International criminal syndicates operating in China, Hong Kong, Singapore and Malaysia ravage Indonesian forests to make luxurious hardwood floors in North America.
Undercover environmental investigators have unveiled what they are calling the "world's biggest timber smuggling racket" claiming Canada is one of the leading importers of Merbau wood stolen from Indonesia's tropical forests.
| For every dollar spent on luxurious merbau wood flooring in the west, local villagers in Papua New Guinea and Indonesia get less than half a cent, according the Environmental Investigation Agency and Telapak (Indonesia). The photo above served as the front cover of the report presented by the two eco-groups. |
In a joint report, "The Last Frontier", the groups expose the international crime syndicates behind the massive looting of merbau trees from Indonesia's Papua Province.
Merbau, a luxurious dark hardwood used mainly for flooring, is being smuggled out of Papua at a rate of around 30,000 cubic metres of logs every month, the report says.
The report exposes for the first time the complex web of middlemen and financiers from across the region responsible for masterminding the theft of Indonesia's forests.
From the millionaire timber barons in Jakarta and the officials on their payrolls, the story traces the role of multinational companies in Malaysia, brokers in Singapore and log dealers in Hong Kong.
It reveals how in a just a few short years, a small anchorage in eastern China has been transformed into the largest tropical log trading port in the world, while a nearby town has become a global centre for wood flooring manufacture, with 500 huge factories consuming one merbau tree every minute of every working day.
Much of this flooring finds its way to Canada and the U.S.
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Alleged Singaporean member of timber syndicate producing fake documents |
"For every dollar spent on luxurious merbau flooring in the west, local forest dwellers receive less than half a cent... meanwhile forest loss in Indonesia is accelerating, with an area the size of Switzerland lost every year," the report stated.
The undercover investigators began their work in the lush rainforests in the Indonesian province of Papua which shares the world's largest tropical island with the country of New Guinea. The most valuable tree species here is merbau, and it is the main target for the logging industry operating across the island.
Merbau is one of the most valuable timbers of Southeast Asia, prized for its strength and durability. The dark timber is widely used for high-class general construction, exterior joinery, flooring, outdoor furniture, decking, beams and cabinet making.
Prices for merbau timber vary, but are around C$245 per cubic metre for logs and C$550 to C$740 for sawn timber at the point of export.
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Merbau trees are targeted by illegal logging syndicates |
The main illegal logging hotspots in Papua are Sorong, Manokwari, Fak Fak, Nabire and Serui. At least 300 000 cubic metres of merbau logs are smuggled out of Papua every month.
Key characteristics of illegal logging in Papua include: exploitation of the KOPERMAS (small scale community logging) system; the involvement of military, police and forestry personnel; coordinated international smuggling syndicates and weak enforcement, the investigators concluded.
The usual method is for middlemen, nicknamed 'foster fathers' (bapak angat) to make contact with members of a community which have substantial amounts of merbau on its land. Often the middleman is a military officer or other official.
The community member will be invited to the nearest town, entertained and persuaded to sign a cooperation agreement. This agreement commonly involves a set price for the timber, plus a promise of gifts for the community--commonly a new church, generators or speedboat engines.
Soon after a logging gang arrives in the community's lands, the merbau is felled and loaded onto barges or ships and a derisory payment made. These activities lead to conflict within communities, who often feel powerless to resist the middlemen.
In one case, a community in the Sorong region of western Papua was promised Rupiah (Rp)$100 million (C$13,420) for 3000 cubic metres of merbau, but received only Rp$25 million (C$3,380) plus sacks of rice and noodles.
In another area near Sorong, EIA/Telapak investigators met members of a community who were being paid just Rp$100,000 (C$13.50) per cubic metre of merbau under pressure from a military police officer.
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Illegal logging camp in Papua |
Companies involved in timber theft from Papua are aided every step of the way by officials from the military, police and forestry department, as long as the requisite bribe is paid, EIA/Telapak investigators said.
Several forestry concessions in the province are linked to military foundations, notably the company Hanurata, which controls five concessions in Papua and shares its headquarters in the city of Jayapura with a detachment of troops from the army's special forces.
Military personnel are frequently employed as security for logging operations.
One timber dealer based in Jakarta told EIA/Telapak investigators that he had 30 soldiers on his payroll to secure his illicit forest concession. The army is also used to intimidate local communities opposed to logging operations on their lands.
| Native lifestyles threatened by illegal logging |
Navy forces operating in the eastern waters of Indonesia have won plaudits for intercepting a series of vessels carrying illegal logs from Papua. Yet in many cases such seizures are carried out when the owner of the timber has underpaid the navy for protection of the shipment.
