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Home
Cover
Title
Glossary
Preface
Introduction
Executive summary
Part I: Transnational logging companies
The need to control transnational logging companies
The Malaysian case study
Part II: Economic, political and legal framework
Trade, national economies and the Asian economic crisis
Politics, law and the logging industry
Land rights and policy
Maps
Part III: Impacts of the logging industry
Social impacts of logging
Environmental impacts of logging
Part IV: Company profiles
Conclusions
References
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 Aokam Perdana, a tin mining company, was launched
into the timber business in August 1990, when Managing Director Teh Soon Seng
(left) undertook a reverse take-over of the company by injecting
timber processor Pembangunan Papan Lapis (Sabah)
Sdn Bhd (PPL) into Aokam.183 In exchange, Teh gained control of
the listed company. By the end of 1994, Aokam was a stock market favourite,
with shares worth US$1.6 billion and profits of 40-60% a year, one of the
highest rates in the world for a timber company.184 The former
company chairman, Tunku Abdullah, who retired in September 1997,185
is a close associate of Prime Minister Mahathir.186 The current
chairman, Samshuri Bin Hj Arshad,187 is a former deputy speaker in
the lower house and former MP of Balik Pulau (Penang).
A major
advantage for the company has been its deal with Idris Hydraulic,
through which Aokam obtained access to a cheap wood supply—RM170
(US$68)/tonne compared to normal price at RM400-540
(US$160-216)/tonne—from Idris Hydraulics' Sagisan concessions in Sabah,
covering 256,000 ha.188 Aokam Perdana also has a 40-year joint
venture for plywood manufacturing between wholly-owned subsidiary Aokam
Resources Sdn Bhd (55%) and Changchun Plywood Plant (45%) in the Chinese
province of Jilin and was reported to be seeking logging concessions in
China,189 although this was later refuted by the company.190
Aokam has sought joint ventures with Idris Hydraulic in Myanmar and Laos.191
The company was reportedly offered concessions in the Solomon Islands and
Papua New Guinea, but turned them down due to a lack of manpower.192
The
former rising star of the Kuala Lumpur Stock Exchange has been in rapid
decline, showing a net loss of RM144.73 million (US$57million) for the year
ending June 1996.193 According to analysts, Aokam's timber complex
became severely under-used, with a number of problems including inadequate
supply of logs.194 In November 1997, Teh Soon Seng, who ceased
being a director in March 1997,195 was wanted by the Malaysian
police in connection with RM45 million (US$11.25 million) of missing funds.
The police were investigating claims of misappropriation of funds in Aokam
Perdana or the transfer of money into another company's account in which Teh
also had an interest. The police were also looking for another Aokam company
executive, Low Thian Hoe.196
The
forestry subsidiaries of Aokam Perdana are likely to be involved in current
efforts to restructure the company in the face of severe financial
difficulties. As part of the restructuring plan, it has been proposed that
Aokam Perdana buys timber harvesting rights from Idris Hydraulic.197
At the end of May 1998, it was reported that Aokam's subsidiary PPL was being
sued by a creditor for non-payment of bills and the parent company had
obtained a restraining order against PPL's winding-up until restructuring has
been completed.198
In October
1996, Associated Kaolin Industries Bhd was reported to be acquiring a total
of 104,758 ha of timber concessions in Gabon through the purchase of
Winnerpac Sdn Bhd from Landzen Developments Sdn Bhd, which in turn had
secured the rights to the concessions from a Gabonese company, Societe
Forestiere de Makokou (SFM). The deal includes three areas in all: 80,000 ha
under a 20-year concession, 15,000 ha under a 10 year concession and 9,758 ha
under a 7 year concession. The total marketable timber was estimated to be
around 6 million cu m.199
AKI
stated that this acquisition would complement the activities of another
subsidiary company, Caton Wood Industries Sdn Bhd in Malaysia, which manufactures plywood and
veneer products, the Gabonese concessions ensuring a supply of logs for
Caton's downstream processing operations in Malaysia. The deal would give the
Gabonese company, SFM, 10% of pre-tax profits whilst the Malaysian company
would get the remainder. AKI expected its subsidiary Winnerpac to be able to repatriate
profits for the financial year to June 30 1998, subject to authorisation from
the Gabonese finance minister.200
In April
1997, Caton Wood Industries was put into the hands of receivers due to the
default on loans and banking facilities totalling RM22.5 million (US$9
million).201 In June 1998, a Memorandum of Understanding was
entered into between AKI and Landzen for the acquistion of SFM to be
completed within six months, taking account of the Sale and Purchase
Agreement signed in October 1996 and an independent valuation of the timber
concession. 202
In
December 1997, property-based Austral Amalgamated Tin Bhd was reported to
have secured a 10 year timber concession in Cameroon, covering 60,000 ha.
According to Mohd Karim, executive chairman of the company, the investment
was seen as a cushion in times of slowdown and was expected to help boost
group profits in 1998. It is not clear whether this deal went ahead or not.
The group was also reported to be exploring opportunities in other African
countries.203 Austral has a subsidiary called Million Quest Sdn
Bhd, registered as a trader in logs, and another called Million Quest (Myanmar)
Sdn Bhd, also registered in Malaysia.204
The
Berjaya Group is a large, diversified conglomerate, including seven public
and about 200 private companies, involved in gambling, textiles, tourism,
hotels, financial services, industrial products, real estate and consumer
marketing.205 It is based in Kuala Lumpur, and is controlled by
Vincent Tan Chee Yioun. The company has gained a reputation at home for
planning to build tourist resorts in ecologically sensitive environments,
which have prompted environmental and public interest groups to launch two
campaigns since 1990 against projects on Penang Hill (the project was
cancelled) and on Redang Island (the project was reduced in size after
ecological damage occurred).206
 Tan Sri Vincent Tan (left) has access to a
number of significant political figures through some of his many companies.
He took over the failed Tropical Veneer Company Bhd, which was in
receivership at the time, and renamed the company Intiplus Bhd, bringing it
under Berjaya's control. Datuk Haji Mohd Fatmi bin Haji Che Salleh was
appointed as deputy chairman of Intiplus in March 1995, after the take-over.
Salleh was a member of the Central Committee (EXCO) of UMNO Youth Malaysia,207
as well as having held various other official positions. Ramli bin Zahari,
appointed as a director of Intiplus in 1995, was at the time head of UMNO
Kuala Kangsar division.208 Danny Tan Chee Sing, Berjaya managing
director, is one of the small group of new Chinese capitalists who are
closely associated with leading Malay politicians209 and Jaffar
Bin Abdul, appointed as a director in August 1997,210 is the
former Inspector General of Police. In November 1994, Berjaya Textiles Bhd was
taken over by Rimbunan
Hijau.
The Group
attempted to move into logging in several countries in 1994. In May of that
year, Berjaya's wholly owned subsidiary, Berjaya Group (Cayman) Ltd, acquired
a timber company in Solomon Islands, Star Harbour Timber Company Ltd. In
September 1994, Berjaya Group Bhd bought 60% stake of the Canadian timber
company Taiga Forest Products Ltd and aimed at expanding Taiga's operations
into the US.
Taiga's main activity is as distributor of building products like lumber,
roofing, moulding and insulation; the deal valued the company at about C$50
million.211 Also in 1994, the group started negotiations in Guyana
and Suriname for access to vast timber concessions.
 Solomon Islands
Berjaya
Group Cayman bought Star Harbour Timber Company Ltd for US$1 million cash,
giving Berjaya access to 45,000 ha concession at the price of only US$ 22.22
(RM 58.43) per ha, inclusive of the sawmill, compared to an average of
US$1,000 (RM2,500) per ha in Malaysia (without sawmill).212
Just a
few months after the deal, the Managing Director of Berjaya Group (Cayman),
Mr Tony Yeong resigned over allegations of an attempt to bribe the country's
Commerce, Employment and Trade Minister, Mr Joses Tuhanuku. The Minister
alleged that Mr Yeong attempted to bribe him with RM8,000 (US$3,200). The
Minister refused the money and immediately informed Prime Minister Billy
Hilly. Mr Yeong was asked to leave the country and resigned from the company.
