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Expert: Bank robs PNG of more logging revenue
April 29th, 2006

A RESPECTED Australian economist has argued that World Bank intervention in PNG’s logging industry has stifled exports that could be worth K13 billion compared with only K416 million in 2003.

Economist Tim Curtin compared Papua New Guinea with Sweden and suggested that PNG’s logging exports could be worth K13 billion or nearly double the country’s total exports in 2003.

“A seriously rich country like Sweden, unimpeded by the World Bank, had been logging at rates of up to 70 million cubic metres a year for the last decade, 35 times more than Papua New Guinea,” he said.
Mr Curtin said this was despite the fact that PNG had a much larger forested area – 369,000 sq km compared with Sweden’s 244,000 sq km.

“Were PNG to attain Sweden’s level of output and there is no reason why it could not, given its equal – possibly superior – suitability for softwood pine forests, then its logging exports could be worth K13 billion,” he said in a paper that will form part of a forthcoming book, Land, Law and Economic Development in PNG.

New Zealand, he said, provided a similar example with loggers producing nearly 10 times as much as PNG in the 1990s, “but from a forested area that is only 7% of the country’s smaller total land area”.
Such a scale of operations would require large plantations and progress to such a phase has hardly begun in PNG partly “because of the difficulty in securing government approval and landowner participation in the required transition”.

Mr Curtin also supported the PNG Government’s decision in May last year to reject the World Bank’s Forest Conservation Project loan of US$17 million (K53 million).

It was “highly unlikely” the loan would “generate sufficient tax revenue to enable the government to repay the full loan which, with interest, could be well over US$35 million (K109 million).

The World Bank had claimed the loan would generate financial and economic rates of return of 21% annually but this was unlikely since the main component of US$6.4 million (K20 million) was for workshops and seminars to improve landowner decision-making.

The loans required payment with interest, commitment fees of 0.85% a year for the first four years and front end fees of 1%.

Mr Curtin said PNG exports of forest product, mainly two million cubic metres of logs, had contributed K415.8 million, or 5.3% of total exports worth K7.79 billion, “despite the World Bank imposed export tax system”.

He also criticised the view of another Australian economist Helen Hughes, that land reform and a massive expansion of oil palm plantations could help PNG achieve a 7% growth rate.

He said another economist, Michael Bourke, had shown the improbability of this analysis by pointing out that to replace crude oil and mineral exports, palm oil would need to be planted over 1.5 million hectares compared with only 108,000 ha at present.

Mr Curtin said: “If anything, Bourke was too kind to Hughes – his demolition would have been complete if he had noticed that her projected growth rate for PNG’s oil palm exports would within 15 years imply output greater than current world consumption – and as a result a collapse in the world price.

“By then, the area under palm oil would have to be over seven million ha – another implausibility, as Bourke points out.”

Tim Curtin
Australian National University

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