Subject: The latest missive from Greenpeace--Papua New Guinea regarding _Significant_ developments in rainforest conservation there... >FOREST UPDATE >PAPUA NEW GUINEA >MARCH 1999 > >Brian D. Brunton >Greenpeace Forest Specialist > >Greenpeace economic analysis of logging in Papua New Guinea > >A recent draft report concludes : >"The Government of PNG should reject commercial logging on at least three >counts: >1. It is spending as much if not more on managing the logging industry as >it receives in rent.2. The Government costs in establishing a new concession >exceeds the benefits they receive. 3. Conservation of the forest has more >economic value than logging. The 1998 tax schedule-based on US$ logging >costs and prices- is probably overly generous to the logging industry and >they are earning windfall profits" > >The effect of the export log tax reductions > >Log Exports Monthly summary for the last four months of 1998: > >month volume m3 value FOB million kina duty payable million >kina > >Sept 98000 14 4 >Oct 113000 16 4 >Nov 148000 20 1 >Dec 202000 14 3 > >Year >'98 1,613000 218 47 > >The effect of the tax is "approximately twice the volume is being logged >for about half a million kina less revenue per month". > >Peroz Hamardarian Raz, the PMs economic adviser, is refusing to give the >PNGFA the K3.2 million needed to fund export tax surveillance, done by SGS. >The SGS contract expires on the 31 March 1999. The PNGFA does not have the >capcity to do the surveillance itself. The loggers will go back to transfer >pricing, (misdescription of species, quantities etc). There is great concern >over this amongst senior officials in the Commission for Internal Revenue >and the PNGFA. This revenue issue is complicated because the PNGFA is using >the opportunity created by the SGS crisis to pressure for a bigger budget >in 1999. > >The push for new logging projects > >A government effort is being made to get beyween 12 to 19 new logging >projects operational in 1999. A directive went out in December 1998 to >Provincial >Forest Manangement Committees for them to fast track logging projects. Many >forest officials are delighted at the prospects of new logging projects. >Others realise there is a capacity problem. > >Two forces are at play. > >The first is a push for these projects coming from the Prime Minister's >Department ( Peroz Hamardarian Raz the PMs economic adviser). He has the job >of keeping the kina strong, and is advocating new logging projects because >the GoPNG needs US dollars to keep the kina from crashing. > >Recently the kina has hovered around US cents 43 to 45. Papua New Guinea's >major dollar exports are petroleum/gas and mining products, but the GoPNG >(because of its own weakness, and the relative power of oil and mining >companies) has agreements with these industries that allow them to keep >their gross receipts in US $ off-shore, and only bring in-country sufficient >US $ to pay their domestic liabilities. An expansion of export logging is >seen as the best option in the short-term to bring in US $ to hold up the >kina. > >In effect, the power of the oil and mining industries drives forest >destruction in Papua New Guinea. > >The second driving force is the link between key political elites and >logging companies. > >Logging companies have subverted the goverence of Papua >New Guinea and are able to get what they want from the elite. They are able >to do this dispite the obvious negative economic, social and environmental >consequences. The elites argue that the the new initiatives merely represent >the political will of landowners. But this claim does not stand up to >serious scrutiny. Landowners in many concessions are split on the issue of >export logging. In some areas industrial logging is firmly rejected. Put >simply, landowners are becoming sentisive to the adverse economics of >logging. K10 a cubic metre is not enough, and they are becoming more and >more >uneasy about the environmental and social impact of logging. > >The issue of logging as a subversion of goverence in Papua New Guinea is now >crucial to the whole of the economy because goverence of forests is now a >matter of key conditionality with the World Bank. > >Realtionships between the Bank (+ the IMF) and the GoPNG have broken down >over forest matters (and other issues), the loggers have destabilized the >ship >of state. Other lenders and donors follow the Bank when assessing risks. >With an economy out of control, and big business very frightened, the power >elites in >government are now taking desperate measures to prop up the kina and prevent >further economic decline. The prophets of doom in the rumor-mills say the >economy will collapse at the end of 1999, the more optimistic say by mid >2000. The Australian Government wants to reduce its aid support to PNG. > >The PNG Forest Authority does not have the budget to implement or administer >the new projects. Its budget has been cut down to K18 million from an >effective K23.2 million in 1998. Apart from this the kina has devalued. The >PNGFA is in the middle of a big retrenchment exercise to try to bring its >staffing levels within budget. The PNGFA will have