Mr Tuhanuku also said that Yeong insisted it was an accepted practice in the
South Pacific, and indeed around the world, for a large company such as
Berjaya to show its appreciation to those in government who assisted the
company. Berjaya Group protested against the allegations.213
Berjaya
had proposed to invest US$60 million (RM157.8 million) in the country, in
exchange for which the provincial governments of Guadalcanal
and Makira agreed to grant an aggregate minimum of 600,000 ha of forest
concession. The US$60 million investment was to be for building an integrated
timber processing complex in the Solomon Islands.214 It was later
reported in Hong Kong that the company failed to raise the capital needed for
the deal215 and eventually withdrew from the Solomon Islands altogether,
following disputes with local landholders. One landowner described their withdrawal
in the Solomon's press, "Thank God Berjaya pulls out... this news brings
relief to our souls".216
Guyana
The
Berjaya Group has sought to invest in Guyana since 1994. The company
requested a 700,000 ha concession in the New River-Upper Berbice area with a
proposed investment of US$112 million. The company also sought exemption from
withholding tax on dividends paid to non-resident shareholders and on
interest payments paid to offshore lenders, exemption from export duties on
all processed wood products, exemption from import duties on all materials
used by the company, a fixed ceiling on corporate tax rates, fixed royalty
rates for the entire life of the contract, deductibility of all interest
payments, an accelerated depreciation allowance, unlimited use of foreign
labour when needed, and investment protection guarantees.217
No
contract could be signed because the forest area in question was outside the
State Forests and because the government—due to national and
international pressure against the sell-off of the Guyanese forests—put
a freeze on handing out of new logging concessions from October 1995. The
moratorium is still in place.
However,
in 1997, despite the fact that the Guyana Forestry Commission was still weak,
the State Forests were extended by 4.6 million ha in the Southern part of the
country and large tracts of forests were selected to be leased out as Exploratory Leases.
Berjaya signed a memorandum of understanding with the Guyanese government for
an exploratory lease in April 1997 for access to 760,000 ha of allegedly
pristine virgin forest,218 which are also claimed by the Macusi
and Wapisiana indigenous peoples.
Significantly,
Berjaya has been operating through another Malaysian company, Tenaga Khemas Sdn Bhd,
which owns 87,850 ha concession in the Berbice River
area. Tenaga Khemas also controls two other companies, UNAMCO and Case
Timbers, and Mr Villupillai Kanagalingam (Tenaga Khemas' representative)
confirmed that he is associated to Berjaya.219 Berjaya therefore
may hold, either in its own name or through its interests in Tenaga Khemas,
Case Timber and UNAMCO somewhere around 1.5 million ha of forestry
concessions in Guyana.
Suriname
As soon
as Vincent Tan put his feet in Suriname
in 1994, he made Mr Surinder Mungra, the brother of Suriname's Minister of Foreign Affairs, the
director of his Suriname
company. Immediately afterwards, Berjaya applied for a huge concession of 1.1
million ha which was prevented from being awarded only due to massive
national and international outcry. A considerable part of the area requested
by Berjaya is inhabited by Amerindian and Maroon peoples, who felt severely
threatened by the concession. This sparked great opposition by indigenous
peoples, environmental and human rights organisations.
In
February 1997, after the government announced that the 1 million ha deal was
probably going to be cancelled, Berjaya requested a different logging
concession of 150,000 ha. It now appears that Berjaya has been awarded three
exploratory permits, whereby the company can conduct an inventory of forest
resources and produce a management plan but is not allowed to log, totalling
300,000 ha.
According
to a newspaper report, Berjaya was already busily chopping down trees in
1996, despite not officially owning concessions. This was made possible
through Berjaya's director Surinder Mungra, who arranged for Berjaya's
equipment to be employed on concessions that had been worked for dozens of
years by small-scale Surinamese companies. When journalists visited a couple
of these concessions, armed men overseeing the logging operations said that
they were there to protect Berjaya's property. The names of Mungra and
Berjaya were repeatedly heard despite the fact that the concession belonged
to someone else on paper and that under Surinamese law it is forbidden to
transfer timber cutting permits to third parties, with the risk of a
punishment of immediate withdrawal of the concession.220
Kenneth
Eswaran, a newcomer to the corporate scene, bought into Benta Plantations Bhd
via a reverse-takeover, acquiring 31% of this company and 28.1% of Mun Loong
Bhd. Eswaran's partner, who owned a further 30% of Benta, is Haji Ishak
Ismail, of Idris Hydraulic221.
Benta changed its name to Best World Land Bhd and, in 1994, Eswaran was
reportedly interested in a 250,000 ha timber concession in Southern Laos and
was expected to sign a deal with the Laotian authorities at the beginning of
1995 and to undertake logging activities during that year.222 The
concession would allow logging for 6 or 7 years. Eswaran was reported to be
setting up a new company, with both the listed vehicles in which he was
involved (Benta—now Best
World Land—and
Mun Loong) investing 55% and 45% repectively in the new company. Total
investment in the new concession was to be about RM60 million (US$24
million). Because the timber business was new to these companies, Eswaran was
believed to be scouting around to hire timber experts.223 Best
World Land Bhd sold its equity in Mun Loong Bhd at the end of 1995 for a
loss, reportedly in order to concentrate on its core business of property
development.224 It is not clear whether the Laos deal was
successfully concluded or not.
Damansara
Realty's main business interests are in steel mills, property development,
timber and oil palm plantations. In 1993, KUB acquired a 15% stake in
Damansara Realty (then called Kesang Corporation).225 KUB is an
UMNO members' co-operative which functions as an avenue for party members to
pool their resources for investment purposes. The Johor Corporation, the
Johor state government's development agency, currently owns 42% of Damansara
Realty and the State-controlled Employees Provident Fund is also a
shareholder.226 Damansara Realty owns 32% of the Long Huat Group.227
Damansara
has incorporated in Papua
New Guinea as Damansara Forest Products
(PNG) Pty Ltd. In 1995, the company successfully completed a deal which
granted it access to 121,000 ha of lush coastal forests in Aitape, West Sepik
Province: 30,000 ha
were slated for clearfelling for the establishment of oil palm plantations
and the rest were to be managed for selective logging. The export of logs
began in July 1996.228 The company had no plans to establish any
downstream-processing facilities in Papua New Guinea and logs were to enable
Damansara's complex to increase its production.229
The Papua
New Guinea deal was controversial even before it was approved, with the then
Forest Minister, Tim Neville, warning the Government against the project,
officially called Aitape Agro-Forest Pty Ltd. The Catholic Women's
Association in Aitape also condemned the deal230 and there were
claims that the genuine landowners were never involved in any negotiations,
and that the deal was being hurried through.231 The deal went
through after Tim Neville lost his post, but local communities have been
voicing opposition to the project on the grounds that they were not consulted
and they were not ready to let a foreign company take over the forest.
However, clearfelling started at the end of 1995 and logs were exported from
Aitape in 1996.232 In July, 1998, the Papua New Guinea logging
operations were halted due to "adverse market conditions", and the
company plans to terminate all logging-related agreements and hopes to
recover RM4.5 million (US$1.2 million) through arbitration proceedings.233
General
Lumber Fabricators and Builders Bhd (GLFB) announced in early 1998 that a
company within the group, Rimyasa Development (PNG) Pty Ltd, had received
approval from the Papua New Guinea National Forest Authority regarding a
logging and marketing agreement with Basoma Holdings Pty Ltd. Under this
agreement, Rimyasa was appointed to manage and undertake logging operations
and marketing activities in respect of 9,800 ha of forest in Papua New Guinea.
The timber permit area was extended for a further 10 years, commencing
December 16th 1997, and Rimyasa's annual harvest quota is 120,000 cu m per
year through the term of the timber permit. GLFB proposes to venture into
sawmilling and other downstream processing activities in PNG.234
GLFB has substantial processing capacity in Malaysia through a number of its
subsidiaries.
Idris
Hydraulic and its subsidiaries are involved in a number of sectors, including
property development, forestry operations and downstream processing. Idris
owns various concessions in Keningau, Sabah,
collectively known as the Sagisan Concession, totalling 256,000 ha. The
concessions last for various periods, up to the year 2011. In order to
efficiently exploit the concession, Idris entered into a joint venture
agreement with Aokam Perdana Bhd in 1992 and there have been recent reports
that these concessions will be transferred to Aokam as part of a rescue
package for the latter company.235 In January 1997, 50% of the
logs from the Sagisan concession were sold to Aokam and the remainder
exported.236
Idris
Hydraulic is managed by Ishak Ismail, who has been secretary for UMNO's
Permatang Pauh division, under Anwar Ibrahim, deputy Prime Minister and
Finance Minister. Ismail was also a director of KUB, an UMNO members'
co-operative set up as an avenue for party members to pool their resources
for investment purposes.237 KUB controlled Idris Hydraulic at one
stage.238 Idris' Chairman, Tengku Ahmad Rithauddeen, is a former
Minister of Foreign Affairs239 and former Defence Minister.
