said. "And the government's stated policy of downstream processing will be stillborn. It will come to nothing."
Following a recent visit to Malaysia by Prime Minister Sir Julius Chan, a government promise to change its policy was widely publicised. Noted PNG's biggest daily newspaper, Post-Courier, the Malaysian timber lobby had grabbed a golden opportunity to lobby Chan.
"Malaysian executives have not made any clear commitment to downstream processing of logs ... This is not acceptable to PNG. They must make a clear statement on their intentions and that statement has not been made," the paper said.
According to Brian Brunton, landowners have lost up to $30 million in unpaid royalties since the beginning of the year when the graduated system should have come into force under the budget. At the same time, the government had collected its increased graduated log tax which was introduced at the same time.
Landholders in PNG were "locked into a set of colonial contracts" which put most of the logging surplus into the hands of loggers and the government, Brunton said. He condemned the new national forest policy for using "inaccurate, confusing and misleading" maps. "The plan also fails in any way to address the needs of women," Brunton says. "And it does not comply with the Forestry Act, because the act says that the plan must be based upon a certified national forest inventory which has never been done."
One analyst, Professor Ron Duncan, said in 1994: "The Melanesian logging contract arrangement distributes revenues from the sale of logs (which belong to customary landowners) in a manner which is economically unjust, and needs to be changed radically."
Brunton says the new initiatives will not alter this: "What the forest minister is doing is trying to confuse landholders. He will not succeed because K10 a cubic metre in the hands of landholders -- less 15 percent to the provincial gopvernment and less 5 percent withholder tax -- is not enough."
ICRAF has called for a complete overhaul of the way in which landholders sell their trees. Says Brunton: "Landholders should not have to sell their timber rights for a royalty. They should sell their trees on a coupe by coupe basis -- and be paid a market price." He believes this would encourage landholders to manage their timber assets in a ³businesslike manner², and help conserve resources for future generations. This would protect the environment.
But Brunton and other campaigners face an uphill battle against an all powerful logging lobby that is believed to have widely bought influence with cabinet ministers, and which has a daily newspaper to support its agenda.
Copyright © 1996 David Robie and Asia-Pacific Network
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