little capacity to do >anything in 1999, and the most likely scenario is that projects will be >implemented illegally, and the loggers will be able to do what they want, >without fear of supervision or regulation (business as usual). > >There are three lists of new projects scheduled for fast-tracking in 1999: > >Forest Board list PM's Dept list projects in >common > >Josephstal(Madang) Josephstal Josephstal >Middle Ramu(Madang) >Amanab 1-4(Sandaun) Amanab 1-4 Amanab 1-4 > S.W Wape(Sandaun) > Aitape East Coast(Sandaun) >April Salumei(East Sepik) April Salumei April Salumei >Morobe South Coast >East Awin(Western) East Awin East Awin >Wipim Tapila(Western) Wipim Tapila Wipim Tapila >Makapa(Western) Makapa Makapa >Kamula Doso(Western) Kamula Doso Kamula Doso >Semabo/Fly(Western) Semabo/Fly Semabo/Fly >Hekiko(Gulf) Hekiko >Hekiko >Turama Extension(Gulf) >East Vailala(Gulf) >Vailala 2-3(Gulf) >North Bongas >Rottock Bay >Asengseng >Mukus Tolo Mukus Tolo Mukus >Tolo >Musa-Pongani(Oro) > Collingwood Bay(Oro) > Ioma Blk 5(Oro) > Cloudy Bay(Central) > >PNGFA attacks small-scale producers > >The PNGFA issued a circular in the Islands Region addressed to "All 500m3 >Operators" effectively stopping their operations. > >The PNGFA has long considered small-scale producers a thorn in its side. >Prices of rough sawn timber vary between K200 to K600 m3, and even with the >costs of production at K100-K150m3, profits are far superior to the K10m3 >royalty from export logs. Landholders use small-scale for social purposes as >well as commercial purposes. > >The PNGFA is now sending notices to NGOs and other groups who operate >small-scale projects telling them they have to apply for Timber Authorities. >This is because the Forestry Regulations were brought into effect in >mid-1998. Regulation 250 purports to require any comercial producer, even if >they produce less than 500m3 per year, to get a TA. It would appear that >Regulation 250 is in legal effect an amendment to >the provisions of the Forestry Act (which allowed all producers of less than >500m3 per annum to do so without a TA. Regulation 250 is ultra vires, beyond >the powers of the regulations. (The Regulations were brought into effect >without >having been put before Parliament, so the bureaucrats effectively wrote >their own laws). The PNGFA has shown it is incapable of regulating the >foreign logging industry, so it is now proceeding to smother its own people >in red-tape. This move is a disaster for the ecoforest industry. > >EU projects export FSC timber to Olympic Games Village. > >The Islands Region Environmental and Community Development Program, funded >by the European Union sent its first shipment of Forest Stewardship Council >certified timber to Sydney, for use in the construction of the Olympic >Village. FSC certification is a label showing that the timber is sourced >from an operation that is ecologically sustainable. The timber was produced >using smallscale eco forestry by Sulu, Kilu and Mareka Villages in West New >Britain. > > >Summaries by provinces > >The main push to open new logging projects is along the western border and >in the Gulf Province. The area along the western border is part of a forest >that stretches into Irian Jaya and the the largest untouched tropical >rainforest out side the Amazon. > >Western Province > >Kamula Doso > >The National Forest Board, in February, decided to use/misuse powers under >the Forest Act to extend the Wawoi Guavi timber permit (434,000ha) >allocated to Wawoi Gauvi Timber Co, a Rimbunan Hijau subsidiary to include >the Kamula Doso FMA Blocks 1,2,&3, 800,000ha., under Rimbunan Hijau's >timber permit. > >There are at least two other companies interested in the Kamula Doso >project, Sine Darby and a company with links to a former Governer General >Wiwi Korowi (and Australian investors?) called Wiko Holdings Pty Ltd.. In >the circumstances the direct allocation to RH is a misuse of discretion. >At the time the allocation was made the Board had been petitioned by the >chairmen of several Incorporated Land Groups calling on the board to >advertise the project. The Board does not appear to have considered this >petition, instead it had before it submissions from Wawoi Tumu Holdings, a >"landowner company" incorporated by Warner Shand lawyers, who are known to >act for Rimbunan Hijau subsidiary and associate companies. > >Representations calling for advertising, or supporting Sine Darby, >had been made by the Western Province Provincial >Forest Management Committee, the Provincial Governor, the Provincial >Execitive >Council. The Recommendation of the Managing Director of the PNGFA was to >advertise and call tenders. Representations to the Board to allocate >directly to Rimbunan Hijau were made by the Secretrary for the Department of >Environment and Conservation, Dr. Wari Iamo. It is not understood on what >basis he put his views. There have been a long standing complaints against >RHs forest management practices in Wawoi Guavi. The Project Options Study >has not been released. The decision of the Board has produced a long list >on legal non-compliance. > >Makapa 301,000ha. > >Information received has it that pressure