In
December 1993, the company announced, after months of speculation in the
financial world, that it was taking over a Myanmar plywood mill and forest
concession of 3.4 million ha, in a joint venture with state-owned Myanmar
Timber Enterprise. The mill was located in Monywa, in the Sagaing forest
division. Forest studies by the Myanmar authorities indicated
that the Sagaing concession had a good concentration of trees similar to
meranti and had teak. 240 It was believed that Aokam Perdana
would enter the deal on a 50:50 split with Idris. The deal appeared to be put
on hold in 1994, as a result of a shake-up in the Myanmar Timber Authority.241
The deal was reportedly progressing once more in January, 1995.242
In
January, 1996, the company was reported to be considering timber concessions
totalling 1.25 million ha in the Democratic Republic of Congo and Gabon.243
In June 1996, it was announced that Idris purchased a 51% stake in Societe
Forestiere de Tchibanga for US$19.12 million. The Gabonese company has two
forest concessions in Gabon,
totalling 246,500 ha. The company's chairman, Rithauddeen, was quoted as
saying that the group expected to produce about 6 million cu m over 20 years.244
Recent information puts Idris' holding in Societe Forestiere de Tchibanga at
48%.245 There is uncertainty surrounding the company's interest in
the Democratic Republic of Congo.
Anscan
International Ltd, a subsidiary of Idris, has signed two concession
agreements with the government of Laos. Pursuant to these
concession agreements, it was reported that Anscan was to develop a 468MW
hydroelectric power plant, Xekaman 1, and a 500 kv transmission line, in the
southern Attapeu province. Power generated would be sold to Thailand.246
The construction of the dam would flood 15,800 ha of relatively pristine
forests, including the north-west boundary of the Dong Ampham protected area
and also penetrates into it.247 The Xekeman river feeds into the
Se Kong river, which is a major tributary of the Mekong.
The dam is expected to have severe ecological impacts on these three rivers'
fisheries. Among the social impacts, the dam necessitates the relocation of
more than 1,100 ethnic minority people. According to an Asian Development
Bank report, people of the Kaseng ethnic group claim to have been moved out
during surveying of the site in 1994, long before any need for clearance.
"If this is confirmed it seems probable that the absence of indigenous
people in the area will be used to press for support for future development
at the site, under the spurious grounds that there is no resettlement
problem."248. It is unclear whether the company is still
committed to this project or not.
Innovest
is a real estate company which has ventured into logging in the last two
years, with the acquisition of substantial forest concessions in Africa. The company has recently proposed a name change
to Inter-Pacific Ventures Bhd, for which approval has been given, but the
change has not yet been effected.249
In 1996,
it was announced that Innovest had acquired a 95% share in a joint venture
with a local government in Congo
(Brazzaville)
to exploit forest concessions covering 336,000 ha under a 25-year agreement.
Under the terms of the agreement, the company is allowed to export logs in
the first two years, after which it is expected to build a plywood mill and
sawmill.250 A subsidiary has been established to operate the
concession: Innovest Industries Congo S.A., 92% owned by Innovest Bhd, 5% by
the state government of Mossendjo and 3% by an overseas investment holding
company.251
Logging
was due to start in September 1997, with Malaysian staff being sent to start
work in July and August 1997. The total number of staff was 189 in August
1997, expecting to rise to 290 by the end of 1997 and to 500 by the middle of
1998, according to the executive director, Tan Sri Mohd Shariff Ahmad. He
said that the company would also recruit some Congolese staff, but did not
say how many. He said production was expected to reach 100,000 cu m by the
end of 1997, rising to 500,000 cu m by end of 1998. By the middle of 1998,
all logs would be processed to sawn timber and exported to the US, Europe
and Asia.252
In
November 1997, the company announced that it also proposed acquiring
Tremendous Portfolio Sdn Bhd, which owns a substantial timber concession of
1.14 million ha in the Democratic Republic of Congo. Innovest proposed
acquiring the company (which had an indicative price of not less than RM75
million (US$18.75 million)) through a combination of equity and cash.253
In December 1997, Innovest announced that it was buying two timber
concessions totalling 707,000 ha in the Democratic Republic of Congo for
US$3.5 million. It is not known if the two deals are related nor if they were
concluded or not. Through the latter deal the company would gain the right to
harvest timber in the concession for the next 25 years, with an option to
extend for another 25 years. Innovest Executive Director Datin Loo Chooi Ting
stated that 50% of the purchase price would be payable to La Societa Cofoa
SARL on the transfer of the concessions to Innovest and the balance when
logging began. Under the sale agreement, the company would transfer to
Innovest all the concession rights for the commercial operation, management
and extraction of all species of timber and other downstream activities.254
The
larger concession, covering 500,000 ha, is located in the central Democratic
Republic of Congo region of Lusambo in Kasai
province, the smaller 207,000 ha concession is in the Western region of
Idiofa in Bandunu province. Loo said logging was expected to start in 1998.
The initial extraction rate would be 350,000 cu m per year and the timber
would be exported to USA,
Europe and Japan.
It was also reported that the company intended to expand into downstream
activities and would build a 300 km tolled highway between Kinshasa and Matudi for "not less than
$40million". It was reported that the company would collect tolls for 30
years, with the contract renewable for another 30 years.255
Innovest
has downstream processing capacity in Malaysia through its subsidiary,
IB Timber Industries Sdn Bhd (formerly Wemberly Holdings Sdn Bhd). It also
owns Innovest International Ltd, which is a timber-related business
registered in the British Virgin Islands.256
Kumpulan
Emas Bhd's principal business prior to 1993 was engineering, plantation and
oil palm consultancy and advisory services. In October 1993, the company
acquired four Solomon Island forestry concessions via a British Virgin
Island registered
company (renamed Emas Pacific after the purchase). The four concessions are:
Integrated Forest Industries Ltd. (holding a 158,174 ha concession in Makira Island),
Rural Industries Ltd. (holding a 63,670 ha concession in Makira Island),
Isabel Timber Co. Ltd. (holding a 234,000 ha concession in Santa Isabel Island)
and Silvania Products Ltd. (holding a 10,299 ha concession in Vagunu island).
Kumpulan Emas paid RM335 million (US$134 million) to buy the four companies.
Rural Industries is dormant and Integrated Forest Industries ceased operating
in 1996.257
At the
time of the purchase, much was made about the potential of the concessions to
contribute to group profits, despite Kumpulan Emas' lack of experience in the
forestry sector: "Even companies with no experience in the timber
industry have leapt onto the South Pacific logging bandwagon. Malaysia's
Kumpulan Emas Bhd... has transformed itself within two years from an
engineering group into a ruler of the rain forest".258
The
prospective "injection of potentially lucrative timber assets into
Kumpulan Emas will lift it from the doldrums and vastly enhance its earning
profile".259 These predictions have proved correct and,
according to company annual reports, the forestry operations in the Solomon
Islands have been the primary source of profits for the group, including a
profit guarantee.260 However, in the Solomon Islands, the
company's operations are surrounded by controversy, becoming known for the
environmental and social problems they have caused.
Between
1993 and 1995, Silvania Products Ltd (the most active of the concessionaires)
had its operations suspended by the government on four separate occasions.261
Several site reports have highlighted the severity of problems associated with
Silvania's and Isabel Timber Company's operations:
In
February 1994, government representatives visited a Silvania site and found
extensive damage to tambu sites (protected sites of spiritual and cultural
significance). These sites had been clearly marked by the company, as
required by the Standard Logging Agreement and provincial ordinance, and
therefore were easily identifiable to workers. However, as the report states,
"it appears that the damage caused by the logging operation is the
result of a lack of understanding of what the tambu site markers represent or
else there is total disregard for these sites by those involved in the
logging process".262 The report made several
recommendations, including better communication between Company management and
other employees.263
In March
1994, a visit by representatives of the Ministry of Forests, Environment and
Conservation, accompanied by Silvania staff, took place to Silvania
operations where road-building and tree-felling operations were taking place.
