Demise of forestry sector

IT would be remiss of anyone to underplay the Government’s attitude towards one major industry in this country.
The Forestry industry in the country is on the verge of collapse.
And the Government wants it to collapse no later 2025 – at least one aspect of it anyway.
The Government has said it wants all round log exports to stop by then and for attention to be shifted to domestic processing of logs and reafforestation.
How that is performed in just two years is a feat that for now lies well beyond the possible.
Most companies have shut down operations or scaled back operations.
Of some 26 companies, 14 have shut down operations or scaled back operations, including the country’s two largest processing plants in Western and in Gulf.
The Forestry Industries Association has counted direct job losses from these companies and operations of 7,000 workers.
But it is not just the loss of jobs that the economy has to contend with.
For tens of thousands of people who depend entirely on timber companies operating in some of the remotest locations, it means loss of schools and health centres, of access to transportation and of livelihood.
Even civil servants in these remote locations depend on the forestry companies for support.
As the Member for Vanimo-Green and a former long-term Forest Minister said in Parliament, before connect PNG these companies were the only connection for thousands of rural dwellers.
It will certainly force outward migration of these urban dwellers when the only means of support is removed.
In place of these companies there is little else promised.
The mid-year economic and fiscal outcome (Myefo) report released by the Treasurer last week mentions that agriculture, forestry and fisheries sector have performed poorly driven by the poor performance of forestry.
The global pandemic hit the timber industry directly but so did the government’s exponential increase in log export taxes from about 30 per cent to 70 per cent.
The Myefo states: “Round logs exports are expected to decline by 16.4 per cent in 2023 due to issues with the Real Estate Sector in China – global sub-tropical timber imports to China and Vietnam, by far PNG’s largest customers have dropped by 25 per cent this year.
“In addition the increase in round log duty is anticipated to reduce log production and exports in line with the policy goal of shifting round log exports to domestic downstream production (there are no taxes on timber products processed locally).”
In December 2022, the log export duty was increased from 38 per cent to 50 per cent and this was increased in the 2023 budget by another 20 per cent increasing the overall rate to 70 per cent.
The increase was aimed at stopping export of unprocessed logs by 2025 and promoting downstream processing thereon.
In the first half of 2023, K169.8 million was collected from log exports.
The Government reports that the primary cause of this reduction in revenues appears to be the significant reduction in global imports in the first half of the year by 25 percent by PNG’s main export countries China and Vietnam.
How the industry can survive with this kind of very heavy duty and be able to find the reserves and the resolve to head into downstream processing is going to be most difficult.
This was a billion kina industry.
How it fares in future is entirely in the hands of Government today.