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close this bookConflict over Natural Resources in South-East Asia and the Pacific (UNU, 1990, 256 pages)
close this folder2. Conflict over land-based natural resources in the ASEAN countries
View the document(introductory text...)
View the document2.1 The ASEAN region: great wealth and great strife
View the document2.2 The historical roots of conflict
View the document2.3 The plunder of forest resources
View the document2.4 The transformation of a natural resource: from agriculture to agribusiness
View the document2.5 Conflicts over mineral resources
View the document2.6 Development and tribal peoples: resistance to displacement
View the document2.7 Natural resource abuses: a time for change
View the documentReferences

2.3 The plunder of forest resources

It has been estimated that nearly two-thirds of the world's tropical rain forests are to be found in South-East Asia, mostly in the Philippines, Sumatra, and Borneo. The Philippines, Indonesia, and Malaysia account for approximately 66 per cent of worldwide exports of hardwood; other tropical countries provide 16 per cent, and the remainder comes from temperate countries (Asia Magazine, 1984: 16).

Rapid depletion of Philippine forest resources began during the Spanish colonial period. The island of Cebu was completely stripped of its large hardwood trees to provide lumber to build the Spanish galleons plying the Manila-Acapulco trade route of the seventeenth and eighteenth centuries American colonialists further developed forest extraction and engaged in the wanton exportation of logs to the home country. After the Second World War, a logging boom erupted in Mindanao, particularly in the northeastern and southern parts of the island. Foreign companies, especially American multinationals, pioneered these ventures. Corporations such as Weyerhauser, GeorgiaPacific, Boise-Caseade, and Findlay Millar were active participants in the exploitation of Mindanao forest resources (Tadem, 1980: 46-7).

Environmental and Economic triplications of Depletion

The major issue on the extractive side is the depletion of the forest cover and the wide-ranging implications of this phenomenon.

Although tropical rain forests cover less than 10 per cent of the earth's surface, half of the world's plant and animal species populations are sheltered by them (Asia Magazine, 1984: 16). These forests are massive reservoirs of thousands of yet-undiscovered species.

Philippine forests have rapidly lost their trees. From 1952 to 1977 the rate of depletion of forest reserves was 61 per cent (Tadem, 1980 47). Due to the half-hearted implementation of conservation laws, the rate of forest destruction exceeds reforestation by a margin of nine to one. In 1981 a series of floods brought about by constant heavy rains in northeastern Mindanao left 283 people dead, 14,000 injured, and thousands homeless (Asia Magazine, 1984: 16). This part of Mindanao had been the site of the logging boom of the 1950s and 1960s, and its forest area has been virtually denuded.

The pulp and paper mills that accompany the logging industry are notorious sources of pollution from chemically contaminated wastes, which are often simply dumped into the rivers and seas. The chemicals used in the mills also cause air pollution, and fishing villages along coastal areas are adversely affected on both counts. Fish producers in Agusan del Norte have filed a resolution opposing the establishment of the Manila Paper Mills because the resulting pollution of the Agusan River and the Mindanao Sea will damage the livelihood of thousands of fishpond operators and individual fishermen (Bulletin Today, 1980). It had been noted that Paper Industries Corporation of the Philippines (PICOP), the country's sole newsprint producer, dumps its waste into Bislig Bay in Surigao del Sur with little or no treatment.

The Philippines was the first of the ASEAN group to be extensively exploited for its forest resources and it will likely lose all its virgin forest designated for production purposes by 1990 at the latest, according to a survey by the United Nations Food and Agriculture Organization (FAO). Logging and wood-processing companies are aware of this, and their response has been to shift their attentions to neighbouring Malaysia and Indonesia.

But resources there are also running short. A 1977 national forest inventory ordered by the federal government in Kuala Lumpur reported that 'the country's timber resources will be depleted in about twelve years unless reforestation measures are carried out urgently' (Rowley, 1977: 47). Sabah, which accounts for 46 per cent of Malaysia's total log production and exports 80 per cent of its production, is expected to log its virgin forests within a period of ten years if current rates of felling are maintained. Peninsular Malaysia, which had drastically cut its log exports to only 2 per cent of production in 1979, has begun to court log imports and may have to compete with Japan for Sabah's logs (Gigot, 1979a: 52-3) Of Peninsular Malaysia's total land area of 35.2 million acres, only 17 million (48 per cent) are still covered with some form of forest, according to the Penang-based environmental group, Sahabat Alam Malaysia (SAM).

