Investigation into Issue of a Permit to Turama Forest Industries Pty Ltd by the Forest Authority

Ombudsman Commission Report on an investigation into the awarding of a Timber Extension Permit to Turama Forest Industries Pty Ltd.

Logging companies mentioned in this document:

Concessions mentioned in this document:


OMBUDSMAN COMMISSION
OF
PAPUA NEW GUINEA



INVESTIGATION INTO ISSUE OF
A PERMIT TO TURAMA FOREST
INDUSTRIES PTY LTD BY THE
FOREST AUTHORITY



FINAL REPORT IN TERMS OF SECTION 22
OF THE ORGANIC LAW ON THE OMBUDSMAN COMMISSION



AUGUST 1997


                                        (1)




PAGE NO..
   CHAPTER 1           JURISDICTION AND PURPOSE OF INVESTIGATION
1

    1.1   introduction
1

    1.2   Jurisdiction
1

    1.3   The Scope of the Investigation
2

    1.4   Method of Inquiry
2


    CHAPTER 2          FACTS
7

    2.1   General
7

    2.2   Timber Permit No. 2-12A
7

    2.3   The Forest Act 1991 No. 30 of 1991

Page 1 screenshot
7

    2.4   The Papua New Guinea Forest Authority and the
          National Forest Board
8
    2.5   Forestry (Amendment) Act - 1993
8

    2.6   National Forestry Development Guidelines
8

    2,7   National Forest Development Programme
8

    2.8   Timber Supply Agreement (ISA) Concept
8

    2.9   Baimuru/Kikori Area or TSA 5 is not for any
          specific company.
9


2.10 The then Managing Director National
     Forest service Ms Jean Kekedo OBE, outlined
     the Government Policies and procedures to
     Goeheae Landowner Company                                   9

2.11 The Forest Agreement to be drafted in
     consultation with TFI and landowners                       11

2.12 The then Managing Director MS. Jean Kekedo OBE,
     suggested to Turama Forest Industries Pty Ltd that
     it will not be necessary for them to respond to
     the advertisement.                                         13

2.13 Awareness campaign in Gulf Province and
     incorporation of landowner groups                          14

2.14 Signing of Forest Management Agreements                    14

2.15 National Forest Development Plan is a requirement
     under the new Forestry Act                                 15

2_16 Forest Management Agreement report submitted in
     April 1995.                                                15

2.17A Land Owners withdraw signatures on the Forest
     Management Agreement relating to Kikori Forest Area        15

2,176 Landowners were not given an opportunity to discuss and
     negotiate Forest Management Act with their Lawyers_        17

2.18 Reply from Ms Jean Kekedo OBE to the Honourable
     Andrew Posai MP, Minister for Forests.                     18

Page 2 screenshot
2.19A Statement made by Ms Jean Kekedo that the Forest
     Management Agreement (FMA) is not for a particular company.     19

2.198 Mr Dike Kari's Paper dated 23rd May 1995.                      20


2.20 Gulf Provincial Forest Management Committee
     inaugural meeting
21

2.21A Gulf Provincial Forestry Committee meeting held
     on 26 May 1995.
22

2.21B Mr Andrew Tagamasau a member of the Gulf Provincial
     Forest Management Committee signs the FMA certificate
     as 'Secretary' to the committee.
23

2.22 National Forest Authority Board Meeting held on
     Tuesday 30 May 1995.
23

2_23 The Policy Paper Number 2
24

2.24 Board Resolution on Turama Extension - Board Meeting
     held on 30 may 1995
28

2.25 Facsimile message to National Forest Authority by
     Mr. B. D. Brunton on 31.05.95
28

2.26 Honourable Titus Philemon Minister for Forests signed
     Timber Permit No. 2.12A dated 1.6.95.
30

2.27 A meeting between a landowner group from FMA Block In
     of Bairnuru-Purari Area meeting and Mr. Dike Kari
     Divisional Manager Policy and Planning on 2.6.95
30

2.28 Article in the Saturday Independent of 10 June 95
     urging Ombudsman to Probe Turama Deal.
31

2.29 Letter to Honourable Titus Philemon MP, Acting Minister
     for Forests, from Ms Jean Kekedo OBE Managing Director.
32

2,30 Ms Jean Kekedo OBE Managing Director informed other
     Members of the Forest Authority about Mr. Brunton's Decision.

Page 3 screenshot
39


                                 (iv)

2.31 Concern of Mr lamo Ila Secretary, Department of Environment
     and Conservation on the Board decision of 30.05.96.
40

2.32 Acknowledgement of Mr. lamo Ila's letter.
41

2.33 Acting Managing Director Mr Keith Dolman's reply
     to Mr_ lama lia.
42

2.34 Mr. Chris Marlow Corporate Secretary sees
     Ms. Jean Kekedo, OBE Managing Director.
43

2,35 Decision of Ombudsman Commission to Investigate the issue
     of limber Permit to Turama Forest Industries Pty Ltd.
43

2.36 Notice Under Section 17(1) of the Organic Law on the Ombudsman
     Commission issued to Ms. Jean Kekedo OBE, Managing Director-.
43

2.37 Reminder sent to Ms. Jean Kekedo OBE Managing Director reply
     dated 19th September 1995 to Ombudsman Commission_
43

2.38 Reply of ms_ Jean Kekedo OBE Managing Director
44

2.39 Letter to Ombudsman Commission from Baimuru District Timber
     Resources Pty Ltd,
44

2.40 Summons Served on Mr Guar Zurenuoc Managing Director
45

2,41 Letter of Resignation of Mr. Keith Dolman, General Manager
45

2.42 Letter of Resignation of Mr. B.O. Brunton,
     member Forest Authority
46


                                     iv)
CHAPTER 3 - RELEVANT LEGISLATIONS
49
3.1 Constitution of the Independent State of Papua New Guinea

Page 4 screenshot
49
      3.1.1. Natural resources and environment.
49
      3.1.2 Division 2 - Ombudsman Commission
49
      3.1.3 Division 4 - The National Executive
50
3.2   Forestry Act - 1991
51
      Section 2.    Interpretation
51
      section 6.    Objectives of the Authority
51
      Section 7.    Functions of the Authority
52
      Section 8.    Powers of the Authority
53
      Section 9.    National Forest Board
53
      Section 16. Calling of Meetings
53
      Section 20. Reports
54
      Section 21, Provincial Forest management Committees
54
      Section 22.   Membership of Provincial Forest Management
Committees 54
      Section 27,   Calling of Meetings
55
      Section 28.   Meetings of the Provincial Forest Management
Committee 55
      Section 33.   National Forest Service
56


                                (vi)

Section 47. National Forest Plan
56

Section 48. National Forest Plan to be Presented to Parliament
57

Section 49. Provincial Forest Plans
57

Section 50. Provincial Forest Plans to be submitted to Board, etc.,
58

Section 54_ Forest Resource Development to Accord with National
            Forest Plan
58

Section 55. Types of Land on which, and manner in which Forest

Page 5 screenshot
             Industry Activities may be permitted.
58

Section S5. Acquisition of Timber Rights, etc., by the Authority
59

Section 57_ Obtaining Consent of Customary Owners to Forest
            Management Agreement
59

Section      Forest Management Agreement
60

Section t?, Board to Consult with Customary Owners and
            Provincial Governments.
61

section      Advertisement of Project
61

Section E.   Project Proposals
62

Section      Project Proposals to be Referred to Provincial Forest
             Management Committee for Evaluation.
62

Section -2   Board to consider agreement and make recommendation
             to the minister.
63

Section 717 Duties of Minister on recommendation
64

Section 7-   Application for a Timber Permit
64


                                  (vii)
3.3 Land Groups   Incorporation Act (Chapter No. 147)
     Section 2    Interpretation
     Section 5    Manner of recognition
     Section 11   Status of recognized groups


                                        (Viii)

CHAPTER 4 - EVIDENCE ON OATH
66

4.1   General
66
      4.1.1 Mr_ Guao Zurenuoc Managing Director and Chairman of
            Papua New Guinea Forest Authority in giving evidence

Page 6 screenshot
               on Oath on 4th March 96 said that:-
66
         4.1_2 Mr. Johnson Mantu acting Divisional manager Operations
               in giving evidence on oath on 24 April 1996 said that:-
66

         4_1.3 Mr. Paul Barker Economic Adviser to the Prime Minister's
               Department in giving evidence on oath said that:-
67

4,2      Access to files and document maintained by National
         Forest Authority.
68

         4.2.1 Mr. Maurice Coughlan Project Lawyer in giving evidence
               before the Commission on Oath said that-
68

         4 2.2 Ms. Bibiana Kenatsi Office Manageress to the Managing
               Director in giving Evidence on Oath before the
               Commission on 12 March 1996 said that:-
68
4.3      incorporation of Landowner Groups
69
      4,3.1 mr Johnson Mantu acting Divisional Manager Operation
National
            Forest Services in giving evidence on oath said that--
69

         4.3.2 Mr. Joseph Badi Supervisor Landowner Liaison Papua New
Guinea
            National Forest Authority in giving evidence on oath
said that:- 69

         4.3.3 Ms Ruth Turia, Manager Acquisition, Papua New Guinea
Forest
               Authority in giving evidence on oath said that:-
70


      4.3.4 Mr. Henry Wasa Project Officer in the lands Group
           Incorporation Division of the Lands Department in
           giving evidence on oath said that:-                    70

      4.3.5 Mr. Lindsay Gideon Registrar of Titles giving
           evidence on oath said that:-                           71

      4.3.6 Mr. Kau Par Forest Management Officer in giving
           evidence on oath said that:-                           71

4.4   Forest Management Agreement.                                73

      4.4.1 Mr. Dike Kari, Divisional Manager Policy and Planning
           in giving evidence on oath said that:-               73

Page 7 screenshot
      4.4.2 Mr. Darnbis Kali) Forest Management Agreement Supervisor
           in giving evidence on oath said that:                75

      4.4.3 Ms. Ruth Turia Manager Acquisition in giving
           evidence on oath said that:-                         76
      4.4.4 Mr Keai Semesse Supervisor Technical Services Southern
           Region in giving evidence on oath said that:-        77

      4.4.5 Mr Hakiso So-omba Manager Allocation in giving evidence
           on oath said that:-                                  77
4.5   Timber Supply Area fTSA) Concept                          78

      43.1 Mr. Terry Warra Director Forest Research Institute Lae in
           giving evidence before the Commission said that-     78

4.6   The Turama Extension Board Paper as an urgent submission    79


      4.6.1 Mr. Chris Marlow Corporate Secretary PNG Forest Authority
in
           giving evidence in oath said that:-                  79
      4.6.2 Mr. Maurice Coughlan Project Lawyer in giving evidence on
           oath said that:-                                     79

4.7   Turama Forest Industries Pty Ltd,                           81
      4.71 Mr. Keith Dolman in giving evidence on oath on
           20,03.96 said that-                                    81

      4.7.2 Mr Goodwill Amos Manager Projects in giving evidence
           on oath said that:-                                   82

     4.7.3 Mr Keai Semesse Supervisor Technical Services Southern
Region
          in his evidence on oath said that:-                  82

4.8   Discussion at the Board Meeting held on 30 May 1995.        83

      4.8_1 Mr Keith Dolman giving evidence on oath said that:- 83

      4,8.2 Mr. Maurice Coughlan, Project Lawyer in giving evidence
on
           oath said that:-                                       85

     4.8_3 Mr. Chris Marlow Corporate Secretary and Corporate
Solicitor in
          giving evidence on oath said that-                      86

     4.8.4 Mr. Soiat William Acting First Secretary Department of
Personnel
          Management and Nominee representing the Secretary to that
          Department in giving evidence on oath said that      87

      4.8,5 Mr. Gaikovina Kula First Assistant Secretary Nature

Page 8 screenshot
             Conservation Division of the Department of Environment
             and Conservation and the Board nominee representing the
             Secretary to that Department in giving evidence on
             oath said that                                       88


             4.8.6 Mr. lamo ila secretary of the Department of
Environment and
                  Conservation in giving evidence on oath said that.
89

                4_8.7 Mr. John Painap former acting Secretary
Department of
                     Prime Minister and presently Secretary Department
of Lands
                     in giving evidence on oath said that.
89

             4.8.8 Mr. Terry Warra Director Forest Research
Institute in giving
                  evidence on oath said that.
90

             4.8.9 Mr. Kanawi Pouru acting General Manager Forest
Authority in his
                  evidence on oath said that.
90

                4.8.10 Mr. Andrew Tagamasau Acting Divisional Manager
Operations
                     and former Regional Manager Southern Region in
giving
                     evidence on oath said that.
91




CHAPTER 5 COMMENTS ON RESPONSE TO THE
              PRELIMINARY REPORT                             93

5.1   Despatch of Preliminary Report,                        91

5.2   Response to the Preliminary Report                     91

      5.2.1 Hon. Titus Philemon MP                           94

      5_2_2 Mr Guao Zurenuoc - Chairman & Managing Director
          National Forest Authority                       94

     5.2.3 Ms Jean Kekedo the then Chairman National Forest
Authority
          & Managing Director of National Forest Service. 94

Page 9 screenshot
        5.2.4 Mr_ Keith Dolerrian the then General Manager, National
            Forest Service.                                 98

        5.2.5 Mr Albert Milala acting Chairman of the Gulf Provincial
            Forest Management Committee.                    99


                                   MUD


CHAPTER 6 FINDINGS                                                     101

6.1     That there is a lacuna in the Forest Act.                      101

6.2     That the National Forest Plan should be in place
        before any Forest Development work is undertaken.              101

6.3     That the Project paper submitted to the Board by the National
        Forest Service failed to give a impartial account of all
        relevant facts for the Board to reach an unbiased decision. 104

6.4 That Ms Jean Kekedo OBE the former Managing Director has not
been
     taking a consistent stand on the interpretation of section 64
     of the Act.                                                 108

6.5     That the Divisional Manager Policy and Planning Mr. Dike Kari
        appears to have failed to perform his duties with due diligence
        and care when he permitted his officers to execute
        Forest Management Agreements before the Land Groups
        were properly incorporated.                                 110

6.6     That the Forest Management Agreement did not contain a
        proper certificate from the Provincial Forest Management
        committee as stipulated under Section 58(f).                   111

6.7     That the Chairman of the Gulf Provincial Forest Management
        Committee failed to observe the condition stated in section
28(3)
        of the Forestry Act and thus he appears to have acted in a
        negligent manner.                                              111

6.8     That the Former General Manager appears to have Acted in
        an improper manner when he allegedly directed the
        Manager Southern Region of the National Forest Service
        Mr. Andrew Tagamasau to sign the relevant FMA certificate
        as Secretary to the Committee.                                 112


                                   (xlv)

6.9     That Mr, Andrew Tagamasau former Manager Southern Region of
        the National Forest Service appears to have acted on an
        improper and irregular manner when he signed the certificate

Page 10 screenshot
       under Section 58(0 as the 'Secretary' of the Gulf Provincial
       Management committee.                                        112

6,10 That Keith Dolman former General Manager appears to have
     misled the Ombudsman Commission when he mentioned on oath
     that there were other extensions earlier approved under the
     Forestry Act 1991.                                          113

6.11 That the statement that the FMA Project relating to
     Turama, Kikori Baimuru area is contiguous as stated in
     Ms. Jean Kekedo OBE Managing Director's letter dated 13_6.95
     to the Minister is incorrect.                                113

6.12 That the Timber Permit issued in terms of Section 73 by the
     Honourable Minister for Forests is without any legal basis_ 114


CHAPTER 7 - OPINION                                                115


CHAPTER 8 - RECOMMENDATION                                         116


CHAPTER 9 - CONCLUSION                                             117


           OMBUDSMAN COMMISSION


      FINAL REPORT UNDER SECTION 22
        OF THE ORGANIC LAW ON THE
          OMBUDSMAN COMMISSION



CHAPTER 1 JURISDICTION AND PURPOSE OF THE
              INVESTIGATION


1.1      Introduction

This is an investigation into the awarding of a Timber Extension
Permit in the Turama
Forest Area in the Gulf Province by the Forest Authority to Turama
Forest Industries
Pty Ltd as an extension to the existing project undertaken by the
company, Several
articles appeared in the Newspapers alleging that the award of the
permit to the
company was in violation of the provisions of the Forestry Act. The
main allegation
was that there was no National Forest Plan, and in the absence of
it, the award Of the
timber resource to the company was improper and wrong. It was also

Page 11 screenshot
alleged that
the members of the Forest Authority Board were not granted an
opportunity to
study the proposals made to the Board in depth before voting and
that the proposal
was submitted in haste as an urgent matter at the Board Meeting held
on 30 May
1995 and passed without proper discussion.

1.2       Jurisdiction

The Ombudsman Commission conducted the investigation under section
219(1)(a) of
the Constitution and section 13 of the organic Law on the Ombudsman
Commission.
These Constitutional Laws allow the Ombudsman Commission to
investigate either on
its own initiative or on complaint by a person affected, any conduct
on the part of
any Government body or any of its officers.


                   2
The Commission can thus investigate the conduct of any arm,
department, agency or
instrumentality of the National Government including a Statutory
Authority such as
the National Forest Authority.

1.3       The Scope of the investigation

In accordance with Section 219(11(a) of the Constitution the purpose
of the
investigation was

       to determine whether any conduct under investigation was
wrong; and
       to determine whether there were any defects in the Saws or
       administrative practices_

1.4       Method of Inquiry

The Ombudsman Commission issued notice on 19th September 95 under
section 17(1)
of the Organic Law on the Ombudsman Commission to the then Managing
Director
National Forest Service Ms Jean Kekedo OBE, of its intention to
investigate the
allegation_

      Section 17(1) states:-

    Before investigating any matter within its jurisdiction, the
commission shall

Page 12 screenshot
   inform the responsible person of its intention to make the
investigation.

The Ombudsman Commission of obtained documents and other evidence
from a
number of different sources and used its powers under Section 18 of
the Organic
Law on the Ombudsman Commission to require the production of
documents and
information.

      Section 18 states

          "Subject to the provisions of this section and Section 20.
the
          Commission may from time to time require any person who, in
its
          apinion is able to give an information relating to any matter
that is
       being investigated    by the Commission to furnish to it that
       information and to    produce any documents, papers or things
that, in
       the the opinion of    the Commission, relate to any matter being
       investigated by it    and that may be in the possession or
control of
       that person


                        3
       (2) Subsection (1) applies whether or not -

           (a) the person is an officer, employee or member of any
State
               Service, provincial government body, local government
body
               or statutory body, and

           (b) the documents, papers or things referred to in that
               subsection are in the custody or under the control of
any
               State Service, provincial government body, local
               government body or statutory body,

           The Commission may, by instrument in writing, summon any
person
           who in its opinion is able to give any information relating
to any
        matter that is being investigated by the Commission, to
attend the
        Commission at a time and place specified in the summons for
        examination by it on oath or affirmation.

    (4) The Commission may administer an oath or affirmation to a
person

Page 13 screenshot
          appearing as a witness before the Commission whether the
witness
          has been summoned or appears without being summoned, and may
          examine the witness on oath or affirmation,

    (5) A witness attending before the Commission has the same
privileges
        and subject to the same -penalties- in -relation
to_:the;:giving 91-
        information, the answering of questions and the production
of
        documents, papers things as a witness before the National
        Court.

    (6) Except on the trial of any person for perjury in respect of
his sworn
        testimony, no statement made or answer given by that or any
other
        person in the course of any inquiry by or any proceedings
before
        the Commission is admissible in evidence against any person
in any
        court or at any inquiry or any other proceedings, and no
evidence in
        respect of proceedings before the Commission shall be given
        against any person.

    (7) Where any person is required by the Commission to attend
before it
         for the purposes of this section, the person is entitled to
the same
         fees, allowances and expenses as if he were a witness in the
         National Court"

However, the Commission initially had difficulties in obtaining
certain files and Board
meeting minutes from the National Forest Authority. Although the
present
Chairman and Managing Director Mr Guao Zurenuoc expressed his
willingness to give
full co-operation to the Commission when he was interviewed on oath
on 5 March
1996, the assured cooperation was initially not forthcoming when the
officers of the


                      4


Commission visited his office to collect certain files. This appears
to have been due

to the fact that ms Biblana Kenatsi office manageress had informed
him that certain

Page 14 screenshot
files required by the Commission do not relate to the matter
concerning the Turama

investigation. The Project Lawyer, Mr Maurice Coughlan, who was
consulted by the

Managing Director had also informed him, (obviously without studying
the Organic

Law on the Ombudsman Commission}, that the Commission had no
authority to call

for those files and documents. The situation reversed when the
Project lawyer after

studying the Organic Law Ombudsman Commission informed the Managing
Director

that the Commission has wide powers to call for information and
documents. The

files and documents were then released but because of this
misunderstanding the

investigation virtually came to a stand still for nearly three
weeks. in this context we

wish to quote the following from the Judgement delivered by At/let J
in Jimmy T

TJEONG and GARAMUT ENTERPRISES v Ombudsman Commission (July 1993):




   -It is quite clear and I accept the submissions of the Ombudsman

   Commission in this respect that once a matter is being
investigated by the

   Ombudsman Commission within its jurisdiction, the Commission is
entitled

   to require "any person who in its opinion is able to give any
information

   relating to any matter that is being investigated by the
Commission to

   furnish to it that information and to produce any documents,
papers or

   things that in the opinion of the Ombudsman Commission relate to

Page 15 screenshot
any

   matter being investigated by it and that may be in the possession
of or

   control of that person- [Organic Law Section 18(1)]. The
Commission can

   also by instrument in writing, summon "any person who in the
opinion of

   the Ombudsman Commission is able to give any information relating
to any

      matter that is being investogated by the Commission, to attend
the

   Commission at a time and place specified in the summons for
examination

      by it on oath or affirmation" [Organic Law, Section 18(3);.




   These enabling powers to require any person to attend for
examination and

   production of material to assist the commission either by
invitation or by

   instrument in writing, that is by summons, do not in my view have
to be

   confined to officers of the governmental body. As long as the
investigation

   is within jurisdiction the commission is enabled wide powers to
require any

   person a public employee within me organisation or governmental
body of

   any service which is being investigated or any private individual
in private

      enterprise that in the opinion of the Commission is able to give
any

   information relating to any -na::,7r that is being investigated
by the

      commission and also to furnish :o the Commission any information
or

Page 16 screenshot
   documents or to attend upon the Commission for examination in
respect of

   any matters that it is investigated.-


                                            5
The following persons were interviewed:

       1.     Mr Guao Zurenuoc             Chairman and Managing
Director National
                                           Forest Service
       2.      Ms Jean Kekedo OBE          Then Chairman     and
Managing     Director
                                           National Forest Service
       3.     Ms Bibiana Kenatsi           Office Manageress to the
Managing Director
                                           PNG Forest Service
        4.     Mr Chris Marlow             Corporate Secretary PNG
Forest Service
        5.     Mr Maurice Coughlan         Project Lawyer PNG Forest
Service
        6.     Mr Keith Dolman             General Managers National
Forest SerVice
        7.     Mr Soiat William            Acting First Assistant
Secretary, Department
                                           of Personnel Management
                    Mr Gaikovina Kula      First Assistant
Secretary,           Nature
                                           Conservation Division of the
Department of
                                           Environment and Conservation
       9.           Mr largo lla           Secretary    of the
Department             of
                                           Environment and Conservation
       10.     Mr Goodwill Amos            Manager Projects National
Forest Service
       11.     Mr Dike Kari                Divisional Manager       Policy
&   Planning
                                           National Forest Service
       12.          Mr Johnson Mantu       Acting Divisional Manager
Operations      -
                                           National Forest Service
       13.   Mr Joseph Badi                Supervisor, Landowner
Liaison - National
                                           Forest Service
       14.    Mr John Painap               Secretary Department of
Lands and Physical
                                           Planning
       15.    Mr Terry Wara                Director Forest   Research
institute, Lae,
                                           National Forest Service.
       16.          Mr Kea' Semesse        Supervisor Technical

Page 17 screenshot
Service   Southern
                                          Region, National Forest
Service
       17.   Mr Kanawi Pouru              Acting General          Manager
National Forest
                                          Service
       18.     mr Hakiso So-omba          Manager Allocation, National
Forest Service
       19.     Mr Dambis Kaip             Forest Management Agreement
Supervisor,
                                          National Forest Service
       20.     Ms Ruth Turia              Manager Acquisition National
Forest Service
       21.     Mr Henry Wasa              Project Officer - Department
of Lands and
                                          Physical Planning
       22.     Mr Andrew Tagamasau        Divisional Manager
Operations    National
                                          Forest Service
       23.    Mr isau Par                 Forest Management Officer,
National Forest
                                          Service


                                6
24.   Mr Paul Barker           Economic   Adviser     -   Prime
Ministers
                               Department
25.    Mr Allen Ross           Special Project     Officer National
Forest
                               Service
26.   Mr Lindsay Giddeon       Registrar of Titles, Department of
Lands and
                               Physical Planning


                 CHAPTER 2 - FACTS




      2.1 General

      in this chapter the Commission states the facts, on which it
has based its findings of
      wrong conduct. The events leading to the granting of Timber
Permit No. TP 2-12A to
     Turama Forest Industries Pty Ltd have been dealt with in fair
detail. Special attention
      has been given to incorporation of land groups, the signing of
Forest Management
      Agreements relating to Turama, Kikori and Baimuru areas as
well as the Board
      Meeting of 30.05.96 at which the issue of Timber Permit was

Page 18 screenshot
taken up and passed as a
      resolution.

