Forest products make a significant contribution to export income earned by the renewable resource sector in Papua New Guinea (PNG). They generated an average of K417 million per year in export income between 2004 and 2006, which was 5% of all export income in this period. The most important forest product exports are logs, which were worth US$187 million (K570 million) in 2007. This is a decline in value of 50% from the logging boom in the mid 1990s when log exports averaged US$385 million between 1993 and 1996. An estimated 10 000 people were directly employed in logging in 2007, a small number compared with the 600 000 smallholders who sell fresh food domestically, for example.
PNG has around 317 500 km2 of tropical forest covering almost 70% of the national land area. PNG’s forests are extremely diverse, ranging from mangroves, swamp forests and eucalypt savanna, to lowland rainforests and montane forests. The most common forest types occur on lowland hills, in lower montane areas and on lowland plains. These three types of forest account for 90% of all forests in PNG and are considered to be the main merchantable forests. Economically valuable trees in PNG number around 400 species, but loggers have tended to focus on only 30–50 species. A characteristic of PNG forests is very high species diversity.
Nearly all forests in PNG are growing on customary-owned land. For this timber to be harvested, the state must first acquire timber rights from the landowners before allocating the rights to logging companies. Prior to 1992, this was done either through the negotiation of a Timber Rights Purchase or a Local Forest Agreement. Since 1992, when a new Forestry Act came into force, state acquisition of timber rights has been through the negotiation of Forest Management Agreements between the PNG Forest Authority and customary owners.
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The Australian administrations of Papua and New Guinea first attempted to survey the timber potential of parts of Papua in 1908 and parts of New Guinea in 1921. In 1923 and 1924 Charles Lane-Poole completed a survey of Papua and New Guinea and recommended the establishment of a forest service. By the time a forest service had been established in 1938, a number of Europeans had commenced sawmilling operations to service the domestic market, and copra plantation owners in the Islands Region were exporting logs and processed timber to the American veneer market. After World War II a significant expansion of sawmilling operations took place to meet the domestic demand for reconstruction materials. The colonial territories had achieved self-sufficiency in sawn timber production by the time a plywood mill was established at Bulolo in Morobe Province in 1953. The mill resulted in an increase in the export of both processed and unprocessed timber, and timber rapidly became the second most important export commodity after copra. By 1957, forest plantations had been established in the Bulolo Valley and near Port Moresby and Rabaul.
However, the pace of development of the forestry export industry was thought to be unsatisfactory and, encouraged by the World Bank, a shift occurred in policy emphasis towards the clear-felling of natural forest for pulpwood or woodchip production. This strategy culminated in a woodchipping project in Madang conducted by Jant Pty Ltd (New Guinea) and using logs from the nearby Gogol Valley.
After Independence in 1975 the number of logging concessions increased gradually and by 1985 logging operations existed in most lowland provinces. The greatest number of logging concessions were in the Islands Region, particularly Manus, West New Britain and New Ireland provinces. These areas were favoured because they possessed the highest stocking density of commercial timber species and because their coastal locations allowed easy access for shipping raw logs.
In the mid 1990s CSIRO and the PNG Forest Authority created the Forest Inventory Mapping System, a geographical information system containing data about forestry and land use in PNG. The research showed that 35% of the forests of Manus, West New Britain and New Ireland provinces had been logged between 1975 and mid 1996. In comparison, only 10% of the forest area of the mainland lowland provinces was logged over the same period, while in the Highlands Region logging activity was negligible. In the early 1990s, when most concessions in the Islands Region had been allocated, the logging industry shifted its attention to the mainland lowland provinces, particularly Western and Gulf.
Information in the Forest Inventory Mapping System (FIMS) suggests the following:
- In 1975, the ‘Gross Forest Area’ was 330 650 km2.
- Between 1975 and mid 1996, 19 850 km2 of forest had been logged and was regenerating.
- Between 1975 and mid 1996, 13 150 km2 of forest was permanently converted to other land uses. Of this area, 3550 km2 was logged and then converted; and 9600 km2 was cleared, but not logged commercially, and subsequently converted.
