Papua New Guinea

Last updated: April 2013

Forest Management

Despite its rich natural resources and stable political climate, PNG still has 40% of its people living below the poverty line on less than $1 a day. While the national GDP benefits from strong extractive industries, these operators are also degrading the resources the majority of the country depends on.

As one of the PNG Government’s top-grossing sectors, forestry plays a significant role in the economic development of the country. Harvesting, transporting and processing of timber and wood products provides employment and royalties payments to many rural communities. As a result, the forest industry is both a blessing and a curse for local people; it’s degrading their territory, but providing income.

Although PNG’s Government is thought to favor industry over the environment, the World Bank reports that still much of the logging in its forests is illegal. Papua New Guinea is a major exporter of tropical logs, shipping out an estimated 2.02 million cubic meters in 2003, mainly to China. PNG has reported a growing stock of some 1.035 billion cubic meters of wood; approximately 50.7% of it was designated for wood production and other commercial use - a newer area for the PNG timber industry.

Transparency

According to Transparency International’s 2013 Corruption Perceptions Index, which measures perceived levels of public sector corruption in countries around the world using a score of 0-100 (where 0 is highly corrupt and 100 is completely clean). Papua New Guinea is ranked 144th out of 177 countries assessed. It has scored a corruption index of 25, meaning it has an average perception of highly corrupt. PNG has performed consistently poorly on Transparency International’s Corruption Perception Index.

The PNG constitution guarantees every citizen “the right of reasonable access to official documents, subject only to the need for such secrecy as is reasonably justifiable in a democratic society”, but guaranteeing this right for people has not been reached. Similarly, the 1991 Forestry Act states that the PNGFA must maintain a public register that will include things like forest maps, final decisions on issuance of logging licenses, details on logging and processing license holders, and copies of Forest Management Agreements. The law also requires the issuance of notices and the holding of public hearings as part of the procedures for the granting of logging permits. Access to this information has been seriously limited and several landowners have had to exercise legal action to get it. It is no surprise, then, that Chatham House researchers have designated PNG’s forestry sector transparency among the worst of any producer country.

TI Asia Pacific Chapter works in PNG on Forest Governance Integrity is focused on issues related to forestry and trade, including Preventative Anti-Corruption measures for Reducing Emission from Deforestation and Forest Degradation, Forest Anti-Corruption Solutions and Advocacy & Forest Governance Analysis, Anti-Corruption Advocacy and Monitoring.

World Bank Worldwide Governance Indicators (WGI) compiles a set of governance indicators for all world economies. These indicators are an important barometer in terms of risk assessment. The WGI country reports are based on the six following aggregate governance indicators: Voice and Accountability, Political Stability and Absence of Violence, Government Effectiveness, Regulatory Quality, Rule of Law, and Control of Corruption. Countries are ranked (percentile rank model) for each of the six governance indicators on a scale from 0 to 100 where 0 corresponds to the lowest rank and 100 corresponds to the highest rank (better governance).

Laws and Regulations

Forestry Laws

Papua New Guinea’s principal forestry legislation is the Forestry Act of 1991. This law provides for the conservation, development, and management of its forest resources. The Act also allocates forest rights and responsibilities through the required Forest Management Agreements between customary landowners and the government. Landholders sell cutting rights to the PNG Forest Authority in exchange for timber royalties. The Forest Authority may then grant the cutting rights to third parties within the private sector. The majority of PNG’s forests are held by communities and individual PNG clans, and there are still many large inaccessible areas of forests that fall outside of formal forest management.

There is general agreement that the forestry legislation in PNG consists of policies, laws, regulations and guidelines that are sufficient to ensure sustainable forest management. However, there are serious implementation and enforcement issues, which allow illegal and unsustainable logging to go unchecked.

National Constitution, Article 4

PNG’s Constitution provides that its natural resources and the environment will be conserved for the benefit of all and repaired for the future. Further, the constitution also requires that parties: (1) apply wise use toward natural resources; (2) conserve and replenish the environment for the benefit of all, and 3) take all necessary steps to protect wildlife.

