http://www.businessweek.com/bwdaily/dnflash/mar2001/nf20010323_535.htm

MARCH 23, 2001

NEWS ANALYSIS

Malaysia's Lumbering Approach to Sustainable Forestry

Its lack of success so far shows how hard it is to stamp out the problems that plague the industry in the developing world

Malaysia is the world's largest exporter of tropical logs and sawn timber. Yet, while expanding aggressively overseas, the nation's logging companies have earned an unsavory reputation across a wide swathe of tropical timber-bearing countries.

That's changing now. The global dynamics in the forest-products marketplace, which has an estimated value of $130 billion annually, now have the Malaysian timber companies cleaning up their act, at least at home. But the industry has a long way to go. Indeed, Malaysia's lack of success so far is a good object lesson in how hard it is to stamp out the problems that plague the industry in the developing world.

ENVIRONMENTAL OFFENDER.

Critics charge that common practices among Malaysian timber companies have long included flagrant overlogging, bribery, and tax evasion. One Papua New Guinea official recently accused two companies of making payoffs to 109 legislators to get more favorable legislation. Other Malaysian outfits -- backed by Japanese and Korean buyers -- were stripping trees in the Solomon Islands at three times the estimated sustainable levels during the 1990s.

A 1998 study calling for the regulation of transnational logging focused primarily on Malaysian companies: "No other Southern country has the same influence and spread of logging activities as Malaysia," says a report by the World Rainforest Movement and Forests Monitor Ltd.

Such criticism is getting harder and harder to ignore because environmentalists now have the ears of most American buyers. Fearing possible consumer boycotts, Home Depot of Atlanta and Lowe's of Wilkesboro, N.C., have restricted sales of woods from endangered forests. So far these are limited moves. For example, Lowe's banned dowels made from ramin, a rare tree species believed to be felled illegally in Indonesia's national parks. But as pressure grows, more tropical woods could be banned.

Environmentalists also scored a major victory by getting the entire industry to accept "sustainable forest management," which the International Tropical Timber Organization (ITTO) agreed to a decade ago. Defining what that means -- and ensuring it's followed -- has given rise to a whole new certification industry. The most developed certification system is the one promoted by the Forest Stewardship Council, based in Oaxaca, Mexico, which has won the support of the World Wildlife Fund (WWF), Greenpeace, and Friends of the Earth.

Malaysia plans to come up with its own sustainable use standards by yearend, according to Chew Lye Teng, the CEO of the Malaysia's National Timber Certification Council. The next step will be winning certification from the Forest Stewardship Council, whose label is expected to be the required ticket of approval to get into many European markets. It may become the standard in the U.S. market, too.

BABY STEPS.

By most accounts Malaysia is further along than many other tropical timber producers, which include Brazil, Indonesia, Cameroon, and the Democratic Republic of Congo. A recent ITTO assessment on progress toward sustainability cited Malaysia among "the top six" of countries following new standards for "annual allowable cuts."

Still, only one Malaysian forest concession -- 55,083 hectares (136,116 acres) operated by the state Sabah Forestry Dept. -- is considered sustainably managed, a tiny fraction of the 10.8 million hectares of land that can potentially be culled. Then, there are other bad habits to shake off. State authorities, who in Malaysia are responsible for forestry, are only now switching over from negotiated contracts to open tenders, years after Western nations made that switch. Meanwhile, critics charge, concessionaires continue to reap windfall profits, some of which allegedly line the pockets of government officials or their relatives.

Abuses may be worst in Malaysia's "Wild, Wild East" state of Sarawak. Roughly 70% of the territory is either being logged or under concession to be logged. The business provides half the state's revenue and employs some 100,000 people. "Politics in Sarawak is logging, and logging is politics," says Borneo Resources Institute's Harrison Ngau, an internationally recognized environmentalist and fighter for the rights of indigenous peoples. The industry is dominated by clannish Foochow-speaking Chinese who arrived as poor immigrants in the 19th century to hunt for edible birds' nests. Nowadays, they live in marbled mansions on sprawling sea-front properties.

And they do take care of their friends. In electoral mudslinging recently, Sarawak Chief Minister Taib Mahmud accused his predecessor, an uncle trying to make a political comeback, of having awarded 1.25 million hectares (3.1 million acres) in logging concessions worth $9 billion to himself and relatives. In his rebuttal, the uncle charged his nephew with having done the same with 1.6 million hectares (4 million acres) for friends and family. Without a truly free press and public disclosure laws, chances of uncovering the exact truth are slim. But legally speaking, the government can do pretty much what it wants. By law, Mahmud, who's now in his 20th year in office, can revoke timber licenses without recourse for whatever reason he chooses.