An additional fee is then required to free the ship.
The navy is also used by powerful timber bosses to disrupt the smuggling operations of rivals.
In addition to the armed forces, both forestry officials and police are implicated in illegal logging activities. In January 2002 four vessels loading illegal merbau logs near Sorong were detected, yet all but one eluded capture.
Investigations into the case reveal the role played by police and forestry officials in allowing the vessels and their cargoes to escape.
The Panamanian-flagged ship MV Africa was detained by marine police laden with 12,000 cubic metres of merbau logs, and the case was passed to Sorong police for processing. Subsequently both the vessel and its contraband disappeared.
Following a complaint by a local timber businessman that police had confiscated his logs to cover up their crime, the case was reopened and five police officers were arrested in December 2004, including the former police chief of Sorong.
One of the men claimed he had been ordered to let the vessel go after a bribe of Rp$700 million (C$92,175) was paid to a high ranking provincial police official.
Another vessel caught during the operation was the MV Sukaria, found to be transporting logs without a timber transport document. In May 2002 the police released the ship after local forestry officials claimed there was no case to answer, as the permits had not been issued due to a lack of forms in the office. The timber on board was linked to the office of the Sorong regent, whose secretary had underwritten the costs of setting up the small-scale concession. A fee of Rp$150 million (C$19,650) was paid to the forestry office to secure the release of the ship.
An experienced merbau trader based in Hong Kong told undercover EIA/Telapak investigators that the average bribe paid to ensure a shipment of illegal merbau logs leaves Papua unhindered is C$246,000.
The money is shared between the army, navy, police and forestry office.
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Merbau flooring being manufactured in Nanxun |
Analysis confirms that each component of the syndicates plays a defined role--from Jakarta-based bosses securing 'protection' for shipments and Malaysian logging gangs on the ground in Papua, to Singapore-based shippers arranging transport for the logs and Hong Kong-based brokers selling huge quantities of merbau to companies in mainland China.
Several major syndicates are in operation, and often compete against each other to secure supplies and develop influential contacts with enforcement agencies.
The scale of the illegal trade in merbau logs is apparent from monitoring of timber trade bulletin boards on the Internet. In a single month in mid-2004 EIA/Telapak logged 25 enquiries concerning Indonesian merbau logs on a single trade website--all illegal under Indonesia's log export ban.
Illegal logging operations on the ground in Papua are frequently controlled by brokers based in Jakarta and Surabaya--both major ports and timber trading centres in Java. These brokers usually have links to senior military officers and other enforcement agencies in order to ensure safe passage for the contraband cargo, and are connected to international buyers.
Using a fake company ID, EIA/Telapak contacted several of the sellers in September 2004, and found that while the traders were initially cautious, most had merbau stock on hand and were keen to cut a deal, although security of the shipments could not be guaranteed.
In one case, inquiries by EIA/Telapak investigators led them to the Jakarta-based company Sinar Remaja, which advertises itself as a wood broker specialising in logs.
At first an employee of the company allegedly said export of merbau logs from Papua was illegal, but soon asked for details of the amount of logs required. He then allegedly responded that he knew of a consignment of merbau logs immediately available in Jayapura.
A few days later company officials explained that they had 12,000 cubic metres of merbau logs in stock ready for export from Papua.
When asked if it was okay to export merbau from Papua, another company's officer replied: "It's difficult, but because the place is quite far away from Jakarta, you can still manage to export it out.
"All of Indonesia cannot export this cargo, but we still manage because in Indonesia... anything is possible... Even now I'm loading... 11,000 (Cubic metres) in Jayapura, Papua. Tomorrow the vessel will go to China."
Malaysian companies and individuals are deeply implicated in illegal logging activities in Papua. For instance, between 2001 and 2003 the Papuan police dealt with 19 cases of illegal logging, with 42 of the 68 suspects connected with the cases being Malaysian nationals.Companies in Singapore act as vital middlemen in the trade--chartering cargo vessels and barges to transport the contraband timber, and linking sellers of merbau in Papua with buyers in India.
Many of the financial transactions for the merbau logs flow through Singapore's banks, including the opening of letters of credit between buyers and suppliers.
Brokers in Hong Kong act as a vital bridge to the Chinese mainland, securing log supplies in Papua and forging connections with buyers in the Shanghai area and Guangzhou province.
The criminal groups directing the trade in merbau from Papua employ a variety of techniques to avoid enforcement action. The easiest method is to pay off the authorities, but this cuts into profit margins.