Forestry Act of 1991

This Act was announced in 1991, and provided for the establishment of the new and autonomous Forest Authority in order to replace the now former PNG Department of Forests. The new law also included a commitment to establish a new forest revenue system; it required the preparation of a National Forest Plan as a precondition for the development of new forestry projects. In addition, the forest policy also called for an increase in domestic log processing since currently 80% of PNG’s timber is exported as unprocessed round logs. As a result, the Act effectively tightened the acquisition and allocation requirements around forest development. The Act has also been amended several times since then, beginning in 1993 and more recently in 2007. Section 54 of the Forestry Act requires that all resources must also be developed in accordance with the National Forestry Plan (NFP). Despite the tightening of regulations, the Forestry Act of 1991 has been subsequently undermined by contradictory amendments and weak implementation. As a result, there has been little increase in log processing since 1991.

National Forest Policy of 1991

The NFP was issued in September 1991 by the National Executive Council. It laid the foundations for detailed reform of forestry legislation in PNG. It was designed as PNG’s forest management policy, and covers the requirements of the forest industry, research needs, forest training and education, and forest organization and administration. It also requires the Forest Authority to prepare a National Forest Plan to provide a detailed statement of how the national and provincial governments intend to manage and utilize the country’s forest resources. In addition, central to the new policy are its concepts of environmental conservation and protection, the decentralization of decision-making, and the full recognition of the people’s rights to their natural heritage.

National Forestry Development Guidelines of 1993

These guidelines were issued by the Minister for Forests and endorsed by the National Executive Council in 1993. The Guidelines provided an implementation guide for elements under the Forestry Act of 1991. It highlights sustainable production, domestic processing, forest revenue, training and localization, review of existing projects, forest resource acquisition and allocation and sustainable development. The Guidelines were thought too radical, and were strongly attacked and scarcely followed.

National Forest Plan of 1996

PNG’s National Forest Plan was finalized in 1996. Hence forth, all forestry projects are expected abide by the Plan. Provincial forest management plans are also required and must be prepared by Provincial Forest Management Committees. The NFP also developed (as required by the Forestry Act of 1991) a National Forest Development Program for the period 1996-2001. Since the Forestry Law and its subsequent amendments cover all aspects of PNG forest policy and the NFDP was not extended, it has now expired. However, discussions to implement a new Plan are underway.

The draft National Forest Plan of 2013 received poor reviews. The draft Plan does not include prescriptions for bringing logging operations more in line with PNG’s Logging Code of Practice. The document and its terms appear, to some, to be based on expired data that does not reflect current forestry conditions in PNG. As of April 2014, no new drafts are available online.

Forestry Regulations of 1996

The 1996 regulations cover all facets of the forest industry procedures and controls. They were approved by the National Executive Council (NEC) and they provide the legal status for the implementation of many of the requirements specified under the Forestry Act 1991 (as amended).

Logging Code of Practice

Pressured by the World Bank, PNG approved the Logging Code of Practice in 1996 to guide logging operations. It is overdue for review and updating. The implementation of the LCOP has been constrained by the limited capacity of the PNG Forest Authority to undertake new training, monitoring and enforcement activities.

Forestry Regulations of 1998

These regulations work toward implementing the many provisions of the Forestry Act of 1991. Some of its terms cover: dedicating National Forests, declaring of reserved trees, establishing powers of the Forest Authority and the National Forest Board, both established by the original Act, advising the Board, organizing the Provincial Forest Management Committees, managing and granting timber permits and permission to develop roads, issuing permits for agriculture and land use, requiring five year work and annual logging plans, registering forestry industry participants, exporting of logs, registering a processing plant, etc.

Environmental Act of 2000

This Act provides the administrative mechanism for environmental impact assessments (EIAs) and guidelines to assess the impacts on the environment from the proposed use plans to determine project approval and permitting. In May 2010, the Act was amended. The new version restricts landowners’ rights for projects ruled to be of “national interest.” In January 2012, efforts were underway to repeal certain sections of the Amendment.