WILLING BUYERS.

The situation isn't likely to improve until Japan and China, which take 80% of Sarawak's timber exports, crack down. If they don't require producers to adhere to the rules, the latter have little incentive to shift to more expensive harvesting methods, such as carrying logs out by helicopter, to reduce the impact of felling. Ironically, a recent influx of cheap timber from Russia's Far East has further undermined Malaysia's good intentions. "There's really not much point to talk about [sustainable forest management] if the prices we get don't cover the additional cost," Barney Chan, the Sarawak Timber Assn. chairman, recently told an international conference in Kuching, the capital of Sarawak.

More disturbing for environmentalists is the scant evidence that consumers worldwide are willing to pay more for green products. Case in point: Wooden window frames are a major Malaysian export to Germany, which has strict environmental standards. But since 1989, their share of the market has dropped from 23% to 10%, according to Chan. In the same period, the use of cheap but less environmentally friendly PVC frames has risen from 39% to 53%. Malaysian wood could be more competitive if more certified timber were on the market, which would probably drive down prices. Before that happens, however, wood frames could be all but forced out of the market by cheaper substitutes.

Meantime, Malaysia is caught in a catch-22. "Our read is this: Timber certification will not bring us a premium in terms of pricing. However, if we don't go for timber certification, we may cut ourselves out entirely from the market," explains Chan. Without uniform standards worldwide and a united front among producing and consuming nations to force adherence to them, however, abuses will continue -- whatever Malaysia does.

By Ken Stier in Kuala Lampur, Malaysia Edited by Thane Peterson

The Melbourne Age
21st April 2001

Sarawak lost as a land of plenty

By MARK BAKER

ASIA EDITOR

BAKUN, CENTRAL SARAWAK, MALAYSIA

The old man remembers a better time when the wild rivers of Sarawak ran clear and fish were abundant, when the grand forests stretched across the vast interior of the island of Borneo, teeming with deer and boar, leopard and rhinoceros.

That was before the Japanese came up river in World War II in search of the retreating British, before the logging companies came to strip the ancient forests, and the government told people to leave their villages and ancestral lands to make way for the big dam.

Huvat Bagi sits on the banks of the Batang Rajang in central Sarawak and surveys his private apocalypse. Below the treacherous Murum rapids, the river slows to a turgid brown soup, thick with the silt of years of reckless logging upstream.

Every few minutes a truck heavy with logs careers down the mountain road showering dust. Across the water the village of Long Murum lies abandoned, the old long houses once home to more than 100 Kayan families crumbling and overgrown.

"Our life is so different now," says Mr Bagi, who is almost 70. "We are losing all our resources, all the things we depend on to survive are being destroyed. What will be left for us?"

Soon even these signs of ruin will be wiped away. In the next few years, if the Malaysian Government has its way, this entire area will vanish, submerged by the biggest hydro-electric project in South-East Asia.

A few kilometres downstream from Long Murum, a 210-metre-high wall will dam the river system that stretches back across Sarawak to the border with Indonesian Kalimantan. It will flood 700square kilometres of forest - bigger than the island of Singapore - to power a 2400- megawatt generating station.

The $A5billion Bakun dam project was stalled during the Asian economic crisis of the late 1990s, but recently revived by a federal government desperate to shore up its flagging political and economic fortunes. The dam will submerge 15 traditional forest communities and destroy the habitat of more than 100 endangered species of wildlife and innumerable exotic plants.

Already more than 9000 villagers have been forcibly moved to resettlement camps at Kampung Asap, a barren, logged-out district two hours away by road. There is nowhere to fish or hunt in the area, where the meagre compensation has mostly run out. Plantation jobs are the alternative to subsistence agriculture, and the restless young are fighting and trying amphetamines.

But some, like Mr Bagi, will not go quietly. At his village, Batu Kalo, five hours up river from Long Murum, he and dozens of other families have refused the government orders to move, and are digging in for a fight. Others are drifting back from the resettlement camps to join them.

"We don't want to be separated from the land where our people have been living all these generations," he says. "We have everything we need for our life here. We can grow rice, we have fish in the river and we can hunt in the forest.

"Already things are changing too fast for our people. Before the logging companies came, the rivers and the streams around this area where very clear. It was very easy to catch fish and the water was sweet to drink. Now many of the fish have disappeared, it is harder to catch them. In the old times the wild game was abundant, now the hunting has gone bad too."

