Disastrous Forestry Policy
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
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
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
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.
Paid Advertisement by Individual and Community Rights Advocacy
Forum Inc, a PNG NGO
Source: The Independent
Date: March 29, 1996
ALL FOREST LANDOWNERS!
YOU ARE LOSING MILLIONS OF KINA
In his budget speech on 22nd November 1995, the Honourable Chris
"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!
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,
Headline: "Chan's Malaysia trip smells disaster for forestry
Source: The Independent
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 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
"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
"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
"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
"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.
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