        2.2 Timber Permit N°. 2-12A

      Timber Permit N°. 2-12 (Turama Timber Project - Gulf Province)
was issued to Long
      Term Trading Pty Ltd in March 1988 for a period of 20 years .
The company changed
      its name from Long Term Trading Pty Ltd' to Turama Forest
Industries Pty Ltd on 21
      July 1989.

        2.3 The Forest Act 1991 N° 30 of 1991.

      In 1991 a National Forest Policy document was formulated.
Subsequently the Forest
      Act of 1991 was introduced to give effect to these proposals.
The main changes,
      inter alia, were:-

            1) the establishment of the PNG National Forest Authority,

            2) the need for the preparation of the National Forest
Plan,

            3) the need to negotiate Forest Management Agreements.

      From the time the Act was implemented no new forest
development project could
      be undertaken in any area without first negotiating and
signing of the Forest
      Management Agreements relating to that area.




 2.4 The Papua New Guinea Forest Authority and the National
    Forest Board.

The Papua New Guinea Forest Authority officially came into existence
on 1st January
1993. The National Forest Board met in February 1993 for the first
time.
A moratorium on new projects was strictly enforced with no new
permits approved
during the year 1993.

2.5 Forestry (Amendment) Act - 1993

Amendments to Forest Act 1991 were approved by the Parliament in

Page 19 screenshot
April 1993.
These Amendment corrected some anomalies in the original Act and
provided for
the modified National Forest Board structure_

2.6 National Forestry Development Guidelines

In 1993 the Honourable Tim Neville MP Minister for Forests proposed
National
Forestry Development Guidelines. These guidelines were endorsed by
NEC in
November 1993.

2.7 National Forest Development Programme

According to the National Forest Board Policy document of 1991, it
was the
responsibility of the National Forest Board to prepare the National
Forest
Development Programme for approval by the National Executive
Council. However,
this was not done.

2.8 Timber Supply Agreement (TSA} Concept

In 1993 the Honourable Tim Neville MP Minister for Forests
introduced the concept of
the Timber Supply Agreement (TSA) based on a decision of National
Executive Council.
This concept is not mentioned anywhere in the Forestry Act of 1991.
According to
the TSA concept the entire country was demarcated into 24 separate
TSAs. The
intention was to grant the Timber Supply Areas to large logging
companies to ensure
that they get adequate timber to carry on timber development on a
sustainable
basis.

In the case of Turama Project area the concept was advertised in
early 1994 as TSA 5
and the Honourable Tim Neville MP Minister for Forests requested the
developers
who were interested in the project to submit Feasibility Study
proposals. The
Turama Forest Industries Pty Ltd submitted a detailed proposal
giving importance to
down stream processing and setting up of a Plywood factory.
Proposals for



9
    development were also submitted by other companies. However, with

Page 20 screenshot
the
  change of Government in September 1994 the TSA concept was
abandoned. Turama
  Forest Industries Ltd thus failed to get additional areas for
logging under the TSA
  concept

  2.9 Baimuru/Kikmi Area or TsA 5 not for any s edfic

   On 14th November 1994 the then Managing Director, Ms Jean Kekedo,
OBE informed
   the Chairman of Kikori Timber Investment Company Pty Ltd that the
Land Group
   Incorporation in the Baimuru/Kikori area or TSA 5 is not for any
specific timber
   company, but it was a requirement of the Forest Act 1991 that
before the Forest
   Management Agreements (FMAs) were signed the resource owners must
be
   incorporated into their land groups. dbit

  2.10 The then Mana in Director National Forest service Ms Jean
                       Kekedo OBE outlined the Government Policies
and
                       procedures to Goeheae Landownner Company

  On 3rd January 1995 then Managing Director National Forest
service, Ms. Jean Kekedo
  OBE sent a letter to Goeheae Landowner Company wherein she
discussed the
  Government polities and the various procedures that have to be
followed in terms.
. of the Forestry Act as follows:-

                       -Present Goverment forest policies and
legislations are geared towards
                       proper use and management of the nation's
forest resources on a
                       sustainable basis and the benefits accruing
from forest developments are far
                       reaching to especially the resource owners.

                       Among the various government policy reforms,
those you need to note are:-

                                           forest resources are used
and managed on a sustainable basis;
                                           on-shore processing and
export of finish wood products;
                                           phase out log export;
                                           increase monetory benefit
to resource owners; and
                                           reviewing of all existing
projects.

Page 21 screenshot
                       In keeping with the above stated policy
reforms, there are set procedures
                       (by legislation) for the acquisition and
allocation of timber resources. To
                       acquire and allocate the Upper Purari Timber
Area therefore, the following
                       summarised procedures shall apply:-

                       Step 1. The Gulf Provincial Government to
recognise the potential of the
                       Upper Purari timber area and have it listed
in it's Provincial Forest Plan as
                       required under Section 54 of the Forestry
(Amended) Act 1991;


                10
Step Z The PNG Forest Authority (PNGFA) assisting the Gulf
Provincial
Forest Management Committee (PFMC) and the Provincial Government to
identify the true landowners and incorporate them into their
respective Land
Groups or Clans as required under the Land Groups Incorporation Act.
This
task will satisfy the legal requirements of Section 57 of the
Forestry
(Amended) Act 1991;

Step 3. The PNGFA to execute a Forest Management Agreement (FMA)
with
all the registered incorporated Land Groups or Clans as required
under
Section 58 of the Forestry (Amended) Act 1991;

Step 4. The National Forest Board. (NFB) shall advise the
landowners, the
Provincial Government and the National Member of Parliament for the
area
its intentions to allocate the timber resource as required under
Section 59
of the Forestry (Amended) Act 1991;

Step 5. The NFB shall then advertise the resource area to seek
expressions
of interest from registered forest industry participants as required
under
Section 64 of the Forestry (Amended) Act 1991. However, where .the
resource area is an extension of an existing approved operation or
project
the Board may consider proposals without advertisement for open
tender;

Step 6. After receiving and complete evaluation of development

Page 22 screenshot
proposals
by the PFMC (assisted by the PNGFA); it shall forward it's report
and
recommendations to the Board as to the proponents with whom further
negotiation should. proceed;

Step 7. After the PFMC (assisted by the PNGFA) has successfully
negotiated a project agreement in accordance with Sections 70 and 71
of MO
Forestry (Amended) Act 1991, it shall submit the final draft of the
project
agreement to the Board for consideration;

Step 8. Where the Board is satisfied with the final draft of the
project
agreement, it shall execute the project agreement on behalf of the
Authority
and recommend to the Minister to grant a timber permit (Section 72
of the
Forestry (Amended) Act 1991);

Step 9. The Minister shall then invite the person with whom the
Authority
had entered into a project agreement to make an application and
after
satisfactory completion be issued a timber permit (Section 73 of the
Forestry
(Amended) Act 1991;

Std 10. Having granted a timber permit and approval to the project's
environmental plan and the forest working plans, logging operations
may
commence,.


                                11
       I hope the above now provide you an insight to the various
steps we need to
       consider and take in acquiring and allocating forest
resources.

       In so far as the Upper Purari timber area is concern, my
staff have
       completed the job of incorporating the various Land Groups
within the area
       in August 1994. As soon as the Lands Department have
completed
       registration, we will return to the area to execute the
Forest Management
       Agreement with the said registered Land Groups.

       Furthermore, in regard to the allocation of the Upper Purari
Timber Area, it
       has been a long term intension of the Authority to see that a

Page 23 screenshot
major forest
       industry development is established within the Kikori Baimuru
region of
       the Gulf Province. In order for this to happen in the
shortest possible time,
       we should consider allocating the resource to an existing
forest industry
       participant.

       If you share this view or have any others, I will be
delighted to hear them
       from you.

       Yours sincerely


       J.L. KEKEDO OBE
       MANAGING DIRECTOR?
       cc:   Divisional,Manager Resource. Development
       cc:   Divisional Manager - Landowner Liaison
       cc:   Regional Manager - Southern    [Exhibit 2A)

2.11 The Forest Agreement to be drafted in consultation with TFI
       and landowners

Then Managing Director, Ms J.K Kekedo, OBE in her letter dated 18
February 1995 to
Turama Forest Industries Pty Ltd mentioned, inter alia, the
following:

        "...given our firm view that this project meets the essential
tenets of the
        National Forestry Development Guidelines, the NFS is pursuing
project
        actualization with vigor.

       To this end we anticipate the following developments:

                Field work for Incorporated Land Groups (1LG) has been
obtained.
                This is now written-up and awaiting gazettal by the
Department of
                Lands and Physical Planning. Given the present
Government's
             desire for new projects, NFS will anticipate full
Gazettal of ILGs and
             press on with next step of seeking a Forest Management
Agreement;


           12
NFS will travel to Gulf on or before 27 February and in association
with the Provincial Government will seek a Forest Management
Agreement (FMA) with landowners. It is anticipated that this will be

Page 24 screenshot
obtained within 10 days field work and no later than 20 March 1995;

A priority action now is to draft forest regulations and we are
presently debating the rightful place and format of much of the
regulatory environment, essentially to determine the shape and
composition of the Project Agreement and Timber Permit. At this
point in time we are disposed to put as much as possible in
Regulations.

Pending agreement on the above, a Project Agreement will be
drafted in consultation with TFI and Landowners and this will form
the basis for negotiating TH's procurement of the said FMAs. It is
envisaged that a draft Project Agreement will be available from 20
March and negotiations commencing shortly thereafer.

TFI might usefully seek a meeting with the Department of
Environment and Conservation with view to ascertaining their
requirements for environmental plans or similar under the
Environmental Planning Act. Once this requirement is clear, TFI may
wish to commence preparation;

Awarding of the Timber Permit • will follow contingent on a Project
Agreement. This may be a very simple document. It may be
necessary to resolve an ambiguity in the adjoining East Kikori TP
should the holders exercise proprietary interest in future
development in blocks 1 & 2 East Kikori. NFS have applied for a
legal ruling through the Courts and will in any event strongly
contest this 'Right' on the basis that the State can not allocate
customary land which has not been acquired_

I trust that this progress is satisfactory and our position
agreeable.

Yours sincerely.

J.L. KEKEDO, OBE
MANAGING DIRECTOR (Exhibit 2B)


                           13
2.12 The, then ManningL Director Ms. Jean Kekedo OBE suggested
    to Turama Forest Industries Pty Ltd that it will not be
    necessary for to respond to the advertisement.

Turama Forest Industries Pty Ltd in their letter dated 2 March 1995
to the Managing
Director PNG Forest Authority mentioned that they were of the
opinion that TP2-12
and formerly TSA5 must necessarily be linked to ensure operating
costs are
minimized_

On 17 March 1995 Ms_ Jean Kekedo sent a reply to Turama Forest
Industries Pty Ltd as

Page 25 screenshot
follows:-

    "Thank you for your letter of 2 March, 1995 in which you respond
to our
    earlier comments regarding the proposed plymil factory. Your
points are
    clear and for the most part in harmony with our postion, with
discussion yet
    required on benefits, charges and incentives. These are points
for detailed
    discussion and negotiation at the time of forming a project
agreement We
    accept responsibility for leading this process and will shortly
open dialogue
    with concerned agencies to that effect.

    The key point though is that we now have three FMAs in waiting
(so as to
    speak) - the FMAs being conditional on gazettal of the
respective land
    groups. You may recall that to save time, NFS agreed to
anticipate land
    groups and pursue FMA in anticipation of land groups. We have
allocated
    additional resources to this and have offered to second a staff
member to
    the Department of Lands and Physical Planning to complete the
requisite
    gazette notices."

     should also point out that notwithstanding any commitments made
by the
    former Minister for Forests through the TSA process, this office
is now
    obligated to go through the formal allocation process by virtue
of being
    deluged by alternative claims on this resource. Accordingly our
strategy will
    be as below:

    1.      PNGFA to draft Project Guidelines - essentially for one
project
            covering the three FMAs with a demonstrated commitment to
            processing and sustainable development. Proponents will be
            required to present a detailed feasibility study;

            Gulf Provincial Government to form PFMC - inaugural meeting
is set
            for 22 March. PNGFA will assist in selecting the two
permanent
            landowner representatives and advocate PFMC adoption of
Project
            Guidelines;

Page 26 screenshot
                             14
      3.     PNGFA to advertise the proposal according to the agreed
             Guidelines. We hope to lodge this advertisement by Friday
24
             March, 1995 and to allow one month for response. Only
registered
             forest industry participants need apply;

      4.  (in meantime) PNGFA to commence discussion with concerned
          Government agencies on concession and incentive
environment for
          a bona tide downstream processing factory in Gulf
Province;

      5.     After consulting with incorporated land groups, PFMC to
evaluate
             proposals and select developer (prior commitments to be
taken into
             consideration);

      6. PNGFA to Negotiate a Project Agreement with selected
developer;

      7. Board to execute Project Agreement and recommend to
Minister to
          grant timber permit (subject to Environmental Plan).

      trust you will appreciate the reasons behind the above
observance and that
      it will not be necessary for TFI to respond to the
advertisement.

      Yours faithfully.

      M. J.L. KEKEDO, OBE
      MANAGING DIRECTOR' (Exhibit 2C)

2.13 Awareness campaign in Gulf Province and incorporation of
      landowner groups

Awareness campaign was conducted by the National Forest Service
Landowner
Liaison Section in August 1994 which was followed by preliminary
steps being taken
for land groups incorporation. The relevant forms completed by the
land groups
were handed over to the Department of Lands and Planning for
gazettal. The
gazettal was done and the certificates of recognition were expected
to be issued if
there were no objections.

2.14 Signing of Forest Management Agreements

Page 27 screenshot
The Forest Management Agreements were done in February/March 1995
under the
supervision of the Divisional Manager Policy and Planning. At that
time the
Certificates of Recognition were not issued by the Registrar of
Titles to the various
Landowner Groups. The Land Groups were interested to know whether
the
resources were ear marked for anybody when the Forest Management
Agreements
were signed. They were told that the process of selection would be
by
advertisement in the gazette.



15
2.15 National Forest Development Plan is a requirement under
                      the new Forest Act

On 23rd March 1994 the then managing Director Ms. Jean Kekedo
informed Mr
Geoffrey Kiwale of Kiwule Business Group Inc. who wanted to start a
sawmill project
as follows:-

                      "Please be advised that the Minister for
Forests has instructed that no work
                      on new projects by way of a sawmilling project
will take place until the
                      following has been completed:-

                                           (a)                     PNG
Forest Authority is properly set up,
                                           (b)
Provincial Forest Management Committees are established,
                                                                   in
each province,
                                           (c)
Registration of Forest industry participants which includes
                                                                   your
Business Group have been completed,
                                           (d)                     A
National Forest Development Plan is in place.

                      These are requirements of the New Forestry
Act." (Exhibit 3)

2.16 Forest Management Agreenent report submitted in April
                      1995.

According to the report on Forest Management Agreement submitted in
April, 1995

Page 28 screenshot
by Dambis Kaip, Forest Management Supervisor, the landowners of
Baina and Sawiti
were told that the Forest management Agreement exercise which PNG
Forest
Authority was co-ordinating was not for one particular company. It
was a legislative
requirement that before any forestry developments take place, Forest
Management
Agreements must be executed_ The selection of the preferred
developer would be
made in accordance with the Government's established procedures.

The Forest Management Agreements in respect of Turama area were
carried out
during the period 27th of February 1995 to 15th of March 1995.

2.17A                                      Land Owners withdraw
signatures from the Forest
                                           Management Agreement
relating to
Kikori Forest Area

On 3rd April 1995 Landonwers represented by Hekiko Forest Pty Ltd
who earlier
signed the Forest Management Agreement informed Ms Jean Kekedo OBE
Managing
Director that they withdraw their signatures from the documents
purported to be
Forest Management Agreement Block I resource area effective as from
the date of
the letter,



16
  The main objections stated in that letter were:-
  "1.          By signing the document, we have given consent for
Turama Forest
               Industries Pty Limited (TFI) to be the Developer of
our forest
               resources in Kaiam, Siawiti and Baina areas.

                (We must make it clear that, that was not our
intention of signing the
                document. In fact, this was not what we were told by
the officers at
                the time of signing in the villages. We never
intended to sign for
                TFI. It was for this reason that, a tribal fight
almost broke out
                between certain clans of Kaiam No. 1 village against
the clans from
                Baina and Siawiti villages.)

Page 29 screenshot
  2.                The proposed Block I area covering our resources is
the same as
                    the TSA No. 5 concept. We understand that, for this
reason, the TFI
                    survey on TSA No. 5 that was carried out during the
period of March
               1994 to September 1994 was accepted by Forests
Authority for the
               purposes of the proposed Block 1 FMA.

                    (The In survey was for TSA No. 5 which was abolished.
The use of
               TSA No. 5 Survey Report for Block T FMA is very
confusing to us.
               We did not understand at all on what basis were we
signing the
               document. It was unclear to us at that time.)

  3.           The Forest officers visiting villages advised us
that;-_.              .
               (a)           The FMA was for Block I forest area
which covers part of
                             the Hekiko forest area.

               (b)                The FMA was to be signed between the
Forest Authority and
                                  the Landowners concerned.

               (c)                The FMA was not for any particular
company nor for TH.

                    The Landowners believed in good faith, it was not for
TFI so they
                    signed the FMA_ We now believe that, this is not the
case after
                    signing the FMA. The Forest Authority have now
collected our
                    signatures and are pursuing for TFI to be the
developer.

                    The Forest Authority by the actions of the officers
concerned had
                    misrepresented their intentions, had misguided us to
believe them
                    that they were doing Government business and had
obtained our
                    signatures by such ill conceived motives to promote
TFI. The
                    motives and actions of the officers concerned are
questionable.


                                                                   17
               4.            if the Forest Authority is recommending TFI

Page 30 screenshot
to be the Developer of
                        the area this is clearly against our wishes
and desire for a separate
                        Developer to develop our forest resources.
(Exhibit 8A)

2.17B                    Landowners were not given opportunity to
discuss
                         and negotiate Forest Management Act with
their
                         Lawyers.

On 7 April 1995 the Honourable Andrew Posai MP, Minister for Forests
informed the
former Managing Director Ms. Jean Kekedo OBE that the land owners
were not even
given the opportunity to discuss and negotiate the Forest Managmeent
Agreements
with their Lawyers. He alleged that this was unacceptable business
conduct, AS a
result they signed a document which they did not understand.
Landowners
deserved better treatment from the Forest Authority officers and
specially when
such officers were fellow country men. Further, the following were
mentioned:-

            "The Landowners wish for and desire a development of
their Hekiko forest
            resources. They also desire a seperate developer for
their timber resources.
            Their reasons for a separate development were as
follows:-

            1.           To allow for competitiveness in provisions
of benefits and
                         participation for the local people.
            2.           To ensure immediate development impact under
a separate package • .                   .
                         of investment."

            3.           To support the Government on its desire to
bring PNG more foreign
                         investments to boost our economy.

            4.           To avoid the TFI experiences of lack of
infrastructural support to
                         Kikori District, lack of support to the
water way people continuous
                         division and conflicts among the people due
to political differences
                         created by in in Kikori.

                            consider that their wish and desire

Page 31 screenshot
genuine and worthy of notice
                        and favourable consideration. As you know
our Government
                        abolished the TSA concept for the main
reason that the concept was
                        foreign and did not recognize our people's
customs, beliefs and
                        tenurial rights over customary land on which
the forest resources
                        stand. In view of this Government policy I
direct you to ensure your
                        forest officers take all necessary actions
to:-


                18
      1. Exclude Landowners from Kaiarn No. 1, Siawiti, Baina,
         Kakedemaiyu, Fogomaiyu and other villages situated
         between these villages along the western side of the Kikori
         river from the FMA recently executed covering Block I
         including a part of Hekiko Forest area. Their letter
formally
         withdrew their signatures to the FMA; and

      2. Process the Hekiko Forest area as a separate timber project
         with a separate FMA over it to be signed by traditional
         Landowners from Kaima No.1, Siawiti, Baina, Kakedemaiyu,
         Fogornaiyu and other villages situated between these
         villages along the western side of Kikori River." (Exhibit
88)

2.18 Reply from Ms Jean Kekedo OBE to the Honourable Andrew
   Posai MP, Minister for Forests.

On 15th April 1995 Ms. Jean Kekedo OBE, Managing Director sent a
reply to the
Honourable Andrew Posai MP, Minister for Forests, as follows:-

      "In the first instant be advised that 1 have asked my staff to
do a full
      analysis of the background dealings concerning this project,
and
      will not be in a position to firmly advise on allocation of
the three
      FMAs until this is to hand. You will appreciate that whilst
the TSA
      concept has, been abandoned, certain and in this instance,
      significant, commitments were made by the previous government
      with respect to allocation of resource in the vicinity now
described
      by the three FMAs. On the basis of this development both East
      Kikori and TFI have an historical claim on these forests.
Hekiko is
      to my knowledge a new player and is without any earlier

Page 32 screenshot
government
       implication as regards commitments to future resource, The
point
       of reminding you of these is to firmly establish the reality
of a
       substantial cost claim against the State should we get it
wrong. In
       the case of TFI, who were invited to undertake a very
expensive
       feasibility study we may expect this claim to be measured in
the Ms
       of millions, hence our caution.

      I must reiterate that our staff have in no respect made any
decisions
      on allocation and the signing of FMAs was firmly undertaken on
the
      basis of assignation of rights to the State and not to any
given
      developer. l must defend this position as regards your
accusation
      that our staff have behaved improperly. To the contrary it
would
      have been wrong and illegal for our staff to have then engaged
in
      discussions/negotiations on a developer. This responsibility
is
      firmly assigned to the PFMC which regrettably has chosen to
delay
      formation despite our protestations. I must also object to
your
      comment that the PNGFA is unreasonably delaying development in


                    19
        this area. We have taken all reasonable steps, including
some short
        cuts, and would be even further on if it were not for the
prospecting
        interests of the new would be developers.

        I trust this clarifies our position.
        Yours sincerely

        MS. JEAN KEKEDO OBE
        MANAGING DIRECTOR' (Exhibit 8C)

2.19A   Statement made by Ms Jean Kekedo that the Forest
        Management Agreement (FMA) is not for a particular
        company.

On 3rd May 1995 the Managing Director Ms Jean Kekedo OBE informed
Hekiko Forest
Landowners as follows:-

Page 33 screenshot
    4_ The purpose of signing the Forest Management Agreement
(RIIA) in
         the area is not for any particular company (including your
intended
         developed but rather to advertise and to select the best
developer
         that can offer Me best for the, landowners rather than just
any one
         that appears first at the “front door”. This is the
Authority's position
         as required under the Forestry Act

       5.    The Authority is not recommending Turama Forest Industries
(7TO
         as the sole developer of the resource. But rather to
advertise the
         resource as mentioned above and select the best company-+T
may
         be one of the contenders for the development of that
resource.
         Therefore, I do not see any basis for withdrawing the
signatures,
         you are not consenting to forest development over your land.
         Landgroup Incorporation (ILG) and Forest Management
Agreement
         (FMA) are only two (2) of the many prerequisites for forest
industry
         development l advise you to re-look at the position you had
taken
         and to see if it is in your interest to withdraw your
signatures."
         (Exhibit 5)


                                   20
2.19B          Mr Dike Karl's Paper dated 23rd May 1995.

On 23rd MaV 1995, Mr Dike Kari Divisional Manager Policy and
Planning submitted a
paper which the Managing Director wanted him to utiiise in his
negotiation. The
relevant sections in that paper read as follows:-

               "TURAMA-KIKORI-RAIMURU
               FOREST MANAGEMENT AREA

        1.     INTRODUCTION

               It has been decided by the Papua New Guinea Forest
Authority
               (PNGFA), in consultation with Gulf Provincial Government

Page 34 screenshot
through
             the Provincial Forest Management Committee (PFMC), and the
             landowners of the Turama, Kikori and Baimuru Forest
Management
             Areas, that a forestry project covering the above Forest
Management
             Area's (FNMA's) will be established in the Gulf Province.