Again, significant criticisms of the operation were noted. The visitors were "appalled
at the level of environmental disturbance taking place due to inexperienced
and unplanned logging operations" and 11 contraventions of the
Standard Logging Agreement were observed. The report states: "The
poor state of Silvania's logging operations was attributed to a recent change
of ownership resulting in inexperienced and unprofessional staff conducting
an environmentally destructive operation" and recommended the immediate
cessation of tree felling and new road building. The report stated that all
staff needed training and roads should be upgraded, provided with drains and
gravelled. "In summary, the environmental impacts of Silvania's
logging operation on Vangunu are among the most serious observed to date in
Western Province....An immediate consequence of the logging operation is
deposit of silt in Marovo Lagoon from rivers flowing down from the eastern
slopes of Vangunu Island. "264
On 11
August 1994, Silvania Products Ltd. received a letter from the country's
Commissioner of Forests temporarily suspending its logging operations.265
According to an Australian press report, Silvania Products was alleged to be
resorting to "illegal and highly damaging practices" in carrying
out its logging activities. The company was reported to have exceeded the
export quota, failed to protect waterways and coral reefs from soil erosion
and failed to build a local sawmill. Solomon
Islands' Forest,
Environment and Conservation Minister, Joses Tuhanuku said that this was not
the first time that Silvania's licence was revoked, its licence having been
revoked twice by the previous Minister.266
In
November 1995, Silvania's logging operations were suspended again by the
Commissioner of Forests, along with those of Isabel Timber Company, for
failing to construct adequate roads prior to felling operations.267
An
Environmental and Social Impact Assessment carried out on behalf of local
landholders in April 1997 detailed the severity of impacts of Isabel Timber
Company's logging operations on a number of plots on Isabel Island.
The report detailed numerous contraventions of both the Standard Logging
Agreement (the official agreement setting out operating requirements) and the
Code of Logging Practice (introduced by the government in 1996, with the
assistance of the Solomon Islands Forest Industries Association). The report
concludes: "The description in this assessment of a litany of poor
forest management practices points to little prospect for commercially viable
stands of timber trees being available for harvest on realistic scales within
time frames relevant to human development regimes. The post harvest forest
condition is such that long term degradation of flora, fauna and substrate
have occurred and will continue to occur both within the logged-over forest
areas and adjacent affected sites e.g. rivers, estuarine and marine areas
including fringing reefs."268
In
addition to severe ecological damage, social impacts have been caused by
Isabel Timber Company's operations. The difficulties in identifying all
relevant landholders to take part in negotiations caused division amongst
communities and there were allegations that landholders were tricked into
signing documents they did not understand. Verbal commitments by the company
to provide clinics and schools were not fulfilled. There was also distress at
the level of water resource degradation caused by the logging activities.269
Isabel
Timber Company is 30% owned by a customary landowners' trust, making it the
only subsidiary not 100% owned by Kumpulan Emas. In theory, this should
ensure that, as a shareholder, the trust is paid a proportion of the profits
from logging equivalent to 30% of the dividend declared by the Solomon Island company. No dividends were paid
to the trust until 1996, after protest from the community.270
In the
early 1990s, under the chairmanship of Wan Azmi Wan Hamzah, this timber
company, formerly known as General Lumber Bhd, began a rapid and successful
strategy of diversification into areas such as property development, shipping
and financial services. However, the company still holds a number of forestry
related interests, and reportedly expanded to overseas operations in
recognition of west Malaysia's
limited forest resources.271
Wan Azmi
is reportedly a close associate of Daim Zainuddin272 (economic
advisor to the government, former Finance Minister and treasurer of UMNO),
and has been linked to Aokam Perdana Bhd through the joint ownership of other
companies.273 Lim Thian Kiat, a director of Land and General,274
is also understood to be one of a set of new Chinese capitalists said to be
closely associated with leading Malay politicians.275
Irian
Jaya/West Papua
By
acquiring the British Virgin Island-registered investment holdings company
Kinley Trading Ltd in 1995, Land and General gained control of an Indonesian
timber complex and a log supply contract through Kinley's subsidiary, PT
Wapoga Mutiara Industries. The complex has downstream timber processing and
is in import and export trading. The log supply agreement amounts to 800,000
ha of forest at the Gulf
of Candrawasih,
Manokwari and Jayapura in Irian Jaya/West Papua. Part of the agreement
included a profit guarantee for the first three years of US$13.5 million per
year. The concessions are for a period of 20 years. 276
Cameroon
Conflicting
reports have appeared concerning Land and General's investment holding
company Overseas & General Ltd (OGL), and its proposed deals in Cameroon.
The Star newspaper of Malaysia reported in July 1997 that OGL had acquired a
55% stake in Cameroon's Societe Forestiere et Agricole des Ruraux Africains
SA.277 Financial analysts, GOH, reported in August 1997 that OGL
had recently acquired rights to a 206,120 ha concession at minimal cost and
would be setting up a 100,000 cu m capacity mill in Cameroon.278
It is not clear if these deals went ahead. According to the KLSE, in August
1998, the group owns 52.3% of Overseas and General SARL, which is registered
in Cameroon, but this company's interests are listed as being
"management and marketing".279
Papua New Guinea
In 1991,
Land and General acquired the forestry operation Cakara Alam in West New Britain, Papua New Guinea. It has access
to 193,281 ha of timber permits.280 The company's operations saw a
pre-tax profit of RM1 million (US$400,000) for the first half of 1997.281
Cakara Alam has been dogged by controversy and is associated with poor environmental
and social practices.
A report
written by a former forester with Cakara Alam identified a number of breaches
of the management plan for operations in the West Arawe timber area.282
Breaches included undersized trees being marked for felling; roads
constructed along the top of ridges resulting in soil erosion; failure to
carry out post-logging site rehabilitation; logging on slopes above 30
degrees; snigging and hauling across rivers and creeks; failure to demarcate
or establish buffer zones. "In rivers, silts and debris resulting
from timber exploitation is evidenced on stones and river banks in all major
rivers and streams".283
In
February 1995, angry landholders closed off a logging area in protest at a
breach of contract by Cakara Alam to build infrastructure, including an
airstrip and wharf, in the West Arawe timber
area, five years after logging started.284
Land and
General has recently acquired a majority stake in the Fenning's Timber group,
which specialises in sawmilling and kiln drying, with operations in Fiji and
Australia.285
Lien Hoe
started out as a building and construction materials manufacturer in 1969 but
enjoyed only modest success. In early 1994, the company started to diversify
via the acquisition of North Sumatera Timber Sdn Bhd, a small timber moulding
plant complete with long-term log supply contracts covering 180,000 ha of
forest in North Sumatra, Indonesia.286
Lien Hoe also owns 70% of Indonesian company PT Budi Tri Sakti, which
manufactures timber mouldings.287
In 1997,
it was reported that Lien Hoe owned 51% of Carlton Resources, a logging
company with a 25 year logging concession covering 152,000 ha in Liberia.
The company made the deal in 1995, paying US$2.50 per ha, but production was
disrupted due to political unrest in the country. Logging resumed in November
1996 and the company was forecasting that profits would start coming in by
March 1997.288
Long Huat
Group Bhd has recently been trying to expand its core business of
manufacturing timber products to include logging, housing and shoe
manufacturing. After recent restructuring of the Long Huat Group, the single
largest shareholder is Damansara Realty Bhd.289
In early 1996, it was due to start operations on its 4,860 ha concession in Sabah, providing the group with 200,000 cu m of timber
over the coming three years. Although the concession was for five years, the
chairman Datuk Lew Sip Hon, said that logging would be completed in three or
four years' time.290
In
addition to the Sabah concession, Long Huat announced in 1997 that it was in
the process of acquiring a logging concession in Papua New Guinea through the
purchase of Landwell Resources Pte Ltd.291 Long Huat Group Bhd
proposed to buy Unicorn Timber Industries Berhad (UTIB) and a 41% equity
interest in Landwell (a 51% owned subsidiary of UTIB) as well as a 30% equity
interest in C-Dragon (70% owned subsidiary of UTIB). Landwell was
incorporated in Papua New
Guinea in 1989, and its principal business
is logging and sawmilling. C-Dragon was incorporated in Malaysia in 1993, and is a timber
processing company. The major shareholders of UTIB, Landwell and C-Dragon
were to enter into a profit guarantee agreement with Long Huat, providing a
profit guarantee in each of the 3 financial years 31/8/99-2001. The
application for this scheme was to be submitted to the Securities Commission
at the end of December 1997.292 Business Times of Malaysia
commented on December 31st 1997 that the company was looking at ways to
finance the acquisition of Landwell with its merchant bankers. The company
was said to be looking at the pricing of the new issue and the rights issue
proposed earlier. According to the Managing Director, Wong Chong Leong, the
company still hoped to proceed with its plans, despite the current constraint
on credit facilities, as it is an export-based company.293 It is
not clear whether this deal is still pending or has been aborted.
