The Multinational Monitor


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The Asian Invasion
Asian Multinationals
Come to the Amazon

by Carlos Sergio Figueiredo Tautz

RIO DE JANEIRO -- Huge Asian logging corporations are flocking to the Amazon region, threatening to unleash an unprecedented round of intensive logging. The companies are swooping in from Burma, Indonesia, Malaysia, the Philippines and South Korea -- countries that have destroyed more than 50 percent of their original forest cover. These companies are estimated to have already bought at least 1.5 million hectares of forest lands in the Brazilian state of Amazonas, and Brazilian environmental organizations project the companies are planning to buy and log another 7.5 million hectares of the Amazon rainforest, one of the most biodiverse areas on earth.


MALAYSIAN TIMBER GIANT SAMLING has exported its industrial logging operations from the rainforests of Sarawak on Malaysian Borneo to Guyana and Cambodia. The expansion has been marked by consistent allegations of environmental neglect, social disruption and abuse of power.


Samling has attracted widespread criticism for its part in the razing of Sarawak's rainforests. With logging concessions amounting to 1.5 million hectares, it is one of the largest timber companies operating in the Malaysian state, where cut-and-run logging is expected to exhaust the primary rainforest by the turn of the century.

Since 1987, Samling's logging operations have brought the company into direct and violent conflict with the native people of Central Sarawak. Dayak culture, which is closely linked to the land and its resources, has been irrevocably altered by logging. In some areas, indigenous people have resorted to blockading Samling's logging roads, declaring that the company has scared away game and polluted rivers.


Driven by the pressure of reduced logging quotas at home, Samling moved to South America to secure vast new forest assets -- and an exceptionally rich source of profits.

In 1991, Barama Ltd., a joint venture 80 percent owned by Samling and 20 percent by South Korean trading giant Sung Kyong, was granted a 25-year license to log 1.7 million hectares of virgin forests in northwest Guyana. The concession covers more than a tenth of Guyana's forests and an estimated 20 percent of the total land area under lease to timber companies. Within 10 years, the company expects to be exporting 1.2 million square meters of raw logs, sawn timber, veneer and processed plywood every year. In 1989, the country's total annual timber export amounted to just 94,000 square meters.

Leaked details of the agreement reveal that Barama enjoys a 10-year tax holiday and timber royalties of, typically, less than $1 per square meter for timber worth more than $150 per square meter in 1994. These charges were fixed in Guyanese dollars for the first 20 years -- a further gift to the company given the likelihood of currency devaluation.

In 1994, there were reports that Barama had betrayed its own management plan in the first year of operation in Guyana. A former employee claimed the company was logging the concession twice as fast as planned; it was "creaming" the forest of its best logs rather than managing it for long-term sustainable production and it was processing only low grade logs on-site while exporting the prime unprocessed to Asia.

Barama's concession also overlaps land claimed by 1,200 indigenous people. This has led to clashes in the Oronoque area, with Barama being accused of bulldozing people's houses, vegetable gardens and fruit trees.

The scale and influence of foreign timber operations in Guyana gives rise to concerns over possible abuses of forestry regulations, and of political and economic power. The head of the country's Natural Resources Agency has acknowledged that monitoring of timber operations is insufficient because of poor funding, opening the door to illegal logging practices. At higher levels too, the system is vulnerable to corruption: the power to grant logging concessions is vested in a small, barely accountable government office and details about concessions are normally kept secret. There is also evidence that the pattern of political patronage which is commonplace in Asia is repeating itself -- to the advantage of foreign companies. In 1993, Samling financed the late President Cheddi Jagan's special tour of the capitals of Southeast Asia, China and Japan to encourage further foreign investment. Foreign companies negotiated timber concessions covering an estimated 4 million hectares as a result.


Three years after grabbing control of a huge area of Guyana, Samling pulled off another coup, this time in Cambodia, by winning logging rights to natural forests covering nearly 800,000 hectares. At the time, this was Cambodia's biggest logging concession, covering 4.5 percent of the country's land area and roughly 12 percent of its remaining forest cover.

Once again, Samling managed to negotiate an alarmingly generous package of benefits, including an 8-year tax holiday, an automatically renewable 30-year lease and royalties which fail to reflect the true value of the timber. The deal allows for a reforestation levy of just $100,000, enough to pay only the preliminary seed costs for an area of roughly 2,500 hectares. The company's full obligations were detailed in an "investment agreement" covering just four pages, signed in 1994 without being debated by Cambodia's National Assembly.

Furthermore, Samling was one of four companies allowed to keep their concessions, despite bans on both the cutting of fresh timber and timber exports implemented the following year by the Royal Government of Cambodia. Previously, leaked documents had revealed that the government was in the process of allocating all of the country's remaining forests -- 35 percent of its total land area -- to mainly foreign companies.