Mr Bagi says life is impossible in the settlement camps, where everything costs money and people can not live traditionally. "Even if the government demands that we move, we will fight to stay here because if we are forced out that will be the finish for us. Our people won't survive the shock of this. The government should respect our choice and leave us alone."

It is a vain hope. While serious doubts remain about the economics and technical feasibility of the project - let alone its environmental consequences - the government says it is determined to proceed.

Already site works for the dam have left huge scars in the landscape at Bakun. A vast network of access roads, storage areas and construction camps has been carved out of the jungle. Despite repeated cave-ins and the rumored deaths of laborers, a Korean company is close to finishing work on the twin tunnels that will divert the river during construction of the dam, and eventually carry the water to drive the generation turbines. A new 120-kilometre sealed highway links Bakun with the coastal city of Bintulu.

Under the original plans, the electricity generated at Bakun was to be transported 670kilometres to the north-west coast of Sarawak by overhead power lines, then 600kilometres by submarine cable across the South China Sea to feed industries in peninsular Malaysia. Many international engineers have dismissed the plan as technically impossible.

Now the government says there will be no undersea cable, but the dam and power station will still be built to full capacity. While the projected power output is almost three times the state's present electricity consumption, officials talk vaguely about attracting new industries and selling power to neighboring Brunei and Kalimantan, which are already self-sufficient in energy.

The real reason for the revival of the project appears to be political. State elections are due in Sarawak this year. There are fears that a sharp decline in support for Mahathir Mohamad's United Malays National Organisation will spread to Sarawak. The ruling United Sarawak Bumiputra Party is aligned with the UMNO-led national coalition, and federal Energy Minister Leo Moggie is from Sarawak.

Abdul Taib Mahmud, Sarawak's Chief Minister for 20 years, has amassed a multi-billion-dollar fortune through his government's control of timber licences and his family's vast logging concessions. He also has a lot riding on the Bakun dam. The jobs and investment associated with the dam will help ensure his government's re-election and some of the biggest contracts will further enrich his family. The Taib family has a monopoly in the local cement trade, and the chief minister's sons are big shareholders in the company that has the rights to clear timber from the dam catchment area.

The Bakun project adds a final insult to a generation of environmental damage in Sarawak that has resulted in the devastation of an ecosystem regarded as second only to the Amazon. Three-quarters of Sarawak was originally covered with primary tropical rainforest - about nine million hectares of rich jungle. Today fewer than 500,000 hectares of primary forest remain, aside from a few national parks and reserves.

With more than 14million cubic metres of timber still being taken each year, international forestry experts estimate that Sarawak will be logged out in four to five years.

Uncontrolled and unsustainable logging practices have had a calamitous impact on the landscape. Loggers have bulldozed their way across the state taking all saleable trees, clear-felling vast areas, destroying the regenerative capability of areas that have been selectively logged, and even stripping the vulnerable high ground using helicopters.

Landslides triggered by logging hillsides and carving access roads through watercourses have created massive siltation. This has turned all the state's major river systems into muddy drains, seriously disrupted river and coastal navigation and flushed millions of tons of topsoil into the South China Sea.

The damage already done by the timber barons has compounded concerns about the viability of the Bakun Dam.

Strenuous efforts were made to hide details of the environmental impact of the project. Control of the cursory environmental impact process was transferred from federal to state authorities and all technical studies were initially classified under the Official Secrets Act. But copies of a detailed official study, carrying two serious warnings, were eventually made public in the early 1990s.

The 250-page report said that planned clear-felling of the dam site and logging of the catchment area would trigger soil erosion at a rate 500 times greater than in untouched forest. It said siltation would reduce the dam's capacity by 20per cent within 30years with, in the long term, the possibility of a dam collapse, with disastrous implications for communities living downstream.

The report also warned that a fault system in the area carried the risk of major earthquakes, a risk that would be compounded by the huge volume of water held back by the dam.

While the inability to secure international financial backing helped bring the project unstuck in the 1990s and may do so again, Dr Mahathir appears determined to go ahead even if it requires the government to underwrite borrowings.

The village people still living in the area are convinced that even if there is another postponement, it is inevitable that the dam will be built.

"I'm very sad about this. It is a great loss for us all," says Liau Anyie, head man of the Kenyah community at Long Lawan, another of the river villages that will be flooded. "We don't understand why this has happened to us. We were never asked to get involved. We never had a chance to express our concerns about this project. They just didn't care what we thought."