             The Project will involve the harvesting and utilisation of
the forest
             resources of the Turama/Kikori/Baimuru Forest Area (Hereon
stated
          as the Forest Area). This paper provides specific
information and
          guidelines to assist the potential investor who are
intrested in
          participating in this project.
          GUIDELINES                . • .

          Proposals for developing the Forest Area should be
consistent with
          both the National Forest Policy (1991) and the National
Forestry
          Development Guidleines (1993)

             SPECIFIC GUIDELINES

             (a)    Area Nett

                         Turarna                   41,600    HA
                         Kikori                    44,600    HA
                         BairnuruiPurari -        180,000    HA
                              Total -             266.200    HA

             (b)    Forest Resource Volume

                         Turama                     852,00mi
                         kikori                    847,400mJ
                         Bairn UM                 3,150,000m3
                              Total               4,849,400m3


                                  21
              (e)    Timefrarne

                     We envisage this project to commence as soon as an
                     agreement is reached and all approvals for the
Forest
                     Working Plan, Environment Plan and the manning and
                     localization plans are received.


                     DIKE KARl
                     Divisional Manager - Policy A Manning

Page 35 screenshot
                23rd May 1995.• (Exhibit 8)

2.20 Gulf Provincial Forest Management Committee inaugural
      meeting

The members of the Gulf Provincial Management Committee were
gazetted on 4th
February 1994 (Exhibit 61 The Gulf Provincial Forest Management
Committee held its
inaugural 'meeting on 26th May 1996 - which was attended .by the
former General
Manager Mr Keith Dolman. According to Section 22(1)(d) of the
Forestry
Amendment, Act 1993 two persons are to represent Land-owing groups
in the
province to be nominated by the Provincial Forest Management
Committee. This
was not done at the inaugural meeting.-
The views, expressed by-Keith. Dolman. and Ben Everts of the
National Forest Service at
the inaugural session Were recorded in the Committee Meeting minutes
as follows:-.

      Mr Keith Dolman

      It is important that we control all forestry activities not
only in Gulf but
      throughout Papua New Guinea. By doing so, we have the forestay
Act,
      Forestry Policy, the Forestry guideline are in place. All
forestry project in
      the country will have to follow all legal requirement under
existing laws of
      this country.

       Gulf was the first province being tried out at present under
the new forestry
       concept. Introduce to the Committee members the extension of
Turama
       Project (FP 2-14. A proposal has been put through for an
extension of the
       project to Baimuru.

      The proposal has been put through by 45 clans and chief
inducing their
      elected leaders in the Gulf Provincial Government

      Existing projects such as Gopera Investment and the current
concession
      under WI is not being affected by the proposal.



                         Requested the Committee to look at the

Page 36 screenshot
project guideline and approve them
                         if we could at the Provincial Forest
Management Committee level and
                         enclose the project guideline to the
National Forest Borad level

                         There is no better deal than the one that
has been put forward by M and
                         the committee should be mindful of that."

                          Mr Ben Everts

                         The proposed project have gone through all
legal requirement except the
                         formal endorsement. from the P.F.ILC-"

     2.21A                                   Gulf Provincial Forest
Committee meeting held on 26
                                             May 1995.

     The following members were present.
                         1.                  Mr. Albert K Milala
Acting Secretary, Department of Gulf

(Chairman of Committee)
                         2.                   Mr Andrew Tagamasau
Regional Manager, PNGFA (Southern Region)
                         3,                   Mr Farema Harivita
Alternate Member representing Local. Level, _

Government
                                             Mr:Lari Heni
-                         Member representing N.G.O
                         5.                  Mr Thadeus Soeka
Alternate Member representing N:G.0
                         6_                  Mr Michael Wanaliu
Forest Manager. Gulf Province and minute

secretary to the committee.

     The Chairman introduced the submission of Turama Extension to
the Committee
Members. After discussion it was resolved as follows:-

                         1.                  To recommend to the
National Forest Board that it adopts the
                                             Guidelines.

                         2.                   To advise the National
Forest Board that the Project Proposals meets
                                              the Guidelines.

                         3.                  To advise the National
Forest Board that the Proposal submitted by TFI

Page 37 screenshot
                                             has the full support of
the GPFMC.

                         A.                  To recommend to the
National Forest Board that it further process the
                                             proposal towards formal
signing by the Board and the Board's
                                             recommendation to the
Minister to issue a Timber Permit in the terms
                                             and conditions of the
project agreement annexed.


                                    23




         However, Mr Lari Heni member representing GIGO, mentioned
during the discussion
         that they were not given enough time to see the submission
and if it was endorsed
         without proper consultation they would have problems. There
was an existing
         problem with the project which they should address first
before they endorsed the
         submission for new areas. He was aware of the water way
problem which might
         blow out anytime with permit review which had been talked
about for the last two
         to three years (Exhibit 7).


         The Chairman and acting Provincial Secretary Mr Albert K.
Malala mentioned that the
1        committee would not consider any more new projects for
development unless they
         had a Provincial Forest Plan in place.


         2.21B   Mr Andrew Tagamasau a member of the Gulf Provincial

                 Forest Management Committee         signs the FMA
1                certificate as ’Secretary’ to the   committee.


I        Mr Andrew Tagamasau, signed the certificate required under
section 58(5) without
         any authority from the Gulf Provincial Forest Management
Committee. This was
         brought to his office in Port Moresby by Mr Joseph
Badi ,on .the instruction of the.
         former General Manager Mr Keith Dolman. Although the

Page 38 screenshot
certificate was dated.26 May
         1996 It was signed very much later. (Exhibit 9).


         2.22 National Forest Authority Board Meeting held on
Tuesday 30

             May 1995.


         The following persons were present at the Board meeting.
         Chairperson: Ms. Jean Kekedo OBE (National Forest Service)


              Members: Mr. Anthony Honey (Forest Industries
Association of PNG)
                       Mr. Sinai Brown OBE, MPA (National Premiers
Council)
                       Mr. Brian Brunton (National Alliance of Non-
Governmental
                       Organisation)
                       Mr Soiat Williams (Nominee of the Secretary,
Department of
                       Personal Management).
                       Mr. Guy Kula (Nominee of the Secretary
Department of
                       Environment & Conservation)


111          Secretariat: Mr. Alan Ross OBE (Secretary)
                      Mr. Chris Marlow (Corporate Secretary)


                                   24



      Observers: Mr.   Keith Dolman (National Forest Service)
                 Mr.   Geoff Stocker (National Forest Service)
                 Mr.   Dike Kari (National Forest Service)
                 Mr.   Maurice Coughlan (National Forest Service)
                 Mr.   Hakiso Solomba (National Forest Service)

 The Board meeting commenced at 9.15am. At 12.45 the acting Minister
for Forests
 Honourable Mr. Titus Philemon and the vice Minister for Forests the
Honourable Bitan
 Kuok attended the meeting,.

 The acting Minister in addressing the Board said that if
differences arose they could
 be ironed out and that in some important cases because of the
nature of a project
 and demands of landowners that the Board needed to give special

Page 39 screenshot
consideration to
 dealing with such matters even though the distribution of Board
papers to members
 may be late The Minister gave as an example the project in the puff
Province where
 such special consideration by the board needed be given.

    2.23 The Policy Paper Number P2

 The Chairperson circulated to the Board a policy, paper P2 although
it was originally
 not on the agenda. of the. Board meeting fixed for 30 May 1995 and
advised the
 Board that it was an urgent matter that needed to be dealt with by
the Board. The
 paper was prepared by the Project Lawyer Mr. M. Coughlan and was
approved by Mr
 Keith Dolman, the General Manager, on 293.96 and presented to the
Board by Ms.
 Jean Kekedo OBE Managing Director. The Policy paper reads as
follows:-

         "FOR THE BOARD
         POLICY PAPER NO. 2
         SUBJECT: Turama Forest Industries - Project Agreement

         A.   RECOMMENDATION:

           That the Board dispense with advertising the Project
under Section
           64 of the Forestry Act and.
      (2) That the Board consider the Project Agreement and when
satisfied;
           Ii)   Execute the Project Agreement
           (ii) Recommend grant of a Timber Permit by the Minister
in
                 favour of Turama Forest Industries.


                     25
B.     FACTS AND CONSIDERATION:

       BACKGROUND:

       The Board have previously considered this matter in relation to
a
       letter of intent to Turarna for the KiKori area (1994) and
       authorisation for Forest Management Agreements to be entered
       into 1995. This has now been done.

       In reference in the letter of intent Turama Forest Industries
has
    carried out a survey of the area and a map based on the
agreement

Page 40 screenshot
      IFMA's) has been prepared. In accordance with the provision of
the
    Act due consideration was given to alternative development
    options and TFI were encouraged to proceed on the basis that
their
    activity was the most suitable use of the area for the benefit
of
    customary landowners.

      A project agreement has been negotiated with the applicant in
      accordance with the Act and having regard to matter of
      sustainable yield and appropriate downstream processing
      undertaken by Turama Forest Industries.

      In accordance with the Act the Provincial Forest Management
      Committee has deliberated on the matter and (with assistance
      from officers of the National Forest Service):-

      (a)    Adopted project guidelines for this project.
      (b)    Evaluated the Project Agreement
      (c)    Recommended consideration by the Board and
             recommendation for issuance of a permit by the Minister.

The matter is now before the Board for:-

      Dispensation from advertisement as extension of an existing
      approved project. This is recommended for approval as
      appropriate under the Act, Turama Forest Industries having a
      permit for an existing area.

t2) Consideration of the Project Agreement and recommendation to
    the Minister for execution as recommended in the Gulf Provincial
    Forest Management Committee's decision of the 26 of May 1995.

All matters having been fully covered, further attention by the
Board is
sought to finalise implementation of this proposed operation.

Section 64 of the Forestry Act 1991 states as follows:-

      "(1) Subject to Subsection (3), after completion of -

             (a) a development options study under Section 62; and


                              26
                  (b)   project guidelines under Section 6.3, the Board
shall
                        advertise the forest development project and seek
                        expressions of interest from registered forest
                        industry participants.

            (2)   Advertisement under Subsection (1) -

Page 41 screenshot
                 (a)   shall be made in Papua New Guinea; and
                 (b)   may be made outside Papua New Guinea; and
                 (c)   shall he done in the manner considered by the
                       Board likely to be most effective; and
                 (d)   shall specify a date on or before which project
                       proposals for timber permits may be lodged.

           (3)   Where a forest development project -

                 fa)   is an extension of an existing approved operation;
                       and

                 is consistent with the National Forest Development
Program,
                 the Board may consider proposals without advertisement
for
                 open tender under Subsection (1).

"

  This section requires no specific comment apart from the fact that
as no National Forest
  Development Program exists the application cannot be said to be
inconsistent with this
  criterion. As Turama Forest Industries have an existing permit,
their operation is clearly
  extension of an existing" approved operation.

    Section 72 state{:-

           "(1) The Board shall

                       negotiate a project agreement in accordance with
Section 70; and

                       where satisfied that the draft project agreement
makes adequate
                       provision for all aspects of the project -

                       (i)         execute the project agreement on behalf
the Authority;
                             and

                       (ii) recommend to the Minister to grant a timber
permit to
                             the person with whom the project agreement
has been
                             entered into: and

                       where not satisfied that the drat( project
agreement makes
                       adequate provision for all aspects for the project
- return the draft
                       project agreement to the Provincial Forest

Page 42 screenshot
Management
                    Committee with details of the matters therein
requiring further
                    negotiation.


                    27

     (2) Where a draft project agreement has been returned to a
Provincial Forest
         Management Committee under Subsection (1), the Provincial
Forest
         Management Committee shall carry out such further
negotiations as are
         necessary and submit a further final draft project
agreement for
         consideration by the Board in accordance with Subsection
(1).

At the sixth meeting of the Board on the 12 January 1994 the Board
approved the following
resolutions:-

(1) Authorise the Minister to enter into a "letter of commitment and
intent" with Turama
    Forest Industries that the Minister will grant TSA 5 to Turama
Forest industries so
    that Turama may now commence the final aspects of its
feasibility study.

(2) Make the approval in 1 above subject to the Board making a
recommendation on the
    TSA 5 document before it is issued to Turama Forest industries.

Whilst the TSA concept and advertising (with the exception of
Josephstaal and Kikori) have
been abolished it is consistent with the course of conduct of the
Board including the
authorising of the above letter of commitment to Turama and their
response by way of
expenditure on feasibility studies and other costs that the
matter„ rather than being reopened by
way of public tender, be considered extension of an existing
approved operation and
Advertising be dispensed. with in accordance with Section 64.

Accordingly, we seek consideration of the attached project agreement
by the Board and
recommendation to the MiniSter.

C.   STAFFING IMPLICA T7ONS:

     Nil

Page 43 screenshot
D.   LEGAL IMPUCATIONS:

    This is the first Permit to be forwarded for consideration since
implementation of the
    Act three years ago. I# will be a landmark as the first permit
under the 1991
    Legislation and Forestry guideline.

E.   FINANCIAL IMPLICATIONS:

    The project in its forestry aspect delivers 180,000 cm per year
at a time when Logging
    levels are at an all time low for weather and other reasons.
This Is compatible with
    requirements from government for productivity. The accompanying
processing
    aspect will be fully in accord with sustainability„ investment
and downstream
    processing required by the guidelines.

F.   ATTACHMENTS:

    (1) The Minutes and Resolutions of the Gulf Provincial Forest
Management
         Committee dated 26 May 1995.

     (2)   Project Agreement


                                  28
       SOURCE:             PROJECT LAWYER

       Paper approved by: Mr. Keith Dolman   29.05.95
                          General Manager    Date

       Paper endorsed for presentation to the Board:
                          Ms. Jean Kekedo OBE     29.05.95"
                          Manasiing Di/1.CW Date

2.24 Board Resolution on Turama Extension - Board Meeting held
      on 30 may 1995

The Chairperson circulated to the Board Policy Paper No. P.2 and
advised the Board
that it was an urgent matter that needed to be dealt with by the
Board.

Mr. Honey declared that he had an interest in the matter and
thereupon left the
Board meeting.

After being invited so to do, Mr 'Coughlan and Mr Dolman both spoke
on the Board
paper.

Page 44 screenshot
Resolved:                                                           .L.

        (Mr Brunton abstaining)

      .`[al That the Board exercise its powers under Sections 64 and
72 of the
             Forestry Act 1991 and dispense with advertising the
project and
             after having considered the matter and it having been
satisfied
             with the project resolved to execute the said Project
Agreement
             and to recommend a grant of a Timber Permit by the
Minister for
             Forests in favour of Turama Forest industries; and

        (b)   That the Board notes that Mr Brunton needed time to read
the
              papers and that he would give his views on the project
within 48
              hours to the Board Secretary who will then advise all
Board
              members of Mr Brunton's views,"

2.25 Facsimile message to National Forest Authority by Mr. B. D.
      Brunton on 31.05.95

Mr. B.D. Brunton sent a facsimile message to the National Forest
Authority for the
attention of Ms. Jean Kekedo on 31.05.95 explaining the reasons for
the stand he
took at the Board Meeting held on 30.05.95. His message reads as
follows:-


                                           29
                   "To         National Forest Authority
                   Attention : Ms. Jean Kekedo OBE
                   Subject:    Turama Forest Industries - Project
Agreement

                   Dear Chairperson,

                 1.      At yesterday's Board meeting I undertook to
get you a response on
                       this matter, after l declined to vote. The
reason why I declined the
                       vote was because l and other board members
were not given
                       sufficient time to study the papers put
before us. 1 note that no
                       member of the board had time to read the

Page 45 screenshot
project agreement that
                         was put before us.

                   2.    My vote in this matter should be recorded as
"No."

                 3.      The reasons for my negative vote are that it
is my view that the
                       Authority is obliged to advertise this
concession, and that the
                       explanation given to the board, to the
contrary, was inaccurate.

                 4.    I also believe that it is,a requirement of
the Act. for a. National Forest
                       Plan to be in place, and for a provincial
forest plan to be in place.

                 5.    For these reasons alone, it is my view that
it would be improper for
                       you to recommend to the Minister that he
signs a timber permit over
                       this concession, and I would appreciate it if
you conveyed my view,
                       namely: that if he signs he will be
committing an illegal act, to the
                       Minister.

                   6.    I have other worries about the project
agreement

                         In law, it is really a 35 year export logging
concession, with an
                         agreement to agree on the construction of a
plywood mill. I do not
                         believe the Authority should be entering into
such a loose
                         arrangement The obligation on the company
needs to be much
                       firmer in law. This is because market
conditions could change to
                       such an extent that the company would not
wish to process. We
                       would then be left with a 35 year logging
concession. l am mindful
                       that the World Bank is insisting that the
same tax regime apply to
                       round log exports and to downstream
processing.

                 7.    I do not believe that we should rush this
project without advertising.
111                    The basis of private enterprise and plural
democracy, as we know it

Page 46 screenshot
                        in Papua New Guinea, is fair competition. We
should not encourage
                        a monopoly-like situations. Let the different
companies bid openly,
                        and let the board and the provincial forest
management committee
                        assess the bids, and make a recommendation to
the minister.


                                30
      8.      The fact that the members of the board who voted in
favour of the
            project, did not read the Project Agreement, is a major
flaw in the
            conduct of the board.

            B.D. BRUNTON

            31st of May 1995" (Exhibit 10A)

2.26 Honourable Titus Philemon Minister for Forests signed
      Timber Permit No. 2.12A on 1.6.95.

Honourable Titus Philemon, acting Minister for Forests signed the
Agreement
between the Papua New Guinea Timber AuthOrity and Turama Forest
Industries Pty
Limited on 1 June 1995 whereby Permit 1\1° 2-12A was granted to
Turama Forest
Industries Pty Ltd (Exhibit 1013).

2.27 A meeting between a landowner group from FICA Block Ill of
      Baimuru-Purari Area meetin and Mr. Dike Kari Divisional
      Manager Policy and Planning on 2.6.95.

A landowner group from FMA Block III belonging to Landowners company
Baimuru District Resources Pty Ltd met Mr Dike Kari Divisional
Manager Policy &
Planning on 2 June 4995 to present their _complaint over signing of
TP.over Blocks I, II
and-Ill to Turama Forest Industries Pty Ltd. Mr. Dike Kari there
upon submitted a
memo to the managing Director on this matter on 5.5.95. The main
issues mentioned
in the memo were as follows:-

            1.    They suspect political involvements in this
project resulting
                  in by passing of procedures.

            2.    The project was not advertised for other
contenders to
                  submit development proposals.

Page 47 screenshot
              3.     The Forestry guidelines were not followed.

              d.     The landowners from Baimuru District were not
consulted.
                     This was their request at the signing of FMA.

              5.     Premier for Gulf is supporter of TR therefore
decision of
                     PFMC is biased.


                                                     31
                              6.       TF1 is Rimbunan Hijau related.
Therefore landowners of
                                       Balmuru do not wish to see any
Rimbunan Hijau related
                                       company in their area.

                              7.       Project should be stopped because
the forestry guidelines
                                    were not followed. (Exhibit 11).
                              Ms. Jean Kekedois comments on these
matters were as follows:.
                              1.       No comments.

                              2.        Act allows for extension.

                              3.       Guidelines were followed.

                              4.       Not aware of this.

                              5.       Premier not Member of PFMC, he was
not there when the
                                       decision was made.

                              6.       TFI is not Rimbunan Hijau.

                              7.   They were followed. (Exhibit 11)

               2.28 Article In the Saturday Independent of 10 June 95
urging
                       Ombudsman to Probe Turama Deal.

             On 10 June 1995 the Saturday Independent carried a news
item on the front page
             titled "Ombudsman to probe Turama deal." The article
mentioned that the National
             Alliance of Non-Governmental Organisation (NANGO) has
claimed that the acting
             minister Titus Philemon signed and granted a timber
permit to Turama Industries to
             develop a logging project over 2,666,000 hectare in the
Gulf Province contrary to the

Page 48 screenshot
              requirement of the Forestry Act.

             The NANGO also called upon the Ombudsman Commission to
investigate into all
             aspects of the allocation of the Turama Project,
alleging that political pressure was
             brought to bear on the National Forest Authority and
the Board. They also want the
             timber permit to be withdrawn and the project
advertised and an assurance from
             the Government that it would honour its commitment to
conservation in the area


                                               32
      2.29 Letter to Honourable Titus Philemon MP Acting
for
             Forests from Ms Jean Kekedo OBE liana • in Director.

     On 13.6.95 Ms Jean Kekedo sent a letter to the then acting
Minister for Forests with
     copy to the Ombudsman CommissiorL The letter reads as follows:-

                    "Date: Tuesday, 13 June 1995

                    To:   Hon Titus Philemon, MP
                          Acting Minister for Forests
                          P.O. Box 5055
                          HOHOLA

                    From: Jean Kekedo, OBE
                          Managing Director

                    Subject: Turama


                   Please find the following background to the
recent criticism through
                   the press against awarding of a timber permit to
Turama Forest
                   Industries. I seek your advice on this, noting
particularly the
                   headline call in the 'Saturday Independent' on .
10/6/95, and the Post
                   Courier on 1315/95 for an Ombudsman Inquiry.

                    1.    ALLEGATION THAT PROJECT IS ILLEGAL IN-AS-
MUCH AS
                          IT IS NOT AN EXTENSION AND SHOULD BE
ADVERTISED.
•                   The following chronology clearly indicates
passage through two
                    governments and three Ministers for Forests and a
consistent intent

Page 49 screenshot
                    to extend timber permit TP2-12 as basis for a
large downstream
                    processing plant in Gulf Province.

                          March 1988 TP2-12 was issued to Turama
Forest Industries
                          (TR) for a 20 year period;

                          September 1992 At the behest of Government
(and under
                          threat of losing their timber permit) TFI
submitted a proposal
                          for additional resource on which to develop
a plywood mill;

                          September 1993 TFI prepared a submission
for a veneer and
                          ply processing facility to be based on a
243,000 Ha
                          extension to existing TP2-12. After
analysis PNGFA


              33
indicated that the area between TP2-12 and TP2-15 would be
made available to TFI. TFI asked that should (after
inventory) the resource not be sufficient then additional
resource be made available;

November 1993 PNGFA advised TFI that the log supply area
reserved for Turama will initially be from the Western
boundary of the Gulf Province to the Purari area in the East,
excluding TP's2-13,2-15 and 2-19; and a corridor up the
Kikori river, up to 20km wide, to accommodate the NEC
approved (CAD project of chevron/W4VF;

March 1994 Conceptual proposal for development of TSA
No. 5 submitted by TFI outlining basis for 2-4 line plymill;

March 1994 Forest Minister wrote to TFI outlining PNGFA
Board approval and providing letter of intent to enter into
TSA under specified terms and conditions.

      Area as previously described
      Entitlement to 80% of Merchantable Timber
      No Guarantees on FMA's (as yet to be negotiated)
      but assurance of best endeavours to obtain FMA's
      Feasibility study due by 3117/94.

April 1994 Press statement from Minister for Forests noting
that TFI will have the exclusive right for 80% of the
merchantable timber in TSA 5 as it becomes available and
PNGFA to negotiate FMA's with view to making timber
available;

Page 50 screenshot
July 1994 TF1 submitted a fully detailed feasibility study for
plywood facility inclusive of conditions for investment and
requesting additional resource.

November 1994 Letter from Deputy Prime Minister to Forest
Minister confirming agreement to granting extension to TP2-
12 for areas from Gulf/Western Border as per application,
excluding Kikori TRP area;



re


                   34
      January 1995 PNGFA advised TFI that FMA's under way, and
      indicated acceptance of Project Proposal.

      FACT: THE FMA/PROJECT AREA IS CONTIGUOUS WITH
      TP2-12 AND HENCE THE USE OF "EXTENSION" IS
      JUSTIFIED IN PHYSICAL AS WELL AS CONCEPTUAL.
      TERMS.

2.    ALLEGATION THAT PROJECT HAS BEEN DEVELOPED
      UNDER POLITICAL DURESS AND WITH INDECENT HASTE.

      The above (1.) chronology indicates development over two
      years and through two governments and three forest
      Ministers.

      Prior to acquisition of resource rights, PNGFA conducted
      awareness programs and facilitated the formation of
      incorporated land groups
      - The first of its kind over a large undeveloped area.

      Subsequent to FMA the PNGFA received numerous
      submissions and held numerous meetings with resource
      owners and has consistently maintained the position that:

            The merchantable resource in the FMA areas will
            support only one plywood mill (having regard to the
            ICAD corridor);

            Selection of Developer will follow due process with
            the Gulf Provincial Forest Management Committee
            (PFMC) recommending to the National Board of
            PNGFA;

            However holding that the background precedent (I.
            above) Engenders a strong claim by Turama Forest
            Industries. This position was supported by the
            State Solicitors Office who held that "Damages"
            were incurred and that it was best to settle with TFI.

