Cambodia could be earning five times as much as it now does from logging and still do a better job of hanging on to its dwindling forests, according to a damning report by the World Bank and others.

Wrong-headed policies currently encouraged illegal logging, allowed over-cutting and created jobs that cost 50 times more in subsidies than they paid out in salaries, the report suggested. And all this benefited just a handful of foreign companies, many of which would go bankrupt if they had to face the cold light of realistic pricing.

Just preventing companies from cutting more trees than the forest can stand may be enough to push them out of business. "If limited to sustainable harvest levels, even with subsidized royalties, concessions are unlikely to be able to operate profitably as planned because of low conversion rates (wasteful use of wood), poor marketing strategies and high capital costs," the report said.

Cambodian officials agreed that all was not well with the country's forests. However, they believed that the report's recommendations - which included raising taxes on cut wood by 600 percent while slashing logging volume - may be impossible to implement.

"You can do anything on paper, but how can we make it work in the Cambodian situation, where we have war, where we have the Khmer Rouge, where we have no control systems?" said one senior advisor to the agriculture minister, who oversees the forestry sector.

At the moment, Cambodia charges much less for its tropical timber than other country. Royalties average US$14 for every cubic meter of wood cut, against an international norm of about US$70. The report calculates that by raising taxes, auctioning off concessions and enforcing environmental laws Cambodia could bump up its income from logging to US$100 million a year from the current US$20 million.

"You can say that we could get five times that, but the day we raise the tax everyone throws their energy into evading it," said the forestry advisor.

Indeed, an attempt to double royalties announced last November has fallen flat.

The report, prepared by the World Bank, the United Nations Development Program and the UN's Food and Agriculture Organization, is being treated as if it were radioactive. Half a dozen numbered copies have been distributed to senior government figures, and of the few people who have seen it, fewer still are prepared to discuss it on the record.

An exception is Minister of Environment Mok Mareth, who thinks the report underestimates the damage being done by illegal loggers when it projects losses of 1.9 million hectares over the next 15 years - about a fifth of Cambodia's total forest. "I think if they go on like this we will lose everything. It is just maths," he said.

Cambodia has already dished out most of its best forest land - some 6.5 million hectares are carved up between 22 companies, most of them foreign. That is more than half of the 11 million hectares of forest that experts working from satellite photos said were left in the country.

Some of the concessions are huge - Indonesian's Panin controls 1.46 million in a single concession, while Malaysian loggers Samling have 800,000 hectares to cut. The World Bank would like to see concession areas shrink and go to a larger number of companies with more local ownership, and which would have to bid openly for the right to cut trees.

Well-connected businessmen in Phnom Penh said they expected just the opposite to happen. They believed the government would use the report as ammunition against existing concession-holders, most of whom are violating their contracts in some way. They expect concessions to be cancelled and redistributed to eight or nine companies with strong political backing. "Bidding? Unlikely!" laughed one Cambodian businessman.

Concession holders would certainly be pleased if the government were to follow another recommendation in the report and reverse a ban on log exports. The government's logic is that by banning exports of raw logs and obliging concession-holders to set up processing plants they will encourage investment and create jobs in Cambodia. The economists' logic is rather different. They believe wood processing cannot profitably be wedded to felling for a number of reasons.

First, there is no domestic market in Cambodia and it would be tough for individual logging companies to market their products abroad in great quantity. Second, one concession area will produce different types of wood which require different types of machinery, much of it expensive. Third, it should be in a logger's interests to cut selectively so that he maintains his resource over the several decades of the concession's life, while it is in the processor's interest to keep feeding the sawmill-beast with as much wood as possible.

"The minute a wood-processing industry is viable, companies will come and do business. You can't make it happen just because a bureaucrat has decided it should," said a forestry adviser. "Well, not without subsidies."

In this case, the subsidies work like this: Cambodia wants loggers to process wood. To make up for their extra investment, it sells wood to them very cheaply, and a huge chunk of money that might have come in to government coffers had they just exported the logs at market price is lost. The World Bank-led report calculates that such subsidies add up to US$18,000 a year per job created, in a country where the average person earns US$286 a year.

Such low incomes practically guarantee that illegal logging will not be stopped. "If an official earns US$15 a month to control logging and someone offers him 50 bucks, it is all over," said a government advisor.

Cambodia's low grade guerrilla war doesn't help. Much of the illegal logging goes on in territory controlled by the Khmer Rouge, with wood going straight across the border to Thailand.

"I don't think we can expect to see the Khmer Rouge paying royalties..." said an analyst in the Agriculture Ministry. The war puts paid to any hope of control in some areas.

Some experts point to other Southeast Asian countries such as Indonesia and Malaysia as models for developing forestry policy, an analogy which makes the cynics smile. "They've done so well with their forestry policy that we see all their companies coming here," commented a resource management specialist. "It's normal to move to the weakest link."

Copyright 1996 Asia Times.

(c) 1996 Chamber World Network International Ltd