Papua New Guinea’s forestry sector has bounced back from the 2008/9 slump, and is looking to value-adding, together with sustainability and traceability practices, for its growth.

Sustainable forestry operations represent PNG’s future. Credit: Cloudy Bay Sustainable Forestry

Papua New Guinea has immense forestry operations, with some 29 forest concessions covering 3.5 million hectares. Eight-four percent of PNG’s landmass is covered by forest, and 5.7 million hectares of this are potentially production forests.

‘84% of PNG’s landmass is covered by forest, and 5.7 million hectares of this are potentially production forests’

While most of its timber-related export income comes from the export of round logs (95% of all timber-related exports in 2011), PNG does produce a range of forest products, including furniture, plywood and prefabricated buildings, for both domestic and export markets.

Processed timber products are exported to Australia, New Zealand and PNG’s South Pacific neighbours. Veneer is mainly sold to China and South Korea. Plantation products account for about 15% of exports.

Credit: Manufacturers Council of PNG

Industry bounces back

Exports of PNG timber rose sharply in 2010 and 2011, after suffering a definite slump during the global financial crisis of 2008/9.

The Bank of Papua New Guinea reported forestry exports worth 768 million kina (US$361 million) in 2011, with some 3.5 million cubic metres of tropical hardwood shipped overseas.

This marked a modest 3.3% rise in value on the previous year, but a massive 87% on 2009 figures. In 2011, the average export price for timber was 208 kina (US$97.86) per cubic metre, with prices in the first quarter of 2012 appearing to fall back somewhat.

Major contributor

In total, forestry contributes about seven per cent to PNG’s gross domestic product, plus millions of kina in taxes, landowner royalties, infrastructure development and work for more than 10,000 people. Most of PNG’s log exports go to eleven Asian countries: 89% to China, followed by Japan, Korea, India, the Philippines, Taiwan, Thailand and Vietnam.

Major industry participants

Malaysian-owned R H Group is the largest player in PNG’s forestry sector. Other major industry participants include Cloudy Bay Sustainable Forestry Ltd, Innovision (PNG) Ltd, Open Bay Timber Ltd, PNG Forest Products Ltd (manufacturers of Niu Homes), Pac-Rim Hardwoods (PNG) Ltd, Stettin Bay Lumber Co. Ltd and Turama Forest Ind. Ltd.

New policy promotes value-adding

Since January 2010, government policy has dictated that all newly-approved forest projects must contain a strong element of downstream processing. Producers already generate sawn timber, veneer sheets, plywood and processed timber exports, but these sectors will receive much greater emphasis.

Opportunities for expansion

Other opportunities for further expansion of PNG’s forest industry include: the increasing domestic demand for timber and wood products driven by PNG’s major new resources projects; establishing plantations; and forest enhancement under climate change protocols.

With five major producers already independently certified for legal origin and chain of custody, new export opportunities should arise in markets requiring third-party verification such as Australia, the USA and the European Union. 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 new entrants to the sector.

Furthermore, the International Tropical Timber Organisation (ITTO) is working with the PNG Forest Authority to enhance forest law enforcement. 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 a national timber inventory, carbon sequestration monitoring, and certification.

First published in Made in PNG 2012