Up For Grabs: millions of hecaters of customary land stolen in PNG for logging

30 Jul 2012

This report analyses and documents the background conditions and impacts of Papua New Guinea’s so-called ‘land grab’, which has seen 72 Special Agricultural and Business Leases (SABLs) totalling 5.1 million hectares of customary-owned land - over 11 per cent of the country and over 16 per cent of accessible commercial forests – granted to unrepresentative landowner companies and foreign-owned corporations for up to 99 years

Logging companies are by far the biggest beneficiaries of the SABL system as they have been able to secure sublease agreements to extract logs under Forest Clearance Authorities issued by the PNG Forest Authority. PNG log exports grew by almost 20 per cent in 2011 due almost entirely to logging within SABLs.

Since 2006, logging companies have exported over 1.5 million cubic metres of whole logs from SABLs, amassing over K290 million (USD 145 million)  for the mostly Malaysian companies involved. Almost all these logs were exported to China.

Of the total 5.1 million hectares of SABLs, 75 per cent or 3.9 million hectares are controlled by foreign-owned corporations under 54 subleases or development agreements. Of these, Malaysian and Australian interests dominate, with control of at least 3 million hectares of customary-owned land in 32 SABLs.

Foreign-owned logging companies hold primary SABL titles to over 190,000 hectares of customaryowned land in four SABLs. Landowner companies
and Incorporated Land Groups that hold nine SABL titles totalling 445,400 hectares also use the addresses of logging companies as their principle place of business when registering their companies with the PNG Investment Promotion Authority. All but one of these addresses is for the Rimbunan Hijau (RH) office in Kennedy Drive, Hohola or their Post Office Box in Port Moresby.

Via these various means, which are far from transparent, SABLs are becoming a mechanism by which established laws and measures designed to
reduce the unsustainable harvest of timber in PNG are being circumvented. While logging has driven the spread of SABLs, oil palm development has been used as its justification. However, only nine SABLs (311,000 hectares) are controlled by listed oil palm or biofuel companies. Most companies  that hold subleases or development agreements over SABLs have no prior experience with agricultural development.

SABLs have resulted is an increase in deforestation of primary forests for oil palm, with potentially the same environmental and social impacts seen
in Indonesia and Malaysia. Developing oil palm plantations on primary forest is highly lucrative as it allows oil palm proponents to profit from the
logs felled when forest clearing is carried out prior to planting. The profits from the sale of tropical logs thus pay for the plantation’s establishment.
Geographic Information System analysis by Greenpeace reveals that the largest 48 SABLs – 95 per cent of the total SABL area – include almost
14 per cent of the remaining 14.7 million hectares of Intact Forest Landscapes in PNG. These are the least developed forests in PNG. SABLs also include over 130,000 ha of PNG’s protected areas.

Analysis of these SABLs also reveals that they contain 12 per cent of the almost 7 billion tonnes of aboveground carbon stored in PNG’s forests. If these SABLs were logged and then deforested, almost 3 billion tonnes of CO2 would be released – this is equivalent to Australia’s total CO2  emissions for the next six years.

Foreign-owned companies potentially hold the carbon rights to about 630 million tonnes of carbon in SABLs and could be the recipients of more than USD 23 billion1, if these rights were sold into international carbon-trading schemes such as those of Australia and the European Union.2 While the customary landholdings of PNG’s forest people are constitutionally protected, they have historically been the victims of governmentled processes that allocate forests to industrial logging companies, often against their wishes.

The previous Somare Government continued this predatory relationship with customary landholders by actively facilitating the granting of SABLs with legislative amendments that enabled logging companies to gain easy access to customary-held forested land.

In 2007, sections 90a and 90b of the Forestry Act 1991 which enabled agricultural development companies to harvest logs under Forest Clearance
Authorities were amended to do away with the requirement of calling for public tenders from registered logging companies to salvage logs from the area to be cleared for agriculture, and allowed logging companies both to apply for Forest Clearance Authorities and to undertake the logging and agricultural operation. It is no coincidence then that, between 2008 and 2011, six times the area of SABLs was granted compared to that granted during the five years between 2003 and 2008.