Despite the establishment of reforestation programmes by the Kuala Lumpur government, log production declined by only 3 per cent overall in 1980, and this was due almost entirely to the 17.8 per cent decline in Sabah (SAM, 1981 2). Timber output in Peninsular Malaysia declined by only 1. 1 per cent, while in Sarawak timber production rose by 15.1 per cent. In March 1981, the Ministry of Primary Industries announced a government plan to reduce the tree-felling rate from 922,000 acres per year to 385,000 by 1985 (SAM, 1981: 2). The Ministry planned to replant, in Peninsular Malaysia, 65,000 acres by 1985 and a total of 500,000 acres from 1985 to 2000. This programme is considered insignificant in the face of a national logging rate of almost 1 million acres per year.

TABLE 2.1 - Indonesian Timber Output, 1970-1977

Product Type and Year Production ('000 cu. m) Export Volume ('000 cu. m) Export Value (US$'000)
Logs
1970 10 899 7 350 100,568
1971 13 706 10 761 168,635
1972 17 717 13 891 230,849
1973 26 197 19 433 583,345
1974 23 380 18 082 725,651
1975 16 296 13 921 499,976
1976 22 741 18 549 780,879
1977 (January-June) n.a. 9 500 450,000
Sawn Timber
1970 568 46.6 1,691
1971 470 80.6 2,804
1972 840 132.2 3,754
1973 1380 337.9 18,226
1974 1919 353.9 26,534
1975 1708 410.4 31,695
1976 1900 643.9 49,053
19771 n.a. 713.0 29,500

Source: Far Eastern Economic Review 2 December 1977, p. 66.
1 Projection.
n.a. = not available.

Indonesia's forests contribute its second highest export eamings, after oil. Overseas sales in 1976 totalled US$830 million. The country has approximately 120 million ha of tropical rain forest, 47 million ha of which is production forest. However, excesses, such as rampant illegal logging, have endangered this vast resource. Logging companies cut indiscriminately in many areas, and in the process they cut down trees of only 40 to 45 cm, in violation of the legal minimum of 50 cm, at times with the tacit approval of forestry officials (Jenkins, 1977: 66). Thus, in many areas 'the whole forest canopy is being or has been destroyed'. The irresponsibility of companies working their concessions, coupled with overharvesting, will soon cause irreversible damage to East Kalimantan's forests.

Widespread logging in Indonesia's outer islands did not occur until the late 1960s, when the new Suharto government adopted an opendoor policy towards foreign investors. Timber exports rose 1,500 per cent from 1966 to 1971, and one-third of foreign capital inflow was to logging through US, Japanese, and Filipino companies (Grossman and Siegel, 1977: 2-3). Indonesia was widely advertised as the alternative to the Philippines for an unrestricted supply of timber for export. A total of 5.6 million ha were offered to investors for exploitation. Weyerhauser, which has closed its operations in Mindanao, quickly moved into Indonesia and occupied a one million acre concession, which it plans to thoroughly deplete by 1990 the year its contract expires (Grossman and Siegel, 1977: 7-8).

Effects of Logging on Agriculture

Logging operations inevitably come into conflict with traditional upland farmers, many of whom belong to non-majority ethnic groups. Relying on slash-and-burn agricultural systems, these hillside farmers depend on their age-old farming practices for survival. Despite the propensity of officials to place equal blame on them for the loss of forest lands, it is an incontrovertible fact that many generations of swidden farming cannot equal the destruction wrought by logging corporations in only a dozen or so years.

TABLE 2.2 - Foreign Investments in Indonesia's Forests, 1970

Nationality of Control Amount Invested (US$ million) Number of Firms Counted in Previous Column Area of Concessions (million ha) Number of Firms Counted in Previous Column Total Number of Firms
United States 62.01 6 2.726 9 9
Japan 70.0 9 2.464 8 12
Philippines 256.0 9 1.647 9 9
Philippines US 238.0 2 1.2 1 2
Malaysia 15.5 14 1.92 14 14
Hong Kong 13.5 4 0.50 4 4
British-controlled 2.0 2 ? - 2
South Korea 53.0 2 0.49 2 2
France 2.5 3 0.37 4 4
Panama 1.5 1 0.l0 1 1
Netherlands 1. 1 1 ? - 1

Sources: Indonesian Observer, 7 March 1969; 'Loggers Locked in a Scramble'. Philippine Lumberman, Vol. 15, No. 10 1969, pp. 22-4; 'Indonesia: Forest Paradise for Foreign Capital', Pacific Report, December 1970; 'List of Foreign Companies Investing in Indonesia', lndonesian Perspectives, September 1970; 'Wilds of Borneo Lure U.S. Lumbermen', Business Week, 27.June 1970, p 51.

