Disastrous Forestry Policy

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OVERVIEW & SOURCE by EE

Following are two very interesting newspaper accounts of the major drama playing itself out in Papua New Guinea concerning implementation of new forest timber revenue structures and rates. Despite intense local and international NGO pressure, World Bank and other investor concern, and increased political condemnation; Prime Minister Chan apparently has indicated he will "lift the new revenue system for the forestry sector."

There has been quite alot of PNG timber industry activity recently, with the general trend of foreign owned industrial forest clearing strengthening; in effect, insuring that the significant PNG rainforest ecosystem will not survive unfragmented into the 21st century. Numerous rainforest clearcuts proceed under the guise of oil palm development. Besides the Sandaun project we reported on recently, the Normanby project in Milne Bay is a proposed K200 million "agro-forestry" project. Too bad most of the forestry part involves clearcutting incredibly old and diverse tropical moist rainforest.

A ferocious battle has been being waged between the PNG foreign timber multinationals and local environmental and peoples organizations. The issue being a new timber revenue structure which increases royalty rates paid to landholders (on a per unit basis) when timber prices are high (many current concession pay K4-8 for a cubic metre, the new rate would be K23 at current log prices). Additionally; new tariff rates were to increase government revenue. While the government has implemented the new tariff rates, the landowner component remains unimplemented. The Individual and Community Rights Advocacy Forum has been running full page advertisements weekly for several months questioning delays in implementation of the new landowner royalty system. Item #1 contains the full text.

Joining the very vocal local criticism of failure to revamp the timber industries revenue structures has been the World Bank, which has made follow through on forestry reform issues a condition for aid. I will be sending the recent front page article entitled "World Bank recommends new forest revenue system" shortly which concluded that "returns to logging companies were adequate" and that the new level of taxation and royalty rates were appropriate. The fact is that prior to Prime Minister Chan's recent statements that the new revenue policy would _not_ be implemented; we had a PNG government saying they were for this new revenue policy. Virtually all civic and peoples organizations in PNG are on record as saying that a new timber revenue policy is needed. Major donors like the World Bank are deeply concerned about the clearly unsustainable and uncontrolled rainforest cutting in PNG. And a large and diverse international audience is concerned ecologically and sociologically with what is happening in PNG.

One group does not want to see this legislation go through. The hugely profitable multinational timber liquidators don't want to share their billions. The fact that this new timber revenue system is not yet in place is a testimony to the extent to which the mostly Malaysian, but including other timber multinationals, have penetrated and control policy in Papua New Guinea. What is occurring is shocking, and immediate attention to the out of control timber mining and political intervention occurring in the South Pacific is necessary. If not, people will suffer and the natural environment will be much reduced for the conceivable future.

ITEM #2 relates parliamentary opposition to Prime Minister Chan's forest policy, based upon the above and additional issues. This item, though clearly politically partisan in nature, illustrates many interesting facts. For example, it is claimed that not a single major downstream processing plant has been built though many have been promised. It is seriously alleged that current government policy threatens PNG sovereignty. Furthermore, the completely dominating and litigatious Rimbunan Hijau of Malaysia is taken to task by name: "Who is Rimbunan Hijau to come in and dictate to us as an independent nation that the policies we adopt for the interest and the benefit of this country are not competent and conducive to their business activities."

IN my opinion, in Malaysian timber interests control of PNG forest policy, we have a new clear indication of how political and economic control will be exercised in an era of increasingly scarce resources. If the US can send troops to defend its oil in Kuwait, who is to condemn Malaysian bribery and corruption to guarantee their continued forest resource use (largely selling to Japan).

Both items are from _The Independent, a wonderful PNG English newspaper. Have been a bit behind with PNG Rainforest News as getting the 800 PNG articles from the past 6 years archived at < http://forests.lic.wisc.edu/pngforest.html >. If anyone has any ideas on how this PNG Rainforest Campaign should proceed, it would be appreciated. It is difficult to see a winning endgame, as PNG's forest resources continue their precipitous decline.

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ITEM#1

Paid Advertisement by Individual and Community Rights Advocacy Forum Inc, a PNG NGO

Source: The Independent
Date: March 29, 1996
Page 22

ICRAF
ALL FOREST LANDOWNERS!
YOU ARE LOSING MILLIONS OF KINA

In his budget speech on 22nd November 1995, the Honourable Chris Haiveta said,

"I AM INTRODUCING A NEW TAX AND LANDOWNER ROYALTY SYSTEM, WHICH WILL GO INTO EFFECT IMMEDIATELY"

"The export tariff is amended to introduce the new revenue system which is a progressive rate of tax on log export based on FOB prices. Previously, different rates applied according to species. _There will also be a concurrent regulatory change by the National Forest Authority to increase royalty payments to landowners._ The new export tariffs and royalties will be structured progressively according to log prices as follows:


    F.O.B. LOG PRICE        MARGINAL           ROYALTY
    KINA/m3                 TAX RATE           K/m3

    0-90                    15%                K10
    91-110                  30%                K12
    111-130                 50%                K15
    131-150                 55%                K18
    151-200                 60%                K23
    Above 200               70%                K23 plus 7.5%
In volume 1 "Economic and Development Policies" presented by Honourable Chris Haiveta on the occasion of the 1996 Budget page 150; emphasis added.

