A New Forest Grab: The Mengen Integrated Agriculture Project
Case study on the Mengen Forest Clearing Authority
Logging companies mentioned in this document:
Concessions mentioned in this document:
FOREST CLEARING AUTHORITY CASE STUDY 2 A NEW FOREST GRAB: THE MENGEN INTEGRATED AGRICULTURE PROJECT
This is a publication of ACT NOW! Published: November 2023 Cover image: Rainforest logs from the Mengen concession ready for export ACT NOW! is a community advocacy organisation based in Papua New Guinea. Its vision is for a ‘gutpela sindaun blong olgeta’ (a just and equitable society) that embraces PNG’s rich and diverse cultural and biological heritage and is based on the principles of sharing, communal land ownership and environmental stewardship. Contact us Follow us info@actnowpng.org Facebook: @ActNowPNG1 +675 7715 9197 Twitter: @actnowpng Website: www.actnowpng.org This work is licensed under a Creative Commons Attribution-Non-Commercial 4.0 International License.
For decades, Papua New Guinea has been in the grip of a forest resource grab by primarily
Malaysian-owned logging companies. There is a high risk that most of this logging can be
classified as illegal, despite being authorised by the PNG Forest Authority (PNGFA). One of the
principal types of logging licence that is being routinely abused is the Forest Clearing
Authority (FCA). This type of licence is intended to permit forest clearance for agriculture or
other land use change, but is being systematically abused to allow large-scale logging of huge
tracts of forest.
This case study focuses on a recently approved FCA, the Mengen Integrated Agriculture Project
in East New Britain.
Covering 52,500 hectares of community-owned forest in the Inland Pomio area, the project was
initiated by Westenders Limited, part of the KK Connections corporate group, one of PNG’s
largest logging companies. The project has a 14-year licence allowing it to clearfell discrete
areas of forests for agriculture planting.
This case study reveals several serious concerns about the project:
• While the project’s logging licence is tied to a proposed agriculture development,
analysis shows that in reality the Mengen Project is a large-scale logging project – with
its primary purpose to make money from selective logging of high value primary
rainforest. It is very questionable whether any of the proposed timber plantation or
agriculture parts of the proposal are genuine and would in fact even be viable.
• There is little evidence of land clearing in the project area so far, but clear evidence of
selective logging (which is not permitted under an FCA) taking place across large parts
of the project area.
• While some landowners appear to have provided signed consent, there has been
sustained and well-documented opposition to the project from numerous landowner
groups in the area.
• The Mengen FCA covers several areas of international environmental significance,
including the Nakanai Karst area, which has received Tentative World Heritage Listing.
• There are credible and concerning reports of police working on behalf of companies in
the area to pressure landowners and stifle any dissent.
ACT NOW! is recommending that Westenders Limited, KK Connections Limited and related
companies should immediately cease all logging activities in the Mengen Project area and
compensate landowners for logging undertaken to date. It is also calling on the PNGFA to
cancel the FCA for this project and provide redress to landowners.
The Mengen Project is just one of 24 currently operating FCAs in PNG. The kinds of issues
present in this case study have been reported in numerous FCA areas, including in the reports
of the SABL Commission of Inquiry. In 2022, the National Forest Board imposed a moratorium
on new FCAs and ordered a review of existing projects. ACT NOW! is calling on the PNGFA to
publicly release information on the review process, suspend log exports from all existing FCAs
until this review is complete and commit to extending the current moratorium on new FCAs
until all recommendations and findings from the reviews have been fully implemented to
prevent future abuse.
For decades, Papua New Guinea has been in the grip of a forest resource grab by the local
offshoots of Sarawak-based logging companies. While recent announcements by Prime
Minister Marape have suggested a growing recognition of the important role of PNG’s forests,1
evidence from the ground suggests that for the logging companies and the government offices
that facilitate their work, it is business as usual. A recent Timber Legality Risk Assessment
published by ACT NOW! has highlighted that most commercial logging in PNG should be
classified as illegal, despite the fact it is conducted under licences issued by the PNG Forest
Authority.2 This echoes concerns expressed by the Bank of Papua New Guinea, which has
identified the logging sector as “high risk” as “strong indicators of large-scale corruption and
illegal logging in the forestry sector in PNG are well known, well documented and widely
accepted”.3
One of the principal types of logging licence that is being routinely abused is the Forest
Clearing Authority. This type of licence is intended to permit land clearance for agriculture or
other land use change, but they are being systematically abused to allow large-scale logging of
huge tracts of forest.
In an earlier case study we looked in depth at one such FCA, the Wammy Project, that has been
operating in West Sepik Province since 2013.4 Now we turn our attention instead to a recently
approved new FCA project, the Mengen Integrated Agriculture Project in East New Britain.
The Mengen project has been in operation for two years and covers 52,500 hectares. Like the
Wammy project, it highlights how the same issues that plagued the now-notorious Special
Agricultural and Business Lease scheme, with its misuse of agricultural leases to facilitate
large-scale logging, are continuing today.
This report reveals a number of significant concerns with the Mengen Project and its obvious
focus on native forest logging over any kind of agriculture development:
• Failure to obtain genuine landowner consent and documented opposition from
numerous local groups,
• The dubious nature of the proposed agriculture projects,
• Failure to follow approved logging plans; and
• Widespread selective logging.
The findings presented in this report are part of a larger scale study into FCAs by ACT NOW!
that aims to build a comprehensive data-set on industry practices within FCA areas. The case
study presented in this report has been developed using a variety of methodologies including
investigative research, satellite imaging technology and field research in the impact area,
where interviews were conducted with key informants. These sources were then triangulated
in order to identify the most significant legal compliance and human rights issues.