Page 51 screenshot
      This is the first new timber permit awarded in Papua New
      Guinea in three years. This is hardly indecent haste.


                                                 •



35
3.                             ALLEGATION THAT THE BOARD DID NOT
ADEQUATELY
                               CONSIDER THE SUBMISSION AND JUDGED
WITHOUT
                               BEING SUFFICIENTLY INFORMED.

                               To have provided more time to consider
this project
                               agreement would have delayed this
project by another two
                               months, noting that:

                                                              The Gulf
PFMC was several times delayed and only

deliberated on the proposal one working day prior to
                                                              the board
meeting;

                                                              Resource
owner pressure for a result has been

considerable.

                                                              As
entitled to do so, Acting Minister for Forests
                                                              requested
board to deliberate on this submission.

                                                              PNGFA
professional and legal officers provided a
                                                              full
briefing on this project during the board
                                                              meeting;
                                                              The board
was on no occasion pressured to take

                                                              any
particular course of action;

                                                              Of the
five board members present (industry

representative in absentia), four voted in favour of

Page 52 screenshot
                                                           granting
the TP to TFI on the basis of an extension
                                                           to TP242.
Dr. Brunton, chose not to vote noting his
                                                           concern
at not having time to read the full project

agreement.

                                                           This
project has been before the board on two
                                                           previous
occasions, firstly to approve a letter of
                                                           comfort
to Turama, and secondly to approve the

commencement of FMA. This was Dr. Brunton's
                                                           first
meeting (although not gazetted) and he may be
                                                           unaware
that this matter had been before the Board
                                                           twice,
although this was read out in the briefing
                                                           provided
on the day_


      36
4. ALLEGATION THAT PROJECT WAS NOT IN
   ACCORDANCE !MTH THE PROVINCIAL FOREST
   PLAN.

   On board day Dr. Brunton commented that the
   proposal is half a Provincial Plan by virtue of the
   /CAD Environmental corridor and the existing
   projects, ALL of which are respected;

   Lamentable though the absence of National and
   Provincial Plans are, they are not mandatory
   preconditions to the issue of a permit and especially
   where it is an extension to an existing one;

   As there is no Provincial Plan at this time, (due to
   longstanding and ongoing financial constraints),
   this agreement can not be inconsistent with the
   plan;

   There are many requirements of the new Forestry
   Act which are yet to be implemented. It is not
   reasonable to hold all Forest Development pending
   realisation of these.

   The issue of Provincial Plan (as with issue of
   advertisement) were raised with the Board. They

Page 53 screenshot
   were not concealed, The Board was asked to
   exercise judgement on these;

5. ALLEGATION THAT THIS PROJECT UNDERMINES
   CONSERVATION INTERESTS.

   The agreement effectively conserves a large area of
   forest (approximately 1.5 million hectares), and in
   particular protects it from spurious oil palm
   schemes. The area has the potential and now be
   developed into a large and secure ICAO;

   The Department of Environment & Conservation is
   on the Board and voted favour;


      37

   The PNGFA have fully briefed world wide fund for
   nature (WWF) who have indicated happiness with
   this development in-so-far as it relates to their
   interest in the integrated conservation and
   development ((CAD) proposal for the Kikori river.

   The 'D' of 'ICAO' is for development and
   significantly the forest available to TFI occupies in
   area terms only 9% of that part of the ICAD within
   Gulf province (which incidentally is now considered
   to cover the full Kikori catchment and as such is
   very much larger than the proposed 20km strip up
   the Kikori river (as we understand was agreed by
   NEC);

   This 9% is for selective felling at sustainable rates
   to accord with Government Policy (since 1990), and
   the preconditions of the IMF/World bank support for
   structural adjustment and financial stabilisation;

   This is the first large scale forestry development
   project to be designed strictly in accord with
   principles of sustainable development;


   The agreement provides for implementation of a
   PNG Logging Code of practice which is the standard
   for environmental acceptable and economically
   desirable development

6. THE ABOVE DEVELOPMENTS RAISE THE
   QUESTION AS TO WHETHER NANO SHOULD BE
   REPRESENTED ON THE BOARD?

   Even should the occasion have permitted, there is
   issue of appropriateness of distribution and

Page 54 screenshot
   consideration out-of-board of legal documents of
   this kind which are commercially sensitive and
   confidential. The ensuing passage to press
   vindicates caution;


                   38
           Subsequent denial by NANGO of this board's
           democratic right to choose may be construed as
           arrogant, patronising, disrespectful and
           unprofessional. ft certainly makes the board
           unworkable,

           Similarly, presentation 'Out of School' (To press)
           after an overwhelming vote in favour, is an abuse of
           protocol and could undermine credibility of the
           Board.

           This is not the first time within the context of the
           board of the PNGFA, that NANGO has acted against
           project development. Dr. Brunton has called for an
           inquiry against PNGFA staff actions in the East
           Sepik area and the Sagaral Gadaisu project, and
           presently his parent NGO organisation is actively
           promoting landowners dissension to the April
           Salumei project over which the state has acquired
           the timber rights.

  With this Background, Minister, you will appreciate that the
  officers of the National Forest Service are extremely.
  concerned at the allegations against the granting of the
  Turama Timber Permit.

  We believe that this is a worthy development which should
  be acclaimed as a positive stride toward responsible and
  sustainable Forest Development and are understandably
  aggrieved to now be subject to such damaging and one-
  sided allegations.

  Given the high political profile and extremely negative
  portents against the Board, the PNGFA, and the Forestry
  Act, may l request that you pass this briefing to the Deputy
  Prime Minister and at your discretion, the Prime Minister and
  having considered all options, advise me on an appropriate
  action.


                                    39

                            KEKEDOJ OBE
                         MANAGING DIRECTOR
                         cc         Rt. Hon Sir Julius Chan, KBE,
GCMG, MP
                                   Prime Minister

Page 55 screenshot
                                  Hon. Chris Haiveta, MP
                                  Deputy Prime Minister & Minister
for
                                  Finance & Planning

                                  Mr. Kenneth Noga, CBE
                                  Director General - National
Intelligence
                                  Organization

                                  Mr. Sao Gabi
                                  Auditor General

                                  Mr. Simon Pentanu
                                  Chief Ombudsman

                                  Mr, Sinai Brown, MP.
                                  Premier - East New Britain Prov.
Govt.

                                  Mr. Riddler Kimave
                                  Premier Gulf Provincial
Government"
                                  (Exhibit 12)

        2.30 Ms Jean Kekedo OBE Managing Director informed other
              Members of the Forest Authority about Mr. Brunton’s
              Decision.

        On 15.6.95 Ms. Jean Kekedo OBE Managing Director informed
the other members that
        Mr_ Brunton has provided to her his views and his decision
was not to support the
        Board's resolution on the project. However the copy of Mr.
Brunton's reply received
        in the Managing Director's office on 31.05.96 was not
circulated. (Exhibits 13A to
        130)


                                         40

2.31 Concern of Mr Iamo Ila Secretary,Department of
       Environment and Conservation on the Board decision of
       30.05.96.

Mr. lama lla who is a member of the Forest Authority expressed his
grave concern on
some issues relating to Turama Forest Industries after discussing
the matter with Mr.
Gal Kula who attend the Board Meeting that day as nominee on his
behalf. The main
features mentioned in his letter dated 07 June 1995 were:-

Page 56 screenshot
                      Lack of Demonstrable Provincial and National
Forest Plans.

                      The Turama project (a major project for the
province)
                      appears to have been promoted in the absence of
                      particularly a considered provincial forest plan
or even a
                      national forest plan.' This demonstrates adhoc
planning that
                     I prefer not to see repeated in future
instances. The•Forest
                     Act has been. in _place for 3 years now, which
is surely
                     adequate time for proper preparations to be in
place. I
                     believe we urgently need a board policy that -
even apart
                     from the legalities - recognises the
circumstances when a
                     timber consent is to be considered with or
without the ..•,
                     background of a provincial forest plan.

                2.    Legal authority to issue such consents. 1 would
like a clear
                      legal opinion to be placed infront of the Board
                      demonstrating how such consents can be issued
having
                      regard section 54 of the Forestry Act which
states that
                      "Forest Resources shall only be developed in
accordance
                      with the National Forest Plan.-

                3.    Uncertainties in the recent conditions

                      It is not clear from the consent conditions as
to whether
                      Turama Forest Industries can operate in the
wider area of
                      the Forest Management Area, The conditions
attached
                      should make it clear that operations can only
take place
                      within certain specified boundaries. I do not
want to be
                      faced at some future date with reports of
logging outside the
                      specified areas; or some executive decision to
"extend"
                      operations with the wider area on the basis that
the consent

Page 57 screenshot
                       actually covers half of Gulf Province. I have
specific
                       concerns relating to the impact of the Forest
Management
                       Agreement on the /CAD area and I write to you
specifically
                       on this issue.


                    41
       4.    Lack of Adequate Prior Circulation of the relevant agenda
             item.

             The matter, as you will have recorded in the Minutes was
             only tabled and considered at the same meeting. The
             primary purpose of the agenda under discussion was the
             issuance of a logging contract to Turarna Industries for
             several sites in the Gulf Province. This was, to my
             knowledge, the first significant consent to logging under
the
             current Forest Act. Due to the vast timber size of the
area to
          be allocated, and the fact of it being the first
allocation of
          the resource in, this fashion, there is a need for the
Board to
          be given sufficient time to adequately discharge its
duties to
          consider the implication of such a proposal as the policy
          implication for elsewhere in PNG are considerable. It is
an
          abuse of procedures to table such a matter at the meeting
          and to expect proper consideration by Board members is
          grossly unfair.

             I believe that such an issue, being the first time such a
             proposal was to be considered should have had adequate
             prior circulation of the documents. it is not sufficient
            .believe_ for such a major policy step to be tabled as a
late
             item.

             As a result of this new adhoc procedure (the absence of a
             formal planning framework and lack of sufficient time for
             board members to consider the implications) being
             established I am worried that now we can now expect such
             further proposals to arrive for Board's consideration, in
the
             same adhoc manner. 1, for one do not want to see this
             practise repeated." (Exhibit 14).

2.32 Acknowledgement of Mr. Iamo Ila's letter.

On 3rd July 1995 Mr Chris G. Marlow Corporate Secretary acknowledged

Page 58 screenshot
receipt of
letter dated 7th June 95 from Mr. lamo Ila and mentioned to him that
the letter
would be listed in the agenda for consideration by the Board at its
next scheduled
meeting on 25th July 1995. (Exhibit 151


                                         bl


                 42
2.33 Acting Managing Director Mr Keith Dolman's reply Mr. lamo
   Ila.

On 4th July 1995 Mr. Keith Dolman acting Managing Director sent a
reply to Mr. iamo
Ha making the following comments:-

       As a Board member you have entrusted your duties to an
alternate
       who has discharged those duties conscientiously. As a general
rule
       it appears inconsistent with the trust placed in the alternate
to now
       review Board decisions by majority, after the event, outside
the
       Board room and in your absence.

      2. The fact that the Turarna project pre-empted a National Plan
is
         incontestable. If this is a criticism then the same will apply
to the
         Kikori ICAD and for that matter the LAC ICAD, as they too have
not
      been approved through the planning process. In the Turama
      situation the Project has at least been subject to extensive
      consultation with Landowners, industry, and community and
      national government and has twice been before the Board. The
      issue of the national plan was clearly raised in the
submission to the
      Board, and it was the Board who agreed with the interpretation
to
      effect that the Project need not be constrained in the absence
of a
      Plan. l note your criticism on the delay in effecting these
plans and
      agree that it has taken too long. I do feel however, that DEC
has
      some responsibility in this regard.

   3. I agree also that the paper was late however there was little
option
       given that the PFMC only met two days before the Board

Page 59 screenshot
meeting.
      To mi;s this occasion would have incurred a minimum delay of
two
      months, and given the enormous and conflicting pressures on us
I
      believe the Boards discomfort over timing is a small price to
pay.
      This Project has already taken three years to develop. There
will
      always be matters of an urgent nature for the Board to
consider and
      we must allow them that flexibility. The key point is that
again the
      Board was not obliged to make any decision even though we
hoped
      of course that they would.

      At Mr. Brunton's request, an opinion was sought from a
barrister of
      his choice. This confirmed the ability of the Board members to
draw
      upon their own experience having regard to this submission and
the
      paper before them. The Board elected to proceed after
discussing
      the questions of the National Plan and the issue of
advertisement
      which was similarly flagged for Board attention.


                                43
         4.   1 will leave the matter of Board submission of your paper
to the
           chairperson who may at the time also wish to raise a
serious issue
           of breach of Board confidentiality, having noted that
within twenty-
           four hours of the Board meeting your Department had
provided a
           copy of the sensitive Turama agreement to a Northern
American
           non-government organisation.

              Keith Dolman
              Managing Director" (Exhibit 16).

2.34 M. Chris Marlow Corporate Secretary sees Ms. Jean Kekedo
      OBE Managing Director.

On 5.07_95 Ms. Jean Kekedo, OBE requested Mr. Chris Marlow to see
her in relation to
his acknowledgement sent to Mr. lamo Ila (Para 2.32) The nature of
the discussion
was not recorded but Mr. Iamo Ila's letter was not tabled at the

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next Board Meeting
held on 25th July 95.

2.35 Decision of Ombudsman Commission to Investigate the 'issue
      of Timber Permit to Turama Forest Industries Pty Ltd.

On 8 Augst 1995 the CoMmission an own-initiative_ derided to
investigate the
award of Timber Permit to Turama Forest Industries Pty: Ltd.

2.36 Notice Under Section 17(1) of the Organic Law on the
      Ombudsman Commission issued to Ms. Jean Kekedo OBE,
      Managing Director

On 19 September 1995, the Ombudsman Commission issued notice under
Section
17(1) of the Organic Law on the Ombudsman Commission to Ms. Jean
Kekedo OBE
requesting her in terms of Section 18(1) of the Organic Law on the
Ombudsman to
produce the file relating to Turama Forest Industries within 7 days
of the receipt of
the letter_

2.37 Reminder sent to Ms. Jean Kekedo OBE Mana • in • Director
      reply dated 19th September 1995 to Ombudsman
      Commission.

As there was no response to Ombudsman Commission's letter of 19
September 1995 a
reminder was sent to Ms_ Jean Kekedo OBE to produce file relating to
Turama Forest
Industries and her report pertaining to Turama Forest Industries.



44
 2.38 Reply of Ms. Jean Kekedo

On 2 October 1995 Ms. Jean Kekedo OBE replied Ombudsman Commission
as follows:

                                 "Dear Mr Waugla

                                 Re: Allegations of Corrupt Dealings &
Illegal Issuance of Licence To
                                 Turama Forest Industries,

                               I note your intention to investigate
the Turama project and will make
                               the file you request available to
you. I have no idea what your item
                               no 2 refers to - ie the ‘report
pertaining to Turama Forest Industries’

Page 61 screenshot
                                  While you will receive an open and
easy assistance from the
                               National Forest, I will say that it
is somewhat disappointing to see
                               that you have decided to investigate
without first discussing this
                               issue with my•office. We have nothing
to hide and I am very sure
                               that the complainant in this instance
will show himself again in a
                               less than favourable light. You may
be aware that the NF S is
                               defending a major court action in
respect to the Turama allocation
                               and there are a number sensitive
court issues which may be sub
                               judice at, the present time. We will
take advice as disclosure of
                               certain matters having regard to the
current, court proceedings.

                                You will understand therefore the
frustration of my team to yet again
                                be called to question and
particularly when we know this as a very
                                good and proper project and yet all
around it flagrant abuses
                                continue their merry way, and
apparently without so much as a
                                raised eyebrow from your office.
                                Yours sincerely.

                                  JEAN KEKEDO, OBE
                                  MANAGING DIRECTOR"

2.39 Letter to Ombudsman Commission from Baimuru District
                Timber Resources Pt Ltd.

On 21 November 1995 the Ombudsman Commission received a letter from
Baimuru
District Timber Resources Pty Ltd_ The salient features mentioned in
that letter were
as follows:-



45
                            "1.               That they were advised by
several lawyers the NG(), ICRAF
                                              and many others that the
appointment of TFI to become the
                                              developer for Baimuru was

Page 62 screenshot
illegal.

                            2.             Between 3 May and 5 May
1995 elections were held in the
                                           villages to set up the
landowner Company in accordance
                                           with the new Forestry
Guidelines. Between 9 May and 11
                                           May 1995 Baimuru Timber
letters were delivered to all
                                           respective members before
the National Forest Board
                                           Meeting. That scared the
politicians. They then acted fast
                                           to counter the landowners
moves to _legally set up the
                                           project along the New
Forestry Rules and Guidelines. That
                                           resulted in the snap NFA
meeting to deliberate on the
                                           project and TFI
appointment.

                            3.             Between 16 May to 31 May
1995 the National Forest, the
                                           politicians the Forest
Minister and the Managing Director
                                           would not see anyone
about the project.

                            4.             National Forest Board net
to deliberate on the "Baimuru "
                                           Project for Blocks 1, 2,
and 3. The issue was pushed
                                           through appointing TFI as
the developer using NrsA-
                                           concept as was advised by
Dike Kari.

                               S.          The NFA and papers
reported that Baimuru was an
                                           extension of the Kikori
Project. That was all rubbish as it could also be a part of the
Gopera TRP extension as well if
                                           the same argument was
used." (Exhibit 17)

2.40 Summons Served on Mr Guao Zurenuoc Managing Director

On 29 February 1996 a summons was served on Mr. Guao Zurenuoc the
newly
appointed Managing Director of the National Forest Authority to
attend in person at
the office of the Ombudsman Commission on 5 March 1996 at 10.00am to

Page 63 screenshot
give
evidence on the matter investigated by the Commission.

2.41 Letter of Resignation of Mr. Keith Dolman General Manager

On 13th March 1996 Mr. Keith Dolman submitted his letter of
resignation as General
Manager which was accepted by Mr Guao Zurenuoc Managing Director.
Mr. Keith
Dolman has mentioned 29th March 1995 as his effective date of
departure on which
day he left the country.


                                       46

2.42 Letter of Resignation of Mr. B.D. Brunton member Forest
      Authority


Mr. BD, Brunton submitted his letter of resignation to the Managing
Director from
his position as a Board Member on 22 April 1996, The important
issues mentioned
therein were as follows:-

             "I have a number of complaints that stem from rapid
politicisation, in
             the context of a bureaucracy that has always ruled and
cannot get
             used to the idea of community participation, and
continual external
             pressure to access forest resources for profit and
gain'

                   failure to comply with Forestry Act Section 9

             The Board under section 9 of the Forestry Act is meant
to manage
             the affairs of the National Forest Authority. But l
have never thought
             this to be so in practice. Instead, the Board and its
agenda are
             manipulated by Forest Authority officers, loggers and
politicians, to
             such an extent that the Board cannot be thought of as
an
             independent managerial unit. This is a matter of major
             consequence, because board members at law are
responsible for
             their decisions and can be held accountable. But the
decisions of
             the board are in fact made for them by others.

Page 64 screenshot
                Agenda items are not infrequently put on the agenda at
the last
                minute so that Board members cannot have an adequate
time to
                reflect on the matters put before them. Board members
are then
             pressured on the basis that the matter is "of national
importance", in
             order to get a quick decision.

             Frequently the agenda of the Board is structured in
such a way that
             only format information is before the Board. The Board
is generally
             kept in the dark about what is going on the ground,
either through
             inadvertence, or in some cases deliberately.

                      failure to comply section 6(1)

                The first objective of the Forest Authority, under the
Forestry Act,
              section 6(1) is "the management, development and
protection of the
              Nation's forest resources and environment in such a way
as to
              conserve and renew them as an asset for succeeding
generations".


                     47

In my view mere lip-service is given to this objective. Forest
projects have been started without provincial and national forest
plans. Projects are started without environment plans. Forest
Authority officers have blatantly mislead the Board on a number of
these key issues, and even when these deficiencies have been plain
for all to see, all objections have been brushed aside.

Of particular concern is the attitude of some Forest Authority staff
that it is not their job to be concerned with conservation (in
contradiction of section 6(1) of the Act, above). So, it is said:
conservation is for the Department of Environment and
Conservation, and not the National Forest Authority. Rubbish!

      delegation of Board responsibilities to Managing Director

The power to delegate Board responsibilities under the Act has been
misused. In effect the Board now is a rubber-stamp. This is
particularly so with the delegation of the power to renew and extend
permits, timber authorities and licences. I am also concerned at the
way logging plans are dealt with in an entirely uncritical manner.

All the logging plans pass without a word of criticism from Forest

Page 65 screenshot
Authority officers, even those controversial projects which where
described in the Barnett Report, or are notoriously bad.

      failure to reform the Forest Management Agreement

It is now well established (see the writing of Professor Ron Duncan)
that the FMA is an unfair, unjust and one sided agreement that puts
the benefits of logging in the pockets of the loggers, and gives the
landholders only a small share of the surplus. The Forest Authority,
and the politicians seem to be at one with the loggers to keep it
that
way. The points of reform that I have sought (landholders to be
included in a tripartite consultative process throughout the life of
a
project, and infrastructure, as a matter of contractual right under
the
FMA), is not taken seriously. Frankly I cannot be a party to dud
contracts that in equitable terms are fraudulent.

In particular a system which allows a logging contractor to control
the marketing of logs does not make sense. Loggers should be
mere contractors, and should be paid their cost of production
(which should be well-known in advance) and a fair return on
capital. Papua New Guineans should be the only people allowed to
operate the chainsaws, bulldozers, timber-jinkers that constitute a


              48

logging operation, and we should get rid of foreign capital in the
log
contracting industry. Foreign capital and expertise should be
reserved for the downstream processing sector.


     granting new concessions with no ability to regulate


The Forest Authority neither has the ability, nor in my view, the
will,
to regulate existing projects. The review process which since the
passing of the Act in 1991 has only managed to scrutinize two
projects, shows that the Authority does not have the ability to
regulate or review.

                                     • :
To my knowledge there has been no prosecution under the Act, and
Forest Authority officers have fought to keep security bond
provisions ineffective. The review system has been done behind
closed doors, with no transparency, and in both cases has
produced, at best mediocre deals, but in reality a continuation of
the
colonial TRP model.

Page 66 screenshot
In that context the pressure to grant more concessions must be
seen as irresponsible.


     failure to support small scale and medium-scale indigenous
     processing                    •


A major failing of the Board: has been its reluctance to move away
from the large scale export-logging model. This is a result of the
mind-fix of the Forest Authority advisers who are locked into big
projects. It is a further indication of the policy strangle-hold
that
Forest Authority staffers and politicians have over the Board."
(Exhibit 18).



49




                                     CHAPTER 3 - RELEVANT
LEGISLATION




 •                  3.1 Constitution of the Independent State of
Papua New Guinea



                    National Goals & Directive Principles N°.4.



                                  3.1.1. Natural resources and
environment



                                We declare our fourth goal to be for
Papua New Guinea's natural

Page 67 screenshot
                                   resources and environment to be
conserved and used for the

                                   collective benefit of us all, and be
replenished for the benefit of

                                   future generations.



                                   WE ACCORDINGLY CALL FOR


                                [11            wise use to be made of
our natural resources and the environment

                                            in and on the land or
seabed, in the sea, under the land, and in the
                                     air, in the interests of our
development and in trust for future
                                            generations; and


                              - 12i         the.conservation and
replenishMent, for the benefit of ourselves
                                            and posterity, of the
environment and its sacred, scenic, and
                                            historical qualities;
and


                                C3          all necessary steps to
be taken to give adequate protection to our

3                                              valued birds, animals,
fish, insects, plants and trees_


                                   3.1.2 Division 2 - Ombudsman
Commission



                                   Section_219 Functions of the
Commission



                                (1)          Subject to this section
and to any Organic Law made for the purposes

                                               of subsection (7) the
functions of this Commission are

Page 68 screenshot
                                            (a)         to
investigate, or its own initiative or on complaint made by a

                                                           person
affected, an7 conduct on the part of



50


__Specified by or under the Organic Law in the exercise of a

power or function vested in it or him by law in cases when the

conduct is or may be wrong, taking into account amongst other

things, the National Goals and Directive Principles,


3.1.3 Division 4 - The National Executive


                                 Subdivision B - The Ministry

                             _   "Section 148 of the Constitution
states as. follows:-r
1
                                 (1)
Ministers including the Prime Minister have such titles,

portfolios and responsibilities as are determined From time

to time by the Prime Minister.