1 The Japan Lumber Journal ('Indonesian Forest Development', Vol. II, No. 4, 1970, pp. 24) gives a figure for US investments of US$88 million.

Thus, tribal groups are being squeezed out of their ancestral lands and deprived of their means of livelihood in the name of development. The Manobos of eastern Mindanao have been pushed out of the lowlands and into the forests by settlers, agricultural companies, and ranchers. Now in their last area of retreat, they are still being hounded out of existence. Farmers in One part of East Kalimantan have been ordered not to grow rice to force them to rely on work in the logging concessions (Grossman and Siegel, 1977: 7-8). In South Kalimantan, natives were ordered to desist from continuing with their traditional methods of farming or felling trees to build homes; otherwise, they risked being accused as thieves.

Long-term effects of indiscriminate logging on the soil have also been documented. Abundant tree cover reduces the speed at which rains hit the ground. Without forests, the force of rains strips off the topsoil in which the necessary nutrients that sustain plant life abound (SAM, 1981: 25). What remains is a barren piece of ground with as much potential to support plants as a desert. Siltation of rivers also takes place, blocking water passageways. The 1981 floods in north-eastern Mindanao were caused by heavy rains spilling off barren mountains into the Agusan River. As the river's outlet was blocked by large silt deposits, the flood-waves simply went back upstream, submerging homes and fields to a depth of about 7 metres (Asia Magazine, 1984: 17).

Communities bordering areas where logging concessions operate are often victims of the negative effects of company operations. Many of them have occupied these areas for generations prior to the entry of the loggers. On the other hand, communities built around the timber operations, where logging workers and their families live, are nothing more than temporary camps whose existence depends on the continued supply of timber. Once the resource is exhausted, these communities are abandoned. Many families continually experience this uprooting and dislocation as they follow the companies for the work they provide.

Reforestation sometimes takes the form of encouraging the development of 'industrial tree farming'. Farmers growing food crops are being urged to grow falcatta, giant ipil-ipil, rubber, and other fastgrowing but mainly softwood trees instead, to supply the large timber processing plants being built by both foreign and local investors, usually in partnership with the government. In Mindanao, hundreds of thousands of hectares of land have been reserved for tree farms. Corporations not wanting to deal with small farms have undertaken the cultivation of softwood trees for their own pulp and paper mills.

Tree farms are cropping up in the north-eastern Mindanao provinces of Agusan del Norte and Agusan del Sur and in the southern Mindanao province of Davao del Norte. Various conflicts have emerged. Applications by two large companies, Manila Paper Mills (MPMI) and the Aguinaldo Development Corporation (ADECOR), for the lease of tens of thousands of hectares have already been approved, with thousands of hectares more to be added later. Settler farming communities will most likely be evicted from their lands as a result. The companies are trying to entice farmers into giving up their claims by offering them jobs on the tree plantations or in the pulp and paper plants. The settlers are resisting, however, and are working against the clock to have their claims titled at the Bureau of Lands. The process is time-consuming as well as financially draining, and both money and time are in short supply for the farmers.

PICOP has been the most aggressive in contracting small-scale farmers to grow falcatta with loans available through funds provided by the World Bank and channelled through the Development Bank of the Philippines (DBP) (Tadem, 1980: 48-9). But farmers cannot go fulltime into tree farming, as it takes seven years before any income can be earned. Also, the terms of the contract tie the farmers to PICOP, with the company dictating the purchase price. Earlier promises by PICOP of large incomes have turned out to be false, and many farmers have actually incurred losses due to the delays by PICOP in collecting the cut trees. Although the farmers are totally dependent on PICOP, the company does not rely on them completely for supplies of pulp because it operates its own 33 000-ha tree plantation.

TABELE 2.3 Industrial Tree Plantation and Tree Farm Agro-foresty Farm Leases by region in the Philippines, 1980 (area in ha)

Region Total Industrial Tree
Plantations
Tree Farms Agro-forestry
Farms
No. Area No. Area No. Area No. Area
Philippines 115 47 800 12 87 759 101 9 111 2 930
Region 9 1 324 - - 1 324 - -
Region 10 6 49 657 50 48 987 10 670 - -
Region 11 3 28 843 20 28 103 1 740 - -
Region 12 1 460 - - - - 1 460
Regions 11 79 284 70 77 090 12 1 734 1 460

The tragic consequences of denudation can be observed in the case of the 24 500-ha watershed of Pantabagan in Nueva Ecija province in Central Luzon (ARE Newsletter, 1981: 3). Some 14,000 families were relocated there to make way for the huge Pantabagan Dam, inaugurated in 1976, and the area has been completely denuded. The cause, according to a World Bank study, was excessive logging operations. A number of government-built houses have slid down from the hillside as heavy rains eroded the soft clay under the houses. These farming families crowd the upper slopes of the watershed and try with little success to plant for soil erosion is too swift and extensive. This area is located high above the dam, so they cannot even make use of the irrigation from the project that caused their resettlement and dislocation from lowland homes.