was put on the Minister to issue a >show cause notice against the permit holder, Innovision, for delay in >proceeding with the start of operations (project agreement approved in >1995). The pressure is said to be coming from another logging company >competing for access to the forests in the Western Province. > >Innovision hired a contractor to clear a camp-site in December. Innovision >also hired trainers from the European Unions Islands Region Environmental >and Community Development Program. The trainers conducted a two week >small-sawmill course. It appears that Innovision has been pressured into >action by the threat of a >show cause notice. It is known that PNGFA officers are checking on the >capability of Innovision to log in Makapa. > >East Awin 201,000ha > >The Western Provincial Forest Management has recommended, and the Boaard as >accepted the recommendation, that this concession be given to General Lumber >Nuigini, a company that is believed to be a subsidiary of Sine Darby Bhd. > >It is said that Sine Darby has ambitious plans >to log all down the Strickland River, and to establish a rubber industry. >There has also been talk of oil palm. Other plans are said to include a >conservation area around Lake Murray. The Development Options Study for this >project is an incompetent document. It argues one issue: that the project is >suitable for logging only. There is no economic analysis in the DOS. > >Kiunga Aeanbak Road > >There is much disatisfaction with the logging project on the Kiunga-Aeanbak >road. The issuing of the Timber Authority was improper. There is >disatisfaction over royalty payments. Landowners have engaged a private >lawyer. The Provincial Forest Management Committee, for the second time, has >asked the Managing Director of the PNG Forest Authority for a show cause >notice to be issued against the logging company. The maladministration of >timber authorities for agricultural clearances and roadlines is a major >issue of World Bank conditionality. The complaints of the PFMC in this case >shows that the World Bank is quite correct in taking a firm stand on this >type of loan conditionality. > >Tapila Wapim > >The Western Province Provincial Forest Management Committee, after pressure >from the PNG Forest Authority, agreed to an extension of the Oriomo TRP >24,000ha, to include the Tapila Wapim TRP 243,000ha, and the current >operator Forest Management Services a company controlled by Jim Belford, a >former executive officer of the PNG Forest Industries Association. > >It is not possible lawfully, to extend a concession by 10 times it size. >That is not an extension, it is a new project, and is merely a device to >avoid competitive tendering. > >This decision was made over the protest of landowner representatives who >called for an investigation into the permit holders activities and pointed >out that there had been complaints about labour conditions and royalty >payments. > >The Development Options Study for this project is an incompetent document. >It argues one issue: that the project is suitable for logging only. There is >no economic analysis in the DOS. > > >In 1998 there had been bush fires which burnt out 50% of the resource, and >the current allocation is considered a "salvage operation". It is believed, >but cannot be confirmed, that the contractor in Oriomo is a Rimbunan Hijau >conn ected company. WWF consultants have confirmed that Tapila Wapim is an >area of high endemism. Austaid is considering an aid project for the >Trans-Fly area in which Tapila Wapim is located. > >WWF has interests in this area as it operates a trans border wetlands >conservation project. > >Semabo FMA-Fly > >The Semabo FMA, most of which is swamp, is to be combined with a new FMA, >probably the Balimo-Fly area. The timber permit holder for Semabo handed the >permit back to the PNGFA saying it was not commercial. Balimo Fly is a >bigger area but about 60% swamp. > > >Sandaun Province > >Amanab Blocks 1 to 4 > >The Board recently approved the FMAs for Blocks 1 and 2. Blocks 3 and 4 were >approved about 3 years ago. Much of this area is swamp. > >South West Wape FMA > >There is an attempt to fast-track this project. A petition for the >liquidation of San Kung Sepik Ventures Limited was made to the National >Court last month. San Kung was involved in promoting a huge forestry project >in the Sepik Provinces in 1998. > >Aitape East Coast > >Another project on the Prime Ministers fast-track list > >East Sepik Province > >April Salumei FMA > >The PNGFA has reniged on its undertaking to exclude the Hunstein Ranges >Wildlife Management Area from the FMA. This is part of the PNGFAs fast-track >strategy. Court action is now underway. WWF has its Sepik Landcare project >in this area. > >Madang > >Josephestaal FMA > >It is still not clear whether the Nature Conservancy/Sustainable Forest >Industries has been awarded the timber permit. There is opposition to TNC on >the ground, and in Waigani, although the PNGFA advisers favour the bid. The >opposition comes from Ministers and "landowners" who favour the Malaysian >and South Korean companies who also bid for the project. The TNC bid is >under-capitalised, which