                                 (2)
Except as provided by a Constitutional Law or.an Act of the

Parliament. all departments, sections, branches and

functions of government must be the political

-.responsibility of a Minister, and the Prime Minister is

politically responsible for any of them that are not

specifically allocated under this section_

                                 (3)
Subsection(2) does not confer on a Minister any power of

direction ar control

Page 69 screenshot
                                             51



3.2 Forestry Act - 1991




       Section 2. Interpretation




       "Authority" means the Papua New Guinea Forest Authority
established by

       section 5.




       "Forest Development Project" means a project to develop
forest resources

       within; -




                (a) an area the subjectof a forest management
agreement, or
                (b) Government Land.




       "Managing Director." means the Managing Director of the
National Forest

       Service appointed under Section 34,




       "National Forest Plan" means the National Forest Plan drawn
up in accordance

       with Section 47.

Page 70 screenshot
       Section 6. Objectives of the Authority




       In carrying out its functions under this Act, the Authority
shall pursue the

       following objectives:-




                 (a)    the management, development and protection of
the Nation s

                        forest resources and environment in such a way
as to conserve

                        and renew them as an asset for succeeding
generations; and




               (ill the maximization of Papua New Guinea
participation in the wise

                        use and development of the forest resources as
a renewable

                        asset; and




               (c)      the utilization of the Nation's forest
resources to achieve

                        economic growth, employment creation and
industrial ar

                        increased clown-stream processing of the
forest resources; and




               (d)      the encouragement of scientific study and
research into forest

                        resources so as to contribute towards a sound
ecologic3I

Page 71 screenshot
                      balance, consistent with the National
development objectives:

                         and


                    52
    (e) the increased acquisition and dissemination of skills,
knowledge
        and information in forestry through education and training;
and

    (f) the pursuit of effective strategies, including improved
        administrative and legal machinery, for managing forest
        resources and the management of National, provincial and
local
        interests.

Section 7. Functions of the Author!

(1) The functions of the Authority are -

       (a) to provide advice to the Minister on forest policies and
           legislation pertaining to forestry matters; and

       (b) to prepare and review the National Forest Plan and recommend
           it to the National Elective Council for approval: and


       (c) through the Managing Director, to direct and supervise the
           National Forest Service; and

       (d) to negotiate. Forest Management Agreements; and

       (e) to select operators and negotiate conditions on which timber
           permits, timber authorities and licences may be granted in
           accordance with the provisions of this Act; and

       (f) (repealed)

    (g) subject to the customs Act, Customs Tariff Act and Exports
        (Control and Valuation ) Act, to control and regulate the
export
        of forest produce; and

       al) to oversee the administration and enforcement of this Act
and
           any other legislation pertaining to forestry matters, and of
such
           forestry policy as is approved by the National Executive
council;
           and

Page 72 screenshot
    (i) to undertake the evaluation and registration of persons
desiring
         to participate in any aspect of the forestry industry; and


                       53
      (j) to act as agent for the State as required, in relation to
any
          international agreement relating to forestry matters; and

     (k) to carry out such other functions as are necessary to
achieve its
         objectives or as are given to it under this Act or any other
law.

(2) Subject to this Act and any other law, the Minister may give to
the
    Authority, through the Board, any direction in regard to the
carrying
    out of the functions of the Authority as he considers necessary
for the
    purposes of achieving the objectives of the Authority.

       8. Officers df the Authority

The Authority has, in addition to the powers otherwise conferred on
it by this
Act and any other law, all powers to do all things that are
necessary or
convenient to be done for or in connection with the performance of
its
functions and the achievement of its objectives:

Section 9. National Forest Board

There shall be a National Forest Board which shall carry out the
functions and
objectives, manage the 'affairs and exercise the powers of the
Authority

Section 16. Calling of meetings

(1) The Board shall meet as often as the business of the Authority
requires,
    and at such time and places as the Board determines, or as the
    Chairman or in his absence, the Deputy Chairman, directs, but in
any
    event shall meet not less frequently than once in every four
months,

(2) Where he receives a request to do so by the Minister or by not
less
     than two members, the Chairman, or in his absence the Deputy
     Chairman, shall convene a meeting of the Board within la days.

Page 73 screenshot
 3) For the purposes of Subsection (1), the Chairman or the Deputy
    Chairman shall give, to every member, at (east 14 days notice of
the
    meeting.

i4) The Minister may, from time to time, request the Board to meet
and
    consider and advise him on matters he may put to the Board.


                                                  54
  (5)         Where he receives a request under Subsection (4), the
Managing
              Director shall convene such a meeting within 14 days.

     Section 20. Reports

  (1)       The Board shall, by 31 March in each year, furnish to the
Minister a
            report on the progress and performance of the Authority
in relation to
            its functions during the year ended 31 December
previously.

  (2)      As soon as practicable after he has received the report
referred to in
           Subsection (1), the Minister shall forward -

           (a)         the report to the Speaker for presentation to
the Parliament;
                       and
              (b)      copy of the report to each provincial
government.

     Section 21 Provincial Forest Management Committees

  The Board shall establish a Provincial Forest Management Committee
for each
  province.

     Section 22 Membership of Provincial Forest Management Committees.

     (1)      A. Provincial Forest 'management Committee shall consist
of

                       a senior officer in the administration of the
province, nominated
                       by the provincial government, who shall be the
Chairman; and

            ▪          an officer of the National Forest Service,
nominated by the
                       Managing Director; and

Page 74 screenshot
               -          one person to represent the local or community
governments
                          situated within those areas of the province
which contain forest
                          resources, who shall be the president of such a
local or
                          community government nominated by the provincial
executive:
                          and

                          two persons to represent land-owning groups in
the province
                          nominated by the Provincial Forest Management
Committee:
                          and


                        55
     (e) one person to represent non-governmental organisations
         concerned with environmental, social or developmental
issues
         nominated by the National Alliance of Non-Governmental
         Organisations.

(2)   The members of a Provincial Forest Management Committee -

      (a) shall be appointed by the Board by notice in the provincial
          gazette;

Section 27.        Calling of Meetings   •

(I)   A Provincial Forest Management Committee shall meet as often as
the
     business of the Committee requires, and at such times and
places as
     the Chairman determines, but in any event shall meet not less
     frequently than once in every four months.

(2) Where he receives a request-to do so by -the Board or by the
Director•
     General or by not less than two members, the Chairman shall
convene a
     meeting of the Provincial Forest Management Committee within 14
     days.

(3) For the .purposes, of Subsection (I), the Chairman shall give,
to every
     Member, at least '14 days notice of the Meeting'.

Section 28. Meetings of the Provincial Forest Management Committee

(1)   At a meeting of a Provincial Forest management Committee -

Page 75 screenshot
        (a)     four members constitute a quorum; and

     (b) the Chairman shall preside, but, if the Chairman is
absent, the
          members present shall appoint a Chairman for the meeting
from
         among their own number: and

     (C) matters arising shall be decided by a majority of the
votes of the
          members present and voting; and

        (d)     the person presiding has a deliberative, and in the event
of an
                equality of votes on any matter, also a casting vote_


                     56
(2) A Provincial Forest Management Committee shall cause minutes of
its
    meetings to be recorded and kept

(3) Where a Provincial Forest Management Committee is deliberating
in
    respect of a particular forest resource, the owners of that
particular
    forest resource shall be entitled to be represented at the
meeting of
    the Provincial Forest Management Committee by two of their
number
    selected by them, who shall be entitled to take part in the
    deliberations but shall not be entitled to vote.

(4) Subject to this Act. the procedures of.\ a Provincial Forest
Maagement .
    Committee are as determined by the Provincial Forest Management
    Committee.

Section 33. National Forest Service

(1) There is established a National forest Service consisting of -

     (a) the Managing Director appointed in accordance with Section
34
              and

     (b) other officers appointed in accordance with Section 36.

(2) The National Forest Service constitutes the staff of the
Authority.

Section 47. National Forest Plan

(1) The Authority shall cause to be drawn up a National Forest Plan

Page 76 screenshot
to
       provide a detailed statement of how the national and provincial
       governments intend to manage and utilise the country's forest
       resources.

(2) The National forest Plan shall -

       (a) be consistent with the national forest policy and relevant
           government policies; and

    (b) be based on a certified National forest Inventory which
sh.ail
        include particulars as prescribed; and


                              57
        (c)   consist of -

              (i)   National Forestry Development Guidelines prepared by
                    the Minister in consultation with the Board and
endorsed
                    by the National Executive Council; and

                    the National Forest Development Program; and

              (ii) a statement, prepared annually by the Board, of
allowable
                    cut volumes, being the amount of allowable cut for
each
                    province for the next succeeding year which will
ensure
                    that the areas of forest resource set out in the
Provincial
                    Forest Plan, for present or future production, are
                    harvested on a sustained yield basis.

(3) For the purposes of Subsection (2)(c)(iii), "allowable cut"
means the
     amount of timber which may be cut annually.

Section 48. National Forest Plan to be Presented to Parliament

As soon as practicable after the National forest Plan has been drawn
up, the
Chairman shall send a copy to the Minister who shall table it in the
Parliament

Section 49_ Provincial Forest Plans

(11     Each provincial government shall, as soon as practicable after
the
     coming into operation of this Act in consultation with the
Provincial
     Forest Management Committee, and in conformity with the

Page 77 screenshot
National
      forestry Development Guidelines, draw up a Provincial Forest
Plan.

(2)    A Provincial Forest Plan shall contain -

       (a)     Provincial Forestry Development Guidelines; and
       (b)     a five .,ear rolling forest development program

(3) Provincial Forestry Development Guidelines referred to in
Subsection
     (2)(a) shall

       (a)     provide an overview of the role of forestry in the economy
of
               the, province, and


                     58
    (b) be broadly directed towards areas of industrial, rural,
economic
         and social development objectives; and

    (c) set out broad objectives and predictions for the long term
of 40
        years and, in greater detail, for the medium term of 10
years;
        and

      (d) state how the forestry sub-sector is expected to contribute
to
             the economy; and

      (e) be renewed every three years.

Section 50. Provincial Forest Plans to be submitted to Board etc.

(1) The provincial Minister shall, on completion of a Provincial
Forest Plan,
    submit a copy to the hoard.

(2) The Board shall consider a Provincial Forest Plan submitted to
it under
    Subsection (1) and, where it considers that the Plan is
inconsistent with
    the National Forest Policy or with the National Forestry
Development
    Guidelines,,shall refer, it back to the provincial government
with details
    of the inconsistency.

(3) Where a Provincial Forest Plan has been referred back to a
provincial
    government under Subsection (2), the provincial government shall

Page 78 screenshot
    remove the inconsistency and the provincial Minister shall
resubmit the
    Provincial Forest Plan to the Board.

Section 54. Forest Resource Develooment to Accord with National
        Forest Plan

Forest resources shall only be developed in accordance with the
National
Forest Plan_

Section 55. Types of Land on which, and manner in which Forest
        Industry Activities may be permitted.

(1) The subject to Subsection (2), a forest industry participant may
exercise
    timber rights on land which is -


                                                          59
                     (a)      Government land - as approved by the
Board; and
                  (b)         State leasehold land - where the lessee
consents and subject to
                              the conditions of the lease; and
                     (c)      private leasehold • where the owner
consents; and
                     (d)      private freehold - where the owner
consents; and
                     (e)      customary land - where -

                              (i)      a Forest Management Agreement in
accordance with this
                                       Division has been entered into
between the customary
                                       owners and the Authority; or

                               (ii)     a timber authority has been
granted.

         (2)      A forest industry participant may carry out forest
industry activities
                  only under and in accordance with -

                     (a)      a timber permit granted under Section 73;
or
                     (b)      a- timber authority granted under Section
87; or
                     (c)      a licence issued under Section 92.

            Section 56. Acquisition of Timber Rights, etc., by the
Authority

            (1)      Subject to this Division. the •Authority may

Page 79 screenshot
acquire timber rights from
                  customary owners pursuant to. a Forest Management
Agreement
                  between the customary owners and the Authority

         (2)         An acquisition under Subsection (1) is not valid,
and no Forest
                  Management Agreement is valid, unless it is
approved by the Minister.

         (3)      No acquisition under this section shall affect the
customary rights c=
                  ownership of the land.

            Section 57. Obtaining Consent of Customary Owners to Forest
                              Management Agreement

         (1)      Where it is proposed to enter into a Forest
Management Agreement
                  over customary land, the title of the customary
owners to that land
                  shall be

                  (a)         vested in a land group or land groups
incorporated under the
                              Land Groups Incorporation Act (Chapter
1117); or



60
               (b)               registered under a law providing for
the registration of title to
                                 customary land.

(2)             Where it is impractical to give effect to the
requirements of Subsection
                (1)(a) or (b), a Forest Management Agreement may be
executed on
                behalf of customary groups who are customary owners
in respect of
                the land covered by the Agreement, by agents of such
groups provided
                that -
                               (a)            such agents are
authorised to so act in a manner which is
                                              consistent with the
custom of the group they represent;
                                              and

                              (b)                  75% of the adult
members resident on the land of each
                                                   such group give written
consent to their group entering

Page 80 screenshot
                                                into the Agreement.

Section 58. Forest Management Agreement

A Forest Management Agreement shall -

(a)               be in writing; and

(b)            specify the monetary and other benefits, if any, to
be received by the
               customary owners in consideration for the rights
granted; and

(c)               specify the estimated volume or other measure of
quantity of
                  merchantable timber in the area covered by the
Agreement; and

(d)            specify a term of sufficient duration in order to
allow for proper forest
               management measures to be carried out to completion;
and

(e)            be accompanied by a map showing clearly the
boundaries of the area
               covered by the Agreement; and

(f)               contain a certificate from the Provincial Forest
Management
                  Committee to the effect that it is satisfied as to -

               (i)               the authenticity of the tenure of the
customary land alleged by
                                 the persons or land group or groups
claiming to be the
                                 customary owners; and


                                                                  61
                  (ii)        the willingness of those customary owners
to                                              enter into the
                              agreement

     Section 59. Board to Consult with Customary Owners   and Provincial
                              Governments.

  Where the Authority has entered into a Forest Management Agreement
the
  Board shall consult with -

                  (a) the customary owners who are parties to that
Agreement, and

                  (b) the provincial government for the province in

Page 81 screenshot
which the area
                             covered by the Agreement is situated; and

               (c) the member or members of Parliament for the
Province and the
                           electorate or electorateS- in which the
area covered by the
                           agreement is situated, in relation to the
intentions of the Board
                           in recommending the _allocation, of a
timber permit over or in
                           relation to that area

  Section 64. Advertisement
  (1)          Subject to Subsection (3), after. completion of

                 {a)         a development options study under Section
62: and

               (b)           project guidelines under Section 63, the
Board shall advertise the
                             forest development project and seek
expressions of interest
                             from registered forest industry
participants.

  (2)            Advertisement under Subsection (1) -

                 (a)         shall be made in Papua New Guinea; and

                 (b)         may be made outside Papua New Guinea: and


               (c)           shall be done in the manner considered by
the Board likely to t',e
                             most effective; and


                            62

         (d) shall specify a date on or before which project
proposals for
              timber permits may be lodged.


    (3)    Where a forest development project -


           (a) is an extension of an existing approved operation; and


           (b) is consistent with the National Forest Development
Program,

Page 82 screenshot
            the Board may consider proposals, without advertisement for
Open
            tender under subsection (1).

       Section 66. Project Proposals


    (1) A registered forest industry participant may make project
proposals in
         relation to a forest development project advertised under
Section 64.


       (2). Project proposals under subsection (1) shall -


            (a) be in the prescribed form; and

            (b) be lodged with the Managing Director; and


            (c) be lodged' on or before the date specified in Section
64(2)(d);
                and


            (d) be accompanied by -


                (i) the prescribed fee; and


                      the prescribed particulars_


    Section 67. Project Proposals to be Referred to Provincial
Forest
             Management Committee for Evaluation.


    (1)     The Managing Director shall refer project proposals lodged
under
            Section 66 to the Provincial Forest Management Committee
for
            evaluation.



63
                            (2)       An evaluation of project proposals
will be made against -

                                      (a)     the National Forestry

Page 83 screenshot
Development Guidelines; and

                                (b)       the specific guidelines for
the project prepared in accordance
                                          with Section 63; and

                                  (C)     the National Forest Policy;
and

                                (d)     any relevant provincial
government policies, provided that they
                                        are not inconsistent with
the National Forest Policy; and

                                (e)       the commercial viability of
the project (including the financial
                                          resources of the applicant,
the past performance of the
                                          applicant in forest industry
and other projects, analysis of
                                          projected cash flows and the
anticipated net benefit to the
                                          resource owners and to the
State).

                       (3)      In making an evaluation under this
section, a Provincial Forest
111                             Management Committee shall at all
times obtain the .assistance of the
                                National Forest Service and of any
relevant Department. -          s
                       Section 72 Board to consider agreement and
make recommendation to
                                        the Minister.

                       (1)        The Board shall -

111                             (a)       consider a draft project
agreement submitted to it under
                                          Section 71 or Subsection
(2); and

                                  (b)     where satisfied that the
draft project agreement makes
                                          adequate provision for all
aspects of the project -

                                                      execute the project
agreement on behalf the Authority
                                                      and

                                          (ii)        recommend to the
Minister to grant a timber permit to
                                                      the person

Page 84 screenshot
whom the project agreement has been
                                                      entered into' and


                              64
      (c)    where not satisfied and the draft project agreement makes
             adequate provision for all aspects of the project - return
the
             draft project agreement to the Provincial Forest
Management
             Committee with details of the matters therein requiring
further
             negotiation.

(2) Where a draft project agreement has been returned to a
Provincial
     Forest Management Committee under Subsection (1), the
Provincial-.
     Forest Management committee shall carry out such further
     negotiations as are necessary, and submit a further final draft
project
     agreement: for consideration by the Board in accordance with
     Subsection (1).

Section 73 Duties of Minister on recommendation

(1) Where the Minister accepts a recommendation from the Board
under
      Section 72, he shall invite the person with whom the Authority
has
      entered into a project agreement under Section 72(1){b)(i) to
make an
      application under Section 77 and, within 30 days of a duly
completed
      application being made, grant a timber to that person.

Section 77 Application for a Timber Permit

(1) A person invited to do so under section (73(1) or 75(1) may
make
     application for a timber permit.

(2)   An application under subsection (1) shall be -

      (a)    in the prescribed form; and
      (b)    lodged with the Managing Director; and
      (c)    accompanied by -

             (i)   the prescribed fees; and
             (ii) the prescribed particulars; and
             (iii) an environmental plan which has been approved under
                   the Environmental Planning Act (Chapter 370)

Page 85 screenshot
                                                     66




                          CHAPTER 4 - EVIDENCE ON OATH




          4.1 General



          The Ombudsman Commission interviewed several persons
during the course of the
          investigation. The evidence cited in the following
paragraphs mainly related to the
          facts already stated in Chapter 2.


                4.1.1 Mr. Guao Zurenuoc Managing Director and
Chairman of Papua New
                      Guinea Forest Authority in giving evidence on
Oath on 4th March
                      96 said that:-


                   He took over office on 2 November 1995 and he found
a letter sent by
                Ombudsman Commission in September 1995 to which no
response was sent. It
                was very unfortunate that only one person was
heavily involved in the Turama
                Project and that person was Mr. Keith Dolman the
General Manager. The other
                person involved in the Turama Case is the Project
lawyer Mr. Maurice
                Coughlan. He.thought that only those two were mainly
involved. He checked
                with all his divisional heads and found, that they
were not directly involved
                with Turama. He also checked with the Board
secretary Mr. Chris Marlow. He
                asked Terry wara who said that he could not
remember. He asked Dike Kari
                who said that he was not involved. These persons
should appear before the
                Commission and confirm that. According to the Board
Secretary Mr. Chris
                Marlow, most of the talking at the Board Meeting

Page 86 screenshot
held on 30 May 1995 was
                done by Mr. Keith Dolman.


                4.1.2 Mr. Johnson Mantu acting Divisional Manager
Operations in giving
                      evidence on oath on 24 April 1996 said that:-

               The greatest involvement relating to Turama Forest
Industries Pty Ltd
                extension came from the former General Manager Mr.
Keith Dolman and the
                Project Lawyer Mr. Maurice Coughlan.


                  67
 4.1.3 Mr. Paul Barker Economic Adviser to the Prime Minister's
    Department in giving evidence on oath said that:-

 Forestry resource is a major national resource and it was essential
that the
 country and the resource owners get reasonable benefit on a long
term and
 sustainable basis. Corruption inevitably comes into an industry
like forestry
 because it is an industry in which there are fixed prices. The
major danger of
 it was that it results in misallocation of resources and poor
decision making. It
 is a trade very much managed and operated by the industry itself
and the
 Government tried to get a handle on what the prices should be and
on a
 range of different issues. Because it is a fairly closed trade and
because the
 operation of Timber Industries were occuring in isolated parts of
the country,
 the Government owned supervisory capability is limited and
different
 government agencies often do not coordinate well with each other as
they
 might be expected to do. That inevitably allowed the different
operators to
 get away with a lot of profit.

 When the Forestry Act was put through in 1991 it had a system of
checks and
 balances. The Act was gazetted in June 1992. There was a delay of
one year in
 the gazettal and in the meantime a lot of activity took place.
There were a lot
 of TRPs that got signed up and-Timber•permits approved and many of
them
 were signed right in the last couple of days in June before the

Page 87 screenshot
gazettal. His
 impression was that it was gazetted in 24th June 1992 although it
was meant
 to be gazetted in April 1992. In the case of Turama area, Turama
Forest
 Industries Pty Ltd was in possession of a TRP and with the concept
of FMA in
 the new legislation there were doubts as to whether the TRP can be
extended
 to service non adjoining areas.



68



             4.2 Access to files and document maintained by National
Forest Authority.

             Mr Guao Zurenuoc, Managing Director in response to the
summons served on him
             produced certain documents and files. One of the files
produced was a file beating
            number MD2/2. The Commission after examining that file
wanted file numbers
            MD1/1, MD 1/2, and MD 2/1. MS. Bibiana Kenatsi office
manageress informed the
             Managing Director that the three files had nothing to
do with Turama Forest
            investigations. Thereafter the Managing Director sought
the opinion of Mr. Maurice
            Coughlan, Project Lawyer who too advised him not to
release the files. However, on
             the insistance of the Commission the flies were finally
released by the Managing
            Director. On examination it was found that these files
contained several documents
            related to the Turama permit which have been shown as
exhibits in the report. In
            this connection the Project Lawyer was questioned on the
role he played in that
            matter.

                         4.2.1 Mr. Maurice Coughlan Project Lawyer
in giving evidence before the
                                    Commission on Oath said that-

                         He advised the Managing Director that the
summons issued to him related to
                         Turama Forest Industries. The Managing
Director suggested that there should
                        be some authority to take possession of the
files MD 1/1, MD 1/2 and MD 2/1.

Page 88 screenshot
                         At that time the Project Lawyer had not read
the Organic Law on the
                        Ombudsman Commission. He then went through
the Act and found that the
                        Commission had wide powers and had the right
to take any documents which
                        in their discretion were related to the
inquiry.

                         4,2.2 Ms. Bibiana Kenatsi Office Manageress
to the Managing Director in
                                     giving Evidence on Oath before
the Commission on 12 March 1996
                                    said that:-

                         She knew from the filling index that those
files were irrelevant to the inquiry
                        as they did not contain documents relating
to Turama. She pointed that to
                        the Managing Director who then took the
position that the files had nothing
                        to do with Turama Forest Industries. She
mentioned that she did not have
                        any interest in the investigation. Managing
Director subsequently instructed
                        her to release the files after numbering the
letters. She wanted to remove a
                        letter from one of the files as that letter
was wrongly filed there, but did not
                        do so as the Commission objected to it.


                               6S
4.3 Incorporation of Landowner Groups

In terms of Section 57 of the Forestry Act where it is proposed to
enter into a Forest
Management Agreement over customary land, the title of the customary
owners to
that land shall be vested in a land group or land groups
incorporated under Land
Groups Incorporation Act,

     4.3.1 Mr Johnson Mantu acting Divisional Manager Operation
National
          Forest Services in giving evidence on oath said that-

     The role he played in Turama Forest Timber permit was in
organising the land
     groups to be incorporated. That was done in his capacity as
Divisional
     Manager for Landowner affairs at that time, He sent his
officers to assist the
     resource owners to organise themselves into landgroups and to

Page 89 screenshot
get the
     documents signed for the purpose of incorporating the land
groups. Basically
     the exercise was firstly to identify who the owners of the land
were and then
     to sign the necessary documents which were subsequently handed
over to
     Lands Department for incorporating the Land Groups under the
Land Groups
     Incorporating Act. Why that was important to the Forest
Authority was that
     under section 57 of the Forest Act the Land Groups have to be
incorporated
     for the purpose of entering into a Forest. .Management
'Agreement with the
            owners.

