Forestry

PNG’S forests have com­mer­cial po­ten­tial but it is cru­cial to un­der­stand global trends.

Business Advantage Papua New Guinea - - CONTENTS - By Kevin Mc­quil­lan and Sarah Byrne

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.’

Niche

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

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