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OPINION: Breaking the Grip of Rimbunan Hijau over Papua New Guinea

Frederic Mousseau, Policy Director of the Oakland Institute.

OAKLAND, Apr 20 2016 (IPS) - James Sze Yuan Lau and Ivan Su Chiu Lu must be extremely busy men. Together, they are listed as directors of some 30 companies involved in various activities and services related to logging or agribusiness in Papua New Guinea (PNG). The former is the managing director of Rimbunan Hijau (RH) PNG and son-in-law of RH’s founder Tiong Hiew King; the latter is executive director of RH PNG Ltd.. All but two of these 30 companies have the same registered address at 479 Kennedy Road, in the national capital, Port Moresby–the headquarter of the RH group in the country.

Frederic Mousseau

Frederic Mousseau

Their ability to magically fit into a relatively small office space on Kennedy Road is not the only puzzling fact about the subsidiaries of the Malaysian group, Rimbunan Hijau. Out of the 30 above mentioned companies, 16 subsidiaries that are directly involved in logging or agribusiness have one other thing in common. According to their financial records , they don’t make a profit. Most of them have been working at a loss for over a decade. During the 12 years for which financial records were available to the Oakland Institute’s researchers, all together, the subsidiaries declared an average loss of about US$ 9 million every year.

How the group – the largest logging operator in PNG – manages to operate at a loss for so many years, and yet still remains in business? If it were unprofitable to log and export timber from PNG, why would these companies continue their operations? These are some of the critical questions raised in a report released in February 2016, The Great Timber Heist: The Logging Industry in Papua New Guinea, by the Oakland Institute. The report exposed massive tax evasion and financial misreporting by foreign logging companies, allegedly resulting in non-payment of hundreds of millions of dollars in taxes.

Recovering tax revenue would be certainly welcomed by PNG given the acute budget crisis the country has been facing in recent months. Yet, it is unclear whether the government of PNG will decide to take action following these revelations. After all, despite the promises made by the Prime Minister, still no action has been taken two and a half years after the damning report on recent land leases, produced by the Commission of Inquiry (CoI), which identified all sorts of malpractices and irregularities and concluded that most leases were illegal.

A first step for any government would be to start monitoring the declared sale prices of exported timber. PNG prices are much lower than those of other exporters of tropical timber (nearly 50% cheaper in 2014), which suggests that logging companies undervalue their exports and therefore their profits. But the recent statements by the Forest Minister in denial of the findings of the report, and given the well-documented deficiencies of the PNG Forest Authority, there is little hope of decisive action by this agency.

Another level of action is the enforcement of tax compliance by the Internal Revenue Commission (IRC), the government agency in charge of tax collection. However, although many RH companies are conveniently located at the same address, it may prove difficult for tax auditors to ascertain the extent of their wrongdoings. The Group has been built as a complex and opaque financial structure: almost all RH holding companies–the parent companies of those operating in PNG–are located in tax havens, primarily the British Virgin Islands, known for facilitating illicit financial flows.

Moreover, the use of multiple subsidiaries in logging operations makes auditing even more complex to conduct. For instance, in one single project in West Pomio, Gilford Ltd.’s records indicate financial transactions with 16 other RH subsidiary companies. This interrelation facilitates transfer pricing as companies of the same group can charge each other an artificially high price for goods, equipment, and services, thereby increasing the sister company’s operational expenses, and artificially reducing their profits. This interrelation would require investigators to not just focus on individual logging companies but to extend their audits to the larger RH Group. But who would they go after?

RH is controlled by Tiong Hiew King, one of Malaysia’s richest men. Although logging is the core business of the group – ‘Rimbunan Hijau’ ironically means ‘forever green’ in Malay, his empire covers a multitude of sectors, and all continents from fisheries in New Zealand, timber in Siberia, to Chinese speaking newspapers in California. RH’s grip over PNG goes far beyond the forests, as it is present across all sectors of the economy. The company’s most recent investment in the capital Port Moresby is a project known as Vision City, which contains the largest shopping mall in the Pacific Islands region and is expected to be expanded to include an office tower block, service apartments, a hotel and convention centre. It also owns the National, the largest of the two daily newspapers in PNG, an airline, Tropicair, as well as shipping and logistics companies.

