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A forest falls in
Cambodia
By Keith Andrew
Bettinger
The
lucrative logging industry in Southeast Asia has
always blurred the lines between legal and
illegal, with huge payments
greasing the wheels of easily corruptible
bureaucrats and politicians. As a result, entire
industries have learned to accept inputs gotten by
hook or crook, causing profit-hungry firms to fall
over each other to meet rising demand.
Asian Pulp and Paper (APP), founded in
Indonesia in 1984, has drawn criticism for its
logging activities, as well as for jilting
investors. (The firm became the largest corporate
defaulter in emerging market history when it
stopped payments on US$14 billion in debt in March
2001.)
APP's most recent rebuke has been
in Cambodia, where it has set up several firms -
Green Rich and Green Elite - to log concessions,
which have for a long time been a favorite target
because the government has been less than
scrupulous in handing them out. Recently, however,
the Ministry of Environment has been sending
signals that it will no longer tolerate any
shenanigans, including the cutting of ancient
forests in national parks.
Exploit then
pull out
Huge logging companies, many based
in Malaysia and Indonesia and with ties to
powerful families and external sources of capital,
have established a modus operandi in which
they exploit irreplaceable, biodiversity-rich
forests in remote locales where they can log for a
few years and then pull up stakes before the
protests of environmentalists and watchdog groups
are heard.
In the 1990s, logging
concessions were used as a foot-in-the-door tactic
into countries with officials amenable to
closed-door deals. These sorts of concessions
required nothing in the way of planning,
tendering, environmental assessments, or
background checks on the firms to confirm their
suitability and reputations. According to Global
Witness's Cambodia campaigner, Mike Davis,
pressure from environmental groups has put an end
to this avenue in most countries in the region,
though the logging conglomerates have designed a
new strategy. "Now the vehicle of choice is
economic land concessions nominally for the
creation of plantations that happen to be situated
on forests, which are then cut," Davis said.
The problems caused by illegal logging
could fill a chapter in an environmental science
textbook: fuel for civil wars (Cambodia), loss of
biodiversity (Cambodia, Malaysia, Indonesia),
disruption of agricultural production (Cambodia),
and deadly landslides (Thailand, the Philippines,
Cambodia), among others. All of the countries of
Southeast Asia have suffered from at least some of
these negative consequences. Many of the problems
are regional. The falling levels of the Mekong
River are an environmental catastrophe in the
making, while the siltation and salinization
caused by erosion from poorly planned clear cuts
is affecting fish catches throughout the region
and threatening the livelihoods of fishermen
across Southeast Asia.
At the same time,
destruction of rainforests from Indonesia to China
affects rainfall levels, causing droughts like the
one that has gripped several provinces in
Cambodia. The new tactic of creating plantation
forests destroys habitats and biodiversity by
replacing what is in effect a botanical garden
with the equivalent of a patch of cabbage. Animal
habitats are destroyed, as well as potentially
crucial genetic resources. Yet logging continues
unabated as powerful transnationals establish
shell companies and corporate facades in various
countries to take advantage of weak institutions.
With promises of jobs, foreign exchange and
payoffs to officials, these firms are welcomed
with open arms. Only much later is the extent of
the damage understood, as ecological calamities
manifest themselves. All too often those who bear
the brunt of the damage are the least powerful,
and those who benefit from the graft suffer no
consequences, as corrupt judicial systems and
family and political ties enable them to buy their
way out of trouble. Meanwhile, the transnational
logging firm sets up another corporate entity or
establishes a new joint venture to begin the
process anew down the road or up the river.
These logging companies are not bound by
considerations that constrain traditional Asian
conglomerates, such as long-term viability,
because the very nature of their business creates
perverse incentives to log as much as possible
before the sun sets, so to speak. Furthermore,
there is a whole sub-economy based on the
extraction of hardwoods and other forest
resources; stop-gap measures that are employed
rarely address the true root of the problem -
demand.