Prior to publication, ACT NOW! wrote to KK Connections, K L Connections, Westenders and
Mengen Resource Development Limited to seek their comment on the issues raised in this
report. No response was received at the time of publication.
The Mengen Integrated Agriculture Project covers 52,500 hectares of community owned forest
in the Inland Pomio area of East New Britain Province. The project initiator is Westenders
Limited, part of the KK Connections corporate group, one of PNG’s largest logging companies.
The project has a 14-year licence (FCA 15-22), allowing it to clearfell areas of forests for
agriculture planting. The FCA was ostensibly granted to allow planting of kamarere (a
eucalyptus species used in flooring, construction and outdoor furniture), canarium (galip nut),
taun (a hardwood) and cocoa as well as for cattle grazing.5 Other crops or plantation trees
mentioned in project documents include oil palm, vanilla, balsa and ‘multi-purpose trees’.6
The project area includes land that was part of a previous logging concession, the Extended
Mengen/Madedua/Bakada Timber Rights Purchase (TRP 14-41).7 The concession was variously
logged by different companies, including another KK Connections company, G88 Limited,
between 1993 and in 2018.8 The project area is also adjacent to two other logging concessions
operated by KK Connections: the Suikol FCA project (operated by Westenders Limited) to the
east, and the Inland Pomio TRP (operated by KK Connections Limited itself and its related
company, Chain Reaction Limited) to the south.9
Figure 1: Map of East New Britain Province showing Mengen FCA
The Mengen Integrated Project was instigated by Westenders and a local company, Mengen
Resources Development Limited, which purports to represent nine land groups in the area. 5
While Westenders was the co-applicant for the FCA, the project’s five year logging plan was
applied for by KK Connections and granted to K L Connections Limited.10
According to the project proposal it is projected to produce 1 million m3 of round logs. Around
a third of total logs are predicted to be taun (pometia pinata).11 The first logs were exported
from the Mengen FCA in April 2022 and as at July 2023, KK Connections had exported 51,065
cubic metres of logs from the area.12
Logging in PNG is governed by the Forestry Act 1991 and managed by the PNG Forest Authority
(PNGFA), which is responsible for granting logging licences under a range of different
concession types.
There are three logging concession types defined in the Act:
● Forest Management Agreement (FMA): an agreement between customary landowners
and the PNGFA for the sustainable management of large areas of forest and selective
timber harvesting. Under the contract the PNGFA acquires the long-term rights to
manage the forest. The PNGFA is then able to select a logging company to sustainably
harvest timber and issue them with a timber permit.
● Forest Clearing Authority (FCA): in contrast to a Forest Management Agreement, an
FCA is intended to facilitate large-scale conversion of forested land to agriculture or
other land uses. The FCA is granted “for the purpose of clearance of natural forest on
areas designated for agriculture or other land use development”.
● Timber Authority (TA): this is used to authorise small-scale harvesting activities. This is
defined as the cutting of less than 5,000 cubic metres of timber for domestic
processing, the removal of up to 50 hectares of forest for agriculture or other land use
change, the clearing of a roadline not exceeding 12.5km in length, or harvesting non-
timber forest products or a timber plantation.
On top of this, over a million cubic metres of logs are still exported each year under the
historical, pre-1991, licence types, the Timber Rights Purchase Agreement (TRP) and the Local
Forest Area (LFA).13
Figure 2: PNG log exports by licence type, 2022. Source: pngiforests.org
FCAs were introduced into the Forestry Act in 2000,14 and were initially granted to holders of
Special Agricultural and Business Leases, theoretically to allow land clearing for agriculture or
other land use projects.
The requirements in the Forestry Act that need to be met before an FCA can be granted make it clear that considering the underlying agricultural (or other land use) project is an important component of the approval process. Before the National Forest Board (the body that oversees the PNGFA) can grant an FCA, it needs to consider a detailed development plan, implementation schedule for the agricultural (or other land use) project, a map showing any areas that are important for conservation or unsuitable for agricultural or other land use development and other information about the project. The Board also needs to see evidence of landowner consent, in the form of a document that verifies the consent of each resource owning clan, via their Incorporated Land Group or agent. There also needs to be a government report showing that a public hearing was held about the project, close to the project site, and a signed agreement between the landowners and the project proponents.15 The Forestry Act also stipulates that any forest clearing operation should take place in four phases. Each phase is to be subdivided into blocks for clearing of a maximum of 500 hectares. Permission for logging under a second or any subsequent phase may only be granted where “all conditions relating to the development plan and implementation schedule have been satisfied”. There is no mention of permission for selective logging under an FCA. Rights under an FCA may be suspended “where the planned land use for which a forest clearance authority is granted is not progressing according to the development plan or implementation schedule” or any condition of the FCA is breached.