Whereas the group appears as PNG’s superpower, citizens are left powerless. As documented in 2013 Oakland Institute’s report and film, logging in PNG hides a multilayered tragedy of daylight robbery, whereby local communities are being deprived of their resources and their rights, with the complicity of their own government. RH has often been accused in the past of connections within the political elite in the country and of involvement in corruption and violence in relation to its logging operations. In a number of occasions, local police forces have been used to intimidate and arrest local landowners opposed to logging and land grabbing by RH subsidiaries.

A single corporate group, RH, thus materializes the betrayal of the unique constitutional protections that PNG citizens are supposed to enjoy. The 1975 Constitution guaranteed people’s land rights and upheld national sovereignty, self-reliance, and the preservation of natural resources as key principles for the country. It called on the State “to control major enterprises engaged in the exploitation of natural resources.” Ironically, today a major enterprise has turned the statement around and appears to be controlling the state and the country’s natural resources. Will Papua New Guineans eventually decide to put the things back in place?


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  • Roger D. Romas

    Frederic, that’s a bull’s-eye piece of informative research. However, most of the PNG Parliamentarians (as I suspect) can’t speak against corruption in the manner and fashion which you have articulated with regards to HR company and its subsidiary companies. Why? Because they all are bloody corrupt!! It seems all our leaders have been “drugged through the spell” of bribe. For instance, given the current economic recession (and as predicted PNG Govt. would go bankrupt by June 2016), not one of the parliamentarians is raising an alarm, except the opposition leader, Mr. Don Polye. Although you have raised some controversial issues critically, they’ll be thrown out the window as PNG is the land of the unexpected (you’ll be framed by these corrupt idiots, so be mindful and take precautionary measures). Nonetheless, we need to make aggressive awareness and fight against corruption and especially few elites who think they can run the show as if they own this country. Papua New Guinea as a nation was politically independent, NOT ECONOMICALLY INDEPENDENT. That’s why we are still in the mulberry bush of confusion, while the leaders are filling their own purse and pot-bellied with clogged brain and cannot make a decisive stand for the people and the people’s right. Perhaps the coming election would be a challenging test. One of the main items on the agenda would be to remove ILLEGAL ASIAN BUSINESS CRONIES who think they can override us or daylight robbing our people’s land and resource!! That’s the dirtiest manipulation at its very worst. Thanks Frederic for your well-articulated piece of research!!! I commend you and we need more advocators to come out and speak against corruption before we are drowned subtly with their psychological lies and manipulation.

  • Frederic Mousseau

    Thank you for your appreciation Roger! We are glad to see that so many PNG citizens are committed to take on the issues raised in our reports. Best wishes!

  • Jade Lee

    Yes Roger, removing ALL shady businesses will be an important first step even though that may be easier said than done. Voting in clean and strong leaders to power too will help. it is not just the dodgy Asian businesses that have corrupted PNG, look at Rio Tinto and the mess it leaves behind in Bougainville; BHP-Billiton and the Ok Tedi mess and the way this mining giant has changed PNG laws to allow to pollute, the list goes on. It is so important to see clearly the causes of corruption and poor economic direction in order to find the cure or the ways forward. Em tasol, ting-ting bilong mi. Stap gud.

  • KY Jelly

    I am from Sabah, Malaysia , which is the neighbouring state of Sarawak, home of the owners of RH and also the big 5 logging companies.From South America to Canada , New Zealand and Southeats Asia. They are probably the largest if not only source of global deforestation, and lack any conscience whatsoever although ironically most are staunch Christians, and such lack of conscience are very a unique trait of this particular ethnicity of Chinese race hailing from the district of Sibu. All I can say is nothing can be done as long as leaders are corrupt then there is no way to stop this onslaught.

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