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OPINION: Breaking the Grip of Rimbunan Hijau over Papua New Guinea

April 20, 2016
Source
IPS - Inter Press Service

Frederic Mousseau, Policy Director of the Oakland Institute, coordinated the research for the Institute’s agroeocology project.

OAKLAND, Apr 20 2016 (IPS) - James Sze Yuan Lau and Ivan Su Chiu Lu must be extremely busy men. Together, they are listed as directors of some 30 companies involved in various activities and services related to logging or agribusiness in Papua New Guinea (PNG). The former is the managing director of Rimbunan Hijau (RH) PNG and son-in-law of RH’s founder Tiong Hiew King; the latter is executive director of RH PNG Ltd.. All but two of these 30 companies have the same registered address at 479 Kennedy Road, in the national capital, Port Moresby–the headquarter of the RH group in the country.

Their ability to magically fit into a relatively small office space on Kennedy Road is not the only puzzling fact about the subsidiaries of the Malaysian group, Rimbunan Hijau. Out of the 30 above mentioned companies, 16 subsidiaries that are directly involved in logging or agribusiness have one other thing in common. According to their financial records , they don’t make a profit. Most of them have been working at a loss for over a decade. During the 12 years for which financial records were available to the Oakland Institute’s researchers, all together, the subsidiaries declared an average loss of about US$ 9 million every year.

How the group – the largest logging operator in PNG – manages to operate at a loss for so many years, and yet still remains in business? If it were unprofitable to log and export timber from PNG, why would these companies continue their operations? These are some of the critical questions raised in a report released in February 2016, The Great Timber Heist: The Logging Industry in Papua New Guinea, by the Oakland Institute. The report exposed massive tax evasion and financial misreporting by foreign logging companies, allegedly resulting in non-payment of hundreds of millions of dollars in taxes.

Recovering tax revenue would be certainly welcomed by PNG given the acute budget crisis the country has been facing in recent months. Yet, it is unclear whether the government of PNG will decide to take action following these revelations. After all, despite the promises made by the Prime Minister, still no action has been taken two and a half years after the damning report on recent land leases, produced by the Commission of Inquiry (CoI), which identified all sorts of malpractices and irregularities and concluded that most leases were illegal.

A first step for any government would be to start monitoring the declared sale prices of exported timber. PNG prices are much lower than those of other exporters of tropical timber (nearly 50% cheaper in 2014), which suggests that logging companies undervalue their exports and therefore their profits. But the recent statements by the Forest Minister in denial of the findings of the report, and given the well-documented deficiencies of the PNG Forest Authority, there is little hope of decisive action by this agency.