Corporate power in the forests of the Solomon Islands

IN THE FIRST HALF OF THE 1990s, Malaysian investors, backed by Japanese and Korean buyers, pushed log production in the Solomon Islands to more than three times higher than the estimated sustainable level. Japanese log purchases alone in 1995 and 1996 were greater than the sustainable yield in the Solomon Islands. If log production had continued to escalate at the mid-1990s rate, these aggressive investors and traders would have depleted the Solomon Islands of commercial trees in less than a decade. The crash in demand for tropical logs following the 1997-98 economic downturn in Asia has slowed this looming environmental catastrophe. Although this could well be a temporary respite, this does provide the government of Prime Minister Bartholomew Ulufa'alu, which took power in August 1997, an opportunity to reform timber management. This paper examines the most important issue and the greatest obstacle facing reformers: the environmental and economic impact of multinational companies on natural forest management.(1) Cheap forest resources that externalize environmental and social costs lure investors and traders, even into areas with little infrastructure. Once there, these corporations generally harvest logs as quickly and cheaply as possible. Logically, they do not function within the bounds of formal laws or policies but rather within the bounds of state and societal rules that are actually enforced, persistently trying to bend these rules in their favour. They strain state capacity to manage forest resources, pressure and entice state officials to develop policies that maximize corporate profits, construct complex corporate structures that reduce accountability and transparency, and evade taxes and timber royalties. Corporations also generate financial incentives that stimulate unsustainable production, harvest concessions illegally and destructively, break or distort obligations to communities and landowners, make informal deals that lower export prices, and construct trade chains that depress consumer prices and stimulate wasteful consumption. These practices seem to suggest that corporations in the Solomon Islands are mischievous or devious resource exploiters. In some ways they are. But often they are rationally responding to market signals, the viability, profitability and uncertainty of operations, and the extent of state and societal controls. The paper begins with a brief discussion of the theoretical literature on the environmental impact on natural resources of multinational corporations. The second section provides essential background on commercial forest resources, environmental policies and forest institutions in the Solomon Islands. The third, fourth, fifth, and sixth sections examine the actual impact of these policies and institutions on the behaviour of multinational investors. The seventh section analyzes the effect of corporate buyers. The conclusion reflects on the importance of the findings in the Solomon Islands for understanding the effects of timber corporations on environmental management in tropical regions.