Forestry in­dus­try look­ing to more on-shore pro­cess­ing

Ac­cord­ing to In­ter­na­tional Trop­i­cal Tim­ber Or­ga­ni­za­tion fig­ures, Pa­pua New Guinea is the sec­ond-largest ex­porter of trop­i­cal hard­woods in the world af­ter Malaysia, with about 15 mil­lion hectares of the coun­try’s 30 mil­lion hectares of to­tal land­mass consi

Business Advantage Papua New Guinea - - Forestry -

Prod­ucts in­clude raw log ex­ports, sawn tim­ber, ve­neer sheets, logs, ply­wood, pro­cessed timer and wood­chips. Most raw tim­ber logs are ex­ported to China, which bought 78% of PNG’S for­est ex­ports in 2011.

Of PNG’S to­tal for­est area, 1.2 mil­lion hectares have been set aside as ‘pro­tec­tion forests’, based mainly on their bi­o­log­i­cal or cul­tural sig­nif­i­cance. A fur­ther 13.2 mil­lion hectares are yet to be clas­si­fied, while PNG also has around 62,000 to 70,000 hectares of plan­ta­tion for­est.

Al­most all of PNG’S forests (99%) are owned by cus­tom­ary landown­ers.

Value-adding

Cur­rently, only about 20% of tim­ber is pro­cessed in­coun­try, for which the main ex­port mar­kets are Australia and New Zealand. How­ever, the PNG Gov­ern­ment has es­tab­lished a pol­icy to in­crease on­shore pro­cess­ing to 80% by 2030.

While only 0.2% of PNG’S for­est prod­ucts are sold in the Euro­pean Union (EU), the EU’S de­mand for Chi­nese goods util­is­ing PNG tim­ber means there is a need to demon­strate a sus­tain­able sup­ply chain.

‘We are the only coun­try in the world where our ex­port of logs is sub­ject to 100% in­de­pen­dent au­dit­ing and cer­ti­fi­ca­tion, prior to ex­port­ing,’ says Bob Tate, Ex­ec­u­tive Direc­tor of the peak in­dus­try body, the PNG For­est In­dus­tries As­so­ci­a­tion. This is car­ried out by the Swiss com­pany, SGS.

Com­mis­sion of in­quiry

In the past few years, PNG’S for­est in­dus­try has had to ad­dress a Com­mis­sion of In­quiry into forestry-re­lated Spe­cial Agri­cul­tural Busi­ness Leases (SABLS). This found most of the 70-odd leases were ob­tained cor­ruptly, mostly for the ben­e­fit of log­ging com­pa­nies.

‘Our po­si­tion has al­ways been that the con­cept of land mo­bil­i­sa­tion for real agri­cul­tural devel­op­ment has un­der­pinned forestry devel­op­ment in PNG since the late 1960s,’ says Tate.

‘We do be­lieve it was se­ri­ously hi­jacked in this lat­est round of SABLS and there was sig­nif­i­cant abuse.

‘Of the 70-odd leases granted for forestry there are only four which will be­come real, vi­able: two in East New Bri­tain and two in Sepik that are mak­ing real and sig­nif­i­cant progress and which will be­come se­ri­ous, large-scale op­er­a­tions.’

Stiff com­pe­ti­tion

For­tu­nately, 2014 was a bet­ter year for the sec­tor, with tim­ber prices higher and to­tal ex­port in­come from round log ex­ports up around 25% for the 12 months end­ing Septem­ber 2014, ac­cord­ing to Bank of PNG fig­ures.

How­ever, Bob Tate says the PNG in­dus­try is fac­ing sig­nif­i­cant com­pe­ti­tion in Asian mar­kets from soft­wood pro­duc­ers.

‘For ex­am­ple, New Zealand ex­ports of tim­ber into China are nearly four times the level of PNG. From North Amer­ica, Canada and far eastern Rus­sia, ex­ports into the Asian mar­kets are rock­et­ing ahead. We do not have the po­ten­tial to com­pete with their scales of pro­duc­tion.'

Man­u­fac­tur­ing ply­wood: the PNG Gov­ern­ment has es­tab­lished a pol­icy to in­crease on­shore pro­cess­ing to 80% by 2030.

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