PNG’S forests have commercial potential but it is crucial to understand global trends.
Bob Tate, Executive Director of the Papua New Guinea Forestry Industry Association, says 88 per cent of Papua New Guinea’s timber exports are sold into China for processing and on-selling into the United States.
In 2018, says Tate, volumes rose slightly and prices averaged at around the high of US$90 per cubic metre. He says the trade war between China and the United States has not directly affected forestry or forest products, but it has created a high degree of uncertainty and caution in forest products markets.
‘The US, Russia, Canada and New Zealand are the four biggest exporters of logs into China. It has been talked about that the US in particular would impose tariffs on Chinese imported manufactured wooden products. Of course, that tends to disregard or ignore the fact that the US is a significant exporter itself of forest products, particularly logs, to China.’
The PNG Government plans to ban round log exports by January 2021 and to promote downstream processing to add value to forest products and increase forest by-products. But Tate points out that the processing sector is in decline.
‘There are now seven mills operating in PNG and there has been no new mills established in the last 15 years. Forest plantation development has fallen from 65,000 hectares to 40,000 hectares since the 1990s. The public sector has largely abandoned its plantations due, significantly, to land tenure issues.
‘If the government is to achieve this goal, it needs to institute a fair and equitable fiscal regime and fiscal stability. Forestry could no longer be regarded as the cash cow it is treated as currently.
‘There needs to be trade regulatory reform to enable efficient and cost-effective exports of products. Currently, it’s a dog’s breakfast of regulation, red tape, and duplication of process and approvals involving five different government departments and agencies and requiring two discretionary approvals by Cabinet Ministers.’
One positive sign is a proposed timber processing facility near Lae. It will be positioned to fill a niche and play an important role in the PNG forestry industry’s future, according to Tony Bartlett, Forestry Research Program Manager at the Australian Centre for International Agricultural Research (ACIAR).
ACIAR has worked with the PNG Government to research the development of a central processing facility for timber coming from community-owned forests.
‘The global market for wood products is continually growing. The Papua New Guinean government has acknowledged this and is hoping that the facility will provide the capacity to add value to timber domestically, and therefore keep a proportion of the income in PNG.’
According to Bartlett, the facility will be profitable from year one.
‘The business plan has already been developed, making this a great opportunity for private business to get involved and invest. Papua New Guinea is well endowed in forestry resources, which makes the sector an important player in the country’s future.’
THE GLOBAL MARKET FOR WOOD PRODUCTS IS CONTINUALLY GROWING.
A timber facility in Lae Credit: ACIAR