- Almost all (97%) logging and clearing activities involved the three main types of merchantable forest. These are classified in FIMS as: forest on lowland hills (less than 1000 m altitude), forest on lowland plains (less than 1000 m altitude) and lower montane forest (1000–3000 m altitude). Of the total amount of forest logged or cleared between 1975 and mid 1996, around 70% was forest on lowland hills, 20% was forest on lowland plains and 10% was lower montane forest.
- Over the period 1975 to mid 1996 the ‘Gross Forest Area’ of PNG was permanently reduced from 330 650 km2 to 317 500 km2, or by about 4%, through both logging and land clearance. Of the 317 500 km2 remaining in mid 1996, 19 850 km2 comprised forest that had been logged and was regenerating.
Distribution of production
Processed timber and plantations
Logs comprise more than 90% by volume of timber product exports from PNG. However, processed timber has increased in importance over the past decade, rising from 8% of exports (by value) in 2001 to 21% in 2005. Processed timber products include veneer, woodchip, plywood, balsa wood and timber from a number of native or introduced species, with kwila the most important of the hardwoods. Veneer is manufactured from forest timber at Panakawa near Balimo in Western Province. Woodchip is processed at a plant in Madang from planted and native forest in the Gogol Valley southwest of Madang, with planted Acacia mangium now the main species harvested. Plywood is made in Bulolo from hoop and klinki pine. Balsa wood is processed at four mills from village and plantations
plots on the Gazelle Peninsula in East New Britain Province.
In 2004, about 52 000 ha of land was under plantation forestry, around 60% of which was managed by the private sector and the rest by the PNG Government. The expected total volume of round wood to be harvested from the current standing trees in the plantations at maturity is 10 million m3 of hardwood and 4 million m3 of softwood. As well, there is an estimated one million m3 of rubber wood (Hevea brasiliensis) that could be harvested in the future.
The volume of plantation timber (mostly as round logs) exported in 2004 was 247 214 m3, worth US$15.5 million (K46 million). The largest plantation areas are at Open Bay in East New Britain Province, Stettin Bay in West New Britain Province, the Wau–Bulolo area in Morobe Province and the Gogol Valley in Madang Province. These four areas account for about 70% of plantation forestry in PNG, with the remaining distributed among 13 locations in 10 provinces.
The distribution of approved logging concession areas as at mid 1996, with the exception of Bougainville Province, was mapped using FIMS. The largest concession areas were in Gulf and Western provinces, followed by West New Britain, Sandaun, East Sepik, East New Britain and Central provinces. Gulf Province had the highest proportion of its forest resources in logging concessions (70%). In the Islands Region the proportion was around 30%, except for West New Britain, which had 60% of its remaining forest resources in concession.
In 2007, West New Britain, Sandaun and Gulf provinces made the largest contributions to national log export volume, accounting for 32%, 15% and 14% of exports respectively. Other provinces that made significant contributions to the total volume of logs exported in 2007 were East New Britain (11%) and Western (8%). Between them, these five provinces accounted for 80% of all log exports in 2007.
There has been a change in the provincial contributions to log exports since the mid 1990s, when the island of New Britain contributed more than half of log exports. Logs from New Britain peaked at 60% of total exports in 1994 (50% WNB, 10% ENB). This declined to about 30% by 2001, but the contribution increased again to 43% by 2007. In 1996, West New Britain Province accounted for 40% of all logs exported from PNG, while East New Britain contributed 16%, Sandaun Province 12%, Western Province 9% and Gulf Province 6%. The shift in logging activity from New Britain to Western and Gulf provinces follows logically from the distribution of approved logging concessions and from the fact that New Britain was one of the most heavily logged regions until the mid 1990s.
Minor forest products
Cajuput oil is produced from distilling the leaf of Asteromyrtus symphyocarpa, a tree that occurs naturally in seasonally inundated areas of Western Province south of the Fly River. Stills are operated by village communities. The oil produced is sold in bulk to local buyers including trade stores in Daru. Trade store owners ship the oil to Port Moresby where it is bottled as Waria Waria oil and retailed through pharmacies and supermarkets or through direct orders. The oil is used externally for the relief of coughs and colds, aches and pains and as a mild antiseptic for wounds. The village industry started in 1996 with the first commissioned still. Current production is around 200 litres per year and is worth about US$8000.
