WHY THEY'RE SINKING MONEY INTO VANUATU’S FORESTRY INDUSTRY

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By Robert Keith-Reid

PORT VILA, Vanuatu (July 16, 2000 - Islands Business Magazine/PINA Nius Online)---About 35 percent of Vanuatu's islands is forest-covered, discounting bush or thicket, according to one estimate. In 1993 controversy flared when Asian companies fiddled logging concessions in the islands of Santo, Erromango and Malekula. Just one company produced licenses for cutting 60,000 to 70,000 cubic meters a year. An independent study suggested that Vanuatu couldn't stand an annual cut of more than 25,000 cubic meters.

After local and international protests the government in 1994 restored a ban on log exports, reduced the allowable cut to 35,000 cubic meters, and called for the renegotiation of all logging contracts.

A five-year Australian-aid sustainable forest utilization project just completed has given a forestry policy, including a code of logging practices that could make timber a useful modest exporter earner and perhaps eventually a substantial one, without destroying forests beyond repair.

At Santo, one company, Santo Veneers, has invested in a veneer mill and a sawmill. Another Santo company exports classy furniture.

In recent years the value of timber exports has run at around $US 4 million.

Attractive potential: According to an Australian forestry expert, David Wood, Vanuatu is good ground for large-scale commercial forestry. "There is a lot of land with very poor forest on it, old gardens or forest damaged by cyclones," he said.

Enter Adrian Sinclair, one of the partners at the Port Vila office of accountants and business advisers, BDO. He spoke to Islands Business on behalf of Australian investors living in the Hunter Valley region and operating as Greenhouse Gas Management, who have just completed the leasing of 5,000 hectares of land at Santo for commercial forestry and who are looking for another 15,000 hectares. At least two other investment groups, one from Europe and one from Asia, are looking at 20,000-hectare plantation schemes in the country, he said.

The attraction is the carbon credit idea and carbon "sinks" that have arisen from the global greenhouse gas/climate warming issue. The idea is that industrial enterprises causing atmospheric pollution compensate for it by investing in schemes that absorb carbon gas, like a forestry plantation "sink."

So much credit will be earned for so much investment. Instead of directly investing in plantations themselves, polluters will be able to buy credits from forestry plantation companies, like those preparing to dramatically change the structure of Vanuatu's small forestry industry.

United Nations Organization experts are in discussion with governments and business groups about the structure of international regulation for a carbon credit scheme. In Australia, all mechanisms for actual trading in carbon credit future have been established, Sinclair said.

"You can have a recognized sink. Its value is dependent on species planted and so forth. There is speculation about this concept and what will it be worth." The value could range from "next to nothing to thousands of dollars per unit. What it will be worth will be dependent on each country's legislation around the world."

BDO has prepared a proposal for approval by the United Nations and is in an advanced stage of discussion with the Vanuatu government about necessary enabling local legislation.

Some environmental organizations are attacking the carbon credit plan. But, said Sinclair, the fact is that investment by the Australian investors he acts for will leave Vanuatu with a major commercial forestry plantation. At Santo a 60-hectare pilot plot of mahogany, sandalwood and white wood already exists. Land is being leased from customary owners on terms, which give them an annual rent, and preservation of traditional use of forest areas.

The leasing company has the right to plant, tend and harvest trees. It is committed to harvesting to international standards. "We are looking at other crops under the trees because other crops can absorb carbon." Sinclair said that the islands of Efate and Malekula were two other islands with forestry plantation potential. "As a concept it is attractive to all Pacific Islands states which have some area."

For additional reports from Islands Business, go to PACIFIC ISLANDS REPORT News/Information Links: Magazines/Journals/Fiji Islands Business.

Pacific Islands News Association (PINA) Website: http://www.pinanius.org 

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