While the Mengen project is described as an “agro forestry” initiative, analysis shows in reality it is a large-scale logging project – with its primary purpose to make money from selective logging of high value primary rainforest. It appears questionable whether any of the proposed timber plantation or agriculture parts of the proposal are genuine and would in fact even be viable. For example, the project documentation states the planned area for cultivation is less than half of the total forest area covered by the FCA. The Project Proposal provides that only 22,500 hectares is suitable for planting.16 The remainder is described as “rocky, steep slopes, mountainous, swamps, gardens, conservations, cultivations, buffers and other existing land used by the inland Mengens”.17 Of the cultivable area, only 2,500 hectares is deemed suitable for agriculture (cocoa and livestock) with the remaining 20,000 hectares slated for kamarere and galip plantations.18 These tree plantations are sometimes referred to as “reforestation”. The proposal is clear that a key purpose of the project is “to maximise value of the merchantable sized tree species upon the execution of a Land forest clearance and log harvesting processes”.19 There is also no evidence from the proposal itself that the project’s cocoa plans are genuine or viable. The proposal includes only a one-page description of the plans for cocoa, accompanied by a two-page budget, that claims significant profit margins over the lifetime of the project.20 There is no map to show where the cocoa will be planted. The costings are also highly questionable. For example, the budget provides for 100 labourers in the cocoa initiative at a total cost of 200 kina per person (US$54). This is equivalent to seven-days work at the current minimum wage and seems likely to be a significant underestimate of the labour required to develop a new cocoa operation and run it over ten years. No costs are provided for the cocoa dryers or fermentaries and no information is provided on how cocoa would be processed, transported and sold. The proposal for cattle farming is even less well developed. The central part of the cattle proposal appears to be eight pages cut and pasted from a user manual on cattle husbandry rather than a genuine site-specific plan.21 It does not consider the viability of the land for cattle, where cattle sites will be located, what markets the cattle will be sold to, how the cattle will be brought to market, or indeed who will have the expertise to manage a cattle project. The only clue as to where the cattle might be located is limited to one page showing photographs of already cleared land - where no further logging seems necessary.
Figure 3: Excerpt page from Mengen Project Proposal The reforestation and plantation timber component of the project has more detail but still lacks key information. The Project Proposal states that there will be 20,000 ha of kamarere and galip plantations established in the area.22 Kamarere (eucalyptus deglupta) is a tropical timber suitable for use in flooring, furniture and joinery. Galip (Canarium indicum) produces large, edible nuts. There is an existing small galip nut industry in East New Britain.23 However, the Mengen proposal does not include plans for harvesting, marketing or selling galip nuts. It instead includes projections for selling the galip trees as timber.24 While both kamarere and galip are suitable to grow in the area, the project proposal does not identify where these trees will be planted. It is stated that 8,300 ha of land will be clear-felled and planted with kamarere in the project’s first five-years, but does not include a map of planting locations.25 The only area clearly identified for clear-felling in the proposal is the 20 metre corridor on either side of the logging road, which is to be cleared and reforested with kamarere. Clearing such a narrow corridor would provide just 320 hectares of new planting and it is unclear where the remaining 19,680 hectares of new plantation would be located.26 The conclusions in the Management Plan do not project confidence about the outcomes. The document states:
The suitability of the whole area is generally moderate to low with regard to climatic
requirements for the envisaged land utilization types particularly a major reforestation.
The soils on the other hand are moderate to highly suitable. The main limiting factors
to the production are high rainfall and slope steepness. Slope steepness and
identification of suitable tree species are main limitations to reforestation. However,
some areas within the designated areas for reforestation have potential for cocoa and
coffee but will be intended for the proposed large scale Reforestation Plantation areas.
Another limiting factor to the reforestation project is the human factor.
.27 [Emphasis added]
Landowners in the area have also claimed that Westenders did not do any feasibility studies in
preparing the agricultural development proposals. Referring to a community awareness
session conducted by the company, landowners claimed:
For a start there was no feasibility study done to establish what the proposed FCA
project would be, what the pros and cons of the project are. It was all focused on the
Timber Resources that was going to be harvested from the FCA area and not the
benefits of the FCA project.28
Local people have also claimed the project is not meeting its projections. The project proposal
states that 1,200 ha of land will be clear felled and planted with kamarere in the first year of
forest clearance operations.29 However, according to a community leader interviewed by ACT
NOW! no planting has occurred in the project area.30 This is consistent with the satellite
analysis which has not identified any clearing of forest areas.
Finally, the project’s costings do not stand up to close scrutiny. ACT NOW! spoke with an
experienced agricultural supervisor who has worked in the area. He estimated that the cost of
developing the proposed agricultural project would likely run to K5,000 per hectare, on a
conservative estimate. This would put the total cost of the project at 112.5 million kina. There is
no evidence in the project documentation that Westenders is prepared to make this size of
investment and with the agricultural levy on log exports projected to generate just 3 million
kina over 14 years, local communities will clearly not be able to fund the agricultural
component themselves.31
As set out above, the Forestry Act requires that FCAs only be granted for land clearing and that
land should be cleared in 500 hectare block phases.
On 27 October 2021, the PNGFA approved the five-year logging plan for the Mengen FCA,
covering logging from 2021-26. The approval allowed logging to take place in identified parts of
the forest, known as coupes with one coupe being logged each year for the first three years
(Coupes 1-3) and Coupe 4 being logged over two years from 2024-25.32
However, KK Connections’ Annual Forest Clearance Plan for the FCA, approved on 23
November 2021, permitted KK Connections to log four blocks in a different area of the forest,
Coupe 8. The Annual Plan also allowed an increase in the volume of logs to be harvested from
a total of 53,407 m3 to 58,548 m3.33 There was no explanation provided for why the location approved for logging was different from that in the approved five-year plan or why the permitted volume had increased. Analysis of recent satellite images suggests that the actual logging has not complied with either of the approved plans, or with the Forestry Act. Instead of being confined to a single coupe, the logging has been spread across Coupes 3,4,5, 6 and 7. These images also demonstrate that the area is being selectively logged rather than cleared. They also show there has been no attempt to adhere to the requirement to restrict operations to 500 hectare blocks, in violation of the Forestry Act. Figure 4 (left): map showing demarcation of coupes in the Mengen FCA area. Source: supplied. Figure 5 (right): satellite image showing areas of logging in 2021 (red) and 2022 (yellow). Source: Global forest change data:- Hansen/UMD/Google/USGS/NASA; Satellite image: Copernicus Sentinel data [2023] This failure to adhere to the principles of an FCA operation by clearing discrete areas of forest for alternative land uses is hardly surprising when the project proposal in examined in detail. The proposal for the Mengen FCA clearly indicates that the plan is for selective logging rather than land clearing. The Project Proposal states that “harvestable commercial trees” will be felled with chainsaws then skidded out of the forest, before being trucked out and shipped away.34 This is a classic selective logging method and does not clear the land for agriculture as smaller and lower value trees are left in place.
