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PAPUA NEW GUINEA RAINFOREST CAMPAIGN NEWS

Forest Industry Grievances

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Forest Networking a Project of Ecological Enterprises

8/18/97

OVERVIEW, SOURCE & COMMENTARY by EE

After years of windfall profits and few if any controls on their

actions, the multinational timber industry operating in Papua New

Guinea is deeply threatened by government actions to reign in their

excesses and promote a more sustainable forestry industry (albeit it

industrial and still ecologically diminishing). The forest industry

is distressed that new revenue measures are finally to be fully

implemented, and blame their lack of in-country processing on others.

The timber industry has thrown down the gauntlet: they will only stop

exporting logs and do in-country processing if they are given access

to virtually all remaining potential production forests.

Additionally, they have shown they will use their considerable

political clout they have acquired to block any efforts to reform the

exploitative timber arrangements currently in place, including

continuing to threaten non-compliance with the government's timber

revenue laws. Note that in The National article, owned by the largest

timber operator, there is little attempt to report on the intricate

issue of forest sustainability; but rather, the plight of the poor

logging industry in propagandized.

If it is so difficult and non-profitable to log the rainforests of

PNG, perhaps the benefits of not logging the forests industrially

(environmental, societal, economic) exceed the benefits gained by a

few when heavy foreign owned logging occurs. Funny, despite all the

grumbling, you do not see any major operators pulling out-only

threatening to do so if they do not get their way regarding forest

policy.

g.b.

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ITEM #1

Title: FIA concerned over new levy

Source: The National

Status: Copyright by the National, request permission to reprint

Date: August 18, 1997

PORT MORESBY: The Government's project development levy (PDL) will

only bring more landowner dissent and problems for timber operators,

with little hope of rapid resolution, the Forest Industries'

Association has warned.

The PDL, introduced to administer the landowner companies' premium,

appears to stand directly opposed to the government's stated aim of

ensuring a sustainable local economy with community-wide

participation.

FIA executive officer Jim Belford said on Friday: "Effective control

of the landowner companies' money is removed from them and given to a

committee comprised mainly of bureaucrats who are far removed from any

real experience of dealing with landowners at the grassroots level.

"Such office models in respect of such operational matters won't work

and should be properly ventilated.

"We in the FIA are concerned about the consequences in the isolated

rural areas when operators close down as a result of excessively high

government charges, and the proposed backdated application of PDL

taken from landowners' companies."

"The resource owners (and their companies) and the operators will

suffer on the spot, and unfortunately, we are all too familiar with

landowners venting their anger on the operators' personnel and

property because they are most convenient targets," Mr Belford said.

The FIA has recommended that all operators prepare their own detailed

assessments of their operating future and as the hard decisions are

taken, maintain open and clear liaison with the landowners, and the

landowner companies, on any decisions leading to forced reduction of

operations because of the worsening investment situation.

Mr Belford also said that the government apparently intends to deny

landowner companies their direct corporate revenue and set up trustee

committees, which will be administered from Port Moresby, to pay out

cash benefits to individuals and administer the balance of landowner

company revenue and direct it into infrastructure and other programs

in the respective timber areas.

"It would be great if this worked, because the redirection of the

premiums now paid directly by operators, together with all other

benefits accrued to landowners into this Project Development Levy,

should mean that all those project obligations previously held by the

operator would now be covered by the PDL arrangements.

"However, realistically, we expect performance of these trustee

committees to be way short of the mark, leaving the operators in

extremely exposed situations without control over means to correct

them.

"As such, operators believe the PDL approach will only bring more

landowner dissent and problems for operators, with little hope of

rapid resolution," Mr Belford said.

He also said that operators are having to take hard decisions on

non-obligatory matters such as in-house apprenticeships and staff

training, sponsorships for charities/sporting groups, and casual

assistance provided to landowners in the form of transport and

infrastructure, in matters which are not regulated by formal

agreements.

"Operators are all too aware that they are closer than anyone else to

the resource owners, but unfortunately this can also mean we are the

main meat in the sandwich if the landowners are not happy with

government royalty payments and the like," Mr Belford said.

Since 1990, government export tax per cubic metre has increased from

K6.60 to K56, an increase of over 800 per cent.

In total terms, log export tax collections by government rose from K14

million in 1990 to over K155 million in 1996.

Royalty for landowners has increased from a net of K3.56 to K9.50 per

cubic metre (266 per cent), and logging machinery has increased in

cost in kina terms, by an average of 70 per cent in the last four

years, causing additional stress to industry financial flows and

planning, and significant cost saving measures have been adopted by

all operators.

Said Mr Belford: "Unfortunately, this has been at the expense of

community programs, training/apprenticeship programs and the like,

which does not auger well for sustainability and is against the grain

for all committed operators."

ITEM #2

Title: PNG missing out, says FIA

Source: The Post Courier

Status: Copyright by Post Courier, request permission to reprint

Date: August 13, 1997

Author: Ruth Waram

PAPUA New Guinea is currently missing out on investment worth about

$US1 billion in the forestry sector because conditions conducive to

investment on an industrial scale does not exist, says the Forest

Industries Association (FIA).

"The major uncertainties which have held up industrial investment in

the forestry sector as a scale which will be competitive in the

mainstream international market place, are the conditions of

operation, especially the statutory charges intended over proposed

operations," FIA executive officer Jim Belford said yesterday.

Mr Belford said this when welcoming the commencement of a government

study on domestic processing policy covering the forestry sector.

He said the study is to look at:

* COSTS/benefits of the log export trade for PNG.

* COSTS/benefits of redirecting export logs to domestic processing of

exportable wood products, and

* APPROPRIATE conditions of operation to generate investment into

export orientated processing.

Mr Belford said the study is expected to take between seven to eight

months and "from then, existing and potential investors will hopefully

be ready to rely on a confirmed government policy on processing."

He said fundamental conditions required for major investment inflow to

the sector from the general investors point of view were:

* REASONABLE security of timber resources.

* AVAILABILITY of land for industrial/town purposes.

* REASONABLE conditions of operation which will allow a return on

investment, commensurate with risk.

"The lack of appropriate conditions is clearly the reason why

investors have so far shied away from PNG as an industrial investment

location.

"Over the last three years, major groups engaged in PNG have committed

investments totaling $US300 million in Australasia, South America,

Indo-China and Africa while none have been committed (to) PNG in

comparison.

"Clearly, the government needs to review its approach in this area if

reputable investors are to be attracted to spend their investment

dollars in PNG," said Mr Belford.

But Mr Belford was skeptical about progress at the government level,

citing a demand from the than forest minister three years ago for

confirmed processing proposals from existing operators.

"We believe he received about two dozen conceptual submissions but by

and large, they haven't been acted on by government.

"Not all timber areas lend themselves to major integrated processing

operations, but where potential opportunities exist, they need careful

planning," said Mr Belford.

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