Jakarta Globe, Jared Ferrie, Mar 23, 2014
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| An elephant pulls a teak log in a logging camp in Pinlebu township, Sagaing, northern Myanmar, in this picture taken March 6, 2014. (Reuters Photo/Soe Zeya Tun) |
Yangon.
Myanmar will ban the export of raw timber logs from April 1, choking off
profits in a sector that provided critical funding to the country’s former
military rulers for decades, as a new reformist government steps up efforts to
save forests.
Myanmar has
some of Asia’s largest remaining expanses of forests, from the slopes of
Himalayan foothills in the north to steamy rainforest in the south.
But it has
been disappearing fast.
Forest
cover shrank almost a fifth, to 47 percent of land area in 2010, from 58
percent in 1990, Forestry Ministry data shows.
Total
timber exports of 1.24 million cubic tonnes in the fiscal year to March 2013
brought in more than $1 billion in revenue, government figures show.
While
timber remains an important income stream for Myanmar’s rulers after a
quasi-civilian government took over from the military in 2011, it is not as
critical as before.
To
recognize Myanmar’s economic and political reforms, the European Union, the
United States and other countries have eased or lifted sanctions, allowing
foreign investment in sectors such as telecommunications.
The reforms
are now reaching into the forestry sector, with the government ready to put
conservation above profit.
The ban is
likely to hurt the forestry industry, which generates about 90 percent of
export earnings from raw logs and not finished products, said Barber Cho, head
of the Myanmar Timber Merchants’ Association.
“Myanmar
industry might suffer, some people might suffer,” said Barber Cho, whose group
represents about 900 companies.
“It’s a
difficult and complicated juncture for us.”
Under the
new rule, revenues could plummet, forcing forestry firms to invest in new
sawmills to stay competitive.
But the
action was necessary, as the former junta had practiced “legal overproduction”
that decimated Myanmar’s forests for decades, Barber Cho said.
Crippled by
sanctions, chronic economic mismanagement and starved for hard currency, the
generals gave logging concessions to their cronies to export raw logs in
exchange for the cash needed to prop up their rule.
Forest
products were the military junta’s second most important source of legal foreign
exchange and exports earned $428 million in the fiscal year to March 2005,
natural resources watchdog group Global Witness said.
Among the
big companies involved in the business are Asia World, the Htoo Group, and
Yuzana Co.
Htoo Group
and Yuzana are the two biggest palm oil companies in the environmentally
sensitive southern region of Tanintharyi.
Yuzana also
runs a 81,000-hectare biofuel concession in the world’s largest tiger reserve
in northern Kachin state, where the military has contracted with Asia World to
build roads and dams, conservation group Forest Trends says.
“All these
renowned companies were granted associated rights over timber extraction in
their project area,” the Washington-based group said in a recent report.
Challenging
the cronies
The ban,
covering all kinds of trees, will end Myanmar’s status as the only country to
export raw teak logs from natural forests rather than plantations. Exports of
teak wood alone earned $359 million last year.
“Of course,
this ban should have been imposed a long time ago, but it’s better late than
never,” a forestry ministry official told Reuters.
“We believe
it will help encourage wood-based industry and increase job opportunities,”
added the official, who declined to be identified as he was not authorised to
talk to media.
From next
year, the government also plans to slash by 80 percent the amount of teak it
allows to be taken from the forests, Barber Cho said.
How the
cronies will fare is an open question, but it’s clear that Myanmar’s
notoriously opaque timber industry has long been a key source of wealth for
many prominent businessmen.
Tycoon Tay
Za said his Htoo Group, engaged in businesses ranging from mining to tourism,
grew from a humble start, based on a loan from his mother-in-law to set up a
sawmill.
Tay Za said
he did not exploit connections to win concessions, which were allotted through
a bidding process, but he did say his father served with top figures in the
military, including Than Shwe, who ruled Myanmar from 1992 to 2011, while Tay
Za was building his business empire.
“It was a
fair competition,” Tay Za said in a December interview. “No need to know the
minister, only open competition.”
Groups such
as Forest Trends and others familiar with the way the junta worked say tenders
were for show. The real concessions were shared out in backroom deals.
“It was not
a tender system, it was a negotiation system,” said Barber Cho.
Data shows
one of Tay Za’s firms received a 270,000-hectare tract of rainforest in a proposed
national park in Tanintharyi, one of Myanmar’s most biodiverse regions.
Tay Za
logged almost two-thirds of another 65,000 hectares of nearby palm oil
concessions awarded to him during the five years to fiscal 2007/8, data shows.
Tay Za, as
well as representatives of Yuzana and Asia World, did not respond to requests
for comment.
The log
export ban will force dominant forestry companies to invest in new processes
and diversify, said Aung Thura, of the Yangon-based research and consulting
firm Thura Swiss.
“It will
have an impact on them, but it won’t destroy them,” he said. “It’s in their
interest to diversify, not just export raw logs.”
—
Additional reporting by Aung Hla Tun in Yangon
Reuters
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