The logging coupe map above also sits at odds with the agriculture and plantation forestry development plan submitted in the Mengen Project Proposal. That proposal indicated that agricultural planting would take place on only 22,500 hectares of the FCA area. The coupe map, above, appears to divide the entire Mengen FCA area of 52,500 hectares into logging zones. Since less than half this area is required for the purported agriculture, logging should not have been authorised under an FCA for the entire project area. Under the Forestry Act, the appropriate logging licence for a selective logging operation is the Forest Management Agreement (FMA). Under an FMA, the state negotiates with the landowners to acquire the long-term rights to harvest timber and in turn issues a Timber Permit to a logging company, authorising logging and setting out an annual “allowable cut” to ensure environmental sustainability.35 Applying for an FMA is a much more laborious and intensive process than an FCA application, involving 34 detailed steps.36 These steps include an intensive awareness process among customary landowners, negotiation of terms between government and landowners with consultation at each stage of the process and stringent environmental assessments. While both the FCA and FMA require landowner consent, the FMA process has stricter procedural requirements designed to ensure landowner consent is meaningful. The FMA process also places more restrictions on logging volumes than the FCA as the whole FMA concept is premised on the basis of sustainable forest management. Obtaining an FCA rather than an FMA in this instance allowed KK Connections to bypass these human rights and sustainability requirements. While the Mengen project is underpinned by signed agreements with at least some landowners, there is evidence that the project did not have the genuine consent of all landowning clans in the area. This is not unusual: lack of landowner consent has been a well- documented problem in the granting of FCAs.37 The proposal documents for the Mengen Project describe it as a partnership between “Incorporated landowner company” Mengen Resources Development Limited (MRDL) and their chosen “development partner”, Westenders Limited.38 MRDL was incorporated in November 2019 and describes itself as a company belonging to one Incorporated Landowner Group, the Extended Mengen Land Group Incorporated. This ILG purports to represent nine land groups: Mio, Kauvaniki, Yee, Remaling, Rukua, Neule, Malo, Gomona, Parole, Lako, Bumba and Gurale.39 While MRLD’s official filings are not up to date, the most recent available information suggests the company has 22 directors who are also the shareholders, all of whom appear to be PNG nationals.40 The ILG is not listed as a shareholder. Granting of an FCA by the PNGFA requires “a verification of the ownership and consent of each resource-owning clan agent (or incorporated landowning group if they have been formed) within the project area”.41 In the case of the Mengen project, this was evidenced by consent forms signed or marked by 12 people purporting to be clan agents or ILG representatives with ownership rights over sections of the land.42 Eleven of those individuals are directors and shareholders of MRDL. These consent forms were witnessed by a Peace Officer from Bago Ward in Central Inland Pomio. There is no evidence of whether the PNGFA undertook any activities
to verify that the signatories were genuinely the clan agents for landowners in their area, or
that all landowning clans from the FCA area were included.
The PNGFA was also provided with an agreement between MRDL and landowners in the area. 43
The agreement provides MRDL with the right to harvest timber in the Mengen area for a period
of 10 years, subject to an FCA being granted. There is just one agreement covering all clans in
the area. It states that it is between MRDL and the 12 clan agents who signed the consent forms.
The template for this agreement states that one agreement should be signed by each clan,
however in this case it appears only one agreement was signed. Attached to the agreement is a
schedule with the names and signatures of 128 purported “resource owners” but it does not list
which village or clan each person is from. According to the project proposal there are around
400 traditional owners living in the project area.44
Despite the paperwork provided to PNGFA, evidence suggests that a significant group of
landowners in the area are opposed to the project. Throughout 2020, landowners in the area
wrote to the Provincial Forest Management Committee (PFMC), the National Forest Board, their
local Member of Parliament (MP) and the Provincial Police Commander raising objections to
the proposed Mengen FCA.45
“
In these letters, landowners alleged that there had been major failures of due process in the
way that the consent for the project was obtained.
Due process was not followed, firstly with only a handful of our Elites currently living
in Kokopo who consented for KKCL to develop our Forest Resource Area.