 Rimbunan Hijau (RH) is headed by Datuk Tiong Hiew
King (left), one of Asia's largest
timber tycoons.294 Forbes Magazine estimated the Tiong family
worth to be US$2.5 billion.295 The group controls both listed and
unlisted companies. In order to gain access to the Kuala Lumpur Stock
Exchange, Rimbunan Hijau undertook a reverse take-over of Berjaya Textile Bhd
in November 1994, renaming the company Jaya Tiasa Holdings Bhd. The Tiong
family retains control of approximately 30% of Jaya Tiasa.296 The
other listed vehicle is Subur Tiasa Holdings Bhd.
The group
has a number of high level political connections: Mohamad Arip bin Mahmud,
the brother of Sarawak's Chief Minister (who controls the allocation of
logging concessions), was appointed as a director of Jaya Tiasa on 13/4/95;297
a sister of the Chief Minister is also one of Tiong's business partners.298
Other directors of Jaya Tiasa include Tiong Thai King (Tiong's brother), who
is a member of the Malaysian Parliament,299 and Abu Talib bin
Othman, former Attorney General.
Tiong is
said to control an estimated 800,000 ha of logging concessions in Sarawak and
his family dominates the logging industry in Papua New Guinea.300
The company has also acquired forestry operations in Brazil; Cameroon;
Equatorial Guinea; Gabon; Vanuatu, New Zealand and the Russian Far East.
Other subsidiary company operations include a US$58.5 million soft-wood
plantation development in New Zealand, a sawmill in Shanghai, a cattle ranch
in Australia, property in Singapore, as well as interests in banking,
newspapers and oil-palm plantations. Rimbunan Hijau also owns a 40% share in Limbang
Trading Sdn Bhd, which has a 310,000 ha concession in Sarawak until 2009 (55%
of Limbang is owned by Sarawak's Minister for Environment and Public Health,
James Wong Kim Min).301 Recent rumours suggest that Rimbunan Hijau
owns, or is in the process of acquiring, Primegroup Holdings,
a company registered in British Virgin Islands with logging concessions in
Guyana and Papua New Guinea.
Sarawak
Rimbunan
Hijau's operations in Sarawak have brought
the company into direct conflict with indigenous people over land rights issues.
For example, in 1987, Kayan villagers in Uma Bawang erected a blockade in
protest at the activities of Marabong Lumber Sdn Bhd, one of the Tiong family
concerns, which was polluting the waterways and threatening their
livelihoods. 42 farmers were arrested, but later released after prosecutors
dropped all charges against them;302 In 1993, complaints were made
to Sarawak officials regarding damage to
fruit trees and farm lands caused by Rimbunan Hijau Sdn Bhd.303
Papua New Guinea
Rimbunan
Hijau has become the largest timber operator in Papua New Guinea and, through
a complex and opaque network of companies, is estimated to control between 50
and 80% of Papua New Guinea's timber production,304 with
concessions estimated at nearly 2 million ha.305 In 1992, the
annual turnover of Rimbunan Hijau companies in Papua New Guinea was estimated
at K700 million (US$722 million) out of the country's K800 million timber
industry.306 Rimbunan Hijau set up a newspaper to strengthen its
position in the country, providing itself and the industry with favourable
media coverage.307
Many
claims of environmental degradation have been levelled against Rimbunan Hijau
and its subsidiary companies in PNG. For example:
§
After a site visit to RH subsidiary Niugini Lumber's operation in LAK TRP, Dr
Franz Arentz, a forestry specialist, remarked that this was the worst example
of tropical forest logging he had seen anywhere in the world;308
§ An
official report documented that staff operating in some sites were not aware
of the company's commitments in its own Environmental Plan nor that they had
a copy of the Plan available on site. The report by the Department of
Environment and Conservation recommended that subsidiary, Nuigini Lumber, be
prosecuted for breaches of its environmental plan.309 Virtual
clearfelling of some sites on steep slopes over 25 degrees led to sheet soil
erosion and there were also cases of fuel-oil widely contaminating logging
camp sites and washing into nearby marine environments;310
§
Complaints have also been made about employee welfare. In a report from a
follow-up sanitary health inspection of camps 1 and 2 in their Aria Vanu
operation, the health inspector stated that RH had "totally neglected
the recommendations specified in the [previous] inspection report of
8/12/93". The letter covered recommendations concerning sanitory
facilities, water supply, overcrowded and poor housing, a lack of safety
equipment and a number of other matters.311
Allegations
of illegal activities against RH include:
§ RH
subsidiary Pacific Logging's illegal logging within the no-logging zone
around Port Moresby;312
§
Pacific Logging's operation in Vanapa was found to meet only 3 of the 26 conditions
of its own environmental plan, a plan that itself had not met any of the
preliminary conditions of PNG government approval in the first place;313
§ RH
subsidiary New Guinea Lumber excavated live reef for use as road and log pond
surfacing. The same company was fined US$30,000 for harvesting in a
concession for 18 months without being registered. It was estimated that the
company had exported US$48 million worth of logs;314
§ In
March 1997, the Governor of Milne Bay (and former Forest Minister), Tim
Neville, confirmed that Saban, a contractor of Rimbunan Hijau, was caught
exporting rosewood logs, which are a prohibited export in log-form in Papua
New Guinea.315
In March
1994, Forest Minister Tim Neville and a film crew from the Australian
documentary programme 'Four Corners' who were making a documentary on
Rimbunan Hijau caught the company 'red handed' with piles of undersized log
on the dock awaiting export.316
As
illustrated in the political section (see above),
the timber industry has had, and continues to have, great influence on the
political processes in the country, including the development of forest
legislation. It has been alleged that RH has chartered planes, paid hotel
bills and arranged for selected landowners to lobby against the First
Forestry Act in East New Britain.317 The company has publicly
lobbied against the raising of taxes, stating that companies would have to
look to Africa and Latin America if higher
operating costs were incurred in PNG.318
At the
beginning of 1997, Francis Tiong, head of the Rimbunan Hijau operations in Papua New Guinea,
was appointed to the board of the National Forest Authority, the agency
charged with monitoring forest management in the country, due to its position
as president of the Forest Industries Association. Due to the clear conflict
of interests of Mr Tiong, the Papua New Guinea Forest Owners Association
threatened to stop all logging operations in the country if landowners were
not represented on the National Forest Authority Board.319
In June
1998, Rimbunan Hijau was reported to be shipping K6 million (US$2.4 million)
of equipment to Russia,
due to poor market conditions and lack of government support (see below).320
Cameroon
In Cameroon,
Rimbunan Hijau's subsidiary, Shimmer International, is the contractor for the
MPL (since 1995) and CAFECO (since 1996) concessions, of 114,650 ha and
26,200 ha respectively. Both concessions are part of the Korup Project area,
which is intended to conserve the Korup
National Park. All of
the timber was reported to be exported as logs to Asian and European markets.321
MPL is currently not operational. Rimbunan Hijau has other interests in Cameroon,
and Shimmer itself is divided into many subsidiaries within the country, a
structure which "is by its nature susceptible to evade the Cameroonian
law which limits the concession size to 200,000 ha by company".322
The
suitability of these two areas for timber exploitation was called into
question by an Environmental Impact Assessment (EIA) of the concessions
undertaken in February 1997, which states that these two concession areas "cannot
be considered appropriate for timber exploitation". The report found
that "the actual timber exploitation is not sustainable at all"
in these two concessions, and that the concessionaires had no management plan
in place.323 A number of environmental impacts were identified in
the report, including:
§
construction of roads on steep slopes, resulting in considerable erosion; high
density of large roads and skidding trails leading to opening of the forest
canopy;
§
road construction of a poor quality thus liable to require major
reconstruction at a later stage;324
§
poor felling techniques; enormous waste of valuable timber;
§ a
lack of limitations on timber harvesting, either in terms of number of trees
or volume of cu m to be extracted per ha.325
Neighbouring
trees were felled and the canopy was opened up or even completely destroyed
over large areas326 leading to soil erosion, particularly during
periods of heavy rainfall.327
Although
the two concessions provided unskilled jobs for locals, who were initially
happy to have roads, there are negative social impacts associated with the
logging. The MPL and CAFECO forest concessions are inhabited by 7-10,000
local people belonging to four tribes, and nearly all villages have a mixed
subsistence and cash economy, with hunting being part of the regular routine.