Copal gum is a resin extracted from the bark of kauri trees (Agathis spp.), used chiefly for making varnishes. Natural stands occur in Sandaun and East Sepik provinces with some smaller stands elsewhere in the lowlands. Copal was exported from Sandaun Province, at least until the late 1970s.
Dammar resin is extracted from the sapwood of a tree species (Vatica papuana) that is present in southern Western Province and some islands in Milne Bay Province. Exports from Tagula (Sudest) Island in Milne Bay Province commenced in 1887 and continued intermittently until the 1970s.
Eaglewood trees grow in New Guinea rainforest below 600 m altitude. The tree produces a fragrant resin that has been exported from PNG since 1998 (More about eaglewood). Over the period 1999–2007 official exports averaged 5.5 tonnes/year, with a mean value of US$438 000/year. The volume peaked in 2001–2003.
Ivory nut is the seed of a plant related to sago and was once used to make buttons. It was exported from PNG between about 1900 and the 1930s.
Massoi bark (Cryptocarya massoy) is an aromatic bark used as a medicine in South-East Asia. The tree is widely distributed in the lowlands of mainland PNG provinces. Some massoi bark was exported from Sandaun Province from near the Indonesian border, at least until 1990.
Noni (Morinda citrifolia) is common in many coastal locations and interest in its commercial production is increasing. A number of products made from noni, particularly noni juice, have become popular as herbal medicines in Western countries and the Pacific since the 1990s. The juice and other products are exported from a number of Pacific island countries. One business has been buying noni fruit in Lae in recent years.
Rattan. There are approximately 60 species of rattan cane in PNG. Rattan cane was exported from PNG in the 1980s and 1990s and has been used for local furniture manufacture. The current status of exports is not known.
Sandalwood (Santalum macgregorii) is a tree endemic to PNG that is found in the seasonally dry lowlands of Central and Gulf provinces together with a separate population in Western Province. The natural distribution of the species has been dramatically reduced by fire and harvesting to the point where it is under threat of extinction in the wild. Sandalwood is highly sought after, particularly in Asia and the Middle East, for carving, incense, perfume and medical preparations derived from the oil. Exports of PNG sandalwood are recorded from the 1890s onwards. Over the period 1997–2007 exports averaged 43.6 tonnes/year, with a mean value of US$57 000/year.
Seeds of a number of native plants, orchids, trees and palms have been exported from PNG for use in horticulture and forestry. Several tree species including Acacia mangium, A. crassicarpa, Eucalyptus pellita and E. deglupta (kamarere) have formed the basis of major plantation developments in South-East Asia since their introduction to commercial forestry there in the mid 1980s.
Tannins are extracted from the bark, roots or leaves of plants. A factory to extract tannin from mangroves was established at Aird Hills in Gulf Province in 1954, but closed after operating for three years.
Tigaso oil (sometimes spelt digaso oil) is the dark brown oily sap of a tree (Campnosperma brevipetiolata). People in the Lake Kutubu to Mount Bosavi area of Southern Highlands Province extract the oil by hollowing out one side of the trunk of a mature tree and allowing the sap to accumulate in the hole. They then trade the oil long distances to higher altitude locations in Southern Highlands and Western Highlands provinces where these trees do not grow. People mix the oil with sweet-smelling leaves and rub the mixture on their bodies and hair as a cosmetic and a perfume before ceremonies. A related species (Buchanania sp.) is used for the same purpose. It is reported that petroleum-based oils, such as engine oil, and vegetable cooking oil are now being used as a substitute, but the trade in tigaso oil continues. The oil was carried in bamboo tubes until the late 1980s, but by the mid 1990s it was being stored in plastic containers and was flown out from Pimaga airstrip for sale in the highlands.