Government’s due Process in ENB totally ignored our call, our ownership rights was
hijacked, incidents of rogue Police arresting our advocates and putting them behind
bars. 46
Landowners have also raised concerns about a lack of transparency in the process, claiming
they were not informed about the Project Development Plan contained in the FCA application,
and that only the faction of landowners in support of the application had been given the
opportunity to observe the PFMC meeting at which it was considered.47
Landowners have also claimed that the formation of the landowner organisation was done in
hotels in Kokopo without widespread knowledge of the communities on the ground.48 While it
appears that a public hearing was held on the project in 2019, there is evidence that this
hearing saw significant community objection to the project. According to the Bago community
leader, resentment about the project and neighbouring logging and oil palm resulted in a fight
at the hearing and its cancellation. As a result no consent forms or community agreements
were signed at that hearing. Officials from the PFMC were present with company officials and
were pushing community members to consent to the project. 49 A letter from landowners to the
NFB also referred to this public hearing, noting that “the Majority of us voiced a total objection
in Meetings, with no amicable outcome.”50
One of the landowners’ letters noted that the landowners had made an agreement with Vanimo
Jaya, another logging company operating on New Britain, and preferred that company as a
potential development partner.51
The landowners also raised concerns about KK Connections’ failure to adhere to the conditions
of its other FCAs on New Britain and called into question the procedures and key elements of
the FCA application, including:
• The vetting process for the Environment Permit,
• The vetting process for ILG and clan ownership,
• The cross-cutting agricultural activities and economic plan,
• The social services infrastructure plan, and
• The road infrastructure plan.52
A community leader who spoke with ACT NOW! also indicated that no services have been
provided by the logging company so far, and only a few in the community are benefiting.
While the project proposal promises that social infrastructure like schools, aid posts, health
centres and community halls would be built by the developer and the local government, these,
it is said, have not been built to date.53
The Mengen FCA covers several areas of land of international environmental significance. In
particular, the area south of Mt Ulawun forms part of the Nakanai Karst area, which has
received Tentative World Heritage Listing based on its significant cultural, natural and
ecological value and its biodiversity.54 The adjacent Inland Pomio FCA also includes two
proposed Wildlife Management Areas (Galue and Pakia WMAs).55
The Tentative World Heritage listing for the area is not mentioned in the Project Proposal, not
are the two adjacent wildlife corridors. The project’s Environmental Permit also does not
mention any of these zones or establish any regulations to protect the areas karsts.
The Project Proposal identifies only three sacred sites within the area, admitting that this “is
perhaps unusual since traditional knowledge is highly treasured amongst the inland Mengen
people”.56 The Proposal does not outline how the project proponents went about identifying
sacred sites in the area, and it seems unlikely that there would only be three inside the entire
52,000 ha area.57
ACT NOW! has seen credible reports of police working on behalf of KK Connections companies
in the area to pressure landowners. In May 2020, the Executive Officer of the local MP for
Pomio wrote to the Provincial Police Commander alleging that landowners favourable to KK
Connections had engaged police to intimidate landowners who did not support the project.
These individuals have engaged police assistance in their pursuit to subdue the efforts
of the legitimate landowners in their quest to protect their land and resources. As
stated, it has reached the attention of the Member for Pomio and their Leader that the
leaders of the legitimate landowners have been intimidated and locked behind cells for
reasons of wanting to protect their resources.58
The letter also sought police assistance to mediate between the two groups of landowners.
The Bago landowner representative interviewed by ACT NOW! also stated that community
uprisings have allegedly been quashed with threats of police action. He alleged community
members had been threatened for following up on company promises of building houses and
infrastructure or for calling for replanting in the logged areas.59
ACT NOW! has also witnessed police guarding commercial premises owned by the KK
Connections group of companies in the Kokopo area.
The Mengen Project is one of 17 current and past logging operations on New Britain island operated by companies in the KK Connections corporate group, one of the largest logging groups in Papua New Guinea. The Mengen project operator, Westenders Limited, is described in the project proposal as “a private owned limited company”.60 The company is owned by six individuals: Malaysian nationals Kuok Tiang Ling (also known as Kevin Ling), Han Hook See, Chung Kui Law and Ka Tai Lee, Chinese national Jiangfeng Zhang and PNG national Nassain Nakikus. All six are also directors of the company.61 While legally Westenders may be a privately owned company, in practice it shares a registered address in Kokopo and four overlapping directors and shareholders with KK Connections Limited. KK Connections is referred to as the “holding company” in passing within the project application62. The KK Connections group of companies includes eight actively operating logging companies that operate predominantly in East New Britain Province (see Figure 6 and Table 1). 63 KK Connections is one of the largest corporate logging groups in Papua New Guinea by export volume. A further six companies appear to be part of the same corporate cluster, including KKC Sawmill Limited, KKC Veneer Limited and KKC Veneer No 2 Limited – all of which appear to be wood processing companies – and a company called Eastwest Oil Palm Industries Ltd.64
Figure 6: The KK Connections corporate group.Source: filings with PNG Investment Promotion Authority, as at 25 October 2023, supplemented with data from PNGi Portal where company filings were unavailable. Note: not all company shareholders are displayed in this diagram The paperwork surrounding the Mengen operation highlights how integrated the different arms of this corporate family are. While Westenders was the co-applicant for the FCA, the five- year logging plan for the project was submitted by KK Connections and the approval for that plan was granted to K L Connections.65 Two of the companies listed as the end market purchasers also appear to be part of the same corporate family – Ningbo Ying Li Timber Co Limited was a shareholder of KK Connections from 2009 to 2015, while Ningbo ND Import & Export Co is the beneficial owner of another PNG-based logging company in the same corporate family (Tian Suyn Limited).66 KK Connections also has historical links to logging company Kerawara Limited. Prior to 2018, KK Connections Limited was listed as a subsidiary of the Kerawara Limited corporate group in official log export reports.67 According to evidence at a government inquiry, Kevin Ling