Fishing is also an important part of life, mainly for the women, and impacts
on streams through erosion threaten this traditional food source. Forests and
fallows are needed by all villagers to provide subsistence and income, a
source of potential conflict with logging operations. Non timber forest
products were reported to be under threat, and highly economic trees used by
the villagers were disappearing. Safety measures for workers were deemed
inadequate by the survey team.328 The team also anticipated social
unrest as infrastructure development was seen to be unsatisfactory or
inadequate to the local people's needs.329
Equatorial Guinea
Shimmer
is also operating in Equatorial
Guinea. In 1996, it produced 115,000 cu m
of logs out of a total for the country of 471,000 cu m and forecasts for 1997
were that it could produce 400,000 cu m.330
Gabon
Rimbunan
Hijau are reported to be operating in Gabon.331
Vanuatu
Santo
Veneers and Timbers Limited and Pacific Veneers were acquired by Rimbunan
Hijau in 1994. Santo Veneers is the main operator in the country, logging on Santo Island. Vanuatu has a log export ban and
Santo Veneers has invested in a massive sawmill in Luganville. The sawmill
has a processing capacity of 50,000 cu m per year.332
The Santo
Veneers operation has been a source of conflict with local landholders since it
started operating. In 1995, locals burned a Santo Veneers bulldozer in
protest at the company logging in an area for which they had no contract. The
supreme court acquitted the local family concerned "after hearing
evidence that Santo Veneers and Timbers Limited were logging in an area where
they had no contract and continued to log the area even after the burning of
their bulldozer and a court injunction not to log there".333
Recent
unconfirmed reports indicate that the company's activities on the island of Santo remain controversial:
§ An
official inspection visit on one occasion in 1997 identified trees which had
been cut illegally;
§
the company is believed to be entering into contracts after having identified
only a few of the legitimate landholders, rather than all of them as required
by law;
§
there are also believed to be other contractual irregularities and reports of
logging in protected areas.
Brazil
According
to the 1998 report of the Brazilian congressional hearing on the activities
of TNCs in the Amazon, Jaya Tiasa Holdings Bhd created a Brazilian subsidiary
Verde Vivo Ltda, a holding company under the presidentship of George Fan Yin
Yon, which in turn set up Verde Compensados S.A. to handle its timber
operations. Verde Vivo Ltda is also interested in establishing oil palm
ventures in Brazil.
Verde Compensados S.A. took control of two Brazilian companies, Maginco
Compensados S.A. and Selvaplac Industria Madeira do Para Ltda, and created 2
further enterprises, in partnership with Brazilian interests, Maginco Verde
S.A.(constituted on the 1st April 1997) and Selvaplac Verde S.A (constituted
on the 4th April 1997). The total area under the control of the group is 53,997
ha, situated in the state of Para. The
Brazilian companies acquired by the group all had records of infractions,
suspensions of operations or land tenure conflicts.334
Russian
Far East
Rimbunan
Hijau have been awarded a 48 year lease agreement in the Russian Far East for
harvesting over a 305,000 ha area. The annual allowable cut is 550,000 cu m.
The company has said it will invest in downstream processing facilities in
the region but the initial focus will be on the export of logs. The
concession is located in the Sukpai watershed in the northern part of the
Sikhote-Alin mountain range in the Khabarovsk
region. This project is expected to be controversial because the forests are
habitat for the Siberian tiger and are part of a "Territory for
Traditional Natural Resource Use" for local indigenous peoples.335
In June 1998, the Rimbunan Hijau owned 'National' newspaper in Papua New
Guinea reported that the company was sending some K6 million (US$2.4 million)
worth of plant and equipment to Russia, including construction, road building
and logging equipment, because of the low log prices on the regional log
market for tropical hardwood and lack of Papua New Guinea Government support
for the industry.336
 The
Sarawak-based Samling Group of companies was founded by Datuk Yaw Teck Seng
in the early 1960s. Operating from the town of Miri,
the group started with three concessions from which it expanded to the point
where it controls 1.5 million ha of forest concessions in Sarawak, another
1.69 million ha in Guyana
and almost 800,000 ha in Cambodia.
In November 1993, the group succeeded in taking control of Lingui
Developments Bhd, which became its main listed vehicle. Some securities
analysts view the Samling Group as the country's largest and most aggressive
fully integrated timber group. The group's other overseas business stretches
to Japan, Taiwan, South Korea, the US and Canada.337 The
Samling group of companies are still controlled by Datuk Yaw Teck Seng and
Yaw Chee Ming, father and son (left) respectively.338
Sarawak, Malaysia
Samling's
logging operations in Sarawak have been
highlighted by forest peoples' communities as having been destructive and
disrespectful of their livelihoods in many instances. The most recent
occasion was in March 1997, when about 70 Penan, a nomadic hunting and
gathering people whose traditional livelihoods almost totally depend on
forest products, went to the Samling Plywood (Baramas) Sdn Bhd and Samling
Timber Sdn Bhd companies to protest about the destruction of their forests
and to hand over a letter petitioning the companies to cease operations on
their ancestral land. Instead of meeting with company representatives, the
Penan were met by a group of the Police Field Force, armed with machine guns,
tear gas and knives, who verbally abused the Penan and then assaulted and
beat them with machine gun butts, boots and knives. Four of the Penan were
then arrested by the police for allegedly damaging company machinery. The
four were seriously ill-treated in jail and then charged on a technicality of
'illegal assembly' before being released to await trial. The case is still
pending.
Guyana
In a
joint venture with the Korean Sung Kyong group, Samling Strategic Corporation
Sdn Bhd set up a locally-incorporated consortium, the Barama Company Ltd
(BCL), in Guyana.
Samling controls 80% of the company. In October 1991, Barama was granted a
1.69 million ha forest concession in the North-West of Guyana that by itself
is larger than all the indigenous peoples' titled land in the country.339
The
agreement between Barama and the Guyanese government grants the company a 25
year licence (automatically extendible for another 25 years) to log the
concession for export of raw logs, sawn lumber, veneer and processed plywood.
The company enjoys a ten-year exemption from income tax, corporation tax,
withholding tax, consumption tax, property tax, most import duties and timber
export taxes. The royalties have been fixed in Guyanese dollars over the
first 20-year period with no provision for adjustment as inflation devalues
the currency.340 Estimates based on data provided by the company
itself and the Guyana Forestry Commission show that Barama pays the
equivalent of less than 1% of the value of the goods exported in taxes,341
resulting in very little gain for the country.
Barama is
alleged to have set up an extensive patronage network in Guyana. The late President
Jagan's Asian fund-raising tour in 1993 was financed by the company; Barama
also paid for fencing the President's residence in the capital Georgetown; it took on the ex-head of Guyana's Natural Resources Agency
as a consultant. He had previously negotiated the original Timber Sales
Agreement with Barama on behalf of the government, .342
An
environmental assessment of the concession by the Edinburgh Centre for
Tropical Forests (ECTF), contracted as a consultant by the company, concluded
that 'timber harvesting may not be biologically sustainable at planned
extraction levels'343 and that this was a major risk that
"could potentially jeopardise the objective of the entire BCL
programme".344
Although
it is recognised that Barama addressed environmental problems through the
ECTF study, complaints have been filed stating that pollution of river
downstream of one of Barama's log ponds is responsible for health problems
among local residents.345
Those who
are set to suffer most as a result of the Barama concession are the
indigenous forest people. The concession overlaps the lands of an estimated
1,200 Amerindians, including four communities with titles and land proposed
as a reserve for the Carib people by the Lands Commission in 1969. The
concession also encloses a large number of Amerindian homesteads without land
titles, scattered along the main rivers. ECTF, which visited the area in
1993, reported some potentially serious negative impacts of BCL's operations,
including the reduction or elimination of traditional food, shelter and other
forest resources of local communities; increased hunting; wildlife trade;
illegal timber felling; social conflicts over jobs; split communities;
culture shock for remote communities; pollution from chemical spills; and
introduced diseases.346
The
Amerindian Peoples Association (APA) has strongly criticised the way in which
the concession was awarded: no consultation with the indigenous communities
and no respect for the Amerindians' land rights. Since 1993, the organisation
repeatedly called on the Minister for Amerindian Affairs to review the contract
and subsequently called for an international boycott of Guyanese timber. At
that point, the Minister promised to institute a Commission of Enquiry to
review the Amerindians' claim and the Barama contract, but up to now the
promise has not been honoured. Meanwhile, Amerindians near the logging camps
have also complained to the Ministry about illnesses caused by the pollution
of their waters, forced resettlement, the bulldozing of crops, low wages,
delayed payments and lack of injury benefits.347
In November
1994, a field survey conducted by the World Rainforest Movement in
co-operation with the APA in the concession area, revealed that dozens of
communities of Amerindians, both Caribs and others of mixed descent, living
in scattered groups throughout the concession, were hearing for the first
time about the Barama contract. They were obviously upset and unhappy to
learn that they now lived within a logging concession belonging to a foreign
company. Most of them did not have land titles despite having claimed land
ownership over the land they inhabited for generations. A small Amerindian
community of Oronoque, which established a co-operative and planted fruit
trees on a 40 ha piece of land allocated to them in 1966, was relocated in
1991 to make way for Barama's log pond and office complex. Those affected
claim that they have not yet received compensation for the fruit trees and
the land promised to them. They now live in tiny lots of untitled land in
poorly constructed wooden houses mostly without water pipes. They also allege
that their graveyard was desecrated, some of the graveyard bodies were
accidentally bulldozed up by a BCL worker and clumsily reburied in a single
grave.348
In
December 1994, the APA called on the Government to establish a small Amerindian
Land Commission to survey the Barama concession more completely, to assess
the Amerindian land claims and to legalise their land ownership and to
require the logging operations to stop activities in the vicinity of the
communities.
