Control of Log Export at Risk

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PAPUA NEW GUINEA RAINFOREST CAMPAIGN NEWS

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2/15/99

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RELAYED TEXT STARTS HERE:

Title: Control of log export at risk

...Urgent talks underway to extend contract

Source: The Independent

Date: February 12, 1999

Byline: ABBY YADI and ROSALYN ALBANIEL

WIDESPREAD transfer pricing and species misdeclaration by log

exporters could return if the log export monitoring contract is forced

to be terminated at the end of next month, PNG Forest Authority

(PNGFA) officials warned.

The officials said the recent lowering of the tax rates on log exports

by the government gave the added incentive for malpractices seen in

the forest industry in recent years to return.

PNGFA is in urgent discussions with Treasury for possible funding and

extension of the contract for the remainder of the year. Several

options are being discussed, including the imposition of a log export

levy, which would raise the necessary funds to continue the contract.

An additional K3 million is needed to see the year through.

Only K1 million has been designated for log export monitoring for

1999. According to the officials, this will last until the end of

March, and if no further funding is forthcoming, the contract with the

Swiss-based Surveillance Generate Systems (SGS), will be terminated.

SGS was contracted in late 1994 to provide inspection, testing and

verification of log exports and species declaration following claims

of massive under pricing and malpractices by logging operators. It

started its monitoring operations in January 1995.

The monitoring activities of SGS made an immediate impact on the

industry, and confirmed that malpractices in the export logging

industry had been rampant. Over the years this has changed and the

company now finds what it called "errors and omissions" by operators

and not so much under pricing of logs or misdeclarations.

The contract has over the past four years cost K15 million, but K9

million of that came from the European Union.

Officially, the contract term expires at the end of March, but PNGFA

wants the monitoring contract to be maintained for at least another

year. .

Figures supplied by SGS indicate that over the four years, the

monitoring activities had resulted in K34 million foreign exchange

earnings, which otherwise would have been foregone.

SGS general manager Bruce Telfer told The Independent if no funding is

forthcoming SGS would have to pack up and go. But he said the PNGFA

would not have the capacity to take over the operations that SGS has

set in place. Apart for extending monitoring and reporting equipment,

SGS currently employs 80 staff, who the PNGFA would not be able to

take back under its current constrained funding from the government.

He said PNGFA also wanted to ensure monitoring systems were in place,

especially under the transitional period for tax rates on log exports.

Greenpeace had earlier sounded the alarm when it warned that all signs

were that SGS would be forced to leave this year and may not offer

their services.

"It looks like they (SGS) will have to leave the country and we expect

to see illegal log exports, misdeclaration of volumes and species

types and transfer pricing return to unsustainable levels," Greenpeace

PNG spokesman Brian Brunton said.

The officials said the K17 million appropriated for PNGFA for 1999

will barely be sufficient to maintain monitoring of existing forestry

operations, even with a 25 per cent reduction in staff levels.

It would not be sufficient to fund any extension of the SGS contract

above the K1 million earmarked for the first quarter, the sources

said.

"Irrespective of which organisation undertakes the log export

monitoring function, it is crucial that it be funded adequately and

that the operation be conducted independently of public service

restrictions," the officials said.

The officials said while they do not expect to see any major

destruction of the country's forests as a result of the lowering of

the tax rates, the concern arises because the lower tax rates will

increase the rate of logging and log exports. This is where the log

export monitoring becomes vital.

"We have checks and balances in our system through the Forestry Act

and Regulations and the Logging Code of Practice that companies are

required to follow. We have put all our field officers through

necessary training to monitor logging operations and stringent control

is applied. Companies which do not follow are immediately penalised.

However, the lowered taxes will increase the rate of logging at a time

when the returns to the nation are very low," the officials said.

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