Papua New Guinea’s forestry sector contributes 4% of the country’s GDP, with significant room to grow as it responds to the rising demand for sustainable and traceable forest products.

Photo by Rocky Roe © Cloudy Bay Sustainable Forestry

While most of its income is from the export of round logs, PNG also produces furniture, plywood, prefabricated buildings and other forest products for domestic and export markets. PNG has over 40 sawmills, a plywood factory, woodchip mill and more than 25 furniture-making factories and joinery shops. The nation boasts more than 60 commercial species falling into the broad categories of major hardwoods, commercial hardwoods and major conifers.

At present, 29 forest concessions are in production across PNG, covering 3.5 million hectares. According to the PNG Forest Industries Association, about 13,000 people are directly employed the industry annually, and that in 2010 it generated export revenue of K756 million (US$368 million).

PNG exported 3.5 million cubic metres of tropical hardwood logs in 2011—well above the previous record of 3 million.

Most of PNG’s log exports go to Asia: 89% to China, followed by Vietnam, India, and other markets. Processed products are exported to Australia, New Zealand and smaller South Pacific nations. Veneer is mainly sold to China and South Korea. Plantation products currently account for about 15% of exports. SGS, the Swiss monitoring firm that tracks log exports for the PNG Government, assesses that PNG exported 3.5 million cubic metres of tropical hardwood logs in 2011—well above the previous record of 3 million cubic metres.

While there are many international investors and operators in PNG’s forest industry, Rimbunan Hijau PNG, a wholly owned subsidiary of Malaysian company Rimbunan Hijau, is by far the most influential forestry player. Other key players include Cloudy Bay Sustainable Forestry, PNG Forest Products and Pacific Rim Hardwoods.

The drive to sustainability

With five major PNG producers already certified or in the process of becoming independently certified for legal origin and chain of custody, new export opportunities should arise in the growing number of markets requiring third party verification. These include Australia, the US and European Union.

The International Tropical Timber Organisation (ITTO) is working with the PNG Forest Authority to enhance forest law enforcement in the country. Under a two year pilot project it will develop a timber tracking system at two timber concessions, develop a legality standard and industry code of conduct, and develop a forestry monitoring module for local stakeholders.

According to the ITTO, the project could lay the foundations for future initiatives such as national inventory, carbon sequestration monitoring and certification.

The industry is also being affected by an ongoing Commission of Enquiry into Special Agricultural and Business Leases (SABLs), due to report in mid-2012. Under SABLs, customary owners lease land to the Government which then issues leases to commercial operators. The enquiry is examining claims that certain tracts of forest had been leased out for 99 years without the full knowledge and consent of landowners.

Challenges and opportunities

Opportunities for the expansion of PNG’s forest industry include the rising domestic demand for timber and wood products driven by PNG’s major new resources projects, plantations, and forest enhancement under climate change protocols.

Forestry companies have several years to transition to projects with a strong element of downstream processing, as outlined by government policy. Producers already generate sawn timber, veneer sheets, plywood and processed timber exports, but these sectors will receive greater emphasis.

The PNG Forest Authority plans to develop 240,000 hectares of commercially viable and sustainable forest plantations by 2030. Approximately 4000 hectares is expected to be contributed by private investors, including possible new entrants to the sector.

The industry is also closely watching the passage of new regulations for importing timber products based on legality and chain of custody through Australia’s parliament.

This article first published in Business Advantage Papua New Guinea 2012/13.