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WORLDWIDE
FOREST/BIODIVERSITY CAMPAIGN NEWS
World
Bank Funded Forestry Project in Papua New Guinea in Danger
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Forest
Networking a Project of Ecological Enterprises
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5/14/99
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Title: World Bank funded projects in danger
...if govt ignores letters
Source: The Independent,
http://www.niugini.com/independent/
Status: Copyright 1999, contact source for
permission to reprint
Date: May 14, 1999
Byline: NEVILLE CHOI
A MAJOR
World Bank forestry project and Bank funding programs to the
PNG
government could be jeopardised if the government does not address
concerns
raised by the World Bank over recent government decisions
regarding
the forestry sector.
In two
letters written to Prime Minister Bill Skate and Treasury and
Planning
minister Iairo Lasaro early last month, the World Bank raised
concerns
that recent developments in the forestry sector, if not dealt
with
properly, could have serious implications on the bank's current
and
future programs for PNG.
One of
the letters was written by Klaus Rohland, Country Director of
PNG and
the East Asia and Pacific Regions, who advised Mr Lasaro on
the
final touches of a proposed Forestry and Conservation Project
(FCP)
funded by a World Bank loan and a grant from the Global
Environment
Facility (GEF) totalling US$17 million. The grant will be
used to
help landowners pursue ecologically based development of their
forests,
such as eco-tourism, small scale sawmilling and other
developmental
forestry projects. The FCP project has already attracted
international
attention as being an example of combining sustainable
development
and conservation. The letters are indicative of its
concerns
of what the government's actions in the forestry sector may
have on
the future of the project.
The
other letter was from Julian Schweitzer, Acting Vice President of
the
East Asia and Pacific Region to Mr Skate.
The letter highlights
the
bank's concerns of recent developments in the forestry sector
which
could "threaten further potential reforms being considered under
the
Social and Economic Development Program".
"Large
concession extensions, fast tracking of new logging operations,
possible
amendments to the Forestry Act, log export monitoring and
recent
changes in the export tax are cases in point.
"We
are nearing completion of the appraisal process for the Forestry
and
Conservation project. Maintaining high standards of governance and
transparency
in the forestry sector is crucial for the further
processing
of this loan as well as the Social and Economic Development
loan,"
Mr Schweitzer's letter reads.
Mr
Rohland further explains the developments in his letter to Mr
Lasaro:
"The purpose of my letter is to further detail our concerns
and to
seek your reassurances that the necessary actions will be taken
to deal
with them. We would like to bring to your attention to the
following
issues:
Allocation
of large concession extension.
"We
understand that a large (800,000 ha) forest area in Western
province,
known as Kamula Doso, is to be granted by the Forest Board
as an
extension to Wawoi Guavi timber area (already over 600,000 ha
and the
largest timber concession in PNG).
Fast
tracking of new logging operations.
"Provincial
Forest Management committees have been directed to 'fast
track'
a number of new logging operations. This process would
circumvent
and weaken the approval processes of the Forest Authority
and the
Forest Board. As you know, the bank has
been closely involved
in the
creation of these approval procedures in recent years. Any
weakening
of them would be unacceptable to us.
Forestry
Act, and the Forestry Board.
"There
has been some discussion regarding a proposal to amend the
Forest Act
to legitimise the fast-track approach. This would be a very
unfortunate
development. In fact, the Forestry Board may need some
additional
strengthening of its independence in order for it to be
even
more transparent in forest resource decisions in PNG.
Log
export monitoring contract.
"The
SGS log export monitoring program is widely supported in PNG, and
has
been responsible for the elimination of a great deal of
malfeasance
for purposes of export tax avoidance. We understand there
has been
some discussion in PNG of replacing the SGS operation with a
local
firm. While in the long run we would support this approach, we
would
certainly not do so at present. We do not believe that a local
firm
could at this stage replicate the standards of inspection SGS has
introduced.
The Forest Authority has apparently requested the
Department
of Treasury that it be allowed to levy producers of logs,
so that
a proper inspection operation can be paid for. We certainly
agree
that the Forest Authority should not be called upon to finance
any
part of the SGS operation from its own budget.
Reduced
budget allocation and staffing in forests authority.
"We
recognise your government's need to reduce the budget of
government
agencies. However, we also point out that the Forest
Authority
is being called upon to implement a major bank project, and
the
Australian Government's assistance to the forestry sector. We
believe
that both interventions are necessary, and are good long-term
economic,
political, social and environmental investments. It is
therefore
difficult to rationalise how the Forest Authority (and the
Department
of Environment and Conservation, which also has major
implementation
responsibilities for these projects) can be expected to
support
these projects with the reduction in staffing and budgets.
Change
to Log Export Tax structure.
"Recent
change of the log export tax structure in PNG has resulted in
virtually
no tax at all being payable by logging firms at current
international
prices. We acknowledge that your government now has a
major
incentive to attract foreign exchange for macroeconomic reasons.
We also
recognise that current international log demand is low,
largely
a result of the Asian economic crisis. However, we do not
agree
that either of these arguments justifies a near zero return to
the
government. We believe very strongly that rendering the forests
resource
almost valueless as a standing resource is an incentive for
less
efficient and less sustainable logging practices. Moreover, the
adopted
tax structure is certain to encourage a great deal of
misrepresentation
on export log prices actually received by firms.
Repeal
of forest concession to The Nature Conservancy.
"The
Nature Conservancy (TNC), a major international NGO, had
negotiated
a forest concession at Josephstaal to demonstrate good
concession
practice and sustainable forest management. We understand
that
the concession may be withdrawn in favour of a commercial
operator.
We are seeking information at this point given that we have
been
informed that all other bidders had been eliminated or had
withdrawn,
and that TNC had been successful in their bid. Certainly, a
forced
withdrawal of TNC from Josephstaal would be a severe blow for
our
efforts in conservation.
Plantations
and the Reaforestation Fund.
"Plantations
have a rather poor history in PNG, and we believe a great
deal of
care with feasibility studies needs to be taken, before major
decisions
to allocate funds for investment in plantations is made. We
have
offered to support some of the needed work under the proposed
project,
and we will need some assurances that no decisions on
plantation
investment will be made before the results of properly
designed
feasibility studies are available.
"Rapidly
declining standards of governance and transparency in PNG's
forest
sector is very much against the principles and understandings
under
which we embarked on preparation of this project and upon which
we have
expressed our support for the government's economic reform
programs.
We hope that the issues raised will be dealt with in an
effective
manner to allow us to proceed with this project and to
further
discussions on a possible structural adjustment program," the
letter
read.
It is
believed that the World Bank is concerned that the current
government
is not putting to good use, the money invested by the bank
over
the past ten years to help the government put in place procedures
to
pursue sustainable forestry.
"Rapidly
declining standards of governance and transparency in PNG's
forest
sector is very much against the principles and understandings
under
which we embarked on preparation of this project and upon which
we expressed
our support for the government's economic reform
programs,"
Mr Rohland said in his letter to Mr Lasaro.
The
Independent understands that Prime Minister Bill Skate and the
Treasury
department are aware of these letters from the World Bank.
It is
also understood that the Chief Advisor Pirouz Hamidian-Rad, who
is
currently out of the country, is dealing with the issue but it is
not
confirmed whether the government has replied to the letters.
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