$100 billion rip-off: Foreign loggers are massively defrauding Papua New Guinea
Papua New Guinea is now the world's largest exporter of tropical timber. All those timber exports must be generating a lot of economic benefits for the South Pacific nation, right?
Wrong.
It turns out that tax evasion is so endemic in PNG's timber industry that the country is losing more than $100 million annually, according to a recent independent report.
Corporate misdeeds
To make matters worse, the report asserts that the biggest culprit of all is Rimbunan Hijau, the Malaysian timber giant that has operated for many years in PNG. The corporation often heralds its benefits to the nation's economy and welfare.
Rimbunan Hijau owns one of PNG's two national newspapers, The National, which invariably defends the corporation and its practices.
The timber report was prepared by the Oakland Institute, an independent California-based think-tank.
Rimbunan Hijau -- or "RH" as it is commonly known in Papua New Guinea -- has been the center of controversy before, having been accused previously of scores of environmental and social misdeeds.
The website Rimbunan Hijau Watch PNG attempts to document many of these accusations but is routinely under threat of lawsuit from the corporation.
Independent report
The Oakland Institute report, entitled "The Great Timber Heist", asserts that a financial sleight-of-hand known as "transfer pricing" is being widely used to defraud government coffers in PNG.
Transfer pricing is a well-known tool used for corporate tax avoidance. It involves the under-pricing of exports to sister or subsidiary corporations, or charging inflated prices for services or consultants.
For instance, at a single logging site in PNG, the Oakland Institute found that a local subsidiary of Rimbunan Hijau listed 15 other RH companies in its accounts -- the kind of 'smoking gun' that often reveals tax avoidance via transfer-pricing.
China Syndrome
Most of PNG's timber is being exported to China, by far the world's biggest importer of tropical timber. China's aggressive policies in pursuing timber are known to be a major driver of environmental degradation and forest loss in the tropics.
Papua New Guinea is known to harbor some of the biologically richest and environmentally most important ecosystems on the planet, and is a hotspot of indigenous cultural diversity.
But despite its great natural and cultural wealth, Papua New Guinea is struggling mightily with financial and human-development crises -- crises that appear to be magnified by the predatory logging practices evidently being used widely to defraud the nation.
