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WORLD BUSINESS

Report: Most PNG logging illegal

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Papua New Guinea celebrated 30 years of independence in 2005 with events across the country.

PAPUA NEW GUINEA FACT BOX

Capital: Port Moresby
Area: 460,00 square km
Prime Minister: Sir Michael Somare
Population: 5.9 million
Population growth: 2.7 percent
GDP: About US$5 billion
Per capita income: About US$800
GDP growth: 2.5 percent, 2005
Main industries: Mining, forestry, agriculture, services
Currency: Kina
Source: DFAT

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Papua New Guinea
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Forestry and Timber

SYDNEY, Australia (CNN) -- The vast majority of logging operations in Papua New Guinea are illegal, environmentally unsustainable and provide little benefit to the country, according to a new report Tuesday.

The report, by the Washington-based Forest Trends non-profit organization, says logging in Papua New Guinea is dominated by Malaysian-owned companies, whose primary export markets are China, Japan, and South Korea.

Once processed, many of the logs are exported to Europe and North America.

Forest Trends says corruption is having a devastating affect on PNG living standards and calls on big importers of PNG timber such as China to take a "global leadership" role in overcoming illegal logging.

The report is based on a five-year external review commissioned by the World Bank and the PNG government.

It said that a study of 14 logging projects covering 3.17 million hectares found all were operating illegally and the harvested timber was not being sustainably managed.

It criticized the PNG Forestry Authority as being "seriously deficient" in its primary governance role and said there was a political vacuum with "no demonstrated government interest in controlling the problems in the sector."

In a statement released Tuesday, Forest Trends CEO Michael Jenkins said the nexus between logging companies and PNG's political elite "needs to be broken," and one way was to help local landowners better understand and defend their rights.

He also urged China and other big importers to take a leadership role.

"They should establish green procurement policies, starting with a pilot program to ensure that wood for the 2008 Beijing Olympics comes from verified legal sources," Jenkins said.

The island of New Guinea -- shared by Indonesia in the west and Papua New Guinea in the east -- contains the largest remaining tract of primary tropical forest in the Asia Pacific, according to Forest Trends.

But despite this forestry resource and abundant other natural resources that include gold, copper, oil and gas, Papua New Guinea is among the poorer countries in the Asia Pacific region, with a per-capita GDP of about $800.

'Fragile state'

Papua New Guinea gained independence in 1975, but by late 2005 Australia's Lowy Institute think tank described it as "one of the world's fragile states."

Its economy has been trending towards a decline in GDP growth, and one recent study by the Australian government suggests that by 2013, real GDP per person will be 15 percent below the level in 2002.

Papua New Guinea has a population of about 5.9 million people, growing at an annual rate of 2.7 percent. That means economic growth needs to be about 3 percent simply to keep pace. In 2005, the PNG economy grew about 2.4 percent, but the government's forecast this year is for a more robust 3 to 3.5 percent, depending on international commodity prices.

The Forest Trends report makes a series of recommendations to overcome some of the key problems in the country's logging industry.

These recommendations include: Continued monitoring of activities, establishment of a legal fund to support challenges through the court system, raising awareness about land-owner rights, support to the Ombudsman Commission, best-practice reviews, and international assistance to investigate potential corruption and the relationship of the timber industry to political groups.

Illegal logging and corruption has long been an issue in PNG's forestry management.

In 1989, a government-appointed commission of inquiry into the operations of logging companies, headed by Judge Thomas Barnett, reported large scale corruption and illegal activities, including transfer pricing which deprived the country of millions of dollars in revenue.

According to the conservation group Greenpeace, Malaysian company Rimbunan Hijau now accounts for about 50 percent of PNG timber exports. Other Malaysian companies active in Papua New Guinea include WTK, Samling, Kerawara and Innovision.

Rimbunan Hijau, controlled by tycoon Tiong Hiew King, says on its Web site that it carries out logging in Papua New Guinea "with due consideration for the protection of the environment through the application of sustainable forest management practices."

It identifies itself as a "genuine partner in PNG's nation-building process."

But Greenpeace claimed that a leaked report by the PNG Department of Labor in 2004 found Rimbunan Hijau's treatment of its employees at one forestry concession "reflects labor exploitation and slavery and should be condemned at all levels."

The company rejected the allegations as "ludicrous" and in January 2004 issued a statement in which it said all the timber it produced in Papua New Guinea was in full compliance with the country's laws.

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