Timber contracting in Melanesia: a system in need of change

Abstract

Many of the problems in the forestry sector reported recently in Papua New Guinea, Solomon Islands and Vanuatu are symptoms of the inefficiency and inequity of the revenue distribution system specified by the logging contract used in these Melanesian countries. Logging contract systems are in need of change?they are leading to environmentally destructive exploitation and poor returns to landowners. The reaction has been to ban logging, thus giving subsidies to domestic timber processing industries. Export taxes are an inefficient and inequitable means of timber revenue distribution. The logging contract needs to be changed to allow landowners and governments to receive most of any windfalls without putting a wedge between world and domestic prices. A method of allocating logging contracts through auctioning is suggested.