means that TNC will have to do export logging >before it gets into downstream processing. > >As export logging is the major cause of forest loss in Papua New Guinea, TNC >is not showing a good example. > >All logging companies promise to do downstream processing, providing they >can do export logging for the first few years to raise the capital to buy >the processing machinery. > >TNC is the only major environmental NGO in Papua New Guinea not to accept >that there needs to be a moratorium on export logging (even the World Bank >and senior forest officers have come to accept that). > >Middle Ramu/Ramu Block 1 > >A further difficulty appears to be that Josephstaal is too small to do >so-called "sustainable logging". So there is a move to combine the >Josephstaal FMA with a block that is described at times as "Ramu Block 1", >and >at other times as "Middle Ramu". This initiative seems to be part an ITTO >backed scheme to develop a "model forestry project". ITTO wants to have >sustainable forestry by the year 2000. But there is no chance of that, > >Two areas have been >identified for this, Ramu and Musa Pongani in the Oro Province. Ramu would >appear to be favourite as it is linked with UNDPs Ramu ICAD, a conservation >scheme and subsidy to the Highlands Pacific mine at Ramu. > >But there are problems with Middle Ramu. About half the population wants to >do pure conservation: a Wildlife Management Area. This feeling is so strong >that landholders (under the influence of alcohol) attacked TNC campaigners >(no serious injuries). TNC is having real difficulty on the ground >convincing landholders that there is such a thing as "sustainable logging". > > >West New Britain > >Asirim-Gasmata T.A. > >Asirim Gasmata Road Alignment Timber Authority appears to be nearer getting >approval. But no environmental plan yet. The TA will be held by Gasmata >Holdings the directors of that company include Peter Arul Forest Minister, >Andrew Posai former forest minister, Isidore Teli. The PNG Banking >Corporation >holds a floating charge over all the property and shares of the company (i.e >the company has a big debt to the Bank). > >Rottock Bay FMA > >On the PNGFAs fast-track list > >Asengseng FMA > >On the PNGFAs fast-track list. Most of this area is too steep for logging >and or karst. It is an irresponsible encroachment on the Whiteman Ranges > >East New Britain > >Open Bay > >The ENB Provincial Forest Management Committee has recommended that the Open >Bay Timber Permit not be renewed. It is likely that PNGFA will ignore the >PFMC. > >Mukus Tolo FMA > >This project is on the PNGFAs list for fast-tracking. The timber permit >holder is thought to be Gasmata Holdings, a company with Peter Arul >Minister for Forests as a director. It has been held up because Gasmata had >not signed the project agreement. It is suspected that Gasmata has liquidity >problems as it is indebted to the PNG Banking Corporation. > >Gulf Province > >Hekiko > >Hekiko is on the PNGFAs fast-track list. It is believed the timber permit is >held by the Yeung's Corporation of Hong Kong. The opportunity for logging in >this area is ripe because Chevron will build a gas pipeline and road for the >PNG-Gas Project. This will open up the area for loggers. The EIA has been >published, but with only limited circulation. There can be no doubt that >logging will follow the road once the new road opens up the Kikori Valley. >Hekiko is mainly karst (logging is forbidden on karst), otherwise it is too >small for any form of sustainability. WWF monitors the environment in the >Kikori on behalf of Chevron. > >"East Vailala" > >This is probably Vailala Block 1, currently held by Long Kong, a Chinese >company. The project is on the Prime Ministers fast-track list. The project >has been mis-managed in the past, and the previous permit holders threatened >with show-cause. The PRC Government intervened and had the permit holder >restructured into Long Kong. > >Vailala Blocks 2 and 3 > >On the Prime Ministers fast-track list. Permit held by Frontier Holdings a >company with no real shareholders. The allocation of the timber permit was >highly irregular. There has been a lot of new machinery on site since late >1998. It is thought that the contractor, if not the control of this project, >is in the hands of Rimbunan Hijau. > >Turama Extension > >This project is on the Prime Ministers fast track list. > >Oro Province > >Collingwood Bay > >Maisin landowners have made it clear to the PNGFA that they want to conserve >their forests and have no part of the fast-tracking exercise on their lands. > >Musa Pongani > >This area is next door to Collingwood Bay. Maisin landowners own land in >Musa Pongani. The area has large swamps. It is unlikely that a logging >project will get up here. > >Goro Itakama > >The Managlas Plateau people have told the PNGFA that they want to conserve >their land and do not want it included in any FMA. > >Ioma Block 5 > >This area is on the Prime Ministers fast track list. About 50% of the >landowners do not want logging. In the adjacent Ioma Block 4, the landowners >chased the loggers out several years ago. > >Brian Brunton > >5 March 1999 > > > > > > > > > > >