The Social Costs of the Wood Industry

Conditions in both logging areas and wood-processing plants leave much to be desired. Wages are low, legally stipulated benefits are often withheld, and housing facilities are inadequate. In this situation, labour-management conflicts often arise, with workers demanding a greater share of the profits reaped by the corporations.

In 1979 the US-owned Findlay Millar Timber experienced a yearlong strike by its 1,000 workers, who were demanding the three months' wages withheld from them by the company (Reyes, 1984). This confrontation between wood-industry workers and the corporation was bitter, with management resorting to standard tactics of harassment and deception to force the workers back to work. Other major strikes in Mindanao-based wood companies were at Zamboanga Wood Products-40 per cent of which was then owned by BoiseCaseade and at Sta. Clara Lumber in Davao. These conflicts rarely end favourably for the workers, because their unions are short on funds and some labour leaders sell out to management.

If the workers insist on carrying on their fight for higher wages and better working and living conditions, the company can always close down its operations and move to other places. Such decisions are also influenced by the fact that with the rapid depletion of forests, companies would have to move on anyway. When this happens, the workers are the hardest hit. Not having benefited from the logging booms of the 1950s and barely able to eke out a marginal existence in the succeeding decades of logging declines, workers have been left to fend for themselves. The first casualties of the death of any industry the workers and their families, just as they are always the last to taste the benefits of any upturn.

Conflicts between Producers and Consumers

On the international level, there is conflict between the producing countries and the consumers, the latter comprising countries from the developed world. Most of the vital information regarding the world wood market is in the hands of the consumers, and producers have little influence in shaping consumers' demands (Khan, 1984: 4). Asian lumber, for example, is a buyer's market, with Japan exercising a dominant role. Market-access problems increase with the degree of processing. The European Economic Community (EEC) charges 13 per cent tariffs on imports from South-East Asia; the United States excludes from its Generalized System of Preferences (GSP) the most important species of South-East Asia, the dipterocarps; and Japan totally excludes timber from its GSP (Khan, 1984: 4). Log exports, on the other hand, usually enter duty-free.

One aspect of the problem is the low storage prospect of timber because of its susceptibility to fungal and insect attacks. Retention of trees is deemed impractical because of the need to respond effectively and promptly to market changes, and the long distances between the producers and the market (Khan, 1984: 4). High transport costs also cut export earnings.

Japan has come under fire from timber-producing countries in the Asia-Pacific region for 'plundering resources without replacing them and without regard for the impact on local economies'; entering into agreements with 'comprador concessionaires who [have] little loyalty to the producing countries'; and 'undermining the indepeudence of these countries through . . . economic imperialism' (Awanohara, 1979: 88).

Japan has also been criticized for perpetuating the primary level of production in wood-exporting countries and failing to accommodate the 'desire to add increasing amounts of processing; and hence, value, to their products before exporting them' (Awanohara, 1979: 88). Only after incessant and impatient demands from the producing countries was some positive response from the Japanese forthcoming; even then, movement has been slow. From the point of view of Japan's own timber-processing industry, the development of local processing in South-East Asia, for example, does not make sense. Japan's own industry is large and labourintensive, and thus carries some electoral clout. It is also protected by tariff barriers that 'encourage imports of unprocessed timber but [put] a damper on value-added imports' (Awanohara, 1979: 88). According to Awanohara, the Japanese government charges the following import duties on wood:

Unprocessed logs = 0 per cent
Sawn timber = 5 per cent within GSP quota and 10 per cent for remainder
Veneer = 7.5 per cent within GSP quota and 15 per cent for remainder
Plywood = 20 per cent.

Such barriers to trade only increase the distrust of developing countries towards the First World, a feeling carried over from the colonial past in which an international economic order highly favourable to the developed world was fashioned and has largely continued to the present. However, the Third World is becoming more aware of how to deal with a system that works against its interests. Since the 19705, calls for a new international economic order have been growing louder, and the developed world has been forced to listen and respond. The successes of the Organization of Petroleum Exporting Countries (OPEC) and the UN Convention on the Law of the Sea (UNCLOS) have inspired others.

