The two companies engaged by New Ireland businessman Walter Schnaubelt to log the Konoagil district of New Ireland were effectively bankrupt at the end of 2015 when they negotiated their logging contracts. Together the two companies were almost K3 million in the red. This is revealed in financial documents filed with the Investment Promotion Authority in Port Moresby.
The two Malaysian owned companies, Millionplus Corporation and Islands Forest Limited are owned by Tiing Siu HAH and Kie Yii LING. In total they have been granted permits and licences to log up to 135,000 hectares of forest in southern New Ireland. The logging operations are illegal because of a lack of informed consent from local people, a flawed landowner identification process and the false promises and inducements used to get some people to accept the logging.
Schnaubelt has promised local forest owners the companies will establish 35,000 hectares of oil palm and build an international standard hospital, nursing school, bridges, schools and main roads in the district, but according to IPA records, both companies were bankrupt at the end of 2015 and could not meet the ‘Solvency Test’.
The Konoagil logging operations have been clouded in controversy, with local people stating they have not given their informed consent, that landowner identification processes were rushed and incomplete and they were forced to sign documents that were never fully explained. Now they must face the fact their forests are being destroyed by two companies that were heavily in debt when they were engaged.
According to its annual return, at the end of 2015, Millionplus Limited was over K2.5 million in the red with liabilities of K3,814,616 and assets of just K1,215,122:
Islands Forests’ position was marginally better – it was only K293,668 in the red, with assets of K3,137,907 and liabilities of K3,431,575:
The PNG Forest Authority and National Forest Board need to answer for how such companies can be given licences and permits for logging operations and Walter Schnaubelt needs to explain to the people of New Ireland why their forests have been handed over to two bankrupt companies and who will fund all the expensive infrastructure he has promised.
Thirty years on from the Barnett Commission of Inquiry that exposed widespread corruption in the logging industry, the people of New Ireland are still falling victim to illegal logging operations set up without the informed consent of ordinary people.
From New Hanover in the north right down to Lak in the south, New Ireland is awash with illegal logging operations, the latest being the so-called Konoagil Oil Palm Project, set up by Walter Schnaubelt, the intending National Alliance candidate for Namatanai.
According to the media reports on the project launch in April, the logging will cover an area of 120,000 hectares and will involve the establishment of 35,000 hectares of oil palm and an “international hospital and school, nurse training centre and banking facilities for the local people”.
However, ever since the project launch landowners have been raising their objections – even presenting a petition to the Forest Minister. The local people say there has been no proper awareness and consultation over the occupation of their land and destruction of their forests.
In July, Schnaubelt was on-hand as CEO of Konoagil Agri Development Ltd, one of the companies he has set up to orchestrate the project, to try and reassure locals and the media all proper processes have been followed – but the truth is the project has been bulldozed through every stage of the legal process by Schnaubelt and his lackeys.
It was Schnaubelt who was behind the incorporation of land groups in highly suspicious circumstances. Local people say some were even forced to complete and sign the registrations while clan boundaries were done in haste and no genealogy studies were ever completed. Proper verification of ILG formation process and issuing of certificates was never done by the Department of Lands.
Schnaubelt then used the ILG certificates to induce two Malaysian owned logging companies, Millionplus Corporation and Islands Forest to move into the area and start logging.
Landowners say they have never been given proper information on project impacts and benefits – including the terms and conditions on which KADL claims to hold 20% of the equity in the business on behalf of the landowners. The landowners say no documentation has ever been shared with them.
Tomorrow we will present the evidence of how Walter Schnaubelt has set up a string of companies to try and hide his involvement as the orchestrator of the whole logging scam. We will also present documentary evidence of how Schnaubelt bulldozed the project through the PNG Forest Authority without the consent of local landholders – and scandalous details on the finances of the Malaysian logging companies involved.
The audacity, bare faced cheek and hypocrisy from Forest Minister Douglas Tomuriesa is just jaw dropping!
This is a man who for three years has vehemently denied any suggestion of illegal logging in PNG, and has wholly heartedly endorsed the destructive logging operations in SABL lease areas that have seen timber worth more then US$400 million stolen from customary landowners and exported to China.
That logging in SABL areas is still continuing today, with Tomuriesa’s seal of approval, yet he tells Parliament:
- ‘The government decision to cancel the leases is commendable’
- ‘The leases should ‘never have happened’
- ‘Due diligence must be done before any approval can be granted’
- ‘Our people’s rights and our children’s future must be protected’
Most staggering of all, Tomuriesa says:
“The land belongs to our people. It must remain with our people, the forest belongs to our people and it must not be taken away from them”
So Minister, please tell us why you have allowed over 4 million cubic meters of logs to be stolen from SABL lease areas without the informed consent of local people but under the guise of approvals granted by you and your Department.
Why are you STILL allowing the logging to continue when you say our people’s rights must be protected!
By HELEN TARAWA, The National (owned by Rimbunan Hijau), November 11, 2016
The Special Agriculture Business Lease (SABL) was designed to fail and the Government’s decision to cancel it is commendable, Forest Minister Douglas Tomuriesa said.