      4.3.2 Mr. Joseph Badi Supervisor Landowner Liaison Papua New
Guinea
           National Forest Authority in giving evidence on oath said
that-

     in terms of the Forestry Act for any new timber project in
order to acquire
     timber rights from the landowners they first have to undertake
land groups
     incorporation. The Land Groups incorporation is basically to
identify the
     landowners in timber areas in order to incorporate such groups
under the
     Land groups incorporation Act administered by the Lands
Department. Only
     incorporated land groups were permitted to sign the Forest
management
     Agreement in terms of Section 57 of the Forestry Act. There
were more than
     300 landowner groups But when they conducted the patrol, that
is visiting
     the villages to get the forms signed, between 15th and 29th
August 1994.
     During this period 250 Land Groups were enrolled. Since that
was a wet
     monsoon period some landgroups were left out. They then
launched a
     subsequent patrol in February/March 1995 to incorporate those
who were left
     out,


                                           70

                During the incorporation stage they found that some
landowner groups were
                supporting Turama Forest Industries and some were

Page 90 screenshot
supporting Rimbunan
                Hijau. They mentioned to the landowners that once
the Forest Management
x.              Agreements were signed the resource was to be
tendered by advertisement.
                Mr. Dambis )(alp supervised the signing of the
Forest Management
                Agreements.


                4.3.3 Ms Ruth Turia, Manager Acquisition Papua New
Guinea Forest
t7_                  Authority in giving evidence on oath said
that:-


                 Basically the job of the Manager acquisitions was to
acquire resources from the
                 resource. owners. The requirement of the Forestry
Act was that before the
                 Forest Authority acquired the right, the Forest
Management Agreement had
                 to be signed. The landowners have to be first
incorporated as landowner
                 groups under the Land Groups Incorporation Act
(Chapter No. 147). once that
                 was done then the Forest Management Agreement could
be executed. But
                 the certificate of incorporation fie the certificate
of recognition} had to be
                 issued by the Lands Department. What they had to do
was to prepare
                 everything and forward' them to the Lands Department
to get the certificates
                 of recognition. The Land Groups incorporation
section in the Lands
                 Department attended to that.


                4.3.4 Mr. Henry Wasa Project Officer in the Lands
Group Incorporation
                      Division of the Lands Department in giving
evidence on oath said
                      that-

                Basically the land groups incorporation is to
incorporate the landowner
                groups in clan lines. They receive application from
Landowner groups for
                incorporation which were carefully examined to
ensure that they were
                completed correctly. They then checked that there
was no duplication of
                names. The receipt of the application were then

Page 91 screenshot
gazetted. A copy of the
                gazette 'together with a letter was sent to Local
Government Council, District
                Magistrate and the landowner groups. Normally a
period of two months was
                given to make their objections and if no objections
were received the
                certificate of incorporation of Land Groups would be
issued. The period of
                two months was not stipulated in the Act but only a
procedural arrangement.


                    73
4.4 Forest Management Agreement.

Before any forest resource development could take place the Forest
Management
Agreements have to be signed between the customary owners and the
Forest
Authority_ An acquisition is not valid and no Forest Management
Agreement is valid
unless it is approved by the Minister in terms of Section Saii). In
the case of
customary land in terms of Section 57(1)(a) the title of the
customary owners to that
land shall be vested in land groups incorporated under the Land
Groups
Incorporation Act. The Board has to consult the customary owners and
Provincial
Governments in relation to the intentions of the Board in
recommending the
allocation of timber permit over that area according to section 58
of the Forestry
Act. The Forest Management Agreement shall contain a certificate
from the
Provincial Forest Management Committee regarding the authenticity of
the
customary land and the willingness of the customary owners to enter
into the
agreement as mentioned in Section 58(1) and (ii) of the Act. The
Forest Management
Agreements in relation to Turama Blocks It H and Ill were entered
into in
February/March 1995_

   4.4.1 Mr. Dike Kari, Divisional Manager Policy and Planning in
giving
       evidence on oath said that:-

   His first dealing with Turama was at the time he actually
instructed the
   officers to go out and acquire the Forest Management Agreements.
He

Page 92 screenshot
      specifically instructed them to explain the whole procedures to
the
   landowners and land groups at what ever specific convenient
location. After
   completing the Forest Management Agreements a report was
submitted by
   Dambis Kaip in April 1995 to the Management.

   There were many questions raised by the Landowners and the key
issue was
   who would get the resources when acquired by the Forest
Authority_ In the
   event that question came up he told them that they should mention
to the
   landowners that it was not earmarked for developer and the
procedure for
   selection would be according to the Act_ This was clearly
indicated in that
   Report as the question was raised over and over again.

   Turama Blocks I, Ii and Ill was a large resource and he should
say that it was
   one of the largest resources acquired under Forest Management
Agreements
   it was the Second Management Agreement that was done after the
Marshall


               74
Lagoon Agreement in Central Province. It covered the area from the
Western
Province and extends right up to Purari and so it was a large
resource and
covered about 1.5 million hectares including swamps, lakes etc
although the
actual production area was less that 300,000 hectares.

In terms of feasibility studies Turama Forest Industries Pty Ltd had
produced a
report under TSA (Timber Supply Areal. The TSA concept was
formulated by
the former General Manager Mr. Smith, His concept was endorsed by
the NEC
decision. But when the Government changed and Mr. Andrew Posal was
appointed as Minister for forest he decided to rescind that decision
by taking
it back to the cabinet and got the .TSA concept abolished_ But in
the case of
Turama area it was advertised as TSA- area N° 5. When it was
advertised a
number of companies put in detailed feasibility studies. Although
the Forest
Management Agreements were done after Marshall Lagoon in terms of
preparation it was well ahead of other projects. The Turama

Page 93 screenshot
extension was
given ahead of Marshall Lagoon. The TSA concept was a policy
decision for
long term supply of logs for down stream processing. The reservation
about
down stream processing was the lack of supply or continuity of log
supply and
so the General manager decided that the way to encourage down stream
processing was to amalgamate certain timber areas in a province and
call it a
TSA.....

TSA was a policy decision made to encourage down stream processing.
Down
stream processing was the processing of whole logs into finished
timber
products like sawn timber, plywood, furniture etc.., The TSA 5
proposal was
evaluated and it was found that Turama Forest industries Pty Ltd was
the most
acceptable proposal but no permit was granted under ISA 5. once the
decision was made to abolish the TSA concept the National Forest
Services
decided to acquire Timber Rights from customary owners by means of
Forest
Management Agreements. The consideration in favour of Turanna Forest
industries Pty Ltd was based on two grounds. one was that the
company put
in the best proposal with substantial investment and spent a lot of
money in
engaging professional engineers to come and work on the proposal.
The
second reason was that they were next door to the existing timber
area which
is TP 2-12 called Turama Timber Permit. The fact that Turama Forest
Industries
Pty Ltd had invested large sum of money in the feasibility studies
was not
binding on the Forest Authority to consider their proposal. The
National
Forest Service thought that since there was somebody who has put in
money


                75



and is serious about it and in view of the difficulties in operating
in that area
due to unfavourable weather conditions and the remoteness they
should be
given preference. It was on those grounds that the Board decided
that

Page 94 screenshot
Turama Forest Industries should be given the extension.

During the period of signing the Forest Management Agreements it was
found
that some resource owners were supporting Rimbunan Hijau operating
in
Urama Gopera Area. Some were supporting Turama Forest Industries Pty
Ltd.
He did not know at that time that Turama Forest Industries 170,, Ltd
would be
selected. His Officers were told that it was__up to the Board to
decide on the
course of action. The impression was given to the resource owners
that the
selection would be done by advertisement. When the resource owners
signed
the Forest Management Agreement they were of the view that the
project
would be advertised.

However, at the time the Forest Management Agreements were signed
the
certificates of recognition were not issued to.the Land groups. As
Divisional
Manager he did not ensure that the Certificates of -Recognition were
obtained
before the officers went to obtain the signatures for the Forest
Management
Agreement . There was pressure from the General Manager. It was only
this
year 1996) that they realised that the Forest management Agreements
could
not be done without the certificates of recognition. Verbal
instructions were
given by the General Manager to get the FMAs done_ In the process of
getting
the FMAs he was not aware that the Land Groups Incorporation was not
in
order. After the FMAs were done Ms Ruth Turia Manager Acquisition
said that
the certificates of recognition were not issued. He did not realise
that after
the initial gazettal of the application the certificates of
recognition were not
issued.




4.4.2 Mr. Dambis Kaip Forest Management Agreement Supervisor in
    givin evidence on oath that:

Turama Project was one approved by the previous Government to be

Page 95 screenshot
considered as a TSA concept. When the new Government came into power
in
September 1994 they did away with the TSA concept. The new
Government
considered Turama project as one of the priority projects in 1995.
Under the
new Forestry Act the timber rights have to be acquired from the
customary
owners by way of Forest Management Agreement. One of the
prerequisites
of the Forest Management Agreement is the incorporation of land
groups.
That was undertaken in September/October 1994.



76

In February 1995 the signing of the Forest Management Agreements
were
undertaken which were the first set of Forest Management Agreements
under
the New Act. In Turama's case there were three blocks. Block I is
called
Turama Block I, Block 11 is called Kikori Block 11 and Block III is
called Baimuru
Block III. Thus there were three separate Forest Management
Agreements that
were signed.

The correct procedure for Forest Management Agreements was that the
incorporation of Land Groups had to be done first and then a
certificate has
to be .issue5, by the Gulf Forest Management Committee. This
certificate has to be. given by the Chairman of the Gulf Provincial
Forest
Management Committee to the effect that the land groups were the
rightful
landowners and that they were willing to sign the Forest Management
Agreements. But what actually took place was that the Forest
Management
Agreements were signed and they came back; The documents were given
to
the project lawyer in mid April 1995 and later according to the
documents
they found that they were signed by the 'secretary to the .Gulf
Provincial
Forest Management Committee. That was not the correct procedure_
They
were told that it was a priority project for the Government which
was
conveyed by Ms. Jean Kekedo through the General Manager to Mr. Dike
Kari.

Page 96 screenshot
One of the major issues, raised by the resource owners was whether
the
project would be advertised. They told them that the project Would
be
advertised and the developer submitting the best proposal would be
selected.
Re compiled a report in April 1995 incorporating all these matters
which was
submitted to the management and so the management ought to have been
aware of those matters.

4.4.3 Ms. Ruth Turia Manager Acquisition in giving evidence on oath
said
                              that-

She was appointed as Manager Acquisition in April 1995 and so she
was not
directly involved in getting the Forest Management Agreements signed
for
Blocks I, II and III of Turama Forest area. Since then she realised
that proper
procedure was not adhered to in obtaining the Forest Management
Agreements. First the land groups have to be incorporated and that
was not
done as the certificates of recognitions were not issued. Then
before Forest
Management Agreements were signed approval had to be obtained from
the
Gulf Provincial Forest Management Committee. That too was not done,
but
approval was obtained from the 'secretary' after the Forest
Management


                77
Agreements were signed_ That too was also improper as the
certificate in
terms of section 58(f) of the Forestry Act had to be signed by the
Chairman of
the Gulf Provincial Forest Management Committee.

4.4.4 Mr Keai Semesse Supervisor Technical Services Southern Region
in
   giving evidence on oath said that-

For allocation of resources Land Groups Incorporation has to be done
first and
certificates of recognition have to be obtained. Then the Land
Groups
Incorporation Certificates and the FMA documents are sent to the
Provincial
Forest Management Committee for endorsement. Once those were
received.
there the docurments were examined by the Committee and certified by

Page 97 screenshot
the
Chairman. Then those documents were sent to the Forest Authority.
The FMA
team was then sent to the field to get the FMAs signed.

4.4.5 Mr Hakiso So-omba Manager Allocation in giving evidence on
oath
   said that:-

Forest resources development work was undertaken in accordance with
the
National Forest Plan. But that plan was not ready. Whether a
developer is
selected by advertisement or not the Forest Management Agreement has
to
be done first. It is the allocation section with the assistance of
the
Corporate Secretary that normally submits project papers- to the
Board for
consideration_ On the contrary, in the case of Turama extension it
was
handled at General Manager's level.


                                       78

4.5 Timber Supply Area (TSA) Concept

The timber supply area concept is not mentioned in the Forestry Act.
It was a
proposal put forward by the then General Manager Mr. Conrad Smith
and approved
as an NEC decision when Honourable Mr Tim Neville MP was the
Minister for Forests.
When the change of Government took place in 1994 the Honourable Mr_
Andrew
Posai new Minister for Forests again took the matter before the NEC
and the TSA
concept was abolished.

            4.5.1 Mr. Terry Warra Director Forest Research Institute
Lae in giving
              evidence before the Commission said that:-

      Since the former Minister Tim Neville was committed to
downstream
      processing he came up with the new concept of Timber Supply
Area(TSA). The
      country was divided into 25 or 26 TSA regions. The Turama area
fell under TSA
      5. The Honourable Minister Tim .Neville MP in 1993 asked the
Timber industry
      to send in proposals for TSA 5 area and gave them 8 months
time. Turama

Page 98 screenshot
      Forest Industries Pty Ltd submitted its proposal. Urama Gopera
a subsidiary of
      Rimbunan Hijau too submitted proposals. Turama Forest
Industries wanted
      Blocks I, II and III. In the timber permit already issued to
Rimbunan Hijau there
      was a clause which committed Block III and parts of I and II.
National Forest
      Service sought legal advice and found that the areas mentioned
in the permit
      were with the customary owners. The permit should not have
included Block
      III and parts of Blocks I and II without acquiring the
resources from the
      customary owners. What the Minister wanted was to lock up the
resources
      through TSA so that there would be security for the existing
industry and any
      potential investor who wanted to come in. TSA concept was
nothing but to
      lock up the resources.


                         79

4.6 The Turama Extension Board Paper as an urgent submission

Turama Forest extension Board paper was only submitted by the
National Forest
Service to the Board to be considered as an urgent matter at the
meeting held on
30.05.96. It was not included with the rest of the agenda items
given to the Board
members earlier. The Corporate Secretary who is also the corporate
solicitor was not
aware until the Board sat on 30.5.96. The paper was prepared by the
Project Lawyer
Mr, Maurice Coughlan and endorsed by the General Manager Mr. Keith
Dolman (who
resigned during the course of our investigation) and the Managjng
Director Ms Jean
Kekedo OBE. The Honourable Titus Philemon MP, acting Minister for
Forests
addressed the Board Members at the same meeting.

     4.6.1 Mr. Chris Marlow Corporate Secretary PNG Forest Authority
in
         giving evidence in oath said that-

    The Board paper was submitted as a late paper to the memberS and
he did
    not see it. Mr. Dolman the former General Manager who attended
the
    meeting indicated that everything had been done as required.

Page 99 screenshot
Unless the
    paper came to him, even if it was a late paper he could not give
his legal
    comments on it Had the paper been given to him; he would have
indicated
    What steps still required to be completed, if at all.. If he was
not asked hp
    couldn't give it The paper was a bit late. and the chairperson
stood up and
    said that everything was completed in relation to it. He has not
been asked
    by the General Manager for comment on this matter. If the
General Manager
    said that everything was in order he certainly was not going to
embarrass the
    Chairperson of the Board or the Members of the Board by saying
that he had
    not seen the Board paper, He would not do that. it would be
quite improper.
    The procedure he adopted in preparing the minutes was that they
reflected
    whether or not the resolution was passed. The minutes did not
reflect the
    pros and cons of the arguments unless a Board member
specifically requested
    that it be recorded in the minutes.

       4.6.2 Mr. Maurice Coughlan Project Lawyer in giving evidence on
oath
           said that:-

       All instructions came to him through the General Manager_ One of
his
    functions was to draft forest agreements. The    General Manager
wanted him
    to prepare a Board paper in a hurry on Turama    Forest Extension
as the Gulf
    Provincial Forest Management Committee made a    decision in favour
of
    Turama Forest Industries Pty Ltd on 26 May 95    (Exhibit 7). He
was informed


                    BO
only the day before the Board meeting scheduled for 3❑ May 1995. If
that was
missed there would be a delay of nearly 2 months before it could be
taken up
at the next Board meeting.

in answering a question that was put to him by the Commission he
admitted
that there was provision in the Act to call for meeting giving 2
weeks notice.

Page 100 screenshot
He did not know what the former managing Director had in her mind
when
she mentioned that the Turama Extension was to be considered as a
matter of
urgency. As far as he knew that was the only project considered as
an
extension W an existing project..




      •                       •


                   81

4.7 Turama Forest Industries Pty Ltd.

Turama Forest Industries Pty Ltd was given a Timber Permit in 1988.
It was originally
known as Long Term Trading Pty Ltd.

   4.7.1 Mr. Keith Dolman in giving evidence on, oath on 20.03.96
said that:-

   Turama Blocks 1,11 and III constituted a large area of land with
timber resources.
   First, they explained the FMAS to the landowners and then the
FMAS were
   signed. Then they talked to those parties who were the project
developers.
   The next thing was that the Gulf Provincial Government and the
Gulf Provincial
   Forest Management Committee were expected to consider those in
their
   meetings. He only knew of one meeting which he attended. But
there had
   been many Provincial Forest Management Committee meetings on that
   matter and at the same time there was a dialogue with various
parties. He
   could not remember when the earlier two Board Meetings at which
Turama
   issue were discussed. The Board agreed to the project as an
extension to TP2-
   12 but he could not remember the dates of the Board meetings.

   At the time they acquired the resources they knew who the
resource owners

Page 101 screenshot
   were. Industry was the only one that was not widely consulted on
this project
   because pre-history indicated that it would go to one particular
company and
   would not be advertised. But that was not a Board decision. He
could not
   remember when the decision to award to the particular company was
made.

    In 1993 Turama Forest industry Pty Ltd submitted to the Forest
Authority a
    very serious proposal for Veneer and Ply process facility. His
understanding to
    the background to that was that they were invited by the then
Government
    presumably by the Forest Minister and the proposal submitted by
the
    company was a very serious one. His thinking was in this Turama
area
    Honourable Tim Neville MP, Minister for Forest wanted to
establish a big
    processing facility.

   He identified an area which was relatively free of other
incumbents and the
   only projects in this area were TP2-12 itself and Urama Gopera
Project TP2-15.
   What the Honourable Tim Neville Minister for Forests did was to
divide the
   country into 14 areas each to be brought under a TSA. What he was
aiming
   was to allocate each one to the big developers like Rimbunan
Hijau, Turama,
   Little Player etc..


                  82
Anyhow the TSA concept was rescinded as it became highly
controversial. By
then Turama Industries Pty Ltd had submitted a very serious proposal
which
would have cost them many, many thousands of kina.

When land groups were incorporated however, the developer was not
mentioned and all that they had to say at that stage was that they
came for
incorporation only.

Under the Act the landowners have a minor role and technically it
was not
necessary for them to know who the developer would be. The selection
of
the developer was left to the Board.

Page 102 screenshot
When he mentioned that there was extensive consultation with the
National
Government what he meant was extensive consultation with Government
agencies like Environment and Conservation Department, Department of
Agriculture, Prime Ministers Department. Discussions were held with
Mr Paul
Barker, Economic Adviser to Prime Minister, Department of Prime
Minister and
in the case of Environment and Conservation with Mr. Gai Kula, First
Assistant
Secretary.

4.7.2 Mr Goodwill Amos Manager Projects in giving evidence on oath
   said that:-

Turama Forest Industries Pty Ltd have been logging since 1988. In
1992 the
company realised that it would not have enough resources to operate
for the
full 20 years and it asked whether the adjoining area called Omati
could be
given. Their permit covered by TP2-12 was a TRP ie Timber Rights
Purchase
and it was only for production. The company went there only to
harvest the
resource. But with the current FMA it was for production and
management,

4.73 Mr Keai Semesse Supervisor Technical Services Southern Region
in
   his evidence on oath said that:-

Turama Forest Industries asked for 10,000 hectares in Omati area but
that was
not given as the new Forest Policy was corning in_ According to the
new
Policy FMAs had to be signed before allocation.


                        83
4.8 Discussion at the Board Meeting held on 30 May 1995.

The Turarna Extension Board Paper was given to the Board Members
only at the
Board Meeting itself. it was taken up as an urgent matter and was
considered as an
extension in terms of section 64(3) of the Forestry Act. Section 64
of the Act reads
as follows:-

    ADVERTISEMENT OF PROJECT

    "(V Subject to Subsection (3), after completion of

Page 103 screenshot
           (a) a development options study under Section 62; and
           (b) project guidelines under Section 63, the Board shall
               advertise the forest development project and seek
               expressions of interest from registered forest industry
               participants.

       (2) Advertisement under Subsection (1) -

           (a) shall be made in Papua New Guinea; and
           (b) may be made outside Papua New Guinea; and
           (c) shall be done in the manner considered by the Board
likely
            to be most effective; and
        (d) shall specify a date on or before which project
proposals for
            timber permits may be lodged.

       (3) Where a forest development project -

           (a) is an extension of an existing approved operation; and
           (b) is consistent with the National Forest Development
Program,

           the Board may consider proposals without advertisement for
open
           tender under subsection CO_ •

       4.8.1 Mr Keith Dolman in giving evidence on oath said that:-

    in his opinion the conditions stipulated in Section 64(3) were
satisfied but he
    didn't check. The significant thing was that they recognised a
barrier in
    proceeding with the project. The barriers were two fold. The
first thing they
    recognised was the prehistory. He came in to the job and there
was a best
    commitment made to that project probably in good faith by the
previous
    Government_ They already had that commitment there. They sought
various
    interpretations as to what that meant in legal terms and cost
claims to the
    State.


                         84

       Then it became clear to them that if possible they should
work with that
       commitment. They struck a barrier. The barrier was the
National Forest Plan.
       The National Forest Plan was a prerequisite to any
development. Unofficially

Page 104 screenshot
       their lawyers sought advice. What he did was that all these
matters were put
       to the Board openly. They did not at any stage underwrite,
understate or
       hide those issues. They put those to the Board with their
explanation.


       There was every opportunity to promote that as an extension
within that area
       as it was contiguous to the existing project.


       In the absence of the National Forest Plan whether the
recommendation was
       ultra wires or not was a matter to be decided by the
Ombudsman Commission.


        There were many things in the Act that were not workable.
They found that
        it was not possible to give one National Development Program
without
        Provincial Plans. This was an extension not a new project.
They could have
        argued that it did not qualify to be subject to the National
Forest Plan
        because it was an extension. Further how could it be
inconsistent when there
        was no National Forest Development Program?


       Further they didn't have enough time to prepare. Had they
missed the
       submission at that board meeting, they had to wait for 2
months for the next
       board meeting. He agreed that a meeting could have been
summoned by
       giving 2 weeks notice. They did not consult the project
lawyer as they had
       other matters to do. There was the Corporate Secretary who
could have
       looked into that matter, The reason for putting it as an
urgent matter was
       that it was dragging on for years and not months. He would
say there was no
       pressure by anybody to take a decision then and there.


       This project had come up in 1988 March before the National
Forest Plan. How
       could it be inconsistent with the plan which did not exist?
He had no
       argument with the Commission when the Commission mentioned

Page 105 screenshot
that if the
       plan did not exist then they could not bring that under
Section 64(3)_ He
       agreed that Kikori ICAD and LAL ICAD did not fall under
Section 64(3), He was
       sure that there were other extensions granted under the
Forestry Act of 1991
       prior to the granting of Turama Extension. He could try to
give the names of
       such extensions. He agreed that still no National Forest Plan
has been
       produced.


                 85

Their understanding was that once a resource is acquired that it was
their
responsibility to select a developer. They didn't believe that they
had to
involve the resource owners in that Selection.

He said that the National Forest Service had a particular developer
in mind but
until such time as the board actually agreed they acted as if they
didn't have a
developer. Under the Forestry Act the resource owners had no right
to know
the developer.

Although TP2-12 in 1988 the extension was sought for under the new
Act.
FMAs were done to allocate resource for Development. Then it should
be in
confirmity with the National Forest Plan. The FMAS were not done
specifically
for allocating to the resources as extension to the existing
project. This issue
was raised by the resources owners and had been denied by the
officers who
attended to the FMAs

4.8_2 Mr. Maurice Coughlan project lawyer in giving evidence on oath
   said that:-

He did not tell the Board that all legal requirements were met that
there was
no problem at all to recommend the project. Only thing he knew was
about
the project agreement and so he could not give a legal certification
of the
paper as requested by the Corporate Solicitor_ He did not have
access to the
Forest Management Agreements.