It has been estimated that Samling would have to harvest 50 square meters per acre -- or five times the sustainable rate -- in order to make a profit on its investments detailed in the contract. A 1996 World Bank report states that, even with subsidized raw materials, processing operations of the kind proposed by foreign companies in Cambodia could not be supported by a sustainable level of harvest. The same report says that Samling's draft management plan had not been approved by Cambodia's Forestry Department "because, among other things, it does not satisfy sustainability requirement [sic] of the 1988 Forest Management Law, and the appropriate regulations."

As in Guyana, Samling has maneuvered itself into a position to take lucrative advantage of a largely unregulated timber industry. Ministry of Agriculture officials say that, in practice, timber companies enjoy carte blanche to cut as fast as they can, ignoring responsible management practices.

In the first stage of the Asian logging invasion, the Asian companies acquired territory and exploitation licenses in the heavily forested countries bordering Brazil. Next, the companies began purchasing vast tracts of Brazilian land. The next step, worry environmental groups like Sao Paulo-based SOS Atlantic Rainforest, will be stepped-up logging of the Brazilian forests. Environmentalists fear the provision of hundreds of new jobs will put pressure on local governments to permit the devastation of the forests.

The attractions of Brazil are many. It offers huge markets of precious and endangered species such as mahagony and ferrule. Despite massive deforestation, the sheer size of the Amazon rainforest means that such wood supplies are plentiful. Environmental controls in Brazil are weak, and some states go so far as to offer loggers economic and legal incentives to expand their operations.

Environmentalists recoil at the unmitigatedly rapacious record of the Southeast Asian logging companies, which are supported by corporations in the world's biggest wood consumer countries, Japan, China, South Korea, the United States and Europe. In less than two decades, the logging companies exploited 62 percent of Indonesia's 116 million hectares of forest -- the world's second largest forested area, after the Amazon. The situation in Malaysia is even worse.


The Asian invasion of South America began approximately five years ago, as the Asian logging companies entered French Guyana, Surinam, Venezuela and Peru [see "Asia Logs Surinam," Multinational Monitor, November 1995]. In Peru and Venezuela, companies have been surveying local environmental legislation and possible available lands but generally have not commenced logging, according to SOS Atlantic Rainforest. The Asian logging companies have already bought 9 million hectares of forest in French Guyana. Samling Malaysia has applied for a license for another 3 million hectares.

Samling Malaysia is a genuine industry leader. It has 2,000 tractors ready to operate in Latin America and recently acquired 260,000 hectares near the Brazilian towns of Uatama and Itacoatiara. Both towns are located in Amazonas, a Brazilian state which has seen only 2 percent of its 1.5 million square kilometers logged or destroyed -- the lowest level among Brazilian Amazon states. Amazonas is fast emerging as the gateway to Brazil for the international logging industry. Malayan WTK company has also entered the state, reportedly buying 200,000 hectares in Caruari, a town located southwest of Manaus, Amazonas' capital.

To forestall Samling's logging plans, Brazil's finance secretary has blocked import of the tractors.

"Besides the low levels of logging, Amazonas state is extremely rich in precious woods, has proportionally one of the lowest populations among Brazilian states and affords plenty of legal incentives to the logging industry," says economist Ronald Bonfim, an economic advisor to the Amazonas State Federation of Industries.

Bonfim says that Amazonas alone contains staggering forestry wealth. "The state has 1.5 million square kilometers -- 150 million hectares," he explains. "In each hectare there are 30 cubic meters of tradable wood, which means a potential value for Amazonas State of about 4.5 billion cubic meters of raw wood. At an average value of between 50 and 70 dollars per cubic meter, we find a value between $225 billion and $315 billion -- an amount that can still be considerably increased by processing the wood."

This data is for only one of the 27 Brazilian states. The Amazon rainforest is a huge area with approximately 5.3 million square kilometers, including the entire states of Acre, Amapa, Para, Roraima and parts of the states of Goias, Maranhao and Tocantins.

The Asian logging companies enter new areas with a consistent strategy, according to SOS Atlantic Rainforest and Ronaldo Bonfim. They first buy economically troubled plantations and sawmills. By easing their way into local economies in this way, people become dependent on the foreign companies, and political opposition to the outsiders' intrusion eases.

At the federal level, Brazil does not impose restrictions on the amount of land foreign companies may acquire or log, as long as they submit an environmental impact study and obtain a license.

"The only way we can stop the forest from being devastated is to control the logging authorizations," says Alessio Fon Melozo of SOS Atlantic Rainforest. "But environmental control in Brazil is traditionally weak."

Already the Asian logging companies have invested $350 million in land and equipment in Brazil, and they are preparing to invest another $650 million, according to environmentalists' estimates.


Despite the lack of regulatory controls, public opinion has substantially mitigated the extent of logging investment in the Amazon. The strong reaction of environmentalists and local communities managed to temporarily block logging industry forces in Guyana. In Surinam, the government temporarily suspended the granting of new logging licenses. And in Brazil, under pressure from domestic and international environmental groups, and with growing unrest in the Brazilian Congress, President Fernando Henrique Cardoso announced in July 1996 that he would impose a two-year moratorium on mahogany and ferrule logging. Approximately 40 percent of Brazil's mahogany is exported, mainly to the United States and England.

