Asian Timber Firms Set Sights on the Amazon

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WORLDWIDE FOREST/BIODIVERSITY CAMPAIGN NEWS

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Forest Networking a Project of Ecological Enterprises

http://forests.org/

1/5/97

OVERVIEW, SOURCE & COMMENTARY by EE

As those of you know that have been on the list awhile, only occasionally

do we pass on dated items. The following piece is a photocopy of an

EXCELLENT Wall Street Journal article from Nov. 1996 which highlights the

Asian timber industries move into the Amazon, a theme we have been

stressing for some time now. Over the past 5 years of "several of

Southeast Asia's biggest forestry conglomerates, some with controversial

environmental records back home, have globalized their logging operations."

The ecologically irresponsible behavior of excessive forest harvest through

industrial forestry practices is set to expand significantly in the Amazon

unless we, the World, do something.

g.b.

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RELAYED TEXT STARTS HERE:

Subject: Asian Timber Firms Set Sights on the Amazon--The Wall Street

Journal Interactive Edition

From: dfiddle@minn.net (Dennis L. Fiddle)

Date: 1996/11/16

Newsgroups: alt.culture.indonesia,soc.culture.indonesia

The Wall Street Journal Interactive Edition -- November 11, 1996

Asian Timber Firms Set Sights on the Amazon

By JONATHAN FRIEDLAND and RAPHAEL PURA

Staff Reporters of THE WALL STREET JOURNAL

PORT KAITUMA, Guyana -- Having cut through their own tropical forests,

Southeast Asia's loggers are now taking on the Amazon. But they may have

met their match. Just ask Soon Khiew Chan, the logging boss of Barama Co.

His concession, which is about half the size of Switzerland, is short on

trees big enough to cut. Torrential rains make it impossible for him to

operate during five months a year. He has environmentalists watching him

closely. And his workers have laid down their saws over, among other

things, whether the company satellite-television link should retrieve the

channel that carried "Baywatch" or the one that had "The Young and the

Restless."

"The potential is here," says Mr. Chan, finishing up a plate of rice and

fried chicken in a longhouse on the edge of a vast clearing. "But for now,

we are losing a lot of money."

Pausing to light a Benson and Hedges, the Malaysian ex-diplomat considers

the task before him. "We have to succeed because this is an industry in

which you can't stand still," he says. "You either go forward or you go out

of business."

Looking for Opportunities

That is what alarms environmentalists. Barama, a Malaysian-South Korean

joint venture, is a new phenomenon in the tropical-timber business. It is a

modern corporation with access to fat credit lines, computer systems to

manage its inventory and affiliated sales offices from New York to

Singapore. It is aggressively canvassing the globe for opportunities to

expand. And it isn't alone.

During the past five years, several of Southeast Asia's biggest forestry

conglomerates, some with controversial environmental records back home,

have globalized their logging operations. They can be found cutting down

virgin forest in Papua New Guinea, in Cambodia and in the African

nations of Cameroon and Gabon. Lately, they have set their sights on the

world's last truly great expanse of tropical forest: the Amazon.

In the past few months alone, the amount of Amazonian forest under

concession to Asian firms has nearly quadrupled to about 30 million acres,

an area roughly equal to the state of Georgia. In addition to Guyana, where

Barama has the oldest and largest of the Asian concessions, these loggers

are at work in neighboring Suriname and in Brazil. Some companies,

including Barama, are seeking out acreage in eastern Bolivia and Peru.

'Resource Grab'

"It's the last great resource grab," says Russell Mittermeier, the

president of the Washington-based environmental group Conservation

International.

What worries Mr. Mittermeier and other environmentalists is that the new

multinational loggers are deliberately focusing on countries that need

ready cash and are neither technically able nor politically willing to keep

an eye on the logging. The environmentalists also contend that even if

the loggers abide by all the rules imposed on them, the sheer scale of

their operations will inevitably quicken the pace of global deforestation.

"A Brazil may be able to handle the pressure," says Thomas Lovejoy, a

scientist at the Smithsonian Institution, "but the poorer countries, like

Papua New Guinea and Guyana, are just sitting ducks." Mr. Mittermeier is

harsher. He calls it "brown-on-brown colonialism."

Guyana's officials argue that they don't have much choice but to invite in

foreign loggers if they want to improve living standards in their country.

"We want to preserve the environment, but we also want economic growth and

social justice," President Cheddi Jagan says. "And for that you need

investment."