Processing/Manufacturing Laws

The majority of PNG’s forests are under customary ownership by local indigenous people and communities. Their land rights are well defined in PNG legislation and regulations. This customary ownership is not well documented or mapped, and the system to permit logging in customary owned forests are weak. While prior, informed consent of customary landowners is required, including written documentation, this process often fails and local people are sufficiently uninformed or individuals commit to agreements without representing larger community interests. “Further, the permit process of logging operations in PNG is also complex and poorly executed. One major cause of forest loss and degradation is from the excessive amount of logging authorized by setting the Annual Allowable Cut too high and without applying the principle of sustainable yield or making an adequate inventory assessment. PNG does not require evidence of sufficient supplies of legal timber as part of the licensing process for timber mills in the country. However, there is a Forest Licensing System in PNG. View Application: Forest Industry Participant. One of two types of timber operating licenses are available:

1) Large timber concession license: Timber permit is issued in advance of harvesting. All the pre-requisites to developing a forest project must be completed in advance. View Checklist for Obtaining Timber Permit. These must be secured by a Forest Management Agreement (see more below).

2) Small operations license: Small operators work under a Timber Authority system, not a license. Here, the Timber Authority allows operations to begin before all pre-requisites are completed or the license is issued. TAs are issued for selective logging operations focused on the domestic market. The TA is issued by the Chairman of the Provincial Forest Committee and subject to PNGFA approval.

Forest Management Agreement

To obtain an FMA, a complex, 34-step process is required. This includes a broad consultation, open and competitive bidding process, and approval will be dependent on the past reputation of the company. The operator must also obtain consent from the customary landowners to implement forest management. No single government official – not even the forests minister – has the power to decide unilaterally on the issuance of a logging license. This is where much of PNG’s illegal forestry comes into play. Resource allocation procedures are often skirted or not locally implemented. After it’s approved, the PNGFA transfers the right to harvest to the developer. The permit holder is then authorized to implement forest management on the land. The term of the agreement is 50 years.

Key Elements of the 34-step Licensing Process:

Resource investigation (Forest Inventory)
Explanations to landowners (Landowner awareness raising)
Establishment of Incorporated Land Group (ILG), a legal body representing land owners
Conclusion of the FMA between the PNGFA and the ILG
Project guidelines development with the participation of landowners
Opening for bidding (Call for Project Proposal to the candidate developers)
Project Agreement signed
Obtaining the approval for the Environmental Plan by the DEC
Issuance of TPs

Timber Legality and Timber Verification

The PNG Government has not provided any active support for forest or timber certification. Industry has also shown little interest in doing so. As of 2012, less than 6% of PNG’s forests were independently verified or certified. In an effort to increase this, the Timber Legality and Timber Verification (TLTV) scheme was developed in hopes of ensuring PNG timber is harvested legally. This certification process is partially financed by the ITTO and intends to provide additional legitimacy to log exports. Tt is often undermined by conflicting policies.

Timber Export Monitoring System (TEMS)

TEMS was introduced in 1994 and requires exporters to receive inspection and certification by a third party prior to export. They will confirm the place of origin, species, volume and price of timber. The inspection is carried out by SGS and barcoded tags are handed to licensees for them to attach to logs at landing points within logging concessions, not at the stump. These tags provide information on the concession, logging block and species. They provide some chain of custody information, but there are gaps.

Transport Laws

Cities and ports in PNG are poorly connected. Construction of new roads is hampered by rugged mountainous and a lack of government funding to create or improve more roads. Presently, only 3.5% of PNGs roads are paved. The principal ports for export in PNG are: Alotau, Port Moresby, Lae, Madang, Wewak, Rabaul (in New Britain), Kieta (Bougainville) and Momote (Manus Island). As there are relatively few roads, river transport is also important, for both freight and passengers.

Timber Export Monitoring System (TEMS)

Under the TEMS, SGS ensures at the time of export that all logs exported are properly declared and that relevant taxes have been paid (learn more under Tax Laws). The SGS system only traces logs back to logging blocks, not to individual stumps. In addition, the system does not involve any checks on the legality of license issuance, harvesting practices or most other forest-related regulations. The major responsibilities of the SGS prior to export are as follows; 1. Attach a tag to the root end of all raw logs to be exported at the collection point on the logging site. The tag must contain detailed information on the logging area, species, etc. and remain on the log during transit; 2. During an inspection prior to vessel loading, SGS must verify the volume of material, recheck the information on the attached tag, and confirm the price listed on the export permit, and 3. Be present when logs are loaded onto the vessel, in order to confirm the inspection and that the right logs are being loaded.

