Performance of landowner companies in the timber projects of Papua New Guinea's forest industry

Abstract

The general situation of Landowner Companies (LOCs) that were associated with timber projects under the old 1979 Forest Policy regime in Papua New Guinea (PG) was quite disturbing. Cases of bribery, corruption, mismanagement and too-cosy relationships with the logging companies on the part of the appointed local representatives, were rife among the LOCs in the PNG logging industry. The situation is generally similar with LOCs in timber projects whose operations began under the 1979 Forest Policy and then continued under the current 1991 Forest Policy regime. Problems identified with LOCs include mismanagement of landowners’ funds, failure to be accountable to the landowners, poor landowner-LOC executive working relationships, and too-cosy relationships between LOC executives and the logging companies. The PNGFA, while aware of the problems facing LOCs, has continued to use the LOCs to facilitate new timber projects under the current 1991 Forest Policy regime. The motivation of this study is to develop a better understanding of the factors that determine the performance of LOCs. The study was based three (3) case study areas and was conducted in two phases. Phase 1 of the study led to the development of major research themes using case study research strategy, with grounded theory as a research method, and supported by an in-depth interview and probing techniques. The research themes highlighted issues relating to various aspects of LOC businesses. The various issues reflected by the research themes were incorporated into the survey for Phase 2, which covered a larger sample size in the same case study areas. The findings from Phase 2 of the study indicate that the LOCs continue to be faced with issues, specifically relating to: poor organisation; lack of capacity, particularly the business knowledge, skills, experience and finance; the big, complex and diverse nature of the landowner groups that have created problems with their management, and the absence of laws or constitutions for the group or LOC businesses in general; and the failure on the part of LOC management to perform their responsibilities. Problems were also noted in the nature of the timber project development agreements involving payment of inadequate project levies that did not reflect serious commitment on the part of the logging company as well as the State to grand to the landowners much need infrastructure projects in appreciation of their willingness to open up the forest resources they own under the traditional land tenure system. The findings from this study that is similar to already existing knowledge on LOC issues cases of miss-management of LOC funds, the too-cosy working relationship between the landowners and the business leaders and the failure to uphold mandatory business responsibilities such as frequent business meetings where landowners get to be informed of how their funds are being used and how the project is going, as well as giving them a chance to offer their business suggestions. The findings from this study that are new include absence of company structure elements, landowners’ high expectation for social services as reflected by their perception of LOC objectives, poorly done business plan, poor representation of landowners in the management structure, appointment of business executive been improperly done, lack of seriousness in the development of business contract, lack of capacity (financial, human and machinery), and absence of law or constitution.