The Government has already started imposing the new export tariff taxes. This is earning millions of kina for government.

The graduated royalty for Landowners on the other hand _is being delayed_ by the government under pressure from logging companies, resulting in huge losses to the Landholders.

This new royalty rate would mean that Landholders will be receiving between K10 per cubic metre, to K23 per cubic metre plus 7.5%, as royalty for all export logs.

The average price for logs is about K160 per cubic metre so for this price you should be paid K23 per cubic metre.

Only the Minister for Forest has the power to impose the new royalty rates. He has so far not done so. YOU ARE LOSING MILLIONS OF KINA!

REMEMBER LANDHOLDERS!

The government now proposes to set up a committee to look at the royalty issues. This is a delay tactic.

The government is earning millions of kina under the graduated export tax whilst you Landholders are losing millions of kina.

Individual and Community Rights Advocacy Forum Inc. PO Box 155, UNIVERSITY NCD.

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ITEM#2

Headline:  "Chan's Malaysia trip smells disaster for forestry 
            resources:  Yaki"
Source:     The Independent
Date:       4/12/96
Page 5

THE Opposition strongly condemned the Prime Minister's intentions to lift the new revenue system for the forestry sector.

Opposition Leader said, "The new revenue system put in place during the Wingti regime is the best recipe for the people of Papua New Guinea. I cannot imagine this system being removed because it was designed and put in place to bring adequate and quality infrastructure developments into logging areas.

"It is also adopted to boost our revenue base from this billion kina resource which we have not realised since logging began in the country.

"The people of Papua New Guinea cannot and must not be fooled by the Chairman of the Timber giant, Rimbunan Hijau, Datuk Tiong Hiew King and the Prime Minister, Sir Julius Chan. It was the very same company who made a similar commitment to build a K30 million wood processing plant down in the Gulf province when we were in government.

"To date this country has not realised a single downstream processing plant. Not even the one announced and promised by Rimbunan Hijau. When were in government, we had ten major proposals for down stream processing plants before us. This is what this country needs.

"The Government must make it absolutely clear to all timber companies that they must demonstrate their commitment to the country and the industry by building plants for down-stream processing. They cannot equate their commitment with the supply of logs.

"What is the Prime Minister trying to achieve for the people of this country by going out of his way to compromise the country's national interest for his personal and sectoral interests. The move by the Prime Minister to allow himself to be used by foreign investors amounts to selling the country to foreigners".

He stressed that the people of this country will not sit back and accept this to happen. The new revenue system must stay, we must not allow the wholesale of our logs for just one toea.

What Papua New Guinea needs is a forestry policy to develop a financially viable and internationally competitive log processing industry, not increased raw log exports.

"Chan cannot subject our forestry resources to the desire of foreign companies to exploit at will. Even to the point of selling the very sovereignty of this country by allowing them to dictate to use the terms of conditions of how they will reward us for exploiting our resources. Why should Papua New Guinea compromise its sovereign right to scrupulous companies who's only motive is to make fast money and disappear?

"Who is Rimbunan Hijau to come in and dictate to us as an independent nation that the policies we adopt for the interest and the benefit of this country are not competent and conducive to their business activities and must be changed?, questioned Mr Yaki.

"The attack on Papua New Guinea and the World Bank's new revenue measures on log exports by the Malaysian logging companies indicates sinister motives. The country's revenue base is limited, and the forestry sector must play its part in meeting our revenue needs. It has not done so anywhere near adequately enough. Chan must be not diverted from achieving this goal", he added.

"What this country will want to see is for its extensive forestry resources to be managed responsibly, and for the whole nation, including landowners and local groups to gain maximum benefits. That requires the on-shore processing of forestry products to maximise the value-added benefits and job creation which this country has been missing out for years".

You are encouraged to utilize this information for personal campaign use; including writing letters, organizing campaigns and forwarding. All efforts are made to provide accurate, timely pieces; though ultimate responsibility for verifying all information rests with the reader.

Check out our Gaia Forest Conservation Archives at http://forests.lic.wisc.edu/forests/gaia.html

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