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PAPUA NEW GUINEA RAINFOREST CAMPAIGN NEWS
Subject: Log Monitoring Flip-Flops
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Forest Networking a Project of Ecological Enterprises
http://forests.org/index.aspleases/orst-sde031999.html -- Forest Conservation Archives
http://forests.org/web/x.aspleases/orst-sde031999.html -- Discuss Forest Conservation
4/10/99
OVERVIEW & COMMENTARY by EE
The Independent, the weekly Papua New Guinea newspaper, is showing
once again that it can live up to its name. They are taking the lead
in documenting the serious forest crisis currently gripping Papua New
Guinea. In particular, their last two editions document government
indecision regarding continuation of log export monitoring. Last week
there had been indications that SGS would continue to provide
independent monitoring financed by a K2 tax (about USD .85) per cubic
meter. Now the forest minister has apparently scuttled this decision
and the future of log export monitoring is again in doubt. In
addition, in a hard hitting editorial board piece, the seriousness of
the current situation is made clear.
g.b.
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ITEM #1
Title: SGS log export monitoring still on
... NEC extends contract to Dec '99
Source: The Independent
Status: Copyright, contact source for permission to reprint
Date: April 1, 1999
THE log export-monitoring contract with SGS (PNG) Pty Ltd and the
National Forest Authority (NFA) which was due to expire today, April
1, will be extended until December 1999. This decision was taken by a
special meeting of the NEC on Friday, March 26, 1999 and overturns the
March 12, 1999 decision by the National Forest Board (NFB), which
would have allowed the contract with SGS to expire today.
To pay for the SGS monitoring service, expected to cost K3.3 million
in 1999, the NEC also instructed the minister for Forests, Peter Arul,
to impose a fixed levy of K2 per cubic metre on all log export from
PNG.
The submission to the NEC was signed by Prime Minister Bill Skate, as
minister for Forests in the absence of Mr Arul who was overseas.
Greenpeace PNG spokesman and forest specialist Brian Brunton said that
Mr Arul has been inconsistent in dealing with the SGS contract and
the export levy.
"Why was Minister Arul not at such an important meeting of the NEC?"
Mr Brunton asked. "Why did he disappear out of the country? The
minister has acted inconsistently in the performance of his duties to
ensure the best interests of PNG were safe-guarded against the
substantial loss of revenue which would occur if SGS ceased monitoring
log export shipments out of PNG."
A NFA brief to the NFB's meeting of March 12 informed the board that
the greatest benefit of the log export monitoring project carried out
by SGS since early 1995 was 'almost undoubtedly its deterrent effect
on log export companies from attempting to evade taxes. For instance,
if it is assumed that the deterrent effect was just 5 per cent of the
f.o.b. log export values, this would represent a saving to PNG over
the period of K79m."
The NFB ignored the NFA advise and determined to end the contract with
SGS on March 31. Mr Brunton's concerns are widely shared by observers
of the PNG forest industry. An expert on PNG forestry industry
yesterday told The Independent that the loss of SGS's inspection
services from April 1st would have had the outcome of almost
completely losing all tax revenue from logging exports and a drastic
fall in royalties to landowners.
The expert, who asked not to be named, stated, "Without log export
inspection, any logger could choose to do price transferring, mis-
declare the species, or under-state the volume and the value of their
log export shipments. As a result the state would lose income due to
tax evasion and cheating, causing a net revenue loss to PNG and the
landowners, whose royalties are computed on the value and volume of
log exports would be cheated of their entitlements."
"This would mean a return to the pre-Barnett Inquiry times when
robber-barons in the logging industry plundered the forests and
cheated the people and the state of hundreds of millions of kina."
Mr Brunton expressed much the same concerns: "The loggers really do
not want an independent log monitoring system that they could not
control. That is why the loggers want SGS out!"
Under Section 121 of the Forestry Act the Minister for Forests can
impose a levy, after consultation with the National Forests Board. The
NFB met on Wednesday, March 31, but it is not known whether Minister
Arul followed the NEC direction and consulted with the NFA on the
government's intention to introduce the levy.
The NEC also directed the Minister for Forests to inform the NFA, that
on the basis of retaining SGS for the remainder of 1999 and of
imposing a log export levy, the PNGFA should proceed to seek European
Union Stabex funding assistance of K1.5m for the 1999 year as a
transitional measure.
The expert who requested for anonymity also expressed deep concern
about efforts by some operators in the logging industry to wreck good
governance of the forestry industry.
"There are operators in the logging industry who are looking for ways
to weaken the entire operations of the Forestry Service. This under-
mining of the professionalism within the NFA is a matter of deep
concern to international donors."
He referred to unconfirmed reports that the General Manager of
National Forest Service, Kanawi Pouru has been relieved of certain
responsibilities by the Managing Director of the PNG Forest Authority
Thomas Nen.
