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Papua New Guinea

Chart 1 - Importing countries' imports of tropical timber from Papua New Guinea{Footnote 1}

Chart 1 shows that logs comprise the great majority of the tropical timber which is exported from Papua New Guinea. The chart excludes a small quantity of wood chips from plantations.

Chart 2 - Importing countries' imports of all commodities from Papua New Guinea{Footnote 2}

Chart 2 shows that the trade value of Papua New Guinea exports is large and increased rapidly between 2002 and 2008, timber accounts for a small proportion of the total. This indicates that the country's economy is based primarily on the export of minerals and oil, not on timber exports.{Footnote 3} Further, such evidence as there is suggests that logging has impoverished local economies and also worsened governance.

Chart 1 shows that China is the initial destination for the great majority of the logs exported. Most of this is attributable to enterprises linked to groups based in Sarawak and owned by families having links to Fujian.{Footnote 4} One of these, Rimbunan Hijau, is said to have accounted for 40% of the total volume of logs exported from Papua New Guinea during 2006,[fourth ¶, p21] perhaps more if all its numerous associate companies[fourth ¶, right, p4] are included.

The great majority of those logs are imported into China predominantly through the customs district of Nanjing. However, it is not clear which timber enterprises transform those logs and what products are made from them. Chart 3 shows the locations of the entities (e.g. mills, head offices, agents, dealers) which are recorded as having imported those logs.

Chart 3 - China's imports of logs from Papua New Guinea by "Location of Importer"{Footnote 5}

There seems to be no published information concerning which enterprises have accounted for most log production in Papua New Guinea during recent years. The list of members of the Forest Industries Association[*] might not include all those enterprises; some members{Footnote 6} appear to be fronts for others.

At least one Japanese group remains active in the sector.{Footnote 7}

In order to help reduce export fraud, a multi-national group (SGS) has a contract to monitor the country's exports of logs, sampling shipments in order to ensure legal compliance downstream from forest gate. However, the widespread illegality which characterises the country's timber exports is alleged to take place "upstream".

Almost all land in Papua New Guinea is owned by local communities. However, the state has acquired most of their forest under long leases and has allocated this as concessions to the industry. Instead of logging sustainably over the duration of those concessions, typically 40 years, the state, in breach of the constitution, has allowed most concessions to become so exhausted within a dozen or so years of logging that their value to local communities is largely and irreversibly destroyed. A number of major enterprises have used violence to overcome local resistance.[p10 et seq]

The government has defied donors, particularly the World Bank (who had to cancel a loan and withdraw from the sector)[penultimate ¶, p14] and Australia, rather than reform its management of the timber industry. An attempt was made to murder the judge who carried out the first major review of the sector.[*]

Since 2010, when the Prime Minister stepped down after allegations of misconduct,[*]] there has been no significant attempt to make the urgent, radical reforms which are clearly necessary[final bullet, p7] and the volume of logs being exported has further increased. Further, relevant files held at the office of a legal team which supported local communities who recently won a landmark claim for compensation against a logging company were subsequently stolen.[*][*] The former Prime Minister's family are alleged to have extensive interest in illegal logging.[*]

A report which summarised the findings of five reviews of the industry commissioned by the government of Papua New Guinea concluded that all the logging operations from which 65% of the country's exports of logs during 2004 derived were unlawful, despite relevant permits having been granted by the authorities.[first two ¶, p2]{Footnote 8} Although the report does not comment on the legality of other logging operations, it would seem reasonable to assume that most of these were likewise unlawful. The exceptions would include those of small scale local forest enterprises - a number of which are FSC-certified - and those of plantations.

Having accepted this, the government sought to re-write the law in order to over-rule that illegality, but subsequently dropped this plan. As an alternative, the government has improperly[*] allocated yet more forest - to a number of opaque foreign enterprises and an unrepresentative minority of local land owners, some of which might be in competition with the established industry[*] - as Special Agricultural and Business Leases "SABLs". After much local and international criticism, the government suspended those SABLs.[*]

The are numerous official and unofficial reports that key officials including Ministers and the Prime Minister's family have personal interests in the country's export-oriented logging industry. The very extensive literature{Footnote 9} suggests that one logging group appears to be central both in this and in the consequent mismanagement of Papua New Guinea's forests - Rimbunan Hijau. There is a very extensive literature pointing to that group's misdemeanours. That group also controls "The Nation", much the most powerful of the country's media groups, is alleged to be complicit in an Indonesian insurgency in the west of the country,[*] people trafficking[fifth ¶, p4] and probably facilitating the laundering of logs from Papua.{Footnote 10}