If simple bribery is not a feasible option, a number of smuggling methods are used: false flags on cargo vessels or when cargo vessels are more prone to interception, smugglers switch to using steel barges, including high-sided coal barges that can transport up to 5,000 cubic metres of logs and using fake documents.
Zhangjiagang port lies near the mouth of the Yangtze River. Five years ago it was a sleepy backwater--the poor relation of the big container terminal in nearby Shanghai. Since then it has transformed itself into what is probably the largest trading centre for tropical logs in the world.
Giant cargo vessels filled with logs from South and Central America, West Africa and Southeast Asia line up to unload at the wharfs, day and night.
Touring the port with one trader, EIA/Telapak investigators drove along between heaps of tropical logs lined up on the shore in stacks stretching for miles.
The port doubles as a market place, and the lobby of a nearby hotel has become an impromptu sales floor, pasted with ads detailing log lots, with photocopied pictures and agents' mobile telephone numbers. Merbau is the most common species advertised.
Using undercover techniques, EIA/Telapak investigators met with a man identified as Shelman Siu in Hong Kong.
He reckoned that around 60 large cargo vessels, each carrying around 10,000 cubic metres of merbau, arrive in China from Papua every year. They are accompanied by fake Malaysian paperwork including Certificates of Origin, and Bills of Landing and other certificates.
Most, he explained, are destined for Zhangjiagang adding: "All the export of round log from Jayapura, from Indonesia, is like smuggling. They smuggle it. Using Malaysian shipping documents...They make a whole set. Country of origin, the whole set of documents, Malaysian. [laughs] I am an expert on this." Siu also spoke of a 'merbau town' where most of the logs end up. This town--Nanxun--is a couple of hours south of Zhangjiagang. Like the port, not long ago it was a backwater. Now it is the wood flooring centre of the world.
Encouraged by incentives from the local government, in just five years more than 500 flooring factories have sprung up, taking over the town. About 70 percent of the merbau imported into China is destined for flooring--and these companies manufacture most of it. Travelling to Nanxun as potential buyers, EIA/Telapak investigators visited a number of these companies, and were given guided tours of their operations.
The companies explained how merbau is by far the most common species used for flooring manufacture, and that the town churns out at least 2.5 million square metres of the distinctive dark coloured flooring every year--worth more than C$245.8 million at western retail prices. Flooring manufacturers buy their merbau logs from agents in Zhangjiagang acting on behalf of the small coterie of large-scale importers. They are then transported by barge to a suburb of Nanxun, where there are 200 mills geared solely to sawing the species.
One of the larger manufacturers, Zhejiang FangYuan Wood Co Ltd, has a C$18.5 million turnover and produces two million square metres of flooring each year.
Merbau is the company's number one seller. Based on figures supplied by industry insiders, EIA/Telapak have calculated that the planks of merbau flooring these sawmills produce in one year, laid end to end, would encircle the planet.
Subsidised by illegally-sourced raw materials, China's exports of wood products have skyrocketed in recent years.
China's wood flooring exports have also expanded dramatically. In the nine months to September 2004, China exported 193,000 tons of wood flooring worth C$295 million--an increase of 77 percent on the same period the previous year.
The US is the largest market for Chinese wood flooring exports, accounting for 30 per cent of all sales, worth C$118 million.
Another major market is Canada.
Western companies selling Chinese flooring make the greatest profits from the trade in stolen merbau. Papuan communities receive just C$0.56 cents for the timber needed to make one square metre of flooring.
One flooring company in China investigated by EIA/Telapak was the Sihe Wood Co. Ltd. The slick sales manager explained to EIA/Telapak investigators how the company regularly ships merbau wood flooring to the US, Canada and the UK.
Shipping records obtained by EIA confirm that in a ten month period to May 2004, 26 consignments of wood flooring arrived in US and Canadian ports from Sihe Wood, including at least two of merbau.
The importer, Canadian company Goodfellow Inc., sells merbau flooring through a chain of distributors across Canada and the US--though there is no evidence the company has broken any law or is aware of the potentially controversial origin of the wood, EIA/Telapak said.
Sihe obtain their merbau logs from the local market in Shanghai, making it impossible to guarantee their legal origin.
The sales manager told investigators that the logs come from Indonesia and Malaysia, and claimed that there were no export restrictions in place in either country. When challenged, investigators were told that information regarding the precise source of the wood "does not exist."
There is little merbau left in Malaysia, and log dealers contacted by EIA/Telapak claimed that most of the flooring produced in China is made from timber stolen from Papua Province.
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