|The Economic Importance of Forestry to Papua New Guinea
I speak today on behalf of the Forest Industries Association of Papua New Guinea.
PNGFIA represents eighty-five percent of PNG’s forest industries. All members of the Association comply fully with PNG laws and regulations governing forestry.
The industry is proud of its contribution to the development of Papua New Guinea.
Forestry’s contribution to the economy of Papua New Guinea (PNG) is significant. Export taxes on logs account for 3 to 6 percent of all tax. Between 1990 and 2005 such taxes represented an average of around 30 percent of all development expenditure by the national government.
We employ 10,000 people and provide infrastructure in rural areas, including health and education facilities, which otherwise would not exist.
World Bank figures suggest the forest industry has contributed up to 8.6 percent of PNG gross domestic product in the past. Food and Agriculture Organization (FAO) figures today suggest 5.1 percent.
Timber’s share of exports has fallen somewhat in the last couple of years. Volumes have not changed, the drop is due to the increase in prices of minerals on world markets.
If world timber prices rise (they appear to be on steady process of recovery since the Asian currency crisis) and prices of minerals fall (that is likely at some time in the future) forestry’s contribution to gross domestic product (GDP) will increase. There are domestic drivers which can be activated to do this.
The industry sees two major challenges. The first is to lift production from commercial forestry to the sustainable cut defined by the FAO and ITTO from the area reserved in PNG for commercial forestry.
According to these organizations, PNG could be producing 25 percent more timber and still remain within the ceiling for sustainability.
Second, the industry sees significant opportunities to increase the value adding from PNG’s forest industries. Wood processing is already one of PNG’s leading manufacturing industries. Our members are confident that the share of value added production from timber can increase significantly in the foreseeable future.
PNG needs development and growth. Per capita GDP has fallen from US$676 in 2000 to an estimated US$585 in 2005. The share of population falling below the World Bank’s poverty line has risen from 37.5 percent to 53.5 percent over the last decade. In rural areas only one child in five attends school.
The global demand for timber (paper, softwood and hardwood) is strong. Like other developing countries, these are resources in which Papua New Guinea has a comparative advantage and can benefit from trading into the global economy. It has a strong sustainable forestry base. Ample areas are available for conservation. A third of PNG’s forests remain unallocated. Claims by Greenpeace that PNG is about lose its forestry and environmental heritage are baseless.
The World Bank Green Book which annually surveys environmental performance of governments around the world had just reported that deforestation in PNG between 1990 and 2005 averaged just 0.4 percent per year. Given the way statistics are collected that is probably statistically insignificant.
Commercial forestry in PNG is commercially viable and environmentally sustainable. A recent by the School of Forestry at Yale University for the World Economic Forum has given PNG the highest rating for sustainable forest harvesting. It is now occurring in areas which are regrowth and operating in the area demarked for commercial forestry.
Greenpeace has campaigned against commercial forestry on the grounds that logging companies were raping the forest and were about to destroy PNG’s forest heritage. It uses lurid claims of slavery of workforces and abuse of human rights.
The damage that is being done in PNG is not to the forests but to the economic base of the economy.
I referred to how PNG’s forest industry is ready for further growth. We are in a position to take up the challenge by the PNG Government for export oriented strategies in resources and commodities industries. We are poised to do this.
The policy framework needs to be improved to support this. The tax system needs to be adjusted to support expansion of the industry. The capacity of the government to manage sustainable forestry needs to be expanded. Systems to give business partners confidence that the industry complies fully with national laws and regulations are needed. The environmental database of PNG’s forestry needs to updated and improved.
These are large tasks and required the support of the government and assistance from donors to strengthen the Government.
Yet for the past five years in PNG we have not had any of this, we have had a relentless campaign run against the commercial forestry industry by Greenpeace and its international and local associates.
They have slandered reputable companies and created a false impression there is an environmental crisis in PNG. They asserted without foundation that most logging in PNG is illegal. They have lobbied Governments in Europe and Australia to ban imports of timber from PNG. They and WWF have pressured importers in Europe not to buy timber from PNG.
In parallel, the World Bank directed its focus on forestry in PNG away from supporting growth in commercial forestry to strengthening governance and promoting environmental management, including ecoforestry.