In June
1997, the Carib people of Port Kaituma lodged a petition against the
exploitation of their people by Barama to the country's president.
Cambodia
In August
1994, SL International Ltd, a Samling Group company, signed an agreement with
the Cambodian Government giving the company two timber concessions totalling
787,000 ha to log and manufacture downstream wood products such as plywood.
One of the concessions, covering 464,000 ha, is located in Kratie, Mondul
Kiri and Kompong Cham Provinces, while the other, of 323,000 ha, is in Koh
Kong and Kompong
Speu Provinces.
Construction of Samling's huge sawmill (the site covers about 2 square km),
located close to Highway 1 to Vietnam, 12km from the Neak Loeung ferry
crossing, started in early 1995 and is now operational.349 Samling
have also recently acquired the former 54,784 ha concession area of the
Cambodia Timber Company in Kampot. This concession area is close to Bokor National Park, with the possibility
that 15,000 ha overlaps the park boundaries.350
As with
the allocation of other concessions in the country, there was controversy
surrounding the awarding of the Samling concessions. The terms of the
contract are extremely favourable, granting the company an eight year tax
holiday and a 60 year concession. Furthermore, charges payable to Cambodia
by the company do not reflect the true value of the timber and no effective
reforestation strategy is included. A draft management plan was submitted to
the Forestry Department but was not approved because, among other things, it
did not satisfy sustainability requirements of the 1988 Forest Management
Law.351
After
completing the access road for logging in one of their concessions, Samling
refused to allow locals to travel along it, destroying one of the central
positive claims put forward on behalf of Samling's operation, namely, that
the road would open up the province to the local populace, and bring
development. Locals have only been able to use the road following pressure
from the Provincial Governor. Locals are also prevented from collecting
timber, both for firewood and for building. Promised levels of employment
have not been realised, with many Vietnamese being hired in place of Khmers.352
The
pressure group Global Witness have received reports that Samling were buying
illegal timber (nearly exclusively deluxe quality) from army units in
Military Region No.2, and from local people, much of it cut in the Snoul
Wildlife Sanctuary. In addition, Samling were alleged at one stage to be
paying the Khmer Rouge US$350 per truck per month in order to remove logs
from the concession.353
Minister
of Agriculture Tao Seng Huor wrote to Mr Han Chen Kong, the Director of SL
(Samling) International in April 1997354 stating that Samling were
guilty of:
§
Starting to cut before receiving a permit.
§
Cutting in areas not permitted by Forestry Department officials.
§
Cutting undersized logs.
§
Continuing exploitation despite the logging ban which came into effect on
31st December 1996.
Brazil
There are
a number of unconfirmed reports of negotiations between Samling and forestry
ventures in Brazil.
These include a possible joint venture with the Chinese company Tianjin
Fortune Timber and the government of China (16,850 ha), the acquisition from
North American interests of AMACOL, covering ownership of 76,844 ha and
access to a further 400,000 ha belonging to third parties (negotiations
suspended or not concluded). There are also unconfirmed reports that the
company was trying to buy 500,000 ha of land.355 (Brazilian
congressional report, 1997).
New Zealand
Samling-controlled
Glenealy Plantations (Malaya) Berhad owns
100 % of the following companies: Hikurangi Forest Farms Limited, Tasman
Foresrty (Gisborne) Limited and TreeOne (NZ) Limited.356
The
principal activities of TimberMaster are provision of management services and
investment holding. It is involved in manufacturing, trading and exporting
doors, frames and timber-related products. In 1995, it diversified into
manufacturing plywood, veneer, sawn timber and acquired a timber concession
of 12,100 ha.357 TimberMaster's Keningau (Sabah) complex has a
production capacity of 12,000 cu m per month, but in early 1997 was running
at only 10,000 cu m per month. TimberMaster was reported to be expanding into
African countries due to restricted availability of logs in Malaysia and Asia Pacific as a
result of tightening government controls.358
In 1996,
TimberMaster's British Virgin Islands subsidiary, TimberMaster Group
International Ltd, signed a joint venture agreement with the Madagascar
Development Corporation for an 80% stake in a joint venture to secure up to
500,000 ha of forest resources359 through the setting up of a subsidiary,
TimberMaster Industries (Madagascar) Limited.360 The Madagascar
government are reported to offer numerous incentives to draw foreign
investment. The TimberMaster joint venture comes with a 7 year tax free
status and the purchase price of RM20 million (US$8 million)was considered
low by analysts, who therefore anticipated a good contribution to the
company's profits from this deal.361
A
Memorandum of Understanding has been signed with the Malawi government for a 60% stake
in a joint venture which includes 120,000 ha of pine plantation and plywood
and furniture manufacturing facilities.362
In early
1997, the company acquired a 220,000 ha timber concession in Gabon
through the purchase of Bois et Scierie du Gabon for US$17.6 million (an
estimated RM 50 million i.e. RM40(US$14)/ha) from Dushan Holdings Ltd. This
was considered a very good deal for TimberMaster since the assets of
machinery etc. were valued at US$11 million. Bois et Scierie du Gabon is
involved in forestry exploitation, sawmilling and trading of wood, including
log exports. The timber can be harvested over a 17 year period.363
In
addition to the above deal, it was reported in April 1997 that TimberMaster
was believed to have secured the rights to log a further 1 million ha in
Gabon, next to the existing 220,000 ha site, about 150km from Libreville.
This new agreement was estimated to provide 300,000 cu m per year and the
company secured the rights via arrangements made with over 100 local
residents who hold timber concessions, or 'family cut' concessions in the
Njolie area. The Star newspaper in Malaysia quoted a source close to
the company, who claimed the site comprises virgin forest and can be logged
over a five year period. Extraction rates were expected to be 25,000 cu m per
month, rising to 50,000 cu m per month in 1998. In April 1997, the company
had a staff of 270 in Njolie and 62 units of heavy machinery.364
The
1million ha Gabon
deal was expected to contribute around US$9 million (RM22.5 million) net
profit. It was reported that a nominal tribute would be paid to the
concession holders per cubic metre of timber logged on their land. The
company apparently committed to investing US$30 million (RM75 million) to set
up an integrated timber complex at Port Gentil, Gabon's second largest port.365
The
current status of the various African ventures is unclear, with a recent
search showing no African-based subsidiaries listed to TimberMaster and the
British Virgin Islands-registered subsidiary, TimberMaster Group
International Ltd, being dormant.366 A recent announcement to the
Kuala Lumpur Stock Exchange suggests that a Gabon deal has been aborted.367
The WTK
Group is the oldest of the big five Sarawak
timber giants. It is owned by Datuk Wong Tuong Kwang, the maternal uncle and
logging tutor of Datuk Tiong.368
The group is managed by two sons of Wong Tuong Kwong: Wong Kie Yik and former
Senator Wong Kie Nai. They are both prominent financiers of James Wong's
Sarawak National Party (SNAP), Wong being the Minister of Environment. WTK
holds huge logging concessions in Sarawak
totalling about 400,000 ha.369
WTK
Holdings Bhd, the KLSE-listed wing of the group, requested a 6 month
extension from the Securities Commission for the purchase of 11 timber
companies at the end of last year but did not indicate why.370 The
deal included a pre-tax profit guarantee of RM126.6 million (US$31.6 million)
per year for 3 years. The companies concerned, and now listed as subsidiaries
of WTK Holdings, were: Cairnfield Sdn Bhd; Gopoint Sdn Bhd; Sarawak Moulding
Industries Bhd; Woodbanks Industries (M) Sdn Bhd; Kuching Plywood Bhd;
Sanitama Sdn Bhd; Limpah Mewah Sdn Bhd; First Count Sdn Bhd; Song Logging Co.