Under the presidential moratorium, old logging licenses remain valid. But Cardoso stipulated that every old authorization for logging the two species must be reviewed for irregularities by 1997. Government studies estimate that 60 to 70 percent of the licensees are operating illegally; in the course of the review, those licenses are to be immediately cancelled. Cardoso's logging license review marks a major change in the government's position. Just weeks before the reform was unveiled, the government said that the logging industry was under control and that mahogany exploitation was "irrelevant" compared to natural deforestation.

In the presidential reform acts, Cardoso also tightened the Brazilian Forest Code, increasing from 50 to 80 percent the minimum area of each Amazon property which loggers must leave untouched.

Enforcing the presidential acts will be difficult. The Brazilian Amazon's 5.3 million square kilometers is the size of the whole of Western Europe. Ibama, the Brazilian environmental agency, has only 650 technicians, 120 vehicles and 30 boats to police the entire Amazon. Cardoso says the army will assist with enforcement, but similar troop deployments have not managed to prevent illegal gold prospecting within indigenous reserves. Environmentalists also say that troops lack the technical expertise to differ a legally logged species from those covered under the moratorium.

The Cardoso administration's environmental record is not cause for optimism about its ability or will to enforce the moratorium. Four years into the administration's tenure, acknowledges Eduardo Martins, head of Ibama, the government has failed to implement an effective environmental policy -- even as it forges ahead with auctions of forest land.

At least officially, the Asian invasion did not motivate Cardoso's logging reforms. The government says the president responded to new satellite surveys, which showed that Amazon deforestation increased from 11,130 square kilometers in 1991 to 14,896 square kilometers in 1994. However, at the signing ceremony for the presidential acts, Environment Minister Gustavo Krause, a neoliberal economist who generally opposes governmental regulations, attacked what he called "economic delinquency" -- frequently associated with the predatory Asian companies -- in the Amazon.

Environmentalists had mixed reactions to the presidential reforms. Greenpeace Brazil, which has campaigned against the logging industry in recent years and managed to interrupt the operation of a mahogany sawmill, sent a congratulatory letter to Cardoso. Now "it is crucial to identify and label the existing stocks already cut, and to make an inventory of [still intact] areas in order to guarantee the success of the presidential act," Greenpeace noted in the letter.

Friends of Earth Brazil has been more circumspect. "The series of acts goes in the right direction, but in a confused and contradictory way," says Friends of the Earth Brazil President Roberto Smeraldi. Smeraldi says the satellite data underestimate the extent of deforestation in the Amazon, which means the government's regulatory approach is not stringent enough. The satellite survey can only register clearcutting, which is uncommon in certain areas of the Amazon; the survey cannot identify the effects of selective wood cuts, he notes. Smeraldi also criticizes the government for not including data for 1995 -- "exactly the year when illegal logging became more intense. More recent data would have pointed to a much more critical situation."

A World Wildlife Fund (WWF) study supports Smeraldi's claims. The WWF study preliminarily found that, from 1992 to 1995, 59,584 square kilometers of the Amazon, an area the size of Belgium, were deforested. This figure suggests a significantly higher rate of deforestation than the government estimate.

Friends of the Earth also charges that the presidential act failed to differentiate between small farmers and big loggers. In preventing small farmers from logging their land, the acts may push some of them to "the frontiers of colonization and, consequently, contribute even more to deforestation," the environmental group argues.

And the depth of the government's commitment to protecting mahogany is unclear. In June, Brazil led a group of wood-producing countries that blocked the listing of mahogany as an endangered species under the international endangered species treaty.


While the Asian invasion may have helped prompt the presidential acts, in the long term it may have more perverse regulatory effects. The arrival of the Asian logging companies in Brazil has revitalized arguments about the "threat of internationalization of the Amazon." This is the very rhetoric that the military dictatorship which ruled Brazil from 1964 to 1985 used to block environmental protection measures in the region and the creation of indigenous reserves.

Today, the "internationalization" claim reflects concerns about the Asian companies' investment and industrialized country consumption of Amazon wood and other products. It also reflects resentment against demands from the United States and other industrialized countries that the Amazon be preserved as an international resource -- without the provision of commensurate international rewards. During the 1992 Earth Summit, the rich G-7 countries (the United States, Japan, Germany, the United Kingdom, France, Italy and Canada) promised Brazil $1.5 billion in financial and technological aid to support environmental protection policies. Only $20 million has actually been transferred to Brazil.

This ongoing "internationalization" of the Amazon may have the perverse effect of buttressing the political power of those Brazilian interests which themselves would like to exploit the Amazon at an unsustainable pace -- making the challenge for Amazon indigenous communities and others in Brazil and around the globe who wish to preserve the Amazon all the more difficult.

This article is based on "Corporate Power, Corruption and the Destruction of the World's Forests," a 1996 report issued by the Environmental Investigation Agency.

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