"Mr. Kanawi Pouru is the most professional, hard-working, competent,
dedicated individual in the PNGFA!" the expert stated.
The Independent has spoken with a number of informed people who agree
with the expert's view of Mr. Pouru.
Apparently Mr. Pouru has not been specifically demoted from the
position of General Manager of the NFS but he has been relieved of
duties relating to a special task force to fast-track 15 new
industrial logging operation.
Observers, including a flood of international writers of letters to
The Independent, are deeply worried by the current government's
instructions to 'fast-track' these new operations. Mr. Pouru is widely
regarded to have acted professionally to ensure that 'fast-tracking'
does not lead to illegal process in breaching forest legislation and
over-turning sustainable forestry management
practices.
Mr. Pouru's responsible approach is said to have frustrated and
exasperated major logging interests who want to get their hands on the
last remaining major timber stands in PNG. Most of these remaining
concessions are in the Western, Gulf and Sandaun provinces. This means
that the current government intention is to grant millions of hectares
of rain-forest, most of the country's remaining rain-forest resource,
to be allocated with great haste, and outside of forest legislation
and regulations.
It appears that 'fast-tracking' of these 15 operations would take away
the last remaining major timber resources in PNG. Mr. Pouru has been
insisting on adherence to correct procedures which has effectively
delayed the granting of these new concessions. Neither Mr Pouru and Mr
Nen have been available to comment to The Independent on these
matters.
Documents obtained by The Independent include a NFA brief to the NEC
which states that the current industry situation is that, compared to
the period prior to the log export tax reduction, approximately double
the volume is being logged for less than the same amount of log export
tax revenue.
"Log prices" according to the NFA brief: "are expected to continue to
rise this year to a level of around K200 per cubic metre. A small K2
per cubic metre export monitoring levy would not adversely affect the
viability of most efficient log export operations."
ITEM #2
Title: Why sacrifice our forest to bail PNG out of crisis?
Source: The Independent, Editorial Board Opinion
Status: Copyright, contact source for permission to reprint
Date: April 1, 1999
AFTER almost three years of toeing the line, the government is now
pushing to fast track about 19 new logging projects. The reason for
this is simple - bring in the desperately needed foreign exchange to
prop up the weak kina. Since the mining and petroleum companies are
not bringing in their earnings except to pay their taxes, our
country's forest is once again on the chopping block. This time, to
bail PNG out of its financial crisis, and not too many people are
jumping up and down about this very very short term measure.
The approval given to some of these forestry projects is highly
questionable. However, like everything else in this country, politics
and the whims of politicians is what counts - never mind the long term
detrimental effects to the environment, or the financial returns to
the villagers.
With the export tax on logging reduced, are the economic gains worth
fast tracking so many of our remaining rainforests? Given the current
world price of logs, is PNG benefitting from this or the logging
industry? What are the alternatives to logging, or is that no longer
economically viable?
These are questions we want answers to and demand that the government
and its advisors honestly answer them.
The fast tracking of these new projects are worrying in that the haste
to get them up and running, short cuts will be taken, where the law is
circumvented, environment impact assessment is bypassed and incorrect
species and quantities reported.
The danger of the industry reverting to the pre-Barnett days is very
real.
Another area of concern is the manpower capacity within the PNG Forest
Authority to ensure that these new projects are all above board. The
Forest Authority is also included in a mass retrenchment exercise
currently underway in the public service. Will there be enough
officers left to monitor these new logging ventures?
While we welcome the government's extension of the SGS contract to
monitor the log exports, the renewal is only up to December 1999. What
happens after December? Given the inevitable staff shortage within the
Department of Forests by December, the monitoring of logs may cease
altogether if the SGS contract is not renewed.
Unless there is consistent monitoring of the log export, the revenue
earned would not be worth the wholesale plundering of the forests.
Why should we sacrifice our forests to bail PNG out of its economic
crisis - a crisis created by the leaders of this country?
A responsible government would also look at the two powerful resource
sectors, mining and petroleum, and get them to bring back onshore the
desperately needed foreign exchange, instead of being content only
with the scraps being thrown our way now.
Why is the government so reluctant to push this through? The only
conclusion one can draw from this is that the government is not
prepared to take on a goliath - given their experience with the fly-
in-fly-out tax. However, in the case of forestry, it is the village
people whose interest is at stake and the government is not too
concerned about that.
While mining and petroleum may earn more than our logs, they are non-
renewable, so why fast track forest projects which may strip the
country bare by the time mines and oil also reach the end of their
lifespan?
ITEM #3
Title: NEC revokes log export levy
... Decision comes days after levy was imposed
Source: The Independent
Status: Copyright, contact source for permission to reprint
Date: April 8, 1999
THE National Executive Council (NEC) has reversed its decision to
impose a levy on log exports only days after making the decision to
impose such a levy.