previously worked for Kerawara as an employee before leaving to form KK Connections in 2006 and establishing the Toriu Timbers project in East New Britain.68 KK Connections has been praised by the PNG government. In August 2021, Prime Minister Marape heralded KK Connections Limited as demonstrating model compliance with “the Government’s forestry sector policy” particularly with respect to “promot[ing] landowner initiatives and respect[ing] them as equal partners rather than spectators on their own land.” 69 In March 2023, the Prime Minister attended the opening of KK Connections new veneer mill in the Gazelle district of East New Britain. It is mooted the mill will be included in a new Special Economic Zone.70 As well as being involved in logging, Westenders Limited holds two government roading contracts: a contract with the East New Britain Provincial Department of Works for the ‘New Britain Highway Missing Link’ and a contract with the Gazelle District Administration for road works.71 Table 1: Logging concessions in East New Britain operated by companies in the KK Connections corporate group Source: PNGi Forests, accessed 13 October 2023. Note there may be overlap between some concessions (for example, where a new FCA or TA has been granted on land previously covered by an expired TRP)
As well as multiple logging concessions, KK Connections operates several log ponds
(a large storage yard where round logs are kept for export). The Mengen Project’s FCA proposal
mentions a company log pond at Bakada Port and other potential log ponds at Vatu, Galilolo
and Ibana ports.72 KK Connections also owns a sawmilling company, KK Sawmill Limited,
which runs a sawmill at the Toriu Project site, and a satellite sawmill at Anasanga Port. 73
This concentration of holdings means that northern part of East New Britain risks becoming
overly dependent on one company, with KK Connections controlling land use and the major
economic activity in the area. As KK Connections is a foreign owned corporate entity, this sits
at odds with the objectives of the Forestry Act 1991, which aims to “maximise Papua New
Guinean participation in the wise use and development of the forest resources as a renewable
asset”.74 It also sits at odds with Prime Minister Marape’s stated aim to “Take Back PNG”. It
may also make it harder for landowners to resist the company’s logging proposals, as there are
few other investors in the area to turn to, and reduces the incentive for KK Connections to
provide competitive remuneration or benefits to landowners.
Two of PNG’s commercial banks are mentioned in the Mengen Project’s FCA application.
Westenders Limited is listed as having an account with Bank of South Pacific’s (BSP) Kokopo
Branch.75 In 2022, BSP published its Environmental and Social Risk Management (ESRM)
Disclosure Statement, which requires it to assess its clients’ environmental and social plans,
policies or practices against established benchmarks, and then take action on non-
compliance.76 BSP has advised ACT NOW! that, in compliance with its ESRM policy, “all
logging activities including production or trade in wood and other wood products sourced
from unsustainable managed forest are considered excluded activities”.77
ACT NOW! wrote to BSP seeking information on its relationship with KK Connections, but did
not receive a response prior to publication of this report.
Australia-New Zealand (ANZ) Bank was also listed as the ‘proposed banker’ for both MRDL and
KK Connections Limited in the FCA application.78 In an email to ACT NOW!, ANZ advised:
We can’t comment on the specifics of former or current customers, however, we can
confirm we do not have a relationship with any of the companies in your letter [KK
Connections and other companies identified as part of the same corporate group]. Our
approach to banking the forests and forestry sector in PNG has evolved over a number
of years in line with our regional presence and strategy. ANZ has limited appetite in
this sector and will only consider customers that are certified and maintain their
certification by the Forestry Stewardship Council (FSC).79
In response to follow up queries, ANZ declined to comment on whether it had previously held a
banking relationship with KK Connections or related companies, but advised that its approach
to the logging sector had been in place for “many years”.80
KK Connections companies have also previously received financing from non-bank lender
Heduru Moni Limited (which trades as Moni Plus), as reported in ACT NOW!’s and Jubilee
Australia’s 2023 report, Lending to the Loggers.81 Heduru Moni is a finance company focused
on personal loans, asset financing, term deposits and foreign currency payments. Financing
for KK Connections companies has included:
• Financing provided to G88 Limited in 2020 for five Toyota Landcruisers;
• Financing provided to K L Connections in 2019 for seven Toyota Landcruisers;
• Financing provided to KK Connections in 2017-18 for four Isuzu trucks and 21 Toyota
Landcruisers.82
The value of this financing is likely to exceed K6 million (US $1.6 million). Heduru Moni has
not responded to multiple inquiries regarding these transactions or provided any information
on its policies in relation to the logging sector.
The Mengen Project proposal also identifies the proposed buyers of the timber from the
concession, both in PNG and overseas. The listed potential PNG buyers include:
• Central Mart Ltd
• Marhow Enterprises Ltd
• BNBM Ltd
• AES Timbers Ltd
• CPL Group of Companies
• JJ Holdings Ltd
• Leon Hardware Ltd
Proposed overseas buyers are from China, Malaysia, Japan, Taiwan and The Philippines.
Table 2: Target overseas buyers of wood products from Mengen FCA c
Source: Project Proposal, page 18.
The two Chinese buyers, which are identified to take 65% of the round logs and sawn timber,
appear to both have current or past links to KK Connections. Ningbo ND Import and Export Co
is the ultimate owner of Tian Suyn Limited, the company responsible for logging in the Bakada
concession (which now forms part of the Mengen concession), and the neighbouring Suikol
concession. Two of the shareholders of KK Connections were shareholders of Tian Suyn until
2021. Ningbo Yongli Lumber Co Ltd appears to be part of the China-based Ningbo Yongli Wood
Group.83 A similarly named company, Ninbo Yongli Timber Pte Ltd, was a shareholder in KK Connections from 2009-2015.84 While ACT NOW! does not have evidence of improper related party transactions in this instance, previous investigations into the practices of logging companies in PNG have identified significant risks for transfer mispricing.85 In June 2023, the Internal Revenue Commission (IRC) imposed a K140 million tax penalty against a prominent logging operator for engaging in illicit tax evasion, specifically through transfer pricing.86 One of the other listed potential purchasers from the Mengen concession, Sojitz Corporation, is a major Japanese trading company. It has previously been criticised for buying wood from illegal logging concessions in Papua New Guinea. In response to an investigation by Global Witness in 2017, the company said it would “not handle wood obtained through illegal logging” and would “seek to mitigate any negative impact” on human rights.87 ACT NOW! sent an inquiry to Sojitz Corporation about the matters raised in this report but did not receive a response prior to publication. PNG is the world’s largest exporter of unprocessed tropical logs. Just under one-third of those logs are currently harvested from operations authorised under an FCA.