Page 106 screenshot
As regards conditions mentioned in Section 64(3) his view was that
it was an
extension to an existing project and it was also contiguous. it was
adjoining
an existing area and was neighbouring. Here the extension was by way
of
acquisition of provision of more resources to an existing project_

He didn't know why three separate Forest Managements were signed_
The
Board considered it as an extension without considering the number
of Forest
Management Agreements_ He was not aware that FMAS were not ready on
the
day that the Board discussed the extension. He knew about it only a
month
later


                              86

          The project guidelines that were taken to Kerema on 26 May
1995 to be signed
          by the Gulf Provincial Forest Management Committee were
partly prepared by
          him. if the Board wanted to consider the Project as an
extension then there
          was no necessity to obtain a project guideline to be
approved from Kerema in
          terms of Section 63 of the Forest act, Such guidelines are
required only when
          the project was advertised under Section 64.


          He spoke to the State Solicitor as he just wanted to get
some interpretation
          regarding National Forest Development Plan but no written
opinion was
          obtained.
          Turama was the only extension considered under the Forest
Act of 1991,


          Resource Development could not be considered without the
National Forest
          Plan because it was the National Forest Plan that contains
the National Forest
          Development Programme.


          When it was mentioned at the Board Meeting that all
requirements have been
          met the Board Members failed to realise that some

Page 107 screenshot
fundamental mistake had
          taken place. He did not specifically say that all legal
requirements were met,
          but he said that condition of Section 64(3) were met as
there was no National
          Forest Development Program.


          However in the case of the Marshall Lagoon project the
Board did not want to
          proceed as there was no National Forest Plan.


          His view of Section 54 was that physical development could
not take place
          without a National Forest Plan.


           He could not understand what was in the mind of the former
Managing
          Director Ms. Jean Kekedo when she mentioned in the last
paragraph of her
          letter dated 17 March 1995 to Turama Forest Industries Pty
Ltd that it was not
          necessary for the company to respond to the advertisement.


          4.8.3 Mr. Chris Marlow Corporate Secretary and Corporate
Solicitor in
              giving evidence on oath said that:-


           In Section 54 development implied the meaning that they
could award a
           project but excluding physical development. His best view
was that a
           resource could not be developed unless there was a
National Forest Plan in
place. That was his liberal and free interpretation,




                87
His view of Section 64(3) was that those two conditions were
conjunctive and
it was compulsory that the National Forest Plan was in place before
having a
development scheme. According to Section 54 the National Forest Plan
should
be in place even in the case of extension to an existing project. In

Page 108 screenshot
case of
doubt he would have gone to the State Solicitor in order to obtain
his opinion
on those sections.

4.8.4 Mr. Soiat William Acting First Secretary Department of
Personnel
   Management and Nominee representing the Secretary to that
   Department in giving his evidence on oath said that:-

At the Board meeting held on 30 May 1995 the issue of granting an
extension
permit to Turama Forest Industries Pty Ltd was taken up as an urgent
matter
and the resolution was passed.

The relevant papers were not given to the members prior to the
meeting but
were given only at the meeting.

The chairperson, the General Manager and the project lawyer spoke on
behalf
of the motion After views were expressed by various members that was
a
majority decision to grant approval. Independent verification of any
matters
mentioned by those three people was not possible at that time.

As mentioned by the Commission, the Board was not well informed as
the
documents were given only at the Board meeting. The members should
have
been given more time to read the Board paper. The chairperson gave
the
impression that it was an urgent matter. Since there was a provision
in the
Act to call for a meeting with two weeks notice such a delay would
not have
hindered the project in anyway.

The minimum condition stipulated in section 64(3) had not been
properly
looked in and the Board would have been misled on that matter. The
decision as made on the limited information that was provided to the
Board of correct information in terms of legislative implication and
minimum
conditions were expressly made to the Board then the decision might
have
been otherwise. There was deficiency in the deliberation. The Board
members should have been correctly briefed because members have to
comply with the legal requirements.


               88

Page 109 screenshot
According to the statement issued by the Honourable Andrew Baing MP,
Minister for Forest the National Forest Plan was not done. That was
the
reason why Ms. Jean Kekedo was sacked. However, the Board had voted
unanimously for her retention in office. Those matters appeared in
the
newspaper.

4.8.5 Mr. Gaikovina Kula First Assistant Secretary Nature
Conservation
   Division of the Department of Environment and Conservation and
   the Board nominee representing the Secretary to that Department
   in giving evidence on oath said that:-

At the Board meeting Mr. Keith Dolman explained the Forest
Management
Agreements showing the boundaries of the FMA. The time spent was
very
short. Prior notice was not given relating to that matter and hence
he could
not consult his Department on the stand that he should take. He
therefore,
made a submission on behalf of the Department after the meeting was
over.

One of the functions of the PNG Forest Authority was to produce a
National
Forest Plan but no plan has been produced so far. They were told
that the
National Forest Plan was in the pipeline.

The Chairperson and the General Manager were pushing the matter
regarding
Turama Extension. Dr. Brunton asked why it was not advertised. He
too
supported that idea_ But they were told that since it was an
extension of an
approved project there was no necessity to advertise. They were told
by the
Managing Director that NEC and the Minister for Forest were
interested in that
matter. Dr. Brunton abstained from voting and mentioned that he
would give
his reasons. However, when Dr. Brunton submitted his reasons, a copy
of his
reply was not given to him. They were told at the Board meeting that
day
that if the motion was not considered it would have to wait for the
next
meeting scheduled 2 months hence. But a meeting could have been
summoned by giving 2 weeks notice. The Managing Director conveyed
that
there was a lot of political pressure from the Minister. She cried
and shed

Page 110 screenshot
tears a couple of times and said that the Minister was getting hard
on her.

When the Chairperson introduced the agenda and mentioned that it was
an
urgent matter and the Minister was interested in getting the Board
to
recommend extension permit. Probably, it was Mr. Sinai Brown who
asked the
Project Lawyer whether it was in line with the legislation. The
Project Lawyer
replied that there was no problem for the Board to agree to the
extension.


                   89
The whole discussion did not exceed 30 minutes. The chairperson
openly said
that there was pressure from the Minister.

4.8.6 Mr. Iamo Ila Secretary of the Department of Environment and
    Conservation in givin evidence on oath said that:-

He attended only a few Board meetings because of his commitments and
therefore he was sending his nominee Mr. Gai Kula most of the time.
Mr Kula
explained what happened at the Board Meeting and he expressed his
views to
the Board Secretary that it was not done in the proper manner as
stipulated
in the Act and why Section 64 of the Act was not consulted before
the
resolution was made. He asked in his letter to the Board Secretary
why the
procedure was not followed but he did not get a reply.

According to the advice given by his nominee that Turama extension
was not
on the agenda and it was brought up at the last minute after all
other agenda
items were discussed. His nominee Mr Gai Kula was caught unaware as
he did
not know that this matter would be taken for discussion that day.
HiS
nominee mentioned to him not to allow that to go and so they should
write
in about some of the areas they have overlooked when they introduced
that
item at the Board meeting.

The developer must have the Forest Plan and the Environment Plan.
The
Environmental Plan has to be approved by the Honourable Minister for
Environment and Conservation. As far as he knew he had not sighted

Page 111 screenshot
any plan
and the Honourable Minister has not taken any steps to approve any
work to
be done there.

4.8.7 Mr. John Painap former acting Secretary Department of Prime
    Minister and presently Secretary Department of Lands in giving
    evidence on oath said that:-

The letter dated 6th June 195 was a letter sent to the former
Managing
Director National Forest Service in response to the letter received
from the
Director General NO as he could not make a decision. What she was
saying in
her reply was that the permit had been awarded and according to her
the
issue has been resolved and decision had been made and whatever that
was
reported had no bearing.


                90
In para 2 of his letter he wanted to know whether it was an
extension of total
area that had been approved. If it was a new extension it should be
in
compliance with the National Forest Development Programme.

His view in Section 64(3} has been that the two conditions
stipulated in that
section must be fulfilled to exempt from advertisement. If one of
the
conditions stipulated was not satisfied he believed that it should
have been
advertised.

He was not satisfied with the answers given by the former Managing
Director
in her reply. Some of the paragraphs in that letter were personal
dealing not
with the facts that were stated. it was a superficial reply. What
was stated in
the last paragraph was not related to his function.

4.8.8 Mr. Terry Warra Director Forest Research Institute in giving
   evidence on oath said that-

The General Manager sought internal legal advice and decided to go
under
section 64(3). The submission was made to the Board a bit hastily
without
adequate notice,

Page 112 screenshot
The National Forest Plan was not there_ After that project went
through they
realised that the National Forest Development Programme was not
there. The
General Manager was handling that project himself. It was the
General
Manager who was pushing the proposal. They decided that no further
project
be considered without the National Forest Plan.

In the case of Marshall Lagoon the TRP (Timber Rights Permit)
expired. The
Forest Management Agreements were done for that area and they went
ahead and advertised. They then realised that the National Forest
Plan was
not there yet. They were not doing the correct thing and they
decided to
speed up the National Forest Plan and the Provincial Forest Plan.
The project
has not been allocated yet.

4.8.9 Mr. Kanawi Pouru acting General Manager Forest Authority in
his
    evidence on oath said that:-

His reading and understanding of the Board's option was that the Act
allows
resources to be allocated. The way he looked at it was that there
were 2
options. one was to advertise. The other was to allocate without
advertisement.


                         91
 If there was an operator on the ground and additional resources are
acquired
within the vicinity, then it was in the national interest that the
operator was
going to meet the national interest then the Board could exercise
the option
not to advertise and allocate the resource to the operator on the
site.

They had a National Forest Policy and the National Forest
Development
Programme was a part of the policy and that was his answer to the
question
whether extension could be given under Section 64(3) of the Act

4.8.10    Mr. Andrew Tagamasau Acting Divisional Manager
          Operations and former Regional Manager Southern Region in
          giving evidence on oath said that:-

He was the Regional Manager Southern Region from October 1993 till

Page 113 screenshot
he was
recently promoted as acting Divisional Manager Operations.

A certificate had to be given by the Gulf Provincial Committee
before the
FMAs were signed. FMAs were not submitted to the Gulf Provincial
Forest
Management Committee when it had its first meeting on 26 May 1996.
The
certificate referred to earlier had to be signed by the chairman of
the
committee. There is only a 'minute Secretary" to the Gulf Provincial
Forest
Management Committee.

But the General Manager instructed him to sign the certificate as
secretary to
the Gulf Provincial Forest Management Committee and so he signed it
accordingly. This was done in Port Moresby after the meeting of 26
May 1996
It was the General Manager who was exerting pressure on him.
Rimbunan
Hijau was trying for this project and the General Manager felt that
the
company had adequate resources and so wanted the Turama Extension
finalised early to cut out Rimbunan Hijau.

The certificate stated that the landowners were willing to sign the
agreement
but no evidence was produced to that effect. The only thing that was
put to
the Committee was the explanation of the project

The landowner groups were not represented at the Provincial Forest
Management Committee meeting. The document that was signed by the
Gulf
Provincial Forest Management committee was something that was
drafted in
the General Manager's Office and brought to Kerema for the committee
members to sign. what was stated in that document was not factually
correct The statement made n paragraph 7 of the minutes that the
Gulf


                92
Provincial Forest Management Committee had been given the
opportunity by
all parties to negotiate the proposal was incorrect_ in fact, there
was no
project proposal put forward before the Committee. The statement in
the
minutes of the committee advising the National Forest Board that the
Proposal submitted by the Turama Forest Industries Pty Ltd had the
full

Page 114 screenshot
support of the Gulf Provincial Forest Management Committee was also
incorrect as that minute was also prepared by the General Manager
and
brought to Kerema to be signed by the Committee members.

As regards the certificate under Section 58(f) he presumed that the
FMA
_document was cleared by the Project Lawyer and so they merely
wanted his
signature. There was pressure from the General Manager who was co-
ordinating all those things_ The General Manager gave him a
telephone call
and told him that he had to sign the certificate. so he signed the
certificate
which was brought to his office at Port Moresby as secretary to the
Committee although he was not the secretary. The correct procedure
is that
the certificate should have been signed by the Chairman Gulf
Provincial Forest
Management Committee before the FMAs were undertaken.


                                      93


CHAPTER 5 - COMMENTS IN RESPONSE TO

                     THE PRELIMINARY REPORT




5.1 Despatch of Preliminary Report.

Pursuant to Section 17(4) of the Organic Law on the Ombudsman
Commission copies
of the reports were sent to the following persons:-

       Hon. Titus Philemon MP Then Minister for Forests
       Mr Guao Zurenuoc       Chairman, National Forest Authority and
Managing
                              Director, National Forest Service
       Ms Jean Kekedo, OBE    Then Chairman, National Forest
Authority and
                              Managing Director, National Forest
Service
       Mr Keith Doleman       Then General Manager, National Forest
Service
       Mr Albert K Milala     Acting Chairman of the Gulf Provincial
Forest
                              Management Committee,
       Mr Dike Kari           Divisional Manager Policy & Planning,
National
                              Forest Service

Page 115 screenshot
         Mr Andrew Tagamasau    Divisional Manager Operations, National
Forest
                                Service
         Mr Maurice Caughlan    Project Lawyer, National Forest Service
         Ms Bibiana Kenatsi     National Forest Service

5.2 Response to the PreliminarY Report

All persons to whom the Preliminary Reports were sent responded with
their
comments. Ms Jean Kekedo in addition to her written reply requested
the
Commission to grant her an opportunity to give oral evidence. The
request was
granted. Mr Maurice Caughlan was also granted further opportunity to
give oral
evidence in relation to certain adverse comments made against him by
Ms Jean
Kekedo OBE.


                                94

           5.2.1 Hon. Titus Philemon MP


        Hon. Titus Philemon MP mentioned that the matter raised in
the letter sent by
        the Commission appeared to be of a technical nature and
required no
        comments from him. His only remark was that his sole
involvement was to
        sign the permit, which he did on the recommendation of the
National Forest
        Board at that time.


        5.2.2 Mr Guao Zurenuoc - Chairman & Managing Director
National Forest
            Authority


         Mr Zurenuoc mentioned that he was not the Managing Director
of the Forest
         Services or Chairman of the Forest Authority at the time the
matters raised in
         the report were made. As a result he would not properly
comment on the
         matter of which he had no personnal knowledge of and would
not either
         agree or disagree with the Commission's preliminary
findings. Any final
         recommendations made by the Commission, wherever possible,
would be

Page 116 screenshot
        implemented.


        5.2.3 Ms Jean Kekedo the then Chairman National Forest
Authority &
            Managing Director of NationaI Forest Service


         (a) Ms Jean Kekedo mentioned that she trusted Mr Doleman's
advice as he
             was appointed to lead the World Bank Team under NFCAP
project prior
             to being appointed as General Manager and felt that if
any body knew
             the rules he would. When Mr Doleman and Mr Caughlan said
that the
             Turama Project could start, she was happy that the
Governments policy
1            on downstream processing could become a reality. She did
not ask her
             staff to make the Turama Project a priority. The then
General Manager
             and the Projects Lawyer said that they could start the
project as it was
             not a new project but an extension_ Her reply was that
as long as it
             confirmed with the Act it was alright. The project
lawyer mentioned
             that all legal areas had been sorted out and that he
received advice
             from the State Solicitor to the effect that he was
correct. Perhaps, the
             only mistake she made was trusting her lawyer. She
should have asked
             for a written advice from the State Solicitor_
Sometimes, heads of
             organisations have so much to do they must rely on their
professional
             staff for advice and trust them enough not to mislead
them. In this
             case she just did that


                   95
(b) Preliminary Finding 5.2.1: - That the National Forest Plan has
not
    been produced during the tenure of office of the former
    Chairperson Ms. Jean Kekedo OBE Managing Director:

       The Preliminary Findings was correct. The Hon Tim Neville
       advised that the National Forest Plan should be abolished by
       making an amendment to the Act.

Cc) Preliminary Finding 5.2.2: - That the extension of TP2-12

Page 117 screenshot
appears
    to have been recommended to the Board without ensuring that
    the conditions stipulated under Section 64(3) of the Forestry
Act
    were, strictly complied with:.

          She relied on her professional managers and the Divisional
          Managers. The advice given to her by the General Manager and
          the Project Lawyer was that Section 64131 of the Forestry Act
          was applicable as the Project was an extension of an existing
          approved operation. The Project Lawyer and the General
          Manager assured her that everything was alright and that as
          there was no National Forest Development Program in place
          then it could not be said that the forest development project
          was inconsistent with the National Forest Development
          Program.

In giving oral evidenCe before the Commission she said that what
annoyed her
most was that Mr Caughian was not speaking the truth. He told her
that
everything was in order and that he was confident that there was no
legal
problem. If Mr Caughlan insisted on the legal point then Mr Keith
Doleman
would have stopped further action on the project.

(d) Preliminary Finding 5.2.3: - That Ms Jean Kekedo OBE Managing
    Director has not been taking a consistent stand on the
    interpretation of section 64 of the Act

          She adopted a consistent stand. Initially the then Minister
for
          Forests wanted to amend the Act and replace it with many new
          provisions such as abandoning of a National Forest Plan. The
          former Minister Neville then gave an undertaking to Turama
          Forest Industries Pty Ltd. After that with a change in
          Government the TSA concept was abandoned by the National
          Executive Council. She was then persuaded by the General
          Manager and the Project Lawyer that an avenue existed to get
          the project off the ground because it was in extension of an
          existing approved project. She had been consistent in her
          approach to given circumstances. It had been the
          circumstances and not. Ny consistency of approach which had
changed


                             96
 (e) Preliminary Finding 5.2.4: - That nothing relating to National
      Forest Plan was mentioned in PNG Forest Authority Annual
Reports
      of 1993 and 1994:

              The 1993 Report clearly Stated that the Board only met

Page 118 screenshot
for the
             first time in February 1993. The 1994 Report highlights
include
            reviews to projects which was a part of the development
of a
            National Forest Plan.

(f)   Preliminary Finding 5.2.14: - That Ms. Jean Kekedo OBE
Managing
      Director appears to have made an improper suggestion in her
      letter dated 17th March 1995 to Turama Forest InduStries Pty
Ltd
      that it was not necessary for them to respond to the
      advertisement:

            Turama had already Carried out feasibility studies Which
were
            given to the Authority. Had the project been advertised
            Turama's Proposal would still have been evaluated with
others.
            She did not accept that her suggestion was improper. Her
            General Manager and the Project Lawyer both advised her
that
            Turama Forest industries Pty Ltd need not lodge a further
            proposal if advertising was carried out

(g)   Preliminary Finding 5.2.15: - That the reason given to the
Board for
      presenting the Turama Extension issue a, an urgent one for
      consideration at the Board Meeting of 30 May 1996 was not
      convincing.

            The members with exception of Mr Brunton were quite
            happy to deal with the Board Paper even after Mr Brunton
said
            he wanted time to read all attachments. The paper was
            prepared by the General Manager and the Project Lawyer
who
            both stated very positively to the Board that all legal
and other
            steps had been taker She did not see why, when the
country
            was going through a severe economic crisis any delays in
the
            project should be allowed.


                                            •




                   97

Page 119 screenshot
(h) Preliminary Finding 5.2.16:- That Ms. Jean Kekedo OBE Managing
    Director appears to have acted in an unprofessional manner when
    she failed to circulate the reply of Mr. Brunton to the Members
of
    the Board or to table it at the next Board Meeting.

         The letters were prepared by the Corporate Secretary and
given
         to her to sign. She specifically recalled requesting that Mr
         Brunton's reply be attached and sent with the reply. in
giving
         oral evidence before the Commission Ms. Kekedo stated that
         she gave specific instructions to her assistant Ms. Bibiana
to
         attach Brunton's reply to the letters that were sent out

(i) Preliminary Finding 5.2.18: - That the statement that the FMA
    Project relating to Turama Kikori Baimuru area is contiguous as
    stated in Ms. Jean Kekedo OBE Managing Directors letter dated
    13.6.95 to the Minister appears to be incorrect_

         The letter was prepared by her General Manager and she was
         assured that it was in order for her to sign. She accepted
the •
         advice of her professional officer

(J) Preliminary Finding 5.2.19: - That Ms Jean Kekedo OBE Managing
    Director appears to have failed to take into consideration the
    National Goals and Directive principles number four on natural
    resources and environment.

         She did not accept that finding. She acted in good faith on
the
         advice given by the General Manager and the Project Lawyer,

(k) Preliminary Finding 5.2.22: - That Ms Jean Kekedo OBE former
    Managing Director, National Forest Service appears to have been
    wrong in her interpretation of Section 64(3) when she stated to
    certain landowner companies that when the' resource area is an
    extension of an existing approved operation or project the Board
    may consider proposals without advertisement for open tender.

         Her letters to landowners were prepared by the General
         Manager. She must respect and accept his professional advice_
         For her as administrator, to reject papers or documents
         prepared by her professionals who were experts In fields
which
         she was not expert would have placed her in a position of
going
       against professional advice, That could amount to
professional
       misconduct or negligence.

Page 120 screenshot
                             98
     (I)     Preliminary Finding 5.2.23: - That Ms Jean Kekedo OBE
Managing
             Director appears to have made an improper suggestion to
the
             Ombudsman Commission in her letter dated 2 October 1995.

                 That finding was wrong - This interpretation by the
Ombudsman
                 Commission was unfair and unreasonable. She never
suggested
                 and certainly Would not ever suggest that an
investigation
                 could not or should not take place. What she said was
that a
                 courtesy at the least should have been shown before
summons
                 were issued.

     5.2.4 Mr. Keith Doleman the then General Mana • er National
Forest
          Service.

             (a) Re evidence given on 20.3.96.

                 The Project was the first to be developed under the
new Forest
                 Act and by the new National Forest Service Authority.
It was also
•                the first significant resource opened for development
in three
                 years. Few could doubt their reality then of being in
the front
                 line of one of the most controversial and difficult
resource
                 management positions in Papua New Guinea. The pressure
from
                 the resource owners, local and central Government,
provincial
               and national politicians, local and international
NGO's and others
               were varied unrelenting and intense. The National
Forest Service
               then led by Jean Kekedo tried very hard to walk the
middle line
               through a largely uncharted Forest Act, which as it
turned out
               was in several instances quite unworkable_

                 The reason they supported the project was simply that
they felt
                 it was very necessary demonstrate that the new Forest
Act
                 and its proteges, the Forest Authority, was workable

Page 121 screenshot
and could
              provide a sense of balance, propriety and satisfaction
to most
              stakeholders. That project stood out for its positive
              opportunities and it provides the highest level of
benefits to
              these source owners. It is firmly structured on a
sustainable cut
              basis. He absolutely rejected the suggestions in many
parts of
              the report to the effect that they (or he)
deliberately misled the
              Commission. if these are mistakes then those were made
              unknowingly and certainly not with a shadow of ill
intent.


                99
      As regards Section 4.8.1 of the Preliminary Report the
quibbling
      aver timing of the report is highly misleading. The reality
again
      was that this project had spanned years and not months. While
      one could have a special meeting in two weeks there are limits
      as to how many of those were acceptable to a Board and they
      had had several by then. More to the point is that the Board
      had addressed to Turama issue several times. Here and in
      several other sections the Commission laments on the lack of a
      Forest Plan. Jean Kekedo herself and others tried very hard to
      appease that requirement of the act, but they were beaten at
      the. post. It was simply not possible to prepare that plan
with
      any sincerity or value because in PNG the State did not own
the
      resource.

      As regards Section 5.2.8 and 5.2.10 he was at a loss to
understand
      the suggestion in the report that he pressurised, bullied or
      coerced Mr Tagamasau to sign the PFMC certificate. That was
      absolute fabrication. He certainly did put pressure on
      Tagamasau as secretary to the PFMC Committee to get the
      committee to sit and deliberate on that issue. He understood
      that the Chairman signed the certificate on the advice and
      support of the committee. He would not have accepted the
      certificate as valid if he had known that Tagamasau signed it.

      As regards Section 5.2.17 he genuinely believed that it was
not
      the first extension. A great many projects were extended, at
      least in time limits, and he thought that there were new areas
      added in some cases_ However, if he was wrong then so be it.
      He strongly refuted the suggestion that he deliberately misled
      the Board.

Page 122 screenshot
5.2.5 Mr Albert Milala acting Chairman of the Gulf Provincial Forest
   Management Committee

    As regard the preliminary finding 5.2.9 of the Preliminary
Report, he
    had been implied to have acted negligently during the course of
his
    duties as chairman of the Gulf Provincial Forestry Management
    Committee. He strongly refuted that allegation of negligence.


            100
Section 28(3) of the Forestry Act to the very best of his knowledge
was
never abused during his course of duties as acting chairman of PFMC.
It
was a general knowledge and backed up by all documents that the
project had all blessings of both the resource owners and the
company
responsible. Further to that it was equally the prerogative of the
said
company in ensuring that certain Resource Owners were present for
that meeting. All necessary preparations for the first ever PFMC
meeting were all organised by Forest Authorities in Port Moresby.
All
deliberations were entertained from documents made available to his
committee by the Forest Authority. He concluded that he was never
manipulated nor bribed in the course of his duties.