Levels of export
Log exports increased gradually during the 1960s from 136 000 m3 in 1961 and then remained in the range 360 000–690 000 m3 a year during the 1970s. In the early 1980s log export volumes increased significantly, reflecting the expansion in logging concessions that occurred during this period. Between 1979 and 1982 the annual volume of log exports more than doubled from around 500 000 m3 to more than one million cubic metres. The volume of log exports increased significantly again in the 1990s, reaching a historical maximum of three million cubic metres in 1997. The highest value of annual log exports was achieved a few years earlier, in 1993, when log exports had a value of US$458 million. At that time, world timber prices were particularly high and export tax rates in PNG were still relatively low. Log exports almost halved between 1997 and 1998, largely as a result of the Asian financial crisis, which caused a decline in demand for timber and lower prices. In 1996, log export taxes were raised substantially and imposed on the basis of value rather than species.
Log export volumes have increased again since 1998, with the volume of 2.8 million m3 in 2007 returning to the high levels achieved in 1993–1997. The exhaustion of major concessions and the decline in productivity of remaining forest resources contributed to the lower export levels between 1998 and 2002.
Processing, exporters and markets
Around 15% of the log harvest is consumed domestically, mainly for building, with the remainder being exported. Logging companies are responsible for their own marketing and export arrangements, which, since 1994, have been monitored by an independent contractor (the Swiss company, Société Générale de Surveillance, or SGS). As part of its monitoring activities, SGS grades and values logs before they are exported.
There has been much speculation and debate about the extent to which the log export industry in PNG is controlled by a small number of Malaysian companies. In 1998, it was estimated that around 50% of log exports were under the control of a single Malaysian company, Rimbunan Hijau (operating through a large number of subsidiaries), while other Malaysian companies (some with apparent commercial or other links with Rimbunan Hijau) controlled a further 30–35% of the industry.
All of PNG’s log exports are to Asian countries. Until the late 1990s, the principal destination for PNG logs was Japan. For example, in 1996 Japan was the destination for 64% of log exports, while South Korea and China made up 18% and 2% respectively. Since 2000, there has been a long-term decline in the Japanese and South Korean markets, and a corresponding expansion into the Chinese market. In 2007, the main destination was China, which was 83% of the export market. Smaller volumes went to Japan (5%), Vietnam (5%), India (3%) and South Korea (2%). A range of factors has caused these changes in export destinations, including the Asian financial crisis in 1997 and material substitutions in the Japanese building industry.
Despite a long and controversial history, the PNG forest industry continues to make an important contribution to the national economy. Locally it is a useful source of employment, although nowhere as many rural people earn money from forestry as from agriculture. Although the volume of log exports has returned to levels experienced in the boom period of the mid 1990s, the value is much less because of lower world prices. A number of commentators have expressed concern about the ability of PNG forests to sustain the current rate of logging. Some have suggested that PNG may be following the same path as some other countries in the Asia–Pacific region that have harvested all their easily accessible forest resource. Some of these countries, including Thailand and the Philippines, are now net importers of tropical timber.
Ongoing concerns remain about the destruction of high-biodiversity forest; loss of income to the PNG Government because of alleged transfer pricing mechanisms by log export companies; and the social disruption caused by payment of relatively large sums of money to small groups of people.
The World Bank forecasts an increase in the real price for logs and sawnwood to the year 2015. The forecast for rising prices for logs and sawnwood contrasts with the bank’s prediction for falling real prices for tropical tree crops. There is strong market demand for high-value tropical hardwoods and this is likely to continue, particularly as China and India have a large and growing demand for timber. The combination of strong demand and reduced supply, because of the depletion of native forests in Indonesia, Brazil and central Africa, is causing prices to rise. This in turn is causing an increased interest in hardwood plantations.
In the future, the PNG forest industry is likely to rely more on woodlots planted and managed by villagers or plantations rather than the exploitation of native forests. Possible hardwood species include teak, kwila, New Guinea walnut (mon), Calophyllum spp., rosewood, kamarere and ton (taun). As well, there is likely to be larger plantings of fast-growing species such as Acacia mangium, A. crassicarpa and Eucalyptus pellita for chipping, sawn timber or fuelwood. Other multipurpose species with potential to provide timber include rubber, aged coconut palms and galip nut.
A key factor determining which species will be adopted as cash crops by villagers will be whether people are prepared to wait for long periods to harvest and receive income from the sale of timber. Certification schemes guaranteeing that timber comes from a well-managed forest will increase opportunities for access to overseas markets.