While FCAs are intended to be granted only in situations where discrete areas of forest need to be cleared for an agricultural or other land use project, there are numerous reports of FCAs being misused for large-scale selective logging operations. For example, in 2018 Global Witness detailed evidence from field investigations that showed some FCAs were not being used to convert forest to agriculture projects but for extensive logging.88 Global Witness also raised concerns about illegality in the granting of new FCAs, after the end of the SABL scheme. Forest Trends’ 2021 Timber Legality Database also reports: These concerns have been endorsed by the PNG Forest Authority’s own officers. In a 2017 planning retreat, PNG Forest Authority staff identified managing FCAs and agriculture clearance as a key priority area. It was noted that “existing procedures are not being fully implemented due to developers bypassing elements of the process and political pressure for developments to go ahead.” The workshop made a number of key recommendations for the future management of FCAs including, “develop only 500ha blocks at a time” and cancellation of “non-compliant” FCAs.89 In September 2023, ACT NOW! and Jubilee Australia published Ten Years Without A Crop, a case study on the Wammy FCA project in West Sepik Province.90 That report revealed how another Malaysian owned logging company has been allowed to selectively log an area of over 100,000 hectares since 2013 under the guise of establishing an agriculture project that has never eventuated. In December 2022 the National Forest Board responded to the concerns of abuse in the use of FCAs by imposing a 12-month moratorium on the issuing of new FCA permits and ordered an audit of existing FCA operations.91 This moratorium has not impacted the existing and ongoing FCA operations and the PNG Forest Authority has not responded to calls to conduct the auditing of these operations through an open and transparent process.
This report identifies a number of significant concerns with the Mengen Project and its obvious
focus on native forest logging over any kind of agriculture development. The project has failed
to obtain genuine landowner consent, as required under PNG law, and has faced documented
opposition from numerous local groups. There is insufficient evidence to conclude that any of
the proposed agricultural projects underpinning the FCA are viable. Some agricultural
activities mentioned in project application documents, such as the proposed cattle operation
and the briefly mentioned vanilla and oil palm plantations, appear to have been concocted for
the purposes of obtaining timber rights. Westenders Limited has failed to follow approved
logging plans and has undertaken widespread selective logging, in violation of the Forestry
Act.
On this basis, ACT NOW! concludes that all logging in the Mengen FCA area should be
considered illegal, and all timber exported from this area considered illegal timber.
ACT NOW! makes the following recommendations.
ACT NOW! recommends that:
1 Westenders Limited, KK Connections Limited and related companies should:
(a) Immediately cease all logging activities in the Mengen Project area;
(b) Rehabilitate areas that have been degraded due to illegal selective logging;
(c) Provide compensation for any illegal logging activities and associated environmental
impacts to the customary landowners.
2 The PNG Forest Authority should:
(a) Immediately stop any further logging in the Mengen FCA, stop any further log exports
and seize any logs already harvested;
(b) Cancel the FCA for the Mengen Project (FCA 15-22);
(c) Investigate whether Westenders Limited, KK Connections Limited or related companies,
have committed any of the offences in section 122 of the Forestry Act 1991 and, if so,
impose the relevant penalty;
(d) Provide compensation for any illegal logging activities and associated environmental
impacts to the customary landowners.
3 The Royal PNG Constabulary should:
(a) Open a criminal investigation into the possible theft of forest resources from the
Mengen FCA area and conspiracy to defraud landowners.
4 Banks and all institutions with anti-money laundering obligations providing services to
companies in the KK Connections corporate group should:
(a) Review their risk exposure and discontinue any arrangements that could be connected to
funds generated from the Mengen Project or the activities of companies mentioned in
this report
The Mengen Project is just one of 24 currently exporting FCAs in PNG. The kinds of issues
present in this project have been reported in numerous FCA areas, including via the SABL
Commission of Inquiry. These concerns may have prompted the PNG Forest Authority’s 2022
moratorium on issuing new FCAs. This moratorium is very welcome in light of the well
documented legal and human rights concerns in relation to FCAs, but does not go far enough.
ACT NOW! therefore recommends that:
5 The PNG Forest Authority should:
(a) Publicly release information on its ongoing review of FCAs, including a schedule of the
FCAs being reviewed and the findings of each review;
(b) Undertake public consultation, including and especially with affected landowners and
civil society organisations, as part of the review of each FCA;
(c) Suspend log exports from all existing FCAs until this review is complete;
(d) Commit to extending the current moratorium on new FCAs until all recommendations
and findings from the reviews have been fully implemented to prevent future abuse;
(e) Immediately establish a public register as required under the Forestry Act.