In 2010, the Somare Government also introduced a long-promised moratorium on whole log exports from new timber concessions. Since then, the only way to export whole logs from new logging areas was for logging companies to have a Forest ClearanceAuthority or a permit to harvest road  corridors when clearing forest for road construction.

Logging in PNG generally occurs within Forest Management Agreement areas, for which logging companies must obtain Timber Permits and follow a regulated process that may take many years. The PNG Forest Authority has not negotiated a new Forest Management Agreement for at least five  years.

Available logs in timber concessions are therefore limited and logging companies used the poorly regulated SABL process as a shortcut to access  new primary forest resources.

The streamlined regulatory processes of SABLs were actively promoted by government agencies. In doing so, government agencies ignored their duty to customary landholders by failing to provide advice, public notification and proper scrutiny of SABL applications and sublease conditions. This failure left many rural communities alienated from their land and with burdensome and unfair sublease conditions which, in most cases, will never lead to significant economic benefits flowing to communities.

The Department of Lands and Physical Planning, the agency responsible for evaluating and granting SABL applications and registering subleases,  has been described by PNG judicial authorities as grossly incompetent and entirely corrupt. All the responsible government departments involved in approving SABLs and Forest Clearance Authorities failed in their statutory duties. In many cases it was the corporations applying for logging or agricultural development that financed the government approval processes.

Directors of landowner companies and Incorporated Land Groups were not provided with independent legal advice when signing subleases. These  subleases are therefore almost entirely to the benefit of the foreign-owned companies who secured them. In many cases these subleases have clauses that demand substantial compensation should the sublease be overturned and offer little economic benefit for the landholders. For the few SABL subleases that do contain clauses for profit sharing, customary landholders are unlikely to see any significant economic benefit as historically very few foreignowned corporations operating in PNG declare profits.

SABLs were originally established to increase economic activity in rural areas and empower local communities who were to benefit from rental payments, employment opportunities and increased welfare services and facilities. The SABL policy – also known as the lease-lease back program – wasalso meant to allow landowners to utilise their own land collaterally to obtain mortgage for business development purposes with the terms of the lease to be set by the customary landholders.

The result has been small groups of customary landholders or landowner companies securing SABL titles and benefits. Of the 51 landowner  companies that hold SABL titles only 14 include clan trusts or Incorporated Land Groups as shareholders. A further 11 are held by between 11 and 22 individual shareholders; 19 are held by between 2 and 10 individuals and six are held by a single shareholder. In May 2011, after international condemnation, the PNG Government announced a Commission of Inquiry into SABLs. The Commission’s report was completed in May 2012 but will not be made public until it is tabled in Parliament by the newly elected Prime Minister in the second half of 2012.

The single biggest issue highlighted during the Commission’s hearings was the lack of fair representation of customary landholders in agreeing to SABLs being granted over their land. The instrument that attempts to resolve customary landowner representation in such matters is the Land Groups Incorporation Act 1974. The Act was established to encourage greater participation by local people in the national economy through the utilisation of their land with greater certainty of title. Of the many problems that arose as a result of the Act, the lack of complementary land registration legislation is an important failing. The object of allowing greater certainty of title was therefore never fully realised.

Legal recognition of the corporate status of customary landholders was instead used to facilitate consent for resource exploitation. The Somare  Government introduced the Land Groups Incorporation (Amendment) Act 2009 and the Voluntary Customary Land Registration Act 2009 to
overcome the many glaring deficiencies of the original Act. Inexplicably, the Somare Government delayed its introduction and the legislation was not  implemented until March 2011 after Somare was deposed and when the full impacts of the original Act became apparent with SABLs. Delaying the introduction of the two amending Acts allowed an additional four million hectares of customary owned land to be leased, most of which was  subsequently given away to foreignowned corporations.

In June 2012, the country went to elections with hopes for a more transparent government and public service that will protect the interests of the  majority of Papua New Guineans, rather than the profits of a few corporations. The newly elected PNG government must act quickly after being formed and implement the recommendations of the Commission of Inquiry as well as review and amend the legislation that allowed the land grab to occur.

To address many of the underlying issues that led to the land grab, the PNG government must also seek international assistance to develop a national land use planning process that includes land use agreements by all relevant stakeholders including customary landholders.

Attached files