                     101


          CHAPTER 6- FINDINGS



The Ombudsman Commission makes the following Findings:-

6.1 That there is a too • hole in the Forest Act.

The Forestry Act states in sections 65 to 73 how a developer is to
be selected only
when a project is advertised in terms of section 64(1). In terms of
section 6413)
proposals may be considered without resorting to open tender, when
conditions
stipulated in 64(3}(a) and 64(3)(b) are satisfied but the Act does
not state how a
developer is thereafter to be selected for the issue of a timber
permit.

6.2 That the National Forest Plan should be in • lace before an

Page 123 screenshot
   Forest Development work is undertaken.

   Section 54 states:-

   "Forest Resources shall only be developed in accordance with the
National
   Forest Plan,-

   The words 'shall' and 'only' are the significant words in this
section. The
   question to be dealt with here is whether this section is
mandatory or
   directory. If it is mandatory the strict compliance is necessary,
failure to
   comply invalidates everthing that follows. To determine the issue
it is
   essential to examine the inter related sections and determine the
   consequences that are to follow if the condition stated in
Section 54 are not
   fulfiled. The relevant sections are Sections 6, 7, 47 & 143,

In terms of Section 6 one of the objectives of the Authority being
the Management,
development and protection of the Nation's forest resources and
environment in
such a way as to conserve and renew them as an asset for succeeding
generations
section 7 which deals with the function of the authority states that
one of the
functions of the authority is to prepare and review the National
Forest Plan and
recommend it to the National Executive Council for approval. This
leads to the
inference that the objective to conservation and renew the Nation's
forest resources
and environment as stated in Section 6, is to be achieved by having
a National Forest


                      102
 Plan. 'Section 47 states inter alia, the ingredients that are to be
found in the National
 Forest Plan one of which being the National Forest Development
Programme which
 is a condition mentioned in Section 64(3) if allocation is to be
made without
 advertisement.

 Section 147 permits the Board to extend saved permits etc..

 It states:

    “The Board may until:

Page 124 screenshot
     (a) The National Forest Plan has been drawn up under Section 47,
or
     (b) 31st December 1993,

    whichever shall happens first, not withstanding the provisions
of this act:-

    (c) Extend in terms of any permit a licence saved by Section
137, or
    (d) grant a timber authority,

    for a period not exceeding one year in a form approved by the
Board:.

 According to this section if the Authority has not prepared the
National Forest Plan
 by 31st December then the authority has no power to grant a timber
authority The
 Sections 87 to 90 deal with the matters relating to Timber
Authority. The timber
 authority relates to project area when the annual harvest does not
exceed 5000 cubic
 metres.

 matters relating to timber permits are dealt with in sections 73 to
86 but these relate
 to project developments when projects are advertised in terms of
Section 64(1). As
-mentioned earlier no development work shall take place without the
National Forest
 Plan.

 Summarising what has been dealt within the earlier paragraphs it
follows that if a
 National Forest Plan is not in place then;

    (a) objective stated in sec (1) cannot be achieved; and
    (b) The Authority would have failed to carry out its function
mentioned in
         section 7(1)(b): and
    (c) The authority has no power to issue timber authority after
December
         1993; and
    (d) The authority has no power to undertake any Forest
Development by
         issuing Timber Permit after advertising the project; and


                      103

   (c) The authority has no power to consider any extension of a
project
        under section 643) as the Forest Development Progrmme is an
item

Page 125 screenshot
       that is to be found in the National Forest Plan.

Thus as far as the Forest Development work is concerned the
authority comes to a
virtual stand still without the National Forest Plan. The inter
related sections earlier
discussed lead to the conclusion that it is mandatory to have the
National Forest Plan
in place.


                    104

6.3 That the Project paper submitted to the Board by the
   National Forest Service failed to give an impartial account of
   all relevant Facts for the Board to reach an unbiased
   decision.

it has been mentioned in the Board paper on Turama that the matter
has come to
the Board on several previous occasions and that the Board Members
were fully
aware of the issues. On examining the Board Papers it was found that
only on two
previous occasions that the matter regarding Turama area came before
the Board.
The first instance was in 1994 to issue a letter of consolation to
Turama Forest
Industries (Pty] Ltd as the Concept relating to Timber Supply Area
(TSA) was
abandoned when the change of Government took place in September
1994_ The
second occasion on which the Turama Area came before the Board was
to authorise
the Forest Management Agreements (FMA) to be undertaken in that
area. it is to be
noted that the first time that Turama Area matter was brought before
the Board to
consider the issuance of a Timber Permit was on 30th May 1995.

According to Section 7(1)(e) it is the function of the authority to
select operators
which in terms of Section 9 is carried out by the National Forest
Board. In order for
the National Forest Board to carry out its functions and objectives
effectively all
relevant matters relating to a particular subject should be placed
before the Board.
in the case of Turama Forest area the paper prepared by the Project
Lawyer and
endorsed by the General Manager and Managing Director had the
following defects--

   (a) That the recommendation of Turama Forest Industries Pty Ltd

Page 126 screenshot
as the
          Developer to be considered under section 64(31 of the Act
without
          giving full facts was improper_

        In terms of Section 64(3) of the Act if a project is an
extension to an
        existing operation then the project could be considered
without an
        advertisement Examination of relevant files maintained in the
National
        Forest Service revealed that there were other operators who
were
        equally qualified and had expressed interest in developing
Turama,
        Kikori. Bairnuru areas_ One of them was Gopera Investment
which has
        staked its claim for the area stating that the area was
covered in the
        existing contract. The former Managing Director took the view
that
        such a claim was invalid in terms of the new Act as no FMAs
were done
        :or the areas claimed. Since it was the Board that has to
make the

                                                  p


                 105
     selection these matters too ought to have been brought to the
notice
     of the Board for the Board to deliberate and arrive at a proper
     decision. On the contrary, Turama Forest Industries Pty Ltd has
been
     recommended to the Board as the appropriate developer.

(b) That the forest development project is an extension of an
existing
    operation is not true.

   Turama Forest industries Pty Ltd was awarded permit No. TP2-12 in
     1988. The current project was considered as an extension of
TP2-12.
   The word extension is not defined in the act. The Managing
Director
     has used the word "contiguous" in place of "extension" in
various
   correspondence. Meaning of contiguous as given in Longsman
   Dictionary is -
   "touching, next (to), having common boarder: eg. England is the
only
   country contiguous to/with Wales."

Page 127 screenshot
       Extension means:
       "The art of extending or condition of being extended".

   The forest project is an extension of an approved operation may
mean
   that the existing boundary of the approved operation is extended
so as
   to enclose the new forest project area with new boundaries. In
this
   case examination of the map of the area reveals that the three
areas
   for which Forest Management Agreements were done are separate
   areas having no common border with the existing area covered by
   timber permit TP2-12.

   The project lawyer has not elaborated on this concept in his
project
   paper. In his further reply to section 17(4) report he mentioned
that in
   the Turama contract they were dealing with the notional extension
of
   an existing approved operation. The boundary was dependent upon
   the area to which extension was designate namely the three FMA's.
He
   believed that the stand taken by the Commission was unduly
   restrictive. He made reference to Placer Holdings Pty Ltd PNG
(1982)
   PNGLR161 18 but did not elaborate on this case as to its
relevance to
   section 64(3) of the Forest Act. The case cited referred to an
extension
   of time and not to an extension of area and so is irrelevant to
this case.
   A restrictive meaning has to be applied to the word 'extension'
to
   prevent any abuse by the National Forest Service as well as the
National
   Forest Authority. Normally, there will be some operator who will
be


            106
operating in an area and if liberal interpretation is taken any such
operator can stake his claim for any area in terms of Section 64(31
even
though the new area may not have a common border with the existing
area That would nullify the general method of selection by
advertisement as stated in Section 64(1) of the Act

We wish to cite the following from the Judgement of Lord Denning in
General Electric Co Ltd V Price Commission 11975] 1 CR 1 at 12 which
was
quoted by Amet J in Re Gegeyo V Minister of Lands & Physical
Planning

Page 128 screenshot
(19871 PNGLR 331 at 335.

   "Parliament often entrusts the decision of a matter to a
   specified person or body, without providing for any appeal.
   It may be a judicial decision, or a quasi judicial decision, or
   an administrative decision. Sometimes Parliament says its
   decision is to be final. At other times it says nothing about
   it In all these cases the courts will not themselves take
   the place of the body to Whom Parliament has entrusted
   the decision. The courts will not themselves embark on a
   rehearing of the matter. But nevertheless, the courts will,
   if called upon, act in a supervisory capacity. They will see
   that the decision making body acts fairly. The courts will
   ensure that the body acts in accordance with the law.... if
   the decision-making body is influenced by considerations
   which ought not to influence it, or fails to take into
   account matters which it ought to take into account, the
   court will interfere. If the decision making body comes to
   its decision on no evidence or comes to an unreasonable
   finding - so unreasonable that a reasonable person would
   not have come to it - then again the courts will interfere._
   And, of course, if the body acts in bad faith or for an
   ulterior object, which is not authorised by law, its decision
   will be set aside. In exercising these powers, the courts
   will take into account any reasons which the body may give
   for its decisions. If it gives no reasons - in a case when it
   may reasonably be expected to do so, the courts may infer
   that it had no good reason for reaching its conclusion, and
   act accordingly."


                       107

     The Commission finds that the National Forest Authority has
been relying only on an      in house interpretation of Section 64(3)
and had not made any attempt to obtain a I written opinion on this
section from the State Solicitor or from a reputed Legal Firm.
The reasons given for considering the project under section 64(3) do
not appear to       be convincing at all. A reason must be based upon
some logic, some rational
     in house interpretation of Section 64(3) and had not made any
attempt to obtain a I written opinion on this section from the
State Solicitor or from a reputed Legal Firm.      The reasons given
for considering the project under section 64(3) do not appear to
be convincing at all. A reason must be based upon some logic, some
rational
I written opinion on this section from the State Solicitor or from a
reputed Legal Firm.      The reasons given for considering the
project under section 64(3) do not appear to       be convincing at
all. A reason must be based upon some logic, some rational
     The reasons given for considering the project under section
64(3) do not appear to       be convincing at all. A reason must be
based upon some logic, some rational
     be convincing at all. A reason must be based upon some logic,

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some rational
     premise, some objective reality, some honest basis and it
cannot be entirely
     subjective. The persons who were mainly responsible for this
lapse appeared to the      former Managing Director Ms. Jean Kekedo
the former General Manager Mr. Keith
     former Managing Director Ms. Jean Kekedo the former General
Manager Mr. Keith
     Dolman and the Project Lawyer Mr. Maurice Coughlan.




                       108

6.4 That Ms Jean Kekedo OBE the former Managing Director has
   not been takin a consistent stand on the interpretation of
   section 64 of the Act.

The fact that Ms Jean Kekedo OBE the former Managing Director has
not been taking
the consistent stand on the interpretation of section 64 of the Act
is seen from the
following:-

         (a) On 3rd January 1995 she sent a letter to Goeheae Landowner
             company outlining the procedures for Timber Permit wherein
             she said:-

             “The Gulf Provincial Government to recognise the potential
             of the Upper Purari timber area and have it listed in it's
             Provincial Forest Plan as required under Section 54 of the
             Forestry (Amended) Act 1991_

             The National Forest Board shall then advertise the
resource
             area to seek expressions of interest from registered
forest
             industry participants as required under Section 64 of the
             Forestry (Amended) Act 1991. However, where the resource
             area is an extension of an existing approved operation or
             project the Board may consider proposals without
             advertisement for open tender.- (Para 2.10)

      1b     On 18th February 1995 she mentioned in her letter to
Turarna
             Forest Industries Pty Ltd that a project agreement would
be
             drafted in consultation with TFI and landowners and that
would
             form the basis for negotiating TF1's procurement of the

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said
             FMAS (Para 2.111

             On 17th March 1995 she informed the Turama Forest
Industries
             Ptv Ltd that not withstanding any commitments made by the
             former Minister for Forests through TSA process this
office has
             been obliged to go through formal allocation process by
virtue
             of being deluged by alternative claims on that resource.
Their
             strategy would be to advertise the proposal according to
agreed
             guideines. They hoped to lodge that advertisement by
Friday
             24th March 199S and to allow one month for response. Only
             registered Forest Industry participants need apply. (Para
2.12:


                                109



            Id) on 15th April 95 Ms Jean Kekedo informed Andrew
Posai Minister
                for Forests thus:-


                   "..You will appreciate that whilst the TSA concept
has been
                   abandoned, certain and in this instance,
significant,
                   commitments were made by the previous governmnet
with
                   respect to allocation of resource in the vicinity
now
                   described by the three FMAs. On the basis of this
                   development both East Kikori and TFI have an
historical
                   claim on these forests. Hekiko is to my knowledge a
new
                   player and is without any earlier government.
implication as
                   regards commitments to future resource. The point of
                   reminding you of these is to firmly establish the
reality of a
                   substantial cost claim against the State should we
get it
                   wrong. In the case of TFI, who were invited to
undertake a
                   very expensive feasibility study we may expect this
claim to

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                 be measured in the 10's of millions, hence our
caution.


                 I must reiterate that our staff have in no respect
made any
                 decisions on allocation and the signing of FMAs was
firmly
                 undertaken on the basis of assignation of rights to
the State
                 and not to any given developer. I must defend this
position
                 as regards your accusation that our staff have
behaved
                 improperly. To the contrary it would have been wrong
and
                 illegal for our staff to have then engaged in
                 discussions/negotiations on a developer. This
responsibility
                 is firmly assigned to the PFMC:- (Para 2.17)


            (e) in her letter dated 3rd May 1995 she informed Hekiko
Landowners thus:-


                 "The purpose of signing the Forest Management
Agreement
                 (FMA) in the area is not for any particular company
                 (including your intended developer) but rather to
advertise
                 and to select the best developer that can offer the
best for
                 the landowners rather than just any one that appears
first at
                 the "front door". This is the Authority's position
as required
                 under the Forestry Act.


                 The Authority is not recommending Turama Forest
                 Industries (TFI) as the sole developer of the
resource. But
                 rather to advertise the resource as mentioned above
and
                 select the best company. TFI may be one of the
contenders
                 for the development of that resource." (Para 2.19)


                 110

6.5 That the Divisional Manager Policy and Planning Mr. Dike Kari
   failed to perform his duties with due diligence and care

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      when he permitted his officers to execute Forest
      Management Agreement before the Land Groups were
      properly incorporated.

In terms of Section 57 of the Forestry Act where it is proposed to
enter into a Forest
Management Agreement over customary land, the title of the customary
owners to
that land shall be vested in a land group .or groups incorporated
under the Land
Groups Incorporation Act To ensure that the Groups are legally
recognised the
Policy and Planning Division ought to have ensured that the
certificates of
recognition were issued by the Registrar of Titles before the teams
were sent to the
relevant areas to get the Forest Management Agreements signed.
However, the
agreements were signed without ensuring that the legal requirements
were satisfied.

Mr Dike Kari failed to perform his duties with due diligence and
care when he
permitted the FMAs to be signed in February/March 1995 before the
Land Groups
were incorporated_


                    111
6.6 That the Forest Management Agreement did not contain a
   proper certificate from the Provincial Forest Management
   Committee as stipulated under Section 58(f).

Section 58(f) of the Forestry Act stipulates that a Forest
Management Agreement shall
contain a certificate from the Provincial Forest Management
Committee to the effect
that it is satisfied as to

      (i) the authenticity of the tenure of the customary land
alleged by
           the persons or land group or groups claiming to be
customary
           owners; and

         di) the willingness of those customary owners to enter into
the
             agreement.

The Gulf Provincial Forest Management Committee had its inaugural
meeting on 26th
May 1995 at which the committee passed a resolution recommending
Turama Forest
Industries Pty Ltd as developer for Turama, Kikori, Baimuru areas.

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According to the
evidence given by Mr Andrew Tagamasau, a member of the committee,
the issue
relating to the certificate was not taken up for discussion.

The senior officials of the National Forest Service should have been
aware that the
certificate from the PFMC was a requirement that has to be fulfilled
in terms of the
Act.

6.7 That the Chairman of the Gulf Provincial Forest Management
   Committee failed to observe the condition stated in section
   28(3) of the Forestry Act.

in terms of section 28(3) where a PFMC is deliberating in respect of
a particualar
forest resource, the owners of that resource shall be represented at
the meeting of
the Provincial Forest Management Committee by two of their number
selected by
them who shall be entitle to take part in the deliberation but shall
not be entitled to
vote. This requirement was not observed by the Provincial Forest
Management
Committee.

The explanation of Mr Albert K. Milala Chairman of the PFMC that it
was equally the
prerogative of the said company in ensuring that certain resource
owners were
present for that meeting is unacceptable to the Commission. It was
the duty of the
Gulf Provincial Forest Committee to have ensured that this condition
was satisfied.


                   112
6.8 That the Former General Manager acted in an improper
   manner when he allegedly directed the Manager Southern
   Region of the National Forest Service Mr. Andrew Tagamasau
   to sign the relevant FMA certificate as Secretary to the
   Committee.

The certificate under Section 58(fl has to be given by the Gulf
Provincial Committee
before the FMAs were signed. The issue relating to the certificate
was not taken up
at the inaugural meeting of Gulf .Provincial Forest Management
Committee.
-However, :the .General 'Manager in order to'give the impression
that the legal
requirements have been met had directed Mr. Tagamasau in an improper
manner to

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sign the certificate as secretary to the committee whereas the
certificate had to be
signed by the Chairman. Mr Tagamasau Manager Southern Region
admitted on oath
that he was never appointed as the Secretary to Gulf Provincial
Forest Management
Committee. There was no secretary to the CPFMC but only a 'minute
secretary' who
is the Forest Manager, Gulf Province. Evidence has been led to show
that General
Manager was interested in the project and he was personally
directing most of the
matters relating to Timber Permit for Turama Forest Industries Pty
Ltd. Mr,
Tagamasau mentioned that he signed the Certificate as secretary to
the Gulf
Provincial Forest Management committee as there was pressure from
the former
General Manager.

6.9 That Mr. Andrew Tagamasau farmer Manager Southern
   Region of the National Forest Service acted in an improper
   and irregular manner when he signed the certificate under
   Section 58(f) as the 'Secretary’ of the Gulf Provincial
   Management Committee.

Mr. Andrew Tagamasau was not the secretary to the Gulf Provincial
Forest
Management Committee and he admitted in oath that he was not elected
as the
secretary to the Committee and that the matter was not discussed at
the Committee
meeting. By signing the certificate Tagamasau acted in a improper
and irregular
manner.


                        113

     6..10 That Keith Dolman former General Manager misled the
        Ombudsman Commission when he mentioned on oath that
        there were other extensions earlier approved under the
        Forestry Act 1991.

     In giving evidence on oath Keith Dolman mentioned that he was
sure that there
     were other extensions granted under the Forestry Act 1991 prior
to the Turama
     Extension. He agreed to give the names of such extensions (para
4.8.1) but without
     giving that information he left Papua New Guinea after
resigning his post (para 2A1).

     The information given by Keith Dolman is in contradiction of

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what was stated in the
     Board paper which reads as follows:-

           "D. Legal implication

            This is the first permit to be forwarded for
consideration since
            implementation of the new Act three years ago. ft will be
a landmark
            as the first permit under 1991 legislation and forestry
guideline."
            (para 2.23)

     Mr Maurice Coughlan, project lawyer in giving evidence on Oath
said that as far as he     knew that was the only project considered
as an extension to an existing project.
     knew that was the only project considered as an extension to an
existing project.
     (Para 4.6.2)

     Thus Mr Keith Dolman appears to have given misleading
information to the
     Ombudsman Commission when giving evidence under oath.

     6.11 That Mr Maurice Coughlan the Project Lawyer failed to act
        with due care and diligence when he expressed his legal
        opinion on the extension of TP2-12 under section 64(3).

     The Project lawyer said that he was asked to prepare the Board
submission by the
     General Manager after he returned from Kerema after attending
the Gulf Provincial
     Forest Management Committee meeting_ He was requested to
prepare the paper on
     Turama extension only on 29th May 1995. The Project Lawyer
mentioned that most
     of the material mentioned in the paper was prepared by the
General Manager
     himself before he proceeded to Kerema and the material was in
the computer. He
     merely added to that material certain paragraphs on legal
issues. He came to know
     that the project was to be considered as an extension under
Section 64(3) only on
     that day.




                      114

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The Ombudsman Commission finds that the Project Lawyer could not
have fully
considered the legal aspects of the issue thoroughly on the same day
and expressed
his opinion. The project lawyer did not obtain any written opinion
on the relevant
sections from the State Solicitor. The paper did not contain
adequate details to
enable the Board members to properly consider the issues and to come
to a decision
as regards the legal implications. The paper merely said that it was
the first permit
to be forwarded for consideration since implementation of the Act
three years ago.
That was not what was expected under that heading. Those remarks had
nothing to
do with the legal implications and was merely a very general and
shallow statement.
It was mentioned that as Turama Forest industries Pty Ltd has an
existing permit
their operation is clearly an extension of an "existing approved
operation"_ This
statement is not as "clear" as stated to be. In the circumstance we
find that the
Board was not been fully appraised and only bare minimum details
have been
disclosed to the Board to arrive at a decision.

Chris Marlow Corporate Secretary wanted Maurice Coughlan to give the
certificate to
the effect that all legal requirements to recommend the issue of
timber permit has
been met. But Maurice Coughlan was not prepared to do so,

Thus Mr Maurice Coughian, the Project Lawyer, has acted in a
negligent manner in
discharging his official duties.

6,12 That the Timber Permit issued in terms of Section 73 by the
   Honourable Minister for Forests is without any legal basis.

   (a) The power granted to the Minister in terms of section 72(11
to issue a
       timber permit to a developer on the recommendation of the
Board
       apply only to project proposals received in terms of section
66 of the
       Act in response to an advertisement under section 64. As
sections 67
       to 72 do not apply to proposals considered under section
64(3) the
       issue of timber permit in terms of section 72(1) of the Act
by the
       Honourable Minister for Forests is without any legal basis.

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                       115


          CHAPTER 7 - OPINION



The Ombudsman Commission is of the opinion that:-

    (a) The timber permit No TP2-12A issued by the then acting
Minister for
        Forest Honourable Titus Philemon to Turama Forest industries
Pty Ltd
        was improper and has no legal backing.

    (b) The officials of the National Forest Service had from the
very inception
        of the whole exercise already made up their minds in favour
of Turama
        Forest Industries Pty Ltd and were merely going through the
        procedures to give an impression that the requirements of
the
        Forestry Act were complied with. When they finally decided
to select
        Turama Forest Industries Pty Ltd in terms of Section 64(3)
of the Act
        they hurriedly submitted the Policy Paper to the National
Forest Board
        on 30th May 1995.

    (c) There are reasons to believe that there was political
interference which
        led the National Forest Board to make a hasty recommendation
to the
        then acting minister for Forest Honourable Titus Philemon to
the issue
        of the Permit to Turama Forest industries Pty Ltd.


                         116



     CHAPTER 8 - RECOMMENDATION



8.0 The Commission after considering the comments received in
response to the
    Preliminary Report and the available facts Makes the following
    recommendations.

Page 138 screenshot
81 (1) That action be taken by the National Forest Authority to
produce a
          National Forest Plan. No new projects be undertaken until
the plan is in
          place_

    (ii) Suitable amendment be brought to the Forest Act to
accommodate
         the issue of Timber Permit when operator is selected in
terms of
         Section 64(3) of the Act.

8.2 Appropriate disciplinary action be taken against the Project
Lawyer Mr.
    Maurice Caughlan for his failure to provide proper legal advice
to the National
    Forest Board on matters that lead to the issue of Timber Permit
No_2-12A to
    Turama Forest Industries (Pty} Ltd.

8.3 That proper procedures be formulated to ensure that the Project
Lawyer is
    held responsible to ensure that all legal requirements under
various provisions
    of the Act are complied with before he makes his recommendations
to the
    Managing Director and the National Forest Authority.

8.4 That Administrative instructions be issued to ensure that
Divisional Heads
    comply with relevant provisions of the Act in carrying cut their
duties and be
    held responsible for failure to observe them.



117




               CHAPTER 9 - CONCLUSION




In accordance with Section 22(3) of the Organic Law on the Ombusman
Commission,

Page 139 screenshot
we request the Managing Director and Chairman of the National Forest
Authority to
notify this Commission within three (3) weeks of the receipt of this
report as to the
steps he proposes to take to give effect to the above
recommendations.



Dated the 14th day of August 1997




SIMON G. PENTANU                                                  MN
HIB TETANG
CHIEF OMBUDSMAN
OMBUDSMAN

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