Tax Laws

Timber and logging companies are allowed to deduct the capital costs incurred in developing their timber and logging business. For example, the costs associated with building access roads, housing and amenities for employees, and structural improvements for secondary processing can be tax deductible. The total cost is deductible over a limited period of time, either the term of the timber lease or 15 years, whichever is less. In addition, timber companies which reforest logged areas can also qualify as primary producers and are allowed a deduction for the full cost of replanting. Timber Export Tax: An export tax on logs (excluding plantation logs and sawn timber) must be paid directly to the landowners of the timber concession site. In 2009, the flat rate was 8 Kina (approximately US$3.00) per cubic meter of wood. Previously, PNG taxed wood at a varying rate based on the going Free On Board (FOB) price for the logs. The larger tax paid on log exports ranges from 20%-35% and averages about 30% each year. It depends on the volume and species of the logs exported and is paid directly to the Internal Revenue Commission.

Royalties Payments & Income Tax Act: The Timber Royalty is determined on a scale basis. The amount is set by the Minister and fixed in the timber permit. The royalty payment in 2011 was Kina 10.00/cubic meter (approximately US$ 3) for all logs produced. PNGFA collects the royalties and redistributes then to the appropriate local community agent.

Trade Laws

The International (Fauna and Flora) Trade Act 1978

This Act provides the mechanism for the control of exploration and importation and introduction of flora and fauna from the sea, whether dead, alive, their by-products, parts or derivatives.

FLEGT - VPA

PNG is one of the only large tropical timber exporting countries is not negotiating, implementing or in preliminary informal discussions regarding a Voluntary Partnership Agreement (VPA) with the EU. To date, the government has shown no interest in doing so. PNG is in the “informing” phase, but where that will lead is unclear at this time. One reason PNG may not be interested is that PNG exports to the EU are very small, although it is possible that the impact of the new EU Timber Regulation (EUTR) on access to EU markets for Chinese timber products may encourage PNG to rethink a VPA. PNG is also involved in the following international conventions: CBD (ratified), UNFCCC (Non-annex I Party), Kyoto Protocol (ratified), UNCCD (acceded), ITTA (Producing Member), CITES (acceded), Ramsar (Contracting Party), World Heritage (accepted), NLBI (member State), and ILO 169 (not ratified).

CITES

CITES (Convention on International Trade in Endangered Species of Wild Fauna and Flora) is an international agreement among governments whose purpose is to ensure that international trade in wild animal and plant species does not threaten the survival of these species. A total of 180 countries have agreed to the CITES regulations, which is a legally binding agreement. It is up to each CITES Party to draft its own domestic legislation in order to comply with its CITES obligations.

See current list of member countries here

PNG ratified the Convention in 1975. The Department of Environmental Conservation is responsible for overseeing the CITES process in PNG. There are CITES listed species that are found and traded in Papua New Guinea. These include:

Aquilaria spp, a timber that can produce agarwood, a fragrant wood extremely valuable for incense, perfume and traditional medicine and where overharvesting has led to the listing of Aquilaria spp in CITES. Papua New Guinea forms the eastern limits of the range of genus, where harvesting for trade has only developed over the last few decades. The CITES listing for Aquilaria spp applies to all parts and derivatives, except seeds; seedling or tissue cultures obtained in vitro, in solid or liquid media, transported in sterile containers; and cut flowers of artificially propagated plants.

Ramin (Gonystylus spp) is a highly prized and popular as a decorative timber for furniture and interior decoration but also for veneer and plywood. Declines in natural forests are associated with excessive harvest by illegal logging for international trade. There is one known species in Papua New Guinea, G. macrophyllus, although there is little information regarding the extent of harvesting and trade. The CITES listing for Gonystylus spp applies to all parts and derivatives, except seeds; seedling or tissue cultures obtained in vitro, in solid or liquid media, transported in sterile containers; and cut flowers of artificially propagated plants.

