Forestry sector as important as mining for PNG

Logging of native forests raises the hackles of a variety of groups from greenies and western diplomats to the rising numbers of people concerned about climate change, making PNG a target for much criticism. By Brian Gomez

Logging of native forests raises the hackles of a variety of groups from greenies and western diplomats to the rising numbers of people concerned about climate change, making PNG a target for much criticism.

However, a new report by PricewaterhouseCoopers suggests PNG's forestry sector is contributing 9.2% of gross domestic product, similar to the contribution made by mining and quarrying.

PWC said the biggest single contributor to GDP was agriculture and fishing (29.3%), followed by community personal and social services (13.9%) and construction (11.4%).

Following a survey commissioned by the PNG Forest Industries Association, PWC said forestry was comparable with mining and quarrying and well ahead of the 3.5% contribution to GDP by oil and gas extraction.

The government collected 130 million kina from the log export tax in 2005, providing it with 2.5% of total revenue excluding receipts from borrowing.

The country exports about two million cubic metres of logs annually, making it the world's second largest exporter of tropical logs after Malaysia, with export revenues of 476.3 million kina or 4.7% of the value of total PNG exports worth 10.1 billion kina.

The PWC report said the 2007 budget papers showed PNG forest products would remain the highest value export outside the minerals sector for the next five years.

Forestry companies surveyed by PWC employed over 6600 staff - overall direct employment is around 9000 - of whom over 90% were PNG nationals with 50% employed in value adding activities.

The latter included veneer processing, timber processing, carpentry and supporting workshop and engineering services.

The PNG FIA said wood processing has been one of the fastest growing manufacturing sectors of the PNG economy over the past 10 years.

Exports rose from an estimated $US9.5 million in 1998 to a record $40 million in 2004 and $32.1 million in 2005.

Most previous reports had greatly undervalued the contribution of forest products to the economy, but the International Monetary Fund last year said it believed forestry's contribution was greater than current estimates.

The PWC report noted the forest industry was one of the few industries that operated in remote rural areas, creating "the few opportunities for rural communities to enter the formal workforce".

This is supplemented by royalties paid to landowners for access to natural resources on their land, it said.

"The forest companies also create basic infrastructure such as roads and housing.

"Unlike the mining, petroleum and agricultural industries no targeted tax credit system exists to encourage the provision of such infrastructure."

The PWC report said based on likely multiplier effects a 25% increase in forestry output would translate to an increase of almost K600 million in GDP, contributing 7% growth to the economy.

PWC said forestry's potential contribution could be viewed from its role in other countries.

Forestry's contribution to GDP in Indonesia was 20%, providing livelihoods for 100 million of Indonesia's 216 million people.

PNG's forest sector has enjoyed steady growth since the impact of the Asian economic crisis in 1997-98, with log exports last year reaching a 10-year high of 2.6 million cubic metres.

Even though logging activity has been going on for four decades, Papua New Guinea's forest cover has remained relatively unchanged, at 65% of the country's total land area.

This is partly due to the fact that the quantum of exports has never exceeded the sustainable level of three million cubic metres annually.

The PWC report quoted the International Tropical Timber Organisation as saying: "Two thirds of PNG is under forest cover and the official timber harvest is well below the estimated national sustainable timber yield."

It said PNG has a land footprint of about 45 million hectares; 30 million hectares are forested with 15 million hectares suitable for forestry operations.

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