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Papua New Guinea the Forestry Sector RepodNo. 8031-PNG PapuaNew Guinea The ForestrySector: A TropicalForestry Action PlanReview Public Disclosure Authorized - 1, 1990 AgricultureOperations Division CountryDepartment V AsiaRegional Office FOR OFFICIALUSE ONLY Public Disclosure Authorized Public Disclosure Authorized Docmen of the WorldBak Thisdocument has a restricteddistribution and may be used by recipients Public Disclosure Authorized onlyin theperformance of their official duties. Its contents may not otherwise bedisclosed without World Bank authorization. CURRENCYEQUIVALENTS Annual Averages 1981 K 1.00 = US$1.49 1982 1.36 1983 1.20 1984 1.12 1985 1.00 1986 1.03 1987 1.10 1988 1.15 August 1989 1.15 ABBREVIATIONS AND ACRONYMS ADB - Asian Development Bank AIDAB - Australian International Development Assistance Bureau m3 - Cubic meters CSIRO Australian Commonwealth Scientific and Industrial Research Organization DAL - Department of Agriculture and Livestock dbh - Diameter at Breast Height DEC - Department of Environment and Conservation DFP - Department of Finance and Planning DLPP - Department of Lands and Physical Planning DOF - Department of Forests FAO - Food and Agriculture Organization of the United Nations FIA - Forest Industries Association of PNG FIC - Forest Industries Council FRI - Forest Research Institute GOPNG - Government of Papua New Guinea LMP - Land Mobilization Prog-am (or Project) mai - Mean Annual Increment MEP - Minimum Export Price NEC - National Executive Council NFDP - National Forestry Development Progrum NPEP - National Public Expenditure Program PIP - Public Investment Program PNGRIS - PNG Resources Information System SPO - State Purchasing Option TA - Timber Authority TFAP - Tropical Forestry Action Plan UNDP - United Nations Development P:ogramme UNITECH - PNG University of Technology _ ,1 AL PAPUA NEW GUINEA THE FORESTRY SECTOR: A TROPICAL FORESTRY ACTION PLAN REVIEW Table of Contents Page No. PREFACE ........ ...........*... iv EXECUTIVE SUMAiARY . v I. INTRODUCTION ............................................... 1 II. FORESTRY AND THE PNG ECONOMY . ... 5 A. The Papua New Guinea Economy: Directions and Policy Imperatives .. 5 B. Forestry in the Economy ................................. 6 L. The National Forestry Development Program ............... 11 D. The Institutional Framework .. 13 III. THE FOREST RESOURCE AND SUSTAINABLE MANAGEMENT ............. 15 A. The Natural Forest Resource of PNG . 15 B. The Sustainable Management of the Resource . .5......... i C. Plantations ... 22 D. Resource Assessments The Need . 27 IV. MAXIMIZING RETURNS TO THE FORESTRY SECTOR .................. 29 A. Government Revenues, Royalty Policy and Rents . 29 B. Methods of Sale of Wood ... 35 C. Log Exports and the Transfer Pricing Issue ... 36 D. Forest Industries Development ........................... 42 V. CONSERVATION AND LAND USE STRATEGY . 51 A. Environmental Controls in Logging . 51 B. Land Registration, Negotiation and Compensation ......... 52 C. Landowner Assistance and Education ....................#. 52 D. National Land Use Planning Issues ....................... 53 E. The Need for a Conservation Strategy ................... 55 F. World Heritage Possibilities and Sustainable Yield ...... 56 G. A Suggested Role for Non-Government Organizations....... 57 This documenthas a restricteddistribution and may be used by recipientsonly in the performance of their officialduties. Its contents may not otherwisebe disclosedwithout WorldBank authorization. - ii - VI. MANAGING THE FORESTRESOURCE. .............................. ..... 59 A. The Present Problem ........................ ... 59 B. Major Constraints to Management . .................. 61 The Policy and Legal Frameworka........... ..... 61 Management Personnelr..o. * * 4 ............ne. 63 Intergovernmental Relations. ...... 64 Landowner-Government Relations. ...... 66 C. A Strategy for More Effective Forest Management 8...... A N3w Act for Forestry in PNG. ... 68 Institutional Requirementsu . ..... 69 A New Forest Service.... .. ... .... ...... .... 71 Re3earch and Development ................... ........ 73 Human Resources Development.......... ........ 75 VII. AN ACTION PROGRAO G .. R . AM........ 77 A. Major Progrem Componenm. .. ..... 77 GovernmentPolicy Statement. 77 New Legislationg....n .. .. 78 Resources and SustainableYield . .78 Conservationand Land Use........ 79 Institutionaland Human Resource Development. 81 Short Term InstitutionalSupport Measures. 83 Further Studies ................ .................. 85 B. Implementingthe Action Program ... .86 InterimManagement Structure ....... ... 86............ External Assistance--TheCase for a Twi .. .87 Phasing of Implementation .......... .... 88 C. Implications for Donors ........ ..... 