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The forest sector

The Papua New Guinea forest sector is recognized as a distinct sector within the Papua New Guinea economy. Forestry policy is directed by the Ministry for Forests and the sector is administered by the Forest Authority. This statutory authority was established following a major Commission of Inquiry during the mid eighties which discovered major corruption and malfeasance rife within the industry.

Contributions to the national/local economy

The forestry sector makes a major contribution to income and employment. For example, a table showing the composition of government revenues from harvesting levies is presented below in Table 1 and the total foreign exchange earnings from log exports compared to the log export tax paid is shown in Figure 1. The forest sector also employs about 7,500 people, representing approximately 4 percent of total formal employment.

Table 1 - Source of revenue from harvested logs

Revenue Item

1994 (km)

1995 (Km)

1996 (Km)

1997 (Km)

Log export tax





Reforestation levy










Other landowner levies & premiums










Figure 1 - Annual revenue from log exports

In many cases, logging companies are also responsible for providing infrastructure and welfare services to the landowners (i.e. local communities). In general, most companies have a poor record of meeting these obligations. Typically, buildings have been cheaply constructed from untreated timber and most roads amount to nothing more than standard logging roads. On the other hand, natural forest resources are important for providing local landowners with subsistence supplies of food, shelter materials and fuelwood. In some cases, the loss of these resources following poorly managed forestry operations has caused some landowners to be worse off following logging projects than they were before. The implementation of a new Logging Code of Practice and new forest revenue system will go a long way to addressing such problems.

Appreciation of contribution by forest sector

There is a general level of understanding of the broad range of benefits which natural forests can provide for the long term welfare of local people. However, where there is a rush for development' and monetary reward many of these benefits tend to be ignored. This happened a lot prior to the Amendment of the Forestry Act in 1991, which now places much greater controls on the allocation of forest resources and required a sustainable level of log harvest. During the period prior to the Amendment there was a headlong rush throughout the country by landowners, under the Forestry (Private Dealings) Act (now repealed), to allow their forest resources to be logged at totally exploitive rates. This has resulted in the almost complete exhaustion of commercial forest resources in the New Ireland and West New Britain Provinces.

The benefits from such operations have not generally trickled down to the genuine owners of the forest and have not been sensibly invested to ensure long term economic development. It is only once the money has dried up that landowners have begun to appreciate the true value of their forest resources. With the new forestry controls and procedures administered by the Forest Authority, plus an on-going awareness programme, the forest owners are beginning to appreciate the value of their forest resources and show a greater interest and control over their use.

Main players in the sector

Despite the gains being made in resource owner awareness and involvement, at least for new projects, the existing forest sector is still dominated by large foreign logging companies. For example, three large Malaysian companies are responsible for over 60 percent of all logging activities. The other major players in the sector are landowner companies, which are generally not representative of the true forest owners and are often controlled by a few (often well educated) important businessmen and politicians. Many logging companies are able to use their financial strength to influence those in positions of power, both at local and national levels, to pursue their own self interests.

With the 1993 Amendment to the Forestry Act, the implementation of new Forestry Regulations (in the final stages of gazettal), the log export surveillance project and the development of stringent procedures (e.g. the Code of Logging Practice and Log Exporting Procedures), will give the Forest Authority much greater control over the forest industry than it had previously. However, such measures will face constant (and often concerted) political, resource owner and industry pressure for change. To date, a number of forestry conditions associated with the World Bank/IMF Structural Adjustment Programme have provided a countervailing force to these pressures, particularly at the political level, and have proven.

Key issues and constraints to be addressed in the short to medium term

Sustainable forest development

There is still of great concern that the permitted log harvest level remains above the sustainable level because of levels set and agreed before 1991. None of the existing forest concessions in Papua New Guinea are being managed on a sustainable basis. For example, instead of a 35 year harvesting cycle, most will be completely logged-out in 10-20 years.

To bring these concessions into line with the new legal requirements will require a substantial reduction in the permitted harvest levels, and probably for smaller concessions to be consolidated into larger areas. This is currently being tackled on two main fronts:

· As existing concessions come up for review or renewal, they are being renegotiated to restrict harvesting to the volumes which would be expected on a 35 year sustainable logging cycle.

· All new concessions are only granted with a sustainable annual harvesting volume.

Originally it had been planned to review all existing concessions promptly and to bring them quickly into line with the requirements of the 1991 Forestry Act (as amended). However, this proved to be legally difficult and a huge drain on the Forest Authority's resources so the process has been scaled back. Major problems identified as part of the process were that there are no clear mechanisms established for concession amalgamation and that there is strong industry resistance to any moves to reduce allowable harvest volumes. The whole review process was also hampered by the long delay in finalizing the new forest revenue system. Nevertheless, it is expected that all forestry operations within Papua New Guinea will be operating within a sustainable harvesting limit within 5 - 10 years.

Acquisition of timber rights

Land ownership in Papua New Guinea is vested with customary landowners who comprise a large share of the rural population. Previous Governments followed a policy of using the nations natural resources, of which timber is one of the few that is renewable, to bring development to the rural sector. For this to happen, however, the Government must first acquire or purchase timber rights from the customary owners.