1In October 2023, the Prime Minister called for PNG to be recognised as a “forest nation” on the global stage. In 2021, he told the UN General Assembly that PNG’s forests were “a significant asset for our planet”. The Marape government has also committed to curb and ultimately ban PNG’s round log exports. See: Department of Prime Minister and National Executive Council (2023) “Prime Minister Hon. James Marape Emphasises Papua New Guinea’s Commitment as a ‘Forest Nation’”, Media Release, 31 October, available at: https://pmnec.gov.pg/prime- minister-hon-james-marape-emphasises-papua-new-guineas-commitment-as-a-forest-nation/ (accessed 6 November 2023); G S Maribu (2021) “PNG’s Prime Minister Wants to Save His Country’s Rainforest. He Can’t Do It Alone”, The Diplomat, 1 October, available at: https://thediplomat.com/2021/10/pngs-prime-minister-wants-to- save-his-countrys-rainforest-he-cant-do-it-alone/ (accessed 6 November 2023); The Marape government has also committed to curb and ultimately ban PNG’s round log exports. 2 ACT NOW! (2023) Papua New Guinea Timber Legality Risk Assessment, 2023, Port Moresby: ACT NOW!, available at: https://actnowpng.org/sites/default/files/publications/Timber%20Legality%20Risk%20Assessment%202023.pdf 3 Bank of PNG (2017) Money Laundering and Financing of Terrorism National Risk Assessment . 4 ACT NOW! and Jubilee Australia (2023) Ten Years Without a Crop: the Wammy Rural Development Project, Port Moresby and Sydney: ACT NOW! and Jubilee Australia. 5 Mengen Resources Development Ltd and Westenders Ltd, “Project Proposal, Mengen Land Agro Forestry & Reforestation Plantation Development Project”, undated, p. 12 and 16 (hereafter “Project Proposal”). 6 Project Proposal, p 12 and 16; Letter from KK Connections to National Forest Board, 30 September 2021. 7 It appears as though this TRP was initially three separate concessions that were later consolidated. It is described as a single concession on the PNGFA website (https://www.pngfa.gov.pg/index.php/projects/timber-projects/west- new-britain-province-timber-projects), but as three concessions in the Project Proposal (see page 9). 8 PNGi Forests, “Extended Mengen”, available at: https://pngiforests.org/licence/extended-mengen (accessed 18 October 2023). 9 Project Proposal, pp. 6, 8 and 9. 10 Letter from KK Connnections Limited to PNGFA, 30 September 2021; Letter from PNGFA to K L Connections Limited, 27 October 2021. 11 Project Proposal, p. 6. 12 Societe Generale de Surveillance (SGS) (2023) Log Export Monitoring - Monthly Reports, December 2022 and April 2023. 13 PNGi Forests, Summary of log exports by licence type, https://pngiforests.org/ (accessed 6 July 2023). 14 Forestry (Amendment) Act 2000. 15 Forestry Act 1991 (as amended), s 90A and 90B. 16 Project Proposal, Cover letter (np). 17 Project Proposal, p. 15. 18 Project Proposal, p. 16. 19 Project Proposal, p. 14. 20 Project Proposal p 63-64. There is also a detailed budget and income projections for the cocoa project, without detail on how these income projections are to be achieved and indeed whether the land is suitable for cocoa. 21 Project Proposal, p. 68-74. 22 Project Proposal, p. 16. 23 The Galip Nut Company, https://www.galipnuts.net/about/ (accessed 18 October 2023). 24 See Project Proposal, p. 17. 25 Project Proposal, p. 39 and p. 45. 26 Project Proposal, Cover Letter. 27 Project Proposal p. 60. 28 Letter from Mengen Landowners to Member for Pomio Open, March 2020. 29 Project Proposal, p. 17. 30 ACT NOW! interview with landowner representative, Kokopo. 31 Project Proposal p. 11. The Agriculture Levy for the project is K2.00 per m3 of logs exported. The proposal projects that the Project will export 1 million m3 of logs. 32 Letter from Managing Director, PNG National Forests Service, to Managing Director, K L Connections, dated 27 October 2021. 33 Note: the time period of the annual plan is November 2021 to October 2022, while the five-year plan is October 2021 to September 2022. Source: Letter from PNGFA to KK Connections re Approval of the 2021-2022 Annual Forest Clearance Plan for Mengen Integrated Agro-Forestry Project (FCA 15-22) East New Britain Province.
34 Project Proposal, p. 33. 35 See Forestry Act 1991 (as amended) sections 57-86. 36 APEC Experts Group on Illegal Logging and Associated Trade (2021) “Timber Legality Guidance Template for Papua New Guinea”, available at: https://www.apec.org/docs/default-source/groups/egilat/2021/0308apec-experts- group-on-illegal-logging-and-associated-trade-egilattimber-legality-guidance-templa.pdf (accessed 6 November 2023) at p 11-12. 37 See ACT NOW!, Papua New Guinea Timber Legality Risk Assessment, p. 7-9. 38 Project Proposal, p. 12. 39 Project Proposal, p. 23. As MRDL has not re-registered with the PNG Investment Promotion Authority since the latest registry upgrade, its details are not available online. 40 PNGi Portal, “Mengen Resources Development Limited”, available at: https://pngiportal.org/search/?q=%22MENGEN+RESOURCES+DEVELOPMENT+LTD%22 (accessed 17 October 2023). 41 Forestry Act 1991 (as amended) s 90A(f) 42 Project Proposal, Annex, pp. 138-158. 43 Project Proposal, Annex, pp. 158-164. 44 Project Proposal, p. 36. 45 A list of correspondence is at Annex 1. 46 Letter from Mengen and Extended Mengen Landowners to National Forest Board, 10 November 2020. 47 Letter from Mengen and Extended Mengen Landowners to National Forest Board, 10