89 ANNEXES 1. Internationaland Coastal Freight Rates for PNG 2. Major Timber SpeciesExported from PNG - 1988 3. Log Export Data: PNG and Major S.E. Asian Suppliers 4. Calculationof Transfer Prices Using Ex Log Pond Japan Prices 5. A Proposed ForestryActt Discussionand Drafting Instructions 6. SuggestedAreas for Conservation/Preservation 7. Terms of Reference and TFAP Mission Members 8. Major Forms of Timber Sale Agreement in PNG 9. Summary of the Minister'sDrafting Instructionsfor a New Forestry Act 10. SuggestedProject Proposals BIBLIOGRAPHY - iii LIST OF TABLES Pare No. 1. Country Data - Papua New Guines..... ................... 4 2. Forestry in the PNG Economy, 1988 .......................... 7 3. PIG Value of Exports by Type of Product .................... 8 4. Japanese Imports of Logs from SE Asia and Pacific Islands, 1965-88 ..............0................... .................9 5. PNG: Volume of Major Exports by Type of Product, 1981-88 ... 9 6. Destination of PNG Forest Product Exports, 1984-88 ........ 10 7. National Forestry Development Programt Logging Concessions, 1987-91 ................... 12 8. NFDP and Original Programs. ... .............. ........ 12 9. Planting Targets by Year ................................... 13 10. PNG Forested Area, 1985 ..... ..... .. 0... .......... 15 11. PNG Natural Forest Area and Grow ing Stock . ............. 15..*is 12. Plantation Areas, 1979, 1985, 1988 ......................... 23 13. Age Classes of Plantations, 1986 ......8 6.....................24 14. Mean Annual Increment Data, Major Plantation Species ....... 24 15. Plantation Development Strategy, 1986-2000 ................. 27 16. Sources of PNG Government Forestry Revenue ................. 30 17. PNG Log Export Volumes, Values, Prices .......... ...... 36 18. FOB Log Prices, Sabah, Sarawak and PNG, 1985-89....... 38 19. Estimated Losses from Transfer Pricing, 1985-87, 39 20. Estimated Losses from Transfer Pricing, 1982-85 39 21. Estimated Losses from Transfer Pricing, 1985-88 40 22. Processed Forest Produce Exports, 195 1-88 43 23. Management Personnel vs Operations, 1972173-87 64 Chart 1: Organization of Dep&rtment of Forests .......... 14 Cinart 2: Forest Service Proposed Structure ..... ................... 72 Map - iv - PAPtA NEW GUINEA THE FORESTRY SECTOR: A TROPICAL FORESTRYACTION PLAN REVIEW Preface 1. The Tropical ForestryAction Plan is an internation.zcoordinating mechanism for halting the destructionof tropical forests and promoting their sustainableuse for the economic and social benefit of people. There are compellingreasons for TFAP support for action in Papua New Guinea. First, of PNG's total land area of some 46 million ha., about 36 million ha (772) is forested and the economywill have to depend upon the developmentof forestry and its other renewableresources for sustainedeconomic activity in future. 2. A secontdreason for TFAP support goes beyond the country's own econo- mic interests. PNG's forests are well known for their outstandingbiodiver- sity. The country'sunusual geology,with spectacularmountain landformson the main island and volcanic features on the smaller islands,has produced a rich diversity of Malay and Gonwanaland flora and fauna. There are more than 11,000 species of flora, including 2,000 ferns alone, while the lowland rain forests comprise more than 1,200 tree species. Many species of flora and fauna are unique to PNG, and some of these are now threatened. 3. Finally, TFAP support is especiallyappropriate because forest sector management in PNG is in a state of disarray. Despite the importanceof the sector, the country does not now have the means to assess the full extent of its forest resource or its sustainableyield, to control existing logging operations,to reap the full benefits from the present level of proe Lction,or to determinefuture policies for conservationand industrialdevelopment. Yet the officialmedium term developmentstrategy provides for even heavier logging in the future, with few measures suggestedfor improvedmonitoring and supervision,and for seeminglyflawed policies to promote local processing. 4. Recognizingboth the importanceof the forest resource and the gravity of the managementproblem it faces, the Government of Papua New Guinea (GOPNG)requested the TFAP to review the forest sector and propose an Action Program for the future. In response,in May 1989, the TFAP mounted an inter- agency mission to PNG under the leadershipof the World Bank, with participa- tion of the Asian DevelopmentBank, Food and AgricultureOrganization, United Nations DevelopmentProgramme, the InternationalInstitute of Environmentand Development,the InternationalUnion of Conservationand Nature, and the bilateral developmentassistance agencies of Australia,New Zealand and the Federal Republic of Germany. The mission actively
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