For more information on CITES and Papua New Guinea, see the following resources:

Forest Resources

The Oceania nation of Papua New Guinea (PNG) has approximately 42.4 million hectares of tree cover, which comes to roughly 63% of its land area. An impressive 91% of this area is also still considered primary forest, making it one of the most intact forest ecosystems in the world. PNG in itself contains over 5% of the world’s known biodiversity, not to mention in a space less than 1% of the world’s collective land area. Its unique location has drawn species from both East Asia and other parts of Oceania, namely the Australian continent. As a result, the country is home to between 15-21,000 higher plant species; 3,000 orchids varieties; 800 coral species; 600 kinds of fish; 250 mammals, including 8 species of tree-kangaroo, and, lastly, 760 types of birds. In addition, many of these species are endemic to the country.

Since PNG generates most of its revenue from the extraction of its natural resources, widespread overexploitation is rampant. The loss is partially attributed to shifting cultivation, conversion of forested lands to agriculture, logging, urban development, infrastructure development, mining developments, and various natural disasters. At its current rate of deforestation, researchers estimate that PNG will lose or have seriously degraded half of its current forest cover by 2021. Even 80% of PNGs commercially available forested area will be compromised by the rate of destruction. While there are many industries contributing to PNG’s deforestation, about 23% of already lost area was cleared by industrial logging activities.

Forest Products

Deep-rooted problems of corruption and poor forest governance in PNG have been documented in detail on multiple occasions over the past 25 years, yet successive administrations have failed to address them. While PNG has one of the best legal frameworks governing forests and forestry of any major developing country, these laws have failed to protect forests and forest-dependent people because they have not been effectively implemented and enforced.

Customary land ownership is guaranteed by the PNG constitution and is the key factor influencing the use of the forests. Ninety seven percent of PNG’s land is designated for communal or clan commons. Outside of community forests, the National Government oversees 29 million hectares of forest; fourteen million hectares of which are labeled reserve forests, and the other 15 million hectares are production forests, 52% of the total forest, is divided into acquired areas (12 million ha) and available areas (3 million ha). From the 12 million hectares under acquired areas, 10 million ha have a timber permit.

Forest law in PNG is governed by its Forestry Act of 1991 and its subsequent amendments (1993). The Forestry Regulations of 1996 and the 2000/2010 Environment Act are also key legislative authorities impacting the forest resource. The Forestry Act gave 80% of the production forests in PNG to the PNG Forest Authority (PNGFA). As a result, PNGFA and the third parties (i.e. logging companies) who have received harvesting rights for these areas, are the main operators within PNG forests.

Production Status

Papua New Guinea is a net exporter of tropical timber and timber products, assisted by low domestic consumption. Round wood logs are the overriding timber export commodity and account for 90% of harvested timber for export by volume. Approximately 2 million cubic meters of logs are exported per year, which makes Papua New Guinea the second-largest exporter of tropical logs after Malaysia. Income generated from the export of tropical timber and timber products is about $126 million, most of which comes from round wood exports. That said, due to frequent transfer pricing by exporters to divert higher export taxes, PNG could be generating as much as $20 million more per year.

Although Japan used to be PNG’s largest export market, China surpassed it after 2001 and now imports around 90% of PNG’s roundwood exports. The rest is predominantly consumed by other Asian countries, namely Japan, South Korea, and Philippines. The only exports to sensitive markets, like the EU, USA and Australia, are small volumes of sawn timber and other products. “There are 29 forest concessions currently in production, covering a total area of 3.5 million hectares. Privately owned companies control all commercial timber production from natural forest areas. Only five companies control over 80% of PNG’s timber production, mostly originating from Malaysia. Rimbunan Hijau, a Malaysian company, controls over half of the countries production. It also dominates governance of the sector and has a strong influence over its governance. The legality of its operations is frequently challenged, and in 2008 it admitted to illegally obtaining logging rights in the Kamula Doso forest.

Given the size of PNG’s log export industry, it is not surprising that its processing infrastructure is limited. Most types of operating facilities number in the single digits. In 2012, there were only one chip mill, two plywood mills, five major sawmills, and two veneer mills.

The presence of the independent monitor of log exports through SGS and the absence of any log export ban, low taxes and the relatively cheap and easy access to licensed log supplies appear to be combining to make illegal export rare. However, the steps to get to export are not always as clean, which for international anti-illegal logging laws like the U.S. Lacey Act, are also relevant. Commonly harvested species include Pometia pinnata (taun), Intsia bijuga(kwila), Eucalyptus deglupta, Calophyllum spp and Anisoptera thurifera.