The Independent reported last week that the NEC had met on Friday,
March 26, 1999 and directed the minister for Forests, Peter Arul to
impose a levy of K2 per cubic metre on export logs to pay for the
costs of the log export monitoring contract with SGS (PNG) Pty Ltd.
The NEC also instructed that the contract with SGS which was due to
expire on Thursday April 1, 1999 be renewed and extended to the end of
1999. Prime Minister Bill Skate stood in as minister for Forests, in
the absence of Mr Arul who was overseas, put the proposals to the NEC
on March 26. It is understood that upon minister Arul's return early
last week he met with the prime minister and this resulted in the levy
being revoked by the NEC in last Wednesday's meeting.
Mr Arul's opposition to the levy is baffling to informed observers.
The minister is reported to be opposed to the levy because he believes
that the National Forest Authority (NFA) lacks the capacity to collect
the levy.
An informed source within the NFA refutes the minister's opinion and
states, "It is a simple procedure! It would be collected by Customs.
The amount of the levy is a straight calculation of the log volume
being exported as shown on the Bill of Lading multiplied by the K2
levy. A cheque would be drawn by the log exporter prior to export and
ship clearance at the same time as the Customs Duty is collected.
Customs would give the cheque to NFA who would hold the cheque in a
log export trust fund."
Minister Arul did not respond directly to our inquiries but he is
understood to be visiting his Kandrian electorate to check on damages
following Monday's earthquake in the area.
The minister did however send out a press release in which he stated
that he was in support of the log monitoring program. The press
release makes no mention however of the log export levy, nor that the
levy was cancelled by an NEC meeting which the forests minister had
attended, whereas such a levy was earlier approved at an NEC meeting
when he was absent.
NEC's decision of March 31, 1999, to continue the SGS contract but not
to impose the levy means that the funding for the contract in 1999
will come from the government, rather than through the levy of K2 per
cubic metre which was to be imposed on the log exporters, as a user
pay levy.
The NFA in a briefing paper dated March 12, 1999 advised the NFB and
subsequently, the NEC that the forest industry could easily afford the
levy because log prices have risen recently and are predicted to
continue to rise throughout 1999.
The cost of the SGS contract for 1999 is K3.3 million. It is
understood that the government hopes to obtain K1.5m from European
Union Stabex funds to pay for part of the contract but the balance of
about K2m must be found within the PNG budget or other domestic
sources. Informed sources state however that the European Union will
insist on guarantees that the log export monitoring will be continue
beyond 1999 before they agree to release the K1.5m.
To obtain the K2m. the NFA will have to make the case to the Budget
Implementation Committee (BIC). Since last week the BIC is headed by
Dr Pirouz Hamidian-Rad, the government's chief economic advisor.
It consists of the chief secretary Robert Igara, secretary for
treasury, Brown Bai, the attorney general, Michael Gene, the secretary
for personnel management, Bill Kua and James Loko, the commissioner-
general for internal revenue commission.
The Independent is informed that Dr Hamidian-Rad had earlier opposed
the extension of the SGS contract on purely economic grounds. The NFA
in its brief to the NFB to the March 12 meeting advised the NFB that
Dr. Hamidian-Rad had stated at a recent meeting that he sees no
benefit in the log export monitoring project. The brief stated, "this
(attitude of Dr Hamidian-Rad) seem strange given the facts, and is at
odds with both his own earlier actions as a World Bank representative,
and with statements by each of the minister for forests, the deputy
prime minister and the secretary for the treasury who were all
supportive of the project."
The 'facts' referred to in the NFA brief is that the SGS contract
since its inception in 1995 has represented a saving to PNG over the
period of K79m, plus K22m on customs duty & company tax and K34m in
foregone foreign exchange earnings totaling K135m, at a cost of only
K15.1m until the end of 1998.
Dr Hamidian-Rad has not been available to respond to The Independent's
requests to comment. Meanwhile, SGS continues to carry on with its log
export monitoring tasks even though its contract officially expired
last Thursday, April 1. The NFB met again yesterday afternoon to deal
with the NEC direction to extend the SGS contract. The outcome of the
afternoon deliberations was not yet known when the newspaper went to
print.
SGS's General Manager, Bruce Telfer informed The Independent that he
has been requested by the NFA Managing Director Thomas Nen to carry on
with log export monitoring because the NEC doesn't want SGS to stop,
despite the contract having expired. "Contractually we should stop log
monitoring but given Mr Nen's assurances, we are continuing but only
for the next week or so, so as to demonstrate our goodwill."
He stated that SGS must start winding down soon because it has
contractual obligations to its staff, so all the staff have been given
a month's notice of termination from April 1, 1999.
Mr Telfer explained, "We will reverse those staff terminations if the
contract is renewed quickly. We are endeavouring to carry on as
normal in the short term, but the clock is ticking.
Given the NEC decision, we are optimistic that the NFB will agree to
extend the contract in due time so that the log monitoring project is
not jeopardised."
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