Asian Pulp and
Paper
APP's business model is a tactically
aggressive one: it turns huge profits by quickly
stripping forests bare, exploiting age-old forests
and indigenous peoples, and leaving town before
the environmental consequences are felt. By the
time communities and governments lodge complaints
and lawsuits, APP has divested itself of local
interests and assets.
Currently APP is
restructuring its debt burden. On Sunday the
Financial Times reported that the firm appeared to
be moving toward a debt resolution that would pay
creditors a tiny fraction of the more than US$4.5
billion it owes them: at the end of January, APP
is expected to put a $5 billion restructuring
system in place at three of its four main
Indonesian subsidiaries.
Meanwhile,
evidence that Cambodia's Ministry of Environment
may be serious about cracking down on firms came
from Minister Mok Maret. "[Green Rich] has always
continued sneaking in [to] cut our thick forest
... The company has to face the legal procedure
before the law," the minister told IFocus, a
Cambodian publication.
While the charges
seem startling, an international conglomerate
boldly defying a national government to denude a
precious jungle reserve, they are not new.
Environmental groups in Cambodia and abroad have
known about the clear-cutting for months.
Furthermore, observers in Cambodia note that Mok
Maret's threats to sue come only after months of
criticism for his role in signing off on the
illegal concession document in the first place.
Cambodia has a long history of sacrificing its
forest resources to line the pockets of those who
have power.
Thus, the timing of the
announcement is somewhat opportunistic. Cambodia,
a nation dependent on foreign aid for an estimated
50% of its official expenditures, has recently
endured its periodic consultation with donors, a
biannual exercise in futility in which donor
nations admonish Cambodia to work harder to reign
in its epidemic problems in human and drug
trafficking, official corruption and environmental
piracy. Each time this meeting convenes the donors
threaten to stop aid to the country, the term
"donor fatigue" is bandied about quite frequently,
and at each meeting the government, perpetually
headed by Prime Minister Hun Sen, promises to get
tough and crack down on the aforementioned
problems.
The money continues to flow, in
some cases exceeding the requests of the Cambodian
authorities. But it is well known that the roots
of each problem are so intertwined with the
government that the government could not function
without the revenue generated by illegal
activities. Furthermore, there is a sense among
government officials that such actions are rooted
in hundreds of years of tradition and political
practice, so that what falls under an official's
purview includes the right to exploit, mine and
chop; the essence of the idea is that the land is
one's to do with what one will. So each conference
is followed by statements of intent and promises
that are rarely if ever followed through, while
the donor community continues to treat Cambodia
like a delinquent child that might change his ways
if given enough opportunities to reform.
Thus, while the Environmental Ministry's
recent actions gain the praise of environmental
groups and international observers, congratulatory
statements are tempered by conditional statements
indicating a skepticism that has developed over
years of interactions with Cambodia's ministries.
Says Mike Davis of Global Witness: "If followed
through, this would be a crucial first step
towards terminating the recent rash of illegal
economic concessions that threaten Cambodia's
protected area system."
APP has a history
of moving from country to country and ignoring
laws, moratoriums and official proclamations.
Despite the fact that then-Indonesian president
Megawati Sukarnoputri declared illegal logging a
capital offence punishable by firing squad last
summer, it was not until the end of October that
APP decided to stop logging in Indonesia. Still,
according to a recent Greenpeace report, up to 90%
of all industrial wood extraction in Indonesia is
illegal. And despite the fact that the Ministry of
Environment in Cambodia has threatened to sue,
sources inside Cambodia say the trees continue to
fall, and that even if APP loses its concession
within the Botum Sakor National Park, they have
other concessions in Cambodia that dwarf the
maximum allowable by law.