For more information:

Recent events:

Contacts

Industry Associations

Forest Industries Association (FIA)

The FIA is an incorporated association of companies involved in all levels of operation in the timber industry in Papua New Guinea. It oversees the PNGFA, advises the Minister for Forests, and gives directions to the National Forest Service, the operational arm of the PNGFA. Membership is voluntary and a representative from the Association is on the board of the National Forest Board.

Civil Society Organizations

WWF-PNG

WWF has a large program based in PNG, dating back to 1990 when the South Pacific Program was established. It focuses on forests and freshwater issues.

Papua New Guinea Eco-Forestry Forum (PNGEEF)

Formed in 1999, the PNGEEF is a not-for-profit incorporated association dedicated to promoting integrated rural community development and sustainable resource use through a viable and sustainable eco-forestry industry. The EFF was appointed to the NFB, but has since been removed following an amendment made to the Forestry Act in 2005. In addition to lobbying activities, the EFF has used the judicial process to challenge the authorization of forestry operations.

Center for Environmental Law and Community Rights (CELCOR)

CELCOR/Friends of the Earth Papua New Guinea. Environmental NGO lobbying on natural resource management, education and awareness raising.

Greenpeace Greenpeace is an independent campaigning organization operating all over the world. It uses non-violent direct action to expose global environmental problems and to force solutions which are essential to a green and peaceful future. It’s work in PNG is focused on curbing the illegal timber trade and unchecked deforestation.

Foundation For People and Community Development Inc. (FPCD)

FPCD’s Ecoforestry Programme activities include awareness, forest management trainings, sawmill trainings, business trainings, good governance trainings, forest survey and inventory, forest replenishment, milling, local marketing and export of milled sawn timber under the Ecotimber label.

Government Ministries

Papua New Guinea Forest Authority (PNGFA)

PNGFA was established in 1993 under the 1991 Forestry Act and it replaced the Department of Forest. PNGFA is overseen by the National Forest Board, which advises the Minister for Forests and gives directions to the National Forest Service. Still, PNGFA is an independent administrative organization. The field inspectors of the PNGFA monitor the logging operation on the sites and verify whether the operation has been completed in compliance with approved logging plans and the operation standards.

Provincial Governments of PNG There are 19 provincial forestry departments around PNG.

Department of Environment and Conservation (DEC)

The DEC was established in 1985 and given the powers to protect PNGs air quality, water, soil, biodiversity and the sustainable use of its natural resources. DEC is also responsible for monitoring compliance with environmental controls on logging. However, it has no enforcement capacity at all. A representative from the DEC is on the board of the NFB. In issuing logging permits, the DEC assesses and approves environmental plans submitted by developers, which contain environmental measures to be taken in implementing developing projects. The DEC is also responsible for supervising the compliance by developers with their environmental plans and conducting on-site environmental monitoring.

Papua New Guinea Forest Research Institute (PNGFRI)

PNGFRI is the scientific research division of the PNGFA. Its main task is providing forest-related research services based on collaboration with users in government, industry, communities and other research providers for the sustainable use of forest resources in Papua New Guinea.

Provincial Forest Management Committees (PFMC)

The PFMCs are consultative committees serving the provincial governments and customary landowners. The PFMCs provide advice to the provincial governments and customary landowners as expert institutions on forest policies at the provincial level.

National Forest Board (NFB)

The NFB is the supreme decision-making body of the PNGFA. It also oversees the NFS, which is the executing body. It initially consisted of members from governmental departments, the Director of the NFS, local representatives, one NGO, and Forestry Industry Association. It now consists of eight members as representative from NGOs were eliminated in 2005 by amendment.

National Forest Service (NFS)

The NFS implements what is directed by the PNGFA. There are six NFS initiatives, including about not limited to: Forest Policy and Planning, Project Allocation, Forest Development, and Field Services. There are five local branches under the Field Services Directory. The NFS is responsible for the following matters in administration of forest-related issues:

Planning (Research on resources, the establishment of a national forest plan, etc.)
Acquisition of forest management rights
Selection of developers and negotiations for agreements
Control and supervision of timber exportation
Implementation and control of forest-related legislation