Buying in Brazil

Given that, Mr. Jagan says, the best the government can do is to make sure

the Asian companies act responsibly. With the help of donors, the country

is beefing up its forestry service. It is also redesigning its royalty and

tax system to make sure the maximum amount of money generated by Barama

stays in the country.

In neighboring Brazil, where logging has traditionally been big business

and where Asian loggers only just arrived in force -- buying up around 11

million acres of forest in the past few months -- the government has

adopted a more confrontational posture. Environment Minister Gustavo Krause

says he plans to keep a tight rein on Asian logging companies. "If the

Malaysians don't leave our forests in peace, we won't leave the Malaysians

in peace," he says. "If they come to Brazil acting as if it is a banana

republic, they are going to have a very rough time of it."

The experience of Barama shows that even with a friendly host, the Asian

firms won't find it easier to extract riches from the Amazon than any of

their equally well-equipped predecessors found it. Among those who tried

and failed to build resource-based empires in the region were Ford Motor

Co. founder Henry Ford -- in rubber -- and the late billionaire shipping

magnate Daniel Ludwig -- in pulp and paper. And they didn't have

environmentalists and aid donors like the World Bank breathing down their

necks.

Even here, at Port Kaituma, man's ambition has often been thwarted by

natural -- or other -- causes. There is an abandoned manganese mine from

the days when Guyana was still a British colony. There is a never-opened

factory built by Cubans during Guyana's socialist phase to process cassava,

a tropical tuber. And then there is what is left of Jonestown, the Reverend

Jim Jones's paradise-on-earth turned death camp, where 911 people ingested

cyanide-laced Kool-Aid in 1978.

Now, with the arrival of Barama, Port Kaituma is again booming. The

population has grown to 2,000, with job-seekers from nearby Indian villages

and Brazilian miners eager to take advantage of the roads built by the

company. New houses are going up on its jagged, red-clay lanes. A Barama-

funded hospital, staffed by a Filipino doctor, is up and running. In a tip

of the hat to the town's latest patrons, a couple has opened up a laser

Karaoke bar.

Barama's owners, Malaysia's Samling Strategic Corp. and South Korea's

Sunkyong Ltd., are in Port Kaituma for the same reason their competitors

are setting up shop elsewhere in South America. They have logged through

most of the high-quality, easily accessible hardwood forest at home.

Southeast Asian governments have put in place policies that encourage them

to go into other businesses -- or to go abroad.

Offshore Tax Havens

That is especially true in Malaysia's case. During the past 20 years,

ethnic-Chinese-owned timber companies from the Sarawak state have gained a

global reputation for their tremendous efficiency. They have logged several

million acres of forest on the island of Borneo, leaving a diminishing

supply of marketable timber in their wake. Many have fattened profits by

routing the log trade through offshore affiliates in tax havens like Hong

Kong.

Stung by international criticism of the Sarawak loggers and eager to retain

a bigger chunk of timber-industry profits at home, Malaysia has adopted

policies to encourage domestic-timber processing and to phase out the

export of raw logs. Prime Minister Mahathir Mohammed boasts that half the

country's land area will remain "forever green," although that includes

extensive oil-palm, rubber and softwood forest plantations.

The impact of these policies, and similar ones in Indonesia, is clear in

statistics compiled by the International Tropical Timber Organization, a

global monitoring body based in Yokohama, Japan. The ITTO found that

tropical raw-timber exports from the Asia-Pacific region have declined

steadily for the past three years as timber exports from Latin America have

jumped. Nigel Sizer, a forestry expert at the World Resources Institute in

Washington, says the latter reflects "a dramatic increase" in commercial

logging in South America.

Before moving on to South America, however, the Asian companies expanded

closer to home. Malaysia's biggest logger, Rimbunan Hijau Group, was one of

the first to venture abroad. Several years ago, it set up shop in the South

Pacific nation of Papua New Guinea. Using a complex network of affiliated

companies, Rimbunan Hijau eventually gained control over at least 60% of

the country's forestry concession area, according to the World Bank. (A

different branch of the same family that owns Rimbunan Hijau owns another

big Sarawak logging company that recently bought a big concession in

Brazil.)

Rimbunan Hijau has been embroiled in controversy from the start, tangling

at various times with government authorities as well as local and foreign

environmental groups. The company's founder and managing director, Datuk

Tiong Hiew King, accuses environmental groups of spreading lies against

the company and has sued at least one of them for libel. In a written reply

to questions about its Papua New Guinea operations, Rimbunan Hijau says "it

is grossly unfair and even malicious to suggest that Malaysian companies

are highly exploitative in their logging practices."