Tomuriesa told Parliament last week that SABL was designed for disaster and the Government had taken a corrective measure, with land going back to the people.
“The investors can now go back and renegotiate proper deals with our people,” he said.
“We should not allow this to happen again, such practice that is approved by this Parliament or by bureaucrats should never have happened.
“I want to commend the prime minister and his Cabinet for looking at the Commission of Inquiry report and eventually cancelling the SABL.
“Due diligence must be done before any approval can be granted; as leaders we allowed this to happen.
“We have to look at any similar controversial acts like the SABL that have been approved in the past and we must stop them now.
“Our people’s rights and our children’s future must be protected by this parliament and not allow foreigners come and dictate to us.
“The land belongs to our people. It must remain with our people, the forest belongs to our people and it must not be taken away from them.
“Our people were given rubbish, today they have the power in their hands to sit back and negotiate.
“I would like to acknowledge all parliament members for your support in making sure that we fix this issue once and for all.
“This SABL must not happen again.
“It there are other initiatives like this, we must stop. We must not sell the birthrights of our people to foreigners.”
The Panama registered bulk carrier, Run Fu 2 has been allowed to sail from Wewak with a cargo of illegally felled timber from the Turubu SABL. The ship is currently sailing towards China with its illegal cargo.
The ship was allowed to leave PNG despite Customs, Police, PNG Forest Authority and SGS all being aware the logs it was loading have been declared illegal by both the National and Supreme Courts.
The Supreme Court decision on 31 August, confirmed an earlier 2014, National Court decision, that the SABL lease over Portion 144C is null and void and all logging and oil palm operations are illegal. But despite the court decisions, the logging is still continuing right under the nose of the PNG authorities and yet another ship has now arrived and is loading logs. In total more logs worth more than $50 million have been exported from the illegal Turubu SABL area.
As we revealed last week, the PNG Forest Authority has seemingly decided it will ignore the court rulings – but surely SGS, the police and PNG Customs can’t all be on on the conspiracy? We now wait to see if they will allow the next ship to leave PNG waters with its illegal cargo!
The PNG Forest Authority and lawyers representing foreign companies involved in logging operations in the Turubu area of the Sepik have apparently decided they can ignore National and Supreme Court orders.
In the above letter, dated 5 September 2016, the Acting Managing Director of the Forest Authority, Goodwill Amos references a meeting in which lawyers, loggers and the PNGFA “established and agreed” a Court decision “to nullify the the SABL over Portion 144C does not affect in anyway the FCA [Forest Clearance Authority] and related activities”.
This directly contradicts the orders of both the National and Supreme Courts.
On 4 July 2014, Justice Gavara-Nanu in the National Court declared the SABL over Portion 144C (Turubu) null and void and ordered:
“Any other related actions or projects undertaken or done either pursuant to or in relation to the SABL, such as logging agreements and or planting of oil palm in the SABL area are also declared illegal and null and void”.
On 31 August 2016, a three Judge bench of the Supreme Court confirmed the decision of the National Court:
“the decision of his Honour Gavara-Nanu is confirmed as are the findings
and orders he has made”
The lawyers representing the loggers, Wewak Agriculture Development Limited and Sepik Oil Palm Plantation Limited, in the Supreme Court were Kuman Lawyers. The very same lawyers, the Acting MD says he met with two days after the Supreme Court decision, on 2 September, when it was decided they could all IGNORE the court order and allow logging to continue.
What makes the PNGFA position even more untenable is that they have been on notice since 2015 that at least one third of the logging under the FCA is occurring outside the SABL boundary – as exposed in satellite analysis published by Global Witness:
Global Witness also reports that the value of the timber taken from the Turubu SABL area is in excess of $50 million.
To add further insult, Goodwill Amos ends his letter by advising the lawyers they should draft a petition to be signed by landowners aggrieved by the decisions of the National and Supreme Courts that should then be handed to government agencies, presumably to pressure the said agencies not to intervene against the illegal SABL and associated activities.
This is the man supposedly in charge of ensuring the responsible, sustainable and LEGAL use of our forests advising lawyers for logging companies how to organise their clients to get government agencies to ignore the law!!!
The Panama registered bulk carrier, Run Fu 2 is currently loading illegally felled timber from the Turubu SABL in East Sepik and is ready to run to Shanghai with its illegal cargo.
On 31 August, the Supreme Court declared the SABL over Portion 144C null and void and said all logging and oil palm operations are illegal.
But the logging is still continuing right under the nose of the PNG Forestry Authority and on 6 September the Run Fu 2 arrived and started loading logs.
Will the Forest Authority, SGS and PNG Customs allow the Run Fu 2 to leave PNG waters with its illegal cargo?
And if the ship does leave, will the police investigate all those involved in facilitating this theft of valuable timber?
