From this month, the European Union (EU) won’t be accepting illegally produced wood products. What impact will its decision have on Papua New Guinea’s forestry sector?

Credit: Cloudy Bay Sustainable Forestry

PNG’s direct exports of forest products to the EU are modest—just 0.2% of the exports in 2011. Of this, plantation-grown balsawood is the single largest export.

A new EU ruling (EU Timber Regulation No.995/2010) bans the importation of illegally harvested and produced timber products into EU markets.

But direct PNG exports to the EU are unlikely to be affected, according to Bob Tate, Executive Director of peak industry body, the Papua New Guinea Forest Industries Association.

The bulk of PNG’s timber finds its way into overseas markets via China, which bought 78% of PNG forest exports, mainly round logs, in 2011. Much of this timber ultimately finds its way into the EU in manufactured products.

‘PNG is the only country in the world with 100% independent third-party monitoring of its log exports… ‘

Industry responding to challenge

While any lasting impact of the EU ruling is likely to be on these exports, the industry is confident it is taking the right steps to mitigate the risk.

‘PNG is the only country in the world with 100% independent third-party monitoring of its log exports [by Swiss company SGS], so we are well-placed to meet these emerging regulatory requirements,’ Bob Tate told Business Advantage PNG. ‘We are also working with China’s State Forestry Administration to make sure our systems are in sync with what they are doing.’

In addition, Tate estimates that 50–60% of processed timber exports—which go mostly to Australia, New Zealand and the Pacific—are produced by the companies that have adopted Forestry Stewardship Council (FSC), the Programme for the Endorsement of Forest Certification regulatory and traceability standards or the SGS TLTV system for certification.

The cost of certification

Cloudy Bay Sustainable Forestry is one PNG company which plans to complete its FSC certification in 2013.

‘… any timber prevented from being exported to the EU through China might be dumped back on the PNG’s home market, with devastating results… ‘

‘FSC certification isn’t the cheapest thing to do,’ notes Chairman Rob de Fegely, who expects the EU regulations, and those in markets such as the United States and Australia, to effectively put an end to the market for illegally logged product.

However, de Fegely notes that different regulations covering forest imports across the EU, United States and now Australia (which passed new legislation in 2012)  could create problems for exporters.

‘We would be disappointed if FSC certification wasn’t enough and we had to go through another process as well,’ he said.

He also expressed concern that any timber prevented from being exported to the EU through China might be dumped back on the PNG’s home market, with devastating results for domestic suppliers like Cloudy Bay.

Bob Tate shares de Fegely’s concerns about the costs of certification.

‘In PNG, most companies aren’t producing significant volumes. SMEs in particular will find it very hard to make the investment in those systems.’

Indeed, he notes that the International Tropical Timber Council has called on timber importing countries to adopt common standards to make it easier for developing countries to comply.

‘It’s hard to know which regulation to comply with,’ he said.

SABL enquiry interim report

The EU decision came shortly before an interim report into the possible illegal allocation of land to forestry interests in PNG.  The Commission of Inquiry into Special Agricultural and Business Leases (SABLs) delivered its interim report to Prime Minister Peter O’Neill last week.

While we will have to wait for the final report for details of the handling of the 72 SABLS under examination, O’Neill suggested that the interim report revealed enough to indicate some government departments had ‘fundamentally misunderstood their role and the legal requirements’.

‘In other instances, the agency has simply failed to administer the law and applicants and developers have enjoyed a free run,’ said O’Neill in a statement.

The final report into SABLS is expected in two months.