Loans Stopped

Still, fears about what foreign loggers are getting away with in Papua New

Guinea led to a rare decision by the World Bank to halt lending on

environmental grounds. The Washington-based lender suspended a $50 million

loan in July when the government of Prime Minister Sir Julius Chan, a

staunch supporter of the timber industry, helped pass legislation to allow

new forestry leases. The bank says it won't resume lending until the

government allows an independent panel to review any new leases. Without

such oversight, says one bank official, the "wholesale plundering" of the

country's forests will continue unchecked.

Rimbunan Hijau isn't the only Southeast Asian timber company whose

offshore-timber operations are controversial. In July 1993, for example,

the Solomon Islands expelled an executive of Indonesia-based Berjaya Group

after the country's commerce minister at the time accused the Berjaya

executive of attempting to bribe him. The executive, Tony C.T. Yeong,

subsequently resigned his Berjaya post, but denied the charges. Berjaya

disavowed knowledge of the affair.

Berjaya has also sought a concession in Suriname. But foreign donors,

dismayed by the actions of a smaller Indonesian company, pressured the

government to refuse new leases. The company, NV Mitra Usaha Sejati Abadi,

or Musa, won a concession of about 375,000 acres in 1993. According to

Indonesian environmental-research group Skephi, which sent investigators to

Suriname, Musa has clear-cut timber on its own territory and bought

illegally felled logs from small-time chain-saw operators. The World

Resources Institute's Mr. Sizer, who has written in-depth reports on

logging in both Suriname and Guyana, calls Musa "among the worst of the

worst."

Musa denies it has clear-cut timber or has bought illegally felled logs.

Musa director Irawan Imoek says attacks on the company "are purely

political and are not based on objective facts."

Praise for Attitude

Nonetheless, Mr. Sizer has a kinder assessment of Barama, next door in

Guyana. "It's one of the better ones," he says. Since it began operations

in 1991, the company has spent $85 million on logging infrastructure and a

large plywood mill. It says it is committed to "sustainable forestry" and

employs a full-time independent expert from the Edinburgh Center for

Tropical Forests to monitor its operations. It also routinely hosts

visitors from environmental groups, embassies and donor agencies.

"Barama has occasionally made mistakes, but they've been willing to correct

their errors of judgment," says Clayton Hall, Guyana's commissioner of

forests. "They are a responsible company."

For now, the positive reviews offer little comfort to Mr. Chan, the logging

boss. Though the company paid little for its vast concession and won big

tax breaks from Guyana's previous government, it isn't even close to making

money. Soil conditions are so poor in the northern Amazon, Mr. Chan says,

that the few types of trees that Barama can legally exploit rarely grow

large enough to cut. "Plenty of forest," he says, "but not enough timber."

Company records show the current cost of its plywood production at $350 per

cubic meter, far in excess of its target cost of $255. Earlier this year,

Samling took full control of Barama's management from Sunkyong in order to

improve performance.

It isn't going to be easy. As the rainy season approaches, Mr. Chan is

under pressure to produce enough logs to keep the plywood mill stoked in

the coming months. But on an inspection of the concession area, he finds

one of his nine logging crews sitting around playing dominoes and listening

to a boombox. Another group is trying to clear leaves from the gear-box of

a skidder, a small tractor used for dragging trees. The foreman tells Mr.

Chan it has already caught fire five times.

TV Turmoil

Labor problems have frequently caused Barama difficulties. Earlier this

year, for instance, a Turkish sawmill placed a large timber order and

chartered a boat to pick up the shipment. The order wasn't ready when the

boat arrived because workers had gone on a two-week strike after the

company began shutting down television broadcasts at 11 p.m. The workers,

some of whom have never before had access to TV, had been staying up all

night to watch soft-porn shows. Barama filled the order by buying logs from

smaller concessionaires, who rarely abide by Guyana's poorly enforced

forestry laws.

Barama has had so many problems, in fact, that competitors wonder when its

owners will pull the plug. "These guys will leave before they ever make a

buck," predicts John Willems, managing director of Willems Timber & Trading

Co., Guyana's oldest logging concern. "Ten years from now, there will just

be more rotting machinery sitting around out there at Port Kaituma."

But Mr. Chan says Barama is going to be in South America for the long haul.

"The opportunities are no longer available at home," he says. "We are here

with a big team and a big investment. We aren't about to give up."

-- Eduardo Lachica in Washington contributed to this article.

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