Calls for court action against this group (not just in Papua New Guinea) have been ignored - and the head of the group has been granted an honorary knighthood by the UK's Queen Elizabeth II.[*]

It is said that local communities receive about US$10 per cubic metre of merbau logs which is exported.{Footnote 11} The average export value per cubic metre for all species of logs reported by the Central Bank of Papua New Guinea increased from roughly US$50 to US$80 between 2002 and 2010. Their average import value per cubic metre, as reported in China, increased from U$110 to US$190 during that period while that of merbau logs in Guangzhou{Footnote 12} increased from approximately US$200 to US$600. During 2010, the unit export values for China's exports of plywood having tropical outer ply, doors and parquet were approximately US$400/m, US$1,300/m, and US$1,100/m respectively. In the UK, the wholesale price of tropical plywood[*] is roughly $1,500/m while that of solid merbau flooring[*] is approximately US$3,000/m.

During last decade, the reported export value per cubic metre of logs tended to be similar to that for the Solomon Islands. This was substantially less than that for the exports of logs to China from Sabah and Sarawak (by approximately 100% and 60% respectively). Export values per cubic metre for the export of logs from the Congo Basin to China tend to be considerably greater than those from Malaysia. Possible explanations include (1) the market value of logs from Papua New Guinea and the Solomon Islands might be correspondingly lower than those from Malaysia and the Congo Basin, and (2) the industry colludes with those establishing reported export values to minimise the payment of export tax.{Footnote 13}

Conclusion:

The great majority of export-oriented production of logs is unlawful and grossly unsustainable. Much is associated with corruption and violation of local communities' rights. Fraud in declaring volumes and export values for customs and tax purposes seems to have reduced. Although a small proportion of the volume of logs exported might be undocumented, there appears to be ample evidence warranting allegations that almost all Papua New Guinea's exports of timber are illegal. China is the destination for most of the country's exports of logs. One group based in Sarawak but long established in Papua New Guinea is particularly prominent in the sector. Although the mix of logging enterprises may have changed - at least nominally - it may be that the same groups dominate the "downstream" distribution (/export) of those logs.

Footnotes
1: Source: based on China Customs, Trade Statistics of Japan, Korea Customs Service, UN Comtrade, others.

2: Source: based on UN Comtrade.

3: Exports from the Exxon-Mobil LNG project, due to commence during 2014, should make the country even less dependent on timber exports and will add to the difficulty of justifying conversion of forest into palm oil plantations.

4: Source: based on China Customs. Note: "yt" = year to.
5: The Tiong family who control Rimbunan Hijau [penultimate sentence, left side], and the Wong family - related to the Tiong's - who control WTK [*] and whose associates in PNG include Vanimo Forest Products and Amanab Forest Products[*].
6: For example, China Long Kong holds a permit but Rimbunan Hijau carries out the logging and marketing[p1]. That permit seems to have been issued after pressure from the government of China[*].
7: Open Bay Timber owned by Sumitomo Forestry [*l . It seems that Stettin Bay Lumber is no longer owned by Sojitz / Nissho Iwai and is now owned by Malaysian interests. JANT is no longer owned by Oji Paper[*]
8: That report also suggests that 80% of the country's exports of logs derive from these illegal concessions but does not comment on whether the remaining 20% were likewise illegal.
9: For example Masalai-I-Tokaut[*] and various publications by Greenpeace.
10: There are reports of equipment being supplied from PNG to Papua and of Papuan logs being declared in PNG as if they were from PNG. [final bullet, p10] There are also reports of logging vessels being used to smuggle in guns and drugs.[*] Due to its geographic proximity to the border, the group's businesses are well-placed to participate in this.
11: A The amount paid for merbau (also known as kwila and Intsia spp. probably exceeds that paid for most other species (due to demand and scarcity). B Roughly six cubic metres of logs are discarded per cubic metre exported, and approximately 15 cubic metres of tree vegetation is destroyed per cubic metre of log exported.[p56]
12: "Tropical Timber Market Report" ITTO (fortnightly editions)[*] Note: most of the increase took place during 2005 (in response to Indonesia implementing its own laws in Papua) .
13: During the middle of last decade, the government and external auditors who audit the accounts of logging companies accepted the annual reports presented by those companies which showed that most made pre-tax losses - despite the market expanding rapidly.