It offered loans to support those programs, but on condition no new licences were issued until the entire system had been reviewed. It proposed a facility to manage environment policy on forestry which would have been fully funded from outside PNG and controlled by NGOs. And it invited other donors to support its programs.
It set up a program to review the forest industry and how it is managed which become an effective platform for Greenpeace to promote its opposition to commercial forestry. The Bank required the PNG Government to establish an “Independent Review Team” (IRT) to review PNG’s logging industry as a condition for a Bank loan to support the industry. It was set up in 2003.
The draft report produced by the Review concluded that PNG’s forestry industry was economically unsustainable and not delivering benefits to PNG. It adopted the conclusions of a draft report which it commissioned which concluded that the commercial forestry industry in PNG was uneconomic.
The study was prepared by an expert who had previously jointly authored a report with Greenpeace arguing that eco-forestry was superior to commercial forestry in the Solomon Islands It also argued for greater emphasis on eco-forestry. The recommendations were never discussed with the forestry industry.
They also supported Greenpeace’s contention that ecoforestry should replace commercial forestry in PNG with eco-forestry and subsistence forestry. The economic viability of eco-forestry in PNG was not properly assessed. Even WWF concedes that eco-forestry is commercially unviable in PNG.
The draft report remained a draft. It lapsed when the PNG government decided the conditions required by the World Bank to support a loan to improve forest management were unacceptable. (As well as the review of logging, the conditions included a moratorium on logging and institutionalization of NGOs in the administration of forestry in PNG).
It is hard to imagine a set of circumstances more inimical to investment and expansion of the commercial forestry industry. They were basically created by the institution charged with supporting economic development in poor countries.
A legacy remains. Today the research commissioned by that seriously flawed process is still used by Green opponents in their continuing campaign against commercial forestry.
Improving governance and improving the capacity of the Forestry Service to manage the environment are worthwhile goals in their own right.
But when fighting “forest crime”, as the World Bank now describes its forestry programs, becomes the focus of donor assistance instead of a complement to the proper focus which is to create an enabling environment to increase the economic benefits of forestry to the people of PNG, things have gone off the rails.
Greenpeace is clear about what it wants – unviable and unsustainable ecoforestry to replace commercial forestry. WWF, to whom the World Bank has consigned its forestry policy in a formal Alliance, is clear what it wants: all forestry is to be conducted only by its rules, the tool being the Forest Stewardship Council which it set up and which it controls.
Given what a small producer of timber PNG is on a world scale, we are frequently puzzled by the intensity of the campaign against PNG and our industry.
Although the World Bank and the PNG government agreed to part ways over forestry last year, last month the Bank published a report supporting international programs on Forest Law Enforcement and Government which ]asserts that 70 percent of PNG’s logging is illegal.
There is no substantiation for that claim. Yet it is damaging. Donors will consider it authoritative if the Bank supports it. The PNG Government has asked the Bank to withdraw the report and correct it. I urge donors to do their own research to find the basis of this claim. As far was can see, it derived from a report published by WWF in 2002 in which there was no substantiation for the number.
The PNGFIA is concerned about illegal logging. We do not condone it among our members and when we come across instances we find that in virtually all cases these are companies not members of the FIA, and we work with the Government to correct the situation. This can include forcing companies to stop operating.
We would assess the incidence of illegal logging in PNG at most would not exceed 15 percent of production when it peaks. We concede this is a problem and primarily a lack of implementation of the Forest Act, but we do not consider it a major problem. It is on the low end of the scale where illegal logging is a problem in international markets.
The PNGFIA looks forward to the opportunity this seminar creates to work with counterpart industries in countries which trade with PNG and learn how others are addressing the challenges to their industry.
We plan to cooperate closely with counterpart organizations to assist to ensure buyers have confidence in the sustainability and legality of timber from PNG.
We urge others, donors in particular, to do independent assessments of the sustainability of PNG’s commercial forestry, the prevalence of legal harvesting, the facts about the environmental situation and the disregard of the development interests of those who would prefer to see forestry in PNG become some sort of environmental poster child for lobbyists in Europe instead of a strong and growing base for poverty alleviation increasing wealth and raising living standards in this country.
Papua New Guinea Forest Industries Association