China’s boom a bust for Asia’s forests

South China Morning Post — July 9, 2005
Oppinion – Editor: By David Kaimowitz and Bambang Setiono

If you’re involved in drug trafficking, you need to watch your back. The war on drugs involves international co-operation between law enforcement agencies all along the trade chain, from remote poppy fields to city streets thousands of miles away.

And the penalties are harsh for those who are caught. But if you’re trafficking illegally harvested timber, the chances are you’ll not only make a fortune, you’ll get away with it too.

Here is how it works for the forest-rich Indonesian province of Papua. According to a recent investigation by a UK-based NGO, the Environmental Investigation Agency and an Indonesian NGO, Telapak, an international syndicate is currently responsible for the felling of 300,000 cubic meters of merbau logs a month. Smuggled to China and India, a month’s supply has a street value of US$72 million.

Just like the drugs trade, meager takings for local forest dwellers translate into big bucks for a few timber barons far from the scene of the crime. The Papuans who cut the trees get US$1 for each cubic meter. The financiers in Singapore, Malaysia, and Hong Kong translate that into US$240 a cubic meter.

Much the same story could be told for other parts the world, from Cambodia to Cameroon, Brazil to Borneo. According to the World Bank, the global trade in illegal logs is now worth around US$15 billion a year. The trade has destroyed vast areas of tropical forest – and will continue to do so if the international community fails to make a concerted effort to address the problem.

Forest-rich countries like Indonesia cannot tackle the trade in illegal logs on their own. The security services are poorly paid. Their equipment is out of date and they lack the funds to mount effective field operations. The illegal loggers, their pockets bulging with cash, routinely bribe government officials and law enforcement officers to get their way. The EIA/Telapak investigation found that the international logging syndicates exploiting Papua’s forests used to pay officials in Jakarta a bribe of US$50 a cubic meter to secure shipping export papers. Now they even avoid that, by smuggling directly from Papua to China.

Around 90 per cent of the proceeds from illegal logging in Indonesia end up in bank accounts elsewhere, particularly in Singapore, Malaysia and Hong Kong. Without the financial support of individuals in those countries, there would be no illegal logging in Papua. The profits may be huge, but the costs are considerable. The syndicates must purchase heavy equipment, pay local communities, bribe officials, hire ships, buy letters of credit and falsify import-export documents.

The only way in which the trade in illegal logs will be curbed is by targeting, and prosecuting, the syndicates who finance these operations. That means finding out which banks they use and freezing their assets. A framework for action, in the form of anti-money-laundering laws, already exists. Under most jurisdictions – including those of the Singapore, Malaysia and Hong Kong – illegal logging activities, such as those in Papua, are classified as ‘serious foreign crimes’ and smuggling illegal logs as well as falsifying document are considered as ‘serious crimes.’

Anti-money-laundering laws are frequently used to prosecute illegal drug traders. It is time they were turned on the illegal logging syndicates. This is beginning to happen in Indonesia. Internationally donor funded, the Center for International Forestry Research, has been providing support to the Indonesian Financial Intelligence Unit, so that they can prosecute the financiers of illegal logging using Indonesia’s anti-money-laundering laws.

Until recently, international efforts to curb illegal logging were dominated by foresters and conservationists. They knew where the trees went, but not the money. It is now clear that only by tackling the financial transactions of illegal log traffickers can the flow of logs be staunched.

What is needed is greater co-operation between the law enforcement agencies and financial experts of different countries in the region, and the wholehearted participation of global organisations such as the Financial Action Task Force on Money Laundering. Then there is a real chance that the forests will be saved.

David Kaimowitz is Director General of the Center for International Forestry Research (CIFOR), Bogor, Indonesia. Bambang Setiono is a CIFOR research fellow.

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