A massive - and massively controversial - logging contract in northeastern Cambodia may be in jeopardy even before a single tree is felled because both sides are sulking over what they see as a bad deal.

Many Cambodians have taken umbrage at seeing some eight percent of their country signed over to the Panin Group, an Indonesian company.

First Prime Minister Norodom Ranariddh said the government would rethink the contract because not enough attention had been given to the impact it would have on the ethnic minorities who make their living from the forest areas to be cut down. The loggers are no happier. Second Prime Minister Hun Sen said Panin had negotiated on the basis of satellite photos taken in 1992. "But the realities of the forest are different now. Places that used to have forest no longer do. So the Panin Group itself suggests it will review the contract," he said.

A forestry expert at Panin's Macro subsidiary in Jakarta said that after enlisting military help for a five-day aerial survey of the concession area, the company determined that the concession area was far from ideal. "It is just not suitable for logging," said Gerondio Panong. "The timber is of no commercial value."

The Ministry of Agriculture announced in October that it had authorized the Panin Group to log 1.46 million hectares of forest. The concession covers most of the sparsely populated Ratanakiri province and spills over into two neighboring provinces, but local authorities said they had no say in the deal. "In my own province, we had no input," said Kep Chuk Tema, the governor of Ratanakiri.

Kep Chuk Tema said he believed a vast logging program would contribute little to the lives of the local population, which shifts around the forest clearing areas and growing crops for a year or two before moving on. "For myself, I don't want the Panin project. I think it is nothing but destructive," he said. "It is so vast."

While Panin is disappointed with the area, the company still intends to send a survey team in April to do a thorough on-the-ground study of the trees. One option the company said it might consider was clear-felling and replanting with fast-growing trees such as eucalyptus which could feed a pulp and paper plant. It said it intended to write local populations into its development plans. "The ethnic minorities are already established there. Of course we can't just push them off the land," Panong said.

Ratanakiri's isolation presents another problem. There is no road to get the timber products out to port in southern Cambodia. The obvious solution would be to truck it across the border and ship it from a port in neighboring Vietnam. "But we are not at all sure that the (Vietnamese) government will give us a permit to take timber through Vietnam," a company exec - utive said.

Ideally, Panin would like to switch to another area. The problem is that most of the areas with decent commercial tree cover are already spoken for. Getting a good concession, even one-half the size of the deal Panin already has, would mean canceling another contract.

But analysts said the government would find it easy to reshuffle contracts, pointing perhaps to another company's failure to comply with environmental rules.

"No logging firm ever complies with their management plan anyway," said Jorge Malleux, forestry specialist at the Food and Agriculture Organization in Phnom Penh.

In the furiously political business of logging, money speaks loudly. On the face of it, Panin is just whispering. According to the contract for Ratanakiri, Panin will pay the government between US$14 and US$20 per cubic meter, depending on the grade of wood. This is far below the US$75 or so recommended by multilateral organizations.

In a macroeconomic plan currently under discussion within the government, planners see forest revenues rising from 5.9 percent of gross domestic product to 7.1 percent by the end of the century. With GDP projected to rise by around eight percent a year, that boils down to a bigger share of a substantially bigger pie. "Cambodia's forests are going to hell in a handbasket and they are talking about increasing yields. It is just not logical," said Gregory Woodsworth, an adviser to the Environment Ministry. Increasing the royalties charged would be a far better bet than simply increasing the amount of timber cut, he noted.

Hun Sen said logging firms were increasingly expected to contribute to Cambodia's economy, for instance by building roads and processing plants. "Lately, companies exploiting our forests have to pay a high price, with royalties, replanting and infrastructure," he said.

Copyright 1996 Asia Times.

(c) 1996 Chamber World Network International Ltd.