A history of
questionable activity
From its beginnings,
APP's activities have always been legally
questionable, but it has always had powerful
friends. The firm has operated in various
countries throughout Asia since 1984 and has been
listed on the New York Stock Exchange. Before
2000, APP aggressively issued bonds and was seen
as a good investment by many brokerage firms. The
bullishness toward the firm came to an end in 2001
when it defaulted on $14 billion in debt. Although
some banks have written off the debt and APP has
been delisted from the New York Stock Exchange,
the US Import-Export bank has pursued action
against APP, as have some hedge funds. Of course,
the firm is in the process of restructuring its
debt burden, but observers note that APP has a
history of manipulating arbitration processes and
debt negotiations. And while "reputable"
institutions in the West have abandoned APP, there
are still powerful friends in China, Cambodia and
Indonesia.
Although APP has left a sour
taste in the mouths of many close to the
devastation in Southeast Asia, the company and its
subsidiaries have had great success in
ingratiating themselves with Chinese banks and
local officials, and thus China has become a
larger variable in the APP profitability equation.
APP has made tremendous investments in Yunnan
province, including building the largest pulp mill
in China, a country notorious for its low-level
corruption and decentralized control in these
matters, with local party chiefs functioning as
plenipotentiaries and brokers of all deals.
Contributing to APP's penetration of China
is a seemingly endless supply of credit. According
to Greenpeace, Chinese banks are still willing to
lend to APP despite the firm's pariah status among
Western firms and Southeast Asian banks. And
although several Japanese, European and American
conglomerates have pledged to no longer do
business with APP, the loose regulation and
wild-west style of business in China creates
short-term opportunities.
The firm has
made the most of its Chinese connection; it has
increased production capacity far beyond the
ability of its eucalyptus plantations to supply.
This leads observers to suspect that APP counts on
access to illegal timber from Cambodia, China and
Laos in its profitability forecasts. Greenpeace,
Global Witness and the World Wildlife Fund have
all observed that APP has a habit of opening mills
without first securing a sustainable pulp wood
supply, and sources familiar with the issues say
APP has its sights set on Russia and Myanmar, two
nations known for corruption.
APP and
companies like it have succeeded in creating a new
business model reliant on a regional lack of
accountability.
Forests are especially
attractive as nations try to improve macroeconomic
figures to attract investment and dress up their
economic performance. Thus, natural resources are
unsustainably used to create short-term returns
for multinationals and to artificially boost gross
domestic product figures. Weak institutions and a
little money changing hands also helps to
facilitate the timber laundering industry, which
has been active between Cambodia, Laos, Malaysia
and Indonesia. Bribes facilitate nation-of-origin
stamping and can purchase visas for seaman, truck
drivers and others involved in transport. There is
an entire timber economy functioning throughout
the region.
As Asia cleans up in the
aftermath of one of the worst natural disasters in
history, many people are starting to pay attention
to the warnings of environmentalists, examining
how industrial expansion and non-sustainable
extraction have exacerbated the damage. Experts
suggest that over the past 50 years half of all
the mangrove forests in Asia have been destroyed.
While the long-term deleterious effects on reefs
and coastal ecosystems has long been known, this
slow death is down on the list of considerations
in a region struggling to develop. It takes a
cataclysm's pause for reflection; experts say that
if mangrove stands still existed in places such as
Thailand, the damage caused by the tsunamis would
have been greatly reduced. The same could be said
for the long-term damage caused by short-term
profit-driven logging throughout Southeast Asia.
While deadly landslides are tragic and have caused
Thailand and the Philippines to ban logging, the
damage caused by illegal logging will have much
more profound effects on the region, both
economically and socially.
Keith
Andrew Bettinger is a researcher and
journalist currently based in Kuala Lumpur. His
interests include development and environmental
issues, as well as US and international politics.
He is a native of Shreveport, Louisiana, and has
advanced degrees in international affairs and
education. He can be contacted at
kisu1492@yahoo.com.
(Copyright 2005
Asia Times Online Ltd. All rights reserved. Please
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