Monday, September 25, 2017

Resource ministry plans reduction in export eligible timber

The Ministry of Natural Resources and Environmental Conservation will reduce the volume of timber that can be exported abroad starting from May 1, according to a ministry spokesperson.

Only timber cut and sold by the state-owned Myanmar Timber Enterprise, which contracts out much of its cutting activity, is eligible for export. MTE sells timber monthly through a tender system, with separate tenders in kyat and US dollars.

At present, timber purchased from MTE in kyat and in US dollar is export eligible, but starting from May 1 any kyat-denominated timber will have to remain in country, said ministry spokesperson U Win Zaw.

The order was released by the ministry’s Forest Department last October in order to give merchants six months to prepare.

“The ministry has decided to halt [the export of logs and sawn timber purchased in kyat] with the aim of [ensuring] smooth distribution of timber at a low price and easier availability for the consumers in the country,” he said.

U Soe Win, Secretary General of the Myanmar Forest Products Merchants Federation, said that the new policy will improve local consumers’ access to cheap local timber – a crucial raw material for wood-based industries and the construction sector.

“But it will also affect the foreign exchange earnings,” he said. “The country is getting export revenue from timber sold at both the dollar and kyat tenders held by MTE. When exporters can only sell timber purchased in dollars, exports will be lower and the country will also receive less foreign currency.”

However, the volume of timber sold in the kyat auction that is of export quality is relatively low, said U Khun Aung Soe, the general manager of MTE’s market and milling department, which is in charge of the monthly tenders.

The volume of wood sold is usually split evenly between the dollar and kyat tenders, but the best quality timber is reserved for the export-oriented dollar sale, he said.

U Khun Aung Soe estimated that only around 30pc of the timber sold in the kyat tenders is suitable for export. But he still thinks it would be better to allow people to export timber bought in either currencies.

Local demand is low, potential export profits high and timber buyers clearly want the option to export, he said. Many timber merchants have asked for the government to extend the May 1 deadline, and it remains to be seen whether the ban will happen as planned, U Khun Aung Soe added.

U Soe Win pointed out another argument in favour of banning the export of timber from the kyat auctions. When the government seizes illegal timber it is sometimes resold through the kyat tenders, which are aimed at the local market.

But seized timber would be an illegal import in many foreign markets and even MTE-cut timber has run into problems. A Swedish Forest Agency investigation recently found that importer Almtra Nordic could not demonstrate who had harvested its timber or where it was cut prior to purchasing it from MTE.

“Seized timber would have complicated documentation [issues] when being export to EU markets,” said U Soe Win, adding that his association agreed with the new ministry policy, despite the benefit foreign exchange earnings bring to Myanmar.

Read more: When selling is more lucrative than protecting: Myanma Timber Enterprise and the deforestation crisis