Like other producers of essential commodities exported mainly to First World countries, timber producers have attempted to restructure the international wood market. Private log producers in Malaysia, Indonesia, the Philippines, and Papua New Guinea banded together to form the Council of Southeast Asian Lumber Producers Association (SEALPA) in 1974. The group has reached specific agreements on limiting log exports in order to stabilize prices and, for the longer term, '[has] agreed to minimize log exports and maximize the export of finished wood products' (Rowley, 1977 47). The more ambitious plan, however, is to ultimately regulate world prices and protect the earnings of the producing countries. SEALPA's supply-demand scenario for timber projected a growth in demand far exceeding the supply for a three-year period from 1978 to 1980 (Asia Yearbook, 1980 91-3). This was calculated to encourage the importation by Japan of processed wood products. From 1975 the proportion of logs in total wood imports had fallen at the rate of 1 per cent per year to 64 per cent in 1979.

TABLE 2.4 - Supply/Demand Scenario for South Sea Logs, 1978-1980 (million cu. m)

  1978 1979 1980
Demand
Japan 21.8 22. 0 21.0
South Korea 6.9 7.2 7.5
Taiwan 7.0 7.3 7.7
Singapore 1.7 0.9 0.7
Others 1.0 0.9 0.7
  38.4 38.3 37.6
Supply
Indonesia 18.9 18.0 16.5
Sabah 12.4 10.0 8.0
Sarawak 4.2 4.5 5.0
Philippines 1.9 0.8 0.5
Others 0.4 0.5 0.5
  37.8 33.8 30.5

Source: Southeast Asian Lumber Producers Association (SEALPA), as reproduced in Asia Yearbook, 1980.

Japan's reaction to the formation of SEALPA was typical of the attitude of developed countries to calls for a new international economic order. In 1975, SEALPA decided to control the export and production of logs for that year to forestall an expected slump in log prices (Stat Romana, 1979: 88-90). Confidently holding a five-month stockpile of logs and lumber, Japan unilaterally slashed the buying prices of logs and lumber 'to break up any wood and forest product cartel in the region' (Stat Romana, 1979: 87). It limited its purchases to low-grade logs from Indonesia, the Philippines, and Malaysia and cut the prices of Philippine logs from US$35/cu. m to only US$25/cu. m, reportedly US$7 below production costs. Although a week after the cut-back the Japan External Trade Organization (JETRO) announced an acceptance of SEALPA's decision, imports were still to be lower in 1975.

Since then, SEALPA has been registering its impact more as a forum than as a cartel. A more effective group has been Komasi, comprising plywood producers from Malaysia, South Korea, and Singapore, which has succeeded in setting a minimum world price for plywood made from tropical logs (Gigot 1979b 53).

TABLE 2.5 - South-East Asian Log Production and Exports, 1979

Country Log Production (million cu. m) Percentage of Log Production Exported Log Exports as Percentage of Total Exports
Peninsular Malaysia 10.2 2 9
Sabah 11. 1 90 52
Philippines 6-7 23 -
Indonesia 31.81 59 -

Source: Far Eastern Economic Review 7 December 1979.
1 Figure is a goal. Total 1978 log production was 26 million cu. m, of which almost 70 per cent was exported.

An international cartel was in the making in 1979 when a member of the International Islamic Fund approached a major supplier of sawmilling equipment in Singapore (Gigot, 1979b 53). Claiming to represent a range of Islamic interests this Singaporean businessman broached the idea of setting up a huge timber-processing complex on the Batam Islands and other islands in the Riau group in Indonesia. To ensure initial supplies, loggers from Sumatra would be brought in. Processed timber would be sold and released at the best possible prices. Malta would provide alternative storage for the timber. Later, loggers in Sabah, Sarawak, the southern Philippines, and Kalimantan would be invited to join in, and log exports to Japan, South Korea, and Taiwan would be stopped altogether. All of these areas have substantial Islamic populations; therefore prospects for co-operation are enhanced. Although there is no clear connection with this plan, Kuwaiti investors had that same year bought into a 300,000-acre concession in Sabah, a Saudi group was negotiating for another concession, and a Saudi prince bought interests in Philippine sawmills.

An international wood cartel is not as easy to set up as one for oil (Gigot, 1979b 53). Most South-East Asian exporters are private entrepreneurs, so unpleasant government intervention is needed to enforce the decisions of the cartel. In addition to storage problems, timber has not been relatively underpriced as long as oil had been. Substitutes also abound for tropical timber, such as softwoods from temperature countries.