PNG’S KEY INDUSTRIAL SECTORS
4.6 Forestry
or about 10% of industry production.
4.6.1 Industry snapshot Approximately 30 million hectares of PNG’s total land area is covered by forests, and about 15 million hectares is high quality tropical hardwoods considered suitable for forestry development. PNG’s current forestry products are raw log exports, sawn timber, veneer sheets, domestic log sales, plantation logs, plywood, processed timber exports and woodchips. The country is the second largest exporter of tropical logs in the world, following Malaysia. According to the Bank of Papua New Guinea, 2.86 million cubic metres of logs were exported in 2010. Forestry is a major contributor to the country’s Gross Domestic Product (GDP). In 2010, the value of PNG’s forest products exports was K700 million (US$300 million)—4.6% of the value of PNG’s main commodity exports. The PNG Forest Authority estimates 7000 people are directly employed in the forestry sector. There are 29 forest concessions in production, covering 3.5 million hectares. All commercial timber production is controlled by private companies, with Malaysian multinational companies currently dominant. Malaysian company Rimbunan Hijau controls over 45% of log exports. In recent years, downstream processing of forest products has been PNG’s fastest-growing manufacturing sector. Exports of this type of product have increased by more than 200% since 1997. The industry currently has more than 40 sawmills, a plywood factory, a woodchip mill and more than 25 furniture-making factories and joinery shops. Downstream processing activities include furniture making, plywood, flooring and other building products.
4.6.2 Markets Most of PNG’s timber is exported. The main markets are in Asia, with more than 80% of log exports going to China/Hong Kong, Korea and Japan. China imported over 1.7 million cubic metres of round logs from PNG in 2005, the equivalent of 74.6% of total log exports. Key markets for processed timber products are Australia, New Zealand and South Pacific countries, apart from veneer, which is mainly sold to China and South Korea.
4.6.3 Plantations PNG has 62,277 hectares of forest plantations. An AusAIDfunded valuation of plantations in 2005 put the investment value of these plantations at K123.64 million (US$41.51 million)
The PNG Forest Authority plans to develop 240,000 hectares of commercially viable and sustainable forest plantations by 2030. Approximately 4000 hectares of this goal is expected to be contributed by private investors, including possible new entrants to the sector. PNG’s Government says the potential for plantation forestry is significant, especially in large areas of deforested grassland.
4.6.4 Regulations and legislation The overarching legislation governing the forestry sector is the National Forest Policy, which covers forest management, the industry, research, training, education and forest organisation and administration. The PNG Forest Authority was established under the Forestry Act of 1991, and provides for regulations on the acquisition and allocation of land for forest development. There are several policy areas currently being reviewed and formulated, including a downstream processing policy aimed at increasing the value of forest exports and technological transfer, a reforestation policy related to PNG’s international commitments under the Kyoto Protocol climate change treaty, and an eco-forestry policy, aimed at creating an environment supportive of landowner participation. Under Reducing Emissions from Deforestation and Degradation (REDD), countries like PNG could receive funds for cutting emissions that result from deforestation and land use change, giving the country an incentive to maintain its forests. The PNG Forest Authority also identifies forest research and non-timber forest products, as likely subjects for future policy reviews. The National Forest Development Guidelines are being reviewed for the first time in 17 years. Drafts presented in August 2009 emphasise downstream processing and the carbon trade. Forest resources of PNG are customary owned. There is a 34-step project development process for timber concession areas, which includes national and provincial planning, surveys of the timber resource, infrastructure and economic potential, a tender process, formal stakeholder negotiations, environmental planning, and annual and long-term working plans. The PNG Government issues two types of timber licences: Timber Permits for big timber concession areas and Timber Authorities for smaller operations. Companies and investors new to PNG must register as a forest industry participant or consultant with the Forest Authority in order to get the permits and approvals necessary for beginning business of any kind in the sector.
THE PNG INVESTORS’ MANUAL - SECOND EDITION
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