Questions over business model at heart of PNG logging

Transcript

Papua New Guinea's government is under pressure to act on alleged tax evasion by overseas logging companies.

This follows a new report by the US-based research group, The Oakland Institute, which exposes a web of tax evasion and financial misreporting by logging companies operating in PNG.

Johnny Blades has more:

The Institute investigated the financial records of dozens of companies, including the Malaysian giant Rimbunan Hijau. RH, with its many subsidiaries, has been the dominant player in PNG's lucrative forestry scene for many years. However the Institute found that many of these companies have reported little or no profit for over a decade. Eddie Tanago of the anti-corruption NGO, Act Now says the government must take action.

EDDIE TANAGO: We support the call by Oakland Institute for the PNG Internal Revenue Commission to urgently act on the report's findings and investigate the decades of companies evading tax, so that these companies are thoroughly investigated and those responsible are brought to justice for their wrong-doing.

PNG's Forestry Minister Douglas Tomuriesa says he hasn't read the Oakland Institute report, nor was he interviewed by the researchers. Yet he claims that his department collects comprehensive taxes from logging in PNG

DOUGLAS TOMURIESA: Forest pays, through tax collections, through these logging companies. We pay up to 400 to 700 million (kina) a year to the internal revenue of this country, and so I don't know where this report is coming from, unless they're not paying some other taxes that I do not know of. But in terms of logging tax, no we are on top of everything.

NGOs like Act Now and the Oakland Institute have long criticised PNG's political leaders for allowing unsustainable and illegal logging to take place. But individual landowners in forested areas remain susceptible to incentives offered by foreign loggers. The head of PNG's chamber of commerce Michael Mayberry says the logging industry generates substantial funds, some of which goes to government and landowner villages.

MICHAEL MAYBERRY: A number of people get really substantial benefits: politicians, public servants, and things like that. A lot of people complain about that but if you're a small landowner and somebody offers you a large motor vehicle, that's a fairly powerful incentive for them to agree to things that perhaps they shouldn't agree to.

Rimbunan Hijau is now rapidly expanding its foothold in a range of sectors in PNG, including retail, real estate, housing and transport. But while its various logging subsidiaries may be officially running at a loss, the government says it's playing by the rules. Minister Tomuriesa says Rimbunan Hijau and others are monitored closely.

DOUGLAS TOMURIESA: We have an international company, SGS, that monitors every logging operation in this country. And last year we were able for the first time to set up the remote sensing equipment at forests, so I monitor every logging operation in this country.

PNG is the world's largest exporter of tropical wood, however the average export price for PNG timber is significantly lower than those of other major exporters of logs. Despite the government assurances, the inconsistencies have only added to questions over who really benefits from large-scale logging in PNG.