By Frederic Mousseau*, IPS news
James Sze Yuan Lau and Ivan Su Chiu Lu must be extremely busy men. Together, they are listed as directors of some 30 companies involved in various activities and services related to logging or agribusiness in Papua New Guinea (PNG). The former is the managing director of Rimbunan Hijau (RH) PNG and son-in-law of RH’s founder Tiong Hiew King; the latter is executive director of RH PNG Ltd.. All but two of these 30 companies have the same registered address at 479 Kennedy Road, in the national capital, Port Moresby–the headquarter of the RH group in the country.
How the group – the largest logging operator in PNG – manages to operate at a loss for so many years, and yet still remains in business? If it were unprofitable to log and export timber from PNG, why would these companies continue their operations? These are some of the critical questions raised in a report released in February 2016, The Great Timber Heist: The Logging Industry in Papua New Guinea, by the Oakland Institute. The report exposed massive tax evasion and financial misreporting by foreign logging companies, allegedly resulting in non-payment of hundreds of millions of dollars in taxes.
Their ability to magically fit into a relatively small office space on Kennedy Road is not the only puzzling fact about the subsidiaries of the Malaysian group, Rimbunan Hijau. Out of the 30 above mentioned companies, 16 subsidiaries that are directly involved in logging or agribusiness have one other thing in common. According to their financial records , they don’t make a profit. Most of them have been working at a loss for over a decade. During the 12 years for which financial records were available to the Oakland Institute’s researchers, all together, the subsidiaries declared an average loss of about US$ 9 million every year.
Recovering tax revenue would be certainly welcomed by PNG given the acute budget crisis the country has been facing in recent months. Yet, it is unclear whether the government of PNG will decide to take action following these revelations. After all, despite the promises made by the Prime Minister, still no action has been taken two and a half years after the damning report on recent land leases, produced by the Commission of Inquiry (CoI), which identified all sorts of malpractices and irregularities and concluded that most leases were illegal.
A first step for any government would be to start monitoring the declared sale prices of exported timber. PNG prices are much lower than those of other exporters of tropical timber (nearly 50% cheaper in 2014), which suggests that logging companies undervalue their exports and therefore their profits. But the recent statements by the Forest Minister in denial of the findings of the report, and given the well-documented deficiencies of the PNG Forest Authority, there is little hope of decisive action by this agency.
Another level of action is the enforcement of tax compliance by the Internal Revenue Commission (IRC), the government agency in charge of tax collection. However, although many RH companies are conveniently located at the same address, it may prove difficult for tax auditors to ascertain the extent of their wrongdoings. The Group has been built as a complex and opaque financial structure: almost all RH holding companies–the parent companies of those operating in PNG–are located in tax havens, primarily the British Virgin Islands, known for facilitating illicit financial flows.
Moreover, the use of multiple subsidiaries in logging operations makes auditing even more complex to conduct. For instance, in one single project in West Pomio, Gilford Ltd.’s records indicate financial transactions with 16 other RH subsidiary companies. This interrelation facilitates transfer pricing as companies of the same group can charge each other an artificially high price for goods, equipment, and services, thereby increasing the sister company’s operational expenses, and artificially reducing their profits. This interrelation would require investigators to not just focus on individual logging companies but to extend their audits to the larger RH Group. But who would they go after?
RH is controlled by Tiong Hiew King, one of Malaysia’s richest men. Although logging is the core business of the group – ‘Rimbunan Hijau’ ironically means ‘forever green’ in Malay, his empire covers a multitude of sectors, and all continents from fisheries in New Zealand, timber in Siberia, to Chinese speaking newspapers in California. RH’s grip over PNG goes far beyond the forests, as it is present across all sectors of the economy. The company’s most recent investment in the capital Port Moresby is a project known as Vision City, which contains the largest shopping mall in the Pacific Islands region and is expected to be expanded to include an office tower block, service apartments, a hotel and convention centre. It also owns the National, the largest of the two daily newspapers in PNG, an airline, Tropicair, as well as shipping and logistics companies.
Whereas the group appears as PNG’s superpower, citizens are left powerless. As documented in 2013 Oakland Institute’s report and film, logging in PNG hides a multilayered tragedy of daylight robbery, whereby local communities are being deprived of their resources and their rights, with the complicity of their own government. RH has often been accused in the past of connections within the political elite in the country and of involvement in corruption and violence in relation to its logging operations. In a number of occasions, local police forces have been used to intimidate and arrest local landowners opposed to logging and land grabbing by RH subsidiaries.
A single corporate group, RH, thus materializes the betrayal of the unique constitutional protections that PNG citizens are supposed to enjoy. The 1975 Constitution guaranteed people’s land rights and upheld national sovereignty, self-reliance, and the preservation of natural resources as key principles for the country. It called on the State “to control major enterprises engaged in the exploitation of natural resources.” Ironically, today a major enterprise has turned the statement around and appears to be controlling the state and the country’s natural resources. Will Papua New Guineans eventually decide to put the things back in place?
*Frederic Mousseau, Policy Director of the Oakland Institute, coordinated the research for the Institute’s agroeocology project.
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