Papua New Guinea’s exports of round logs fell sharply in 2019, according to the Executive Officer of the Papua New Guinea Forest Industries Association, Bob Tate. With the government keen to phase out round log exports, he outlines the best strategy for developing the industry.

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The Executive Officer of the PNG Forest Industries Association (PNGFIA), Bob Tate, tells Business Advantage PNG that log export volumes fell by an eighth in 2019, from ’about the four million cubic metre mark in 2018’ to approximately 3.5 million cubic metres in 2019.

One of the reasons for this fall was that 90 per cent of PNG’s wood exports go to China, which reduced its imports of wood by 12 per cent last year, largely because of the US-China trade frictions.

‘We are not immune to that. It is also impacting the Solomon Islands,’ explains Tate.

He warns that, by 2030, China hopes to move from being the world’s largest log importer to a ‘blip on the radar’. Tate says the Asian giant is ‘driven by self-sufficiency in domestic log supply.’

Downstream processing

In July 2018, former Prime Minister Peter O’Neill said the government aimed to ban all round log exports by 2020. The current Marape-Stevens government is also committed to the ban.

Last year, during an event hosted by the Port Moresby Chamber of Commerce and Industry (POMCCI), the Prime Minister said that ‘by the end of 2020, we will have an inventory and systematically work with [the industry] to ensure that we fully mature our forestry downstream by 2025 and beyond.’ He also mentioned that every current operator in the forestry sector will be required to submit their plans to go into downstream processing to the National Forestry Authority.

‘We rely very much on import tariff protection to maintain our local markets. We can’t compete effectively against plywood imports from China, or sawn timber imports from New Zealand.’

Tate, however, says that there has been little consultation with the industry.

‘The shift to downstream processing has been a long-standing objective of the PNG government, even back in the 1980s. It unfortunately ignores reality,’ he tells Business Advantage PNG. ‘It has never materialised, the reason being the high cost of doing business in PNG. It makes PNG’s industry comparatively uncompetitive in export markets.

‘Even in the domestic market, we rely very much on import tariff protection to maintain our local markets. We can’t compete effectively against plywood imports from China, or sawn timber imports from New Zealand.’

‘We need to rapidly expand the forest plantation resource and build our processing around those plantations.’

Tate does, nevertheless, point to successful examples of downstream processing. ‘There have been large investments in operations in Western Province and with PNG Forest Products up in Bulolo; there is some up in Vanimo.

‘They have seen niche opportunities and capitalised on those. PNG Forest Products are into everything: engineered wood products, pre-fabricated housing and even the furniture to go into those houses. They are also a significant producer of plywood.’

Plantations

PNG Forest Industries Association’s Bob Tate.

What does Tate think is the best way to add value to PNG’s forestry sector? He says in the past there was some success with ‘high value forest plantations’, which could be repeated.

‘Unfortunately, they have all been abandoned by the state. But the future for competitive processing in PNG for international markets is to go back to the future.

‘We need to rapidly expand the forest plantation resource and build our processing around those plantations.’

In the meantime, Tate believes PNG’s tariff regime should remain unchanged.

‘At the moment, given the economic recession we are in, [the tariffs] are best left alone. There is no real point in trying to encourage more wood production when there is no demand for it.’