Prior to the 1991 National Forest Policy and Legislation, timber rights were acquired by a process referred to as Timber Rights Purchase (TRP). Under this system, rights were acquired where at least 75% of the adult clan members of a land owning clan or group agree to sign the TRP agreement The rights acquired under this system were exclusively only for the harvesting of merchantable timber and did not transfer to the State or concessionaires the rights to manage the forest.

Under the current forest policy and legislation, the system for acquiring timber rights is facilitated through a process of incorporation of all the various land owning groups. It is a form of land registration under the Land Group Incorporation Act. A Forest Management Agreement (FMA) is then entered into between the registered land groups and the Forest Authority. The rights acquired under this system empower the State or a concessionaire to harvest and manage the forest in a sustainable manner.

The Forest Authority has started to apply the new acquisition system, but some major constraints and problems have already been encountered, including:

· The procedures for incorporating land groups is lengthy and, coupled with the lack of manpower assigned to this task in the Department of Lands and Physical Planning (DOLPP), the anticipated speed in land group registration has not been achieved. This slows down the acquisition process and subsequently slows down the development of the sector to a level below what is expected by the government.

· Incorporation of land groups can be conducted and presented to the DOLPP for registration by any person. Due to DOLPP understaffing, land group documents may not be adequately assessed for compliance and hence serious problems can arise for forest concessionaires during the development of the resource.

· Defining land boundaries is an extremely difficult task given the lack of proper documentation. This leads to many running land disputes which, on many occasions, have to be resolved using the judicial system.

In recognition of the manpower problem of the DOLPP, the Forest Authority is assisting the Land Registration Branch of DOLPP to expedite the registration of land groups in forest development areas. Assistance is provided in checking and entering the applications for incorporation, preparing letters for gazettal, sending copies of the gazettal notices to land groups and preparing Certificates for Incorporation to be signed by the Registrar. In addition, amendments will be introduced to shorten and simplify the Land Group Incorporation Act, to speed-up this process and be consistent with the understanding and knowledge of local landowners, many of whom are rural based and have little understanding of the current legal requirements.

Landowner companies

The landowner company (LOC) concept was developed as part of the 1979 National Forest Policy in order to increase national participation in the forestry sector. Since then the number of LOCs has mushroomed, with many having been issued with Timber Permits, supposedly to develop their own resources.

Whilst the concept is good in theory, the practical reality has not been so good. Most of the LOCs have been plagued by mismanagement, corruption, and in-fighting between different landowner factions. The result has been that most LOCs have become alienated from the people that they were supposed to represent most of the income of the LOCs has also ended up in the pockets of their directors and many have become linked to foreign logging companies.

The main reason for the above problems is a lack of education and business knowledge on the part of the majority of landowners. There have also been difficulties in successfully structuring the LOC's due to the complex land tenure system and proliferation of land-owning groups in Papua New Guinea and difficulties the government has in imposing punitive actions when laws are broken.

To try and control this problem, the Forest Authority is moving on two fronts:

· it is trying to ensure that all landowner groups receiving money are fully representative of the people, are incorporated under the Associations Act rather than the Companies Act, and are carrying-out proper management of the forest resources under their control.

· it is trying to restrict the number of new Timber Permits being given to LOCs.

Unfortunately, there is little legislation to support any of these moves, especially for the 72 approved existing LOCs. Also, landowners have very high expectations of financial benefits from this scheme (especially from the most educated landowners).

A few landowners have found unlikely allies in support of the LOCs amongst many of the `green' NGO groups who believe this promotes the idea of landowner empowerment Unfortunately, many LOC directors take the NGO's good intentions and construe them for their own benefit. This is an issue that will not be easily resolved

Improve the level of monitoring and surveillance of log harvesting and export operations

Tremendous advances have been made in the standard of monitoring of forestry operations in the field., Staff housing, offices, vehicles and field equipment have been provided at all forestry projects and considerable staff training has been undertaken However, the Government's current financial difficulties are likely to place increasing budgetary pressures on the Forest Authority which will result in decreased monitoring capacity.

Implementation of the Logging Code of Practice

Since the Code was adopted by the Papua New Guinea Government in July 1996, the Forest Authority has undertaken a concerted awareness campaign and education programme. It is imperative that this momentum be maintained and that the requirements of the Code which was made Statutory as from 1st July 1997 continued to be enforced.

Development of a consistent domestic processing policy

Currently, there is no clear policy on domestic processing and much of the debate regarding the subject is based on emotional issues. The Forest Authority currently has a study in progress to review the domestic processing policy options and to recommend the most efficient package of measures to encourage domestic processing. This study commenced in July, 1997 and is expected to be completed by end of March 1998.

Development of a plantation sector

There is huge potential for rural employment generation through plantation development, particularly on large areas of deforested grasslands. In addition, it is almost certain that if a large processing sector is to get established in Papua New Guinea then it will require a large plantation resource to provide the basis.

Historically, most plantation development in Papua New Guinea has been undertaken by the State and the record of accomplishment is very poor. Most of the plantations which still exist have either been abandoned or are neglected, although measures are currently being taken by the Forest Authority to improve this situation. There is a need to properly address the issues of land tenure and resource ownership in order to successfully develop a privately owned plantation sector.

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