Contribution of Forestry to Poverty Alleviation - APFNet

Government continues to be the primary beneficiary of the forest industry, receiving US$ 30 million in
cash revenues annually. These receipts go directly into consolidated revenue. Government pays for the
PNG National Forest Service, the Department of Environment and Conservation, and independent log
export monitoring. However, an examination of budget papers suggests that government provision of
infrastructure and social services to the communities in logging projects is limited.
The forestry industry plays the major role in terms of the economic activity associated with the
production of wood products. Its operations are part of a value chain that includes other participants
who rely upon the activities of the industry for at least part of their income, such as transport service
providers and other local businesses that supply products and services to the industry and directly
benefit from the activities of the industry.
There are a number of economic impacts associated with the forestry industry. These benefits accrue
across the country from the lowest levels of economic activity within villages that support forestry
operations, to coastal shippers that transport the forestry products to the market, and finally to
Government which receives significant taxation revenues from the sector.
The forestry industry is one of the few industries that can and does operate in remote rural areas. As
such, the industry creates the few opportunities for rural communities to enter the formal workforce
and access the benefits. The benefits from formal employment are also supplemented from royalties
paid for access to the natural resources on their land.
Forest companies also create basic infrastructure such as roads and housing unlike in mining, petroleum,
and agricultural industries, where no targeted tax credit system exists to encourage the provision of
such infrastructure.
In the absence of government support, the presence of the forestry industry in rural areas is usually
seen as a proxy for government with communities becoming entirely dependent on the operation to act
as the government body and the business entity to provide services to the community.
The concept of royalties and formal employment improving rural areas and communities’ standard of
living is sound. Unfortunately a combination of local corruption within landowner organizations, poor
education, and lack of government presence both in terms of meaningful development and appropriate
institutional involvement do not enable the realization of the full value of this concept (Price Water
House Report for FIA, 2006).
Large-scale plantation establishment
Most of the government-established plantations are in a state of neglect due to lack of funding and
landowner disputes. Plantations established by timber companies, though in a healthy state, are hampered
by landowner disputes and competition from other land uses. Landowner disputes are common issues
because of lack of commitment in honoring land lease agreements. The lease agreements are generally
for 99 years and landowners claim that the government often fails to pay annual lease payments,
including those sub-leased to timber companies.
Large-scale plantations provide employment to rural people. However, there is strong evidence that
most employees have been employed from outside the communities, depriving the landowners their
rights and employment benefits. This is one of the major contributing factors to landowner disputes.
Although large-scale forest plantations create opportunities for employment and other benefits, the
landowners are often denied these opportunities, creating major social issues such as law and order and
increasing poverty.
Large-scale plantation establishments in PNG are generally undertaken at state and large private
sector levels. Plantation activity is currently insignificant with only 62,000 ha under production, in
which 55% are state-owned and 45% are privately-owned. The common species in the private sector
plantations is Eucalyptus spp, and in state-owned plantations, Araucaria spp. The species choices
are mainly determined by the geographic conditions: Araucaria species are mainly high-altitude
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