Sdn Bhd; Ninjas Development Sdn Bhd; Sut Sawmill Sdn Bhd. The list includes
concession holders in Sarawak and downstream
processing and marketing companies371. More recently, on 22/6/98,
the Board announced that the High Court of Malaya had granted it a 60 day
restraining order to stop creditors and others from taking court action
including winding-up proceedings.372
WTK's
main activities overseas have been in Papua New
Guinea, where WTK Realty has been operating a 287,000
ha concession in Vanimo, Sandaun Province (West Sepik)
and elsewhere in the country.
Sarawak, Malaysia
WTK
logging operations in Sarawak have
encountered resistance by indigenous people since 1986. The Penan of the
Magoh-River region were threatened and intimidated when they started refusing
small gifts from the company in exchange for permission to log in their area.
Penan and Kelabit people were arrested in 1986-87 for blockading logging
roads serving WTK logging operations. Local people have also complained that
WTK is responsible for the destruction of a number of significant cultural
and spiritual sites such as graves and for the decimation of important tree
species used for making dart poison and many important fruit trees which form
part of the staple diet for the people of the region.373
Papua New Guinea
Local
reports in 1995 highlighted severe environmental and social problems caused
by WTK's activities. During the same year, the Vanimo Landowners Association
urged the Minister of Forests to undertake an urgent review of the Project
Agreement signed between the State government and WTK, "before PNG's
forests and natural environment is completely destroyed under the
dictatorship of the foreign contractor company WTK Realty". The Vanimo
Landowners Association highlighted the fact that the company had breached the
Project Agreement on several grounds, including forest destruction, soil
erosion and water pollution, total disrespect of indigenous people. Even the
legality of the deal between WTK and the company which previously owned the
concession was questioned. The Landowners' Association called for the
termination of the contract as WTK had clearly failed to comply with the
Agreement and the conditions in the timber permit.374
In April
1997, WTK was reported to be pressing for a new concession in the Whitemen
ranges, an area of high biodiversity priority in West New Britain
Province. Andrew Baing,
the pro-logging Forest Minister let the Forest Board know that he wanted WTK
to get the timber permit in the Asengseng Forest Management Area. Originally,
the Government had said that there was to be no logging in that area because
of ecological priority and the morphology of the area, which has slopes
steeper than 30 degrees. Any logging in that area would breach the Logging Code.375
Brazil
WTK Group
has aimed to establish itself in the state of Amazonas through two
operations, the acquisition of the company Amaplac, which has downstream processing
facilities near Manaus,
and through buying a large area of forested land in Carauari municipality of
313,719 ha. In March 1996, both Amaplac and the company WTK Brasil Florestal
(established in December 1995) were taken over by Datuk Wong Kie Nai, Wong
Kie Chie, Wong Kie Yik and Wong How Yeong.376
In fact
the purchase of land by WTK has been the subject of some confusion, with
reports stating that the company was buying 1.2 million ha of forested land
but discovered that 900,000 ha of that was indigenous land and had to be
returned.
According
to the Malaysian Ambassador to Brazil,
WTK has purchased a sawmill and about 300,000 ha of timber concession in a
remote area of Amazonas
State. The area was
said to be situated between the Jurna and Purus
River, not far from the borders with
Peru and Bolivia. However, a WTK official
refused to confirm the deal and said the company had not yet started any
timber activities in Brazil.377
Other companies / interests
Atlantic
Industries has been granted a logging concession covering 80,000 ha in
traditional Maya land in Belize.
Atlantic is reported to be a subsidiary of a
Malaysian company but the actual owners have not been identified. The
concession is located in the Columbia River Forest Reserve and was bought for
the reported sum of US$1.50 per ha. The concession overlaps the lands of 10
Maya villages, who have strongly protested the hand-out of concessions on
their lands and are actively fighting to get the concession withdrawn.
However, Atlantic has already built one of Central America's largest sawmills
on Maya land—over the protest of the Maya and without the Environmental
Impact Assessment required under Belize law.378 The company is
also reported to have cut forest outside the concession area and taken out
trees during the rainy season, accelerating soil erosion.379
In May
1995, it was reported that Chew Piau signed a Memorandum of Understanding
with Eastern Era to work three concession areas totalling 507,300 ha for a
period of 90 years in Papua
New Guinea. 30% of the area was to be
developed into oil palm plantations and the proposed venture included setting
up an integrated industrial complex for the down-stream processing of logs
from the concession areas. Chew Piau would hold 51% stake in each of the
joint venture companies established to operate in the concession areas.380
ZimMal
Holdings is a joint venture between Development Trust of Zimbabwe and a
Malaysian company, chaired by Dr Hassan Ali, called Hasedat. Sources told the
Zimbabwe Independent that in return for putting up 12,000 houses in the Matabeleland, the Malaysian investors were given
logging rights covering 50,000 ha of both Forestry Commission and indigenous
communal land under forest. The newspaper also reported that Malaysian
businessmen visited the northern part of Matabeleland,
which is rich in teak, mukwa and mahogany.381
KTS,
headed by Datuk Lau Hui Kang,387 has bought the company Carolina
Industria and Comercio de Madeiras Tropicais Ltda, based in Itacoatiara,
Amazonas state, Brazil, from interests in the Cayman Islands. Carolina has forest
management plans covering 15,400 ha, but these are currently suspended for
being in the Abufari biological reserve. There are also unconfirmed reports
that KTS has bought around 400,000 ha of forest in the Vale do Rio Madeira.388
In 1997,
Mafira entered into a joint venture with Kwitaro Investments, the first
company to have signed a Memorandum of Understanding with the Guyanese government
for an Exploratory Lease
to 760,000 ha of forests in Southern Guyana.
The deal was signed on 3 April 1997 between the then Guyanese President, Sam
Hinds, Kwitaro's Director, Rudy James and Kwitaro's parent company in Guyana
(Kurupukari Development Inc.), whose Executive Director is Lockman Sirin. The
Exploratory Lease is in Region Nine between the Essequibo, Kuyuwini and Rewa Rivers.
Kwitaro will pay US$0.50 per ha annually under the exploratory lease.389
Rudy
James, in a letter to the press on 16 April 1997, described his foreign
partner, the Mafira Group of Malaysia
in the following terms: "We have researched to find a joint venture
partner with vast experience in the industry and a good track record. They
have earned excellent environmental audit rating." The Guyana Human
Rights Association conducted a company search of Mafira and the only details
they received indicated that Mafira Techniques Sdn Bhd, managed by Lt. Gen.
Dato' Jaffa Mohammed, was established in 1990 and deals in helicopters,
warship lifeboats, missile and rocket launchers, revolvers and pistols. In a
press release of 17th April, 1997, the Guyana Human Rights Association urged
both the Government and Dr. James to provide more specific information of the
claimed "excellent environmental audit ratings" of Mafira.390
Maving
Brothers Ltd is a wholly-owned subsidiary of Nila Wood Industries Sdn Bhd and
one of the two main shareholders in the company is also a member of the Board
of Directors of New Zealand Wood Products, a company linked through
shareholding to IB Holdings Limited, which is owned by Primegroup Holdings.391
Maving
Brothers became one of the most controversial companies operating in the Solomon Islands when the Solomon Islands' Government gave
it the right to log 895,000 cu m (worth US$130 million) in Pavuvu, the
largest island in the Russell group. The island is inhabited by 2,000 local
people, who were due to be resettled on another island to make way for
logging.392 The islanders refused to move and threatened to burn
any logging equipment brought onto the island. Later in the month of April,
soldiers with semi-automatic rifles detained 56 islanders, armed with knifes
and axes, who tried to stop logging.393 In May, even the Catholic
Church publicly condemned the logging of Pavuvu. In July of the same year,
the media reported that 12 policemen were deployed to protect the timber
workers and to prevent protesters from disturbing the first ship-loading
(bound to Japan).
On 3rd July, three bulldozers were burnt by angry local people.394
Local
reports claim illegal logging on customary land, logging of undersized and
protected nut trees, pollution of a freshwater stream and logging close to
watercourses.395 On 30 October, Martin Apa, Russell Island's
anti-logging leader, was found dead on Yandina wharf. This was viewed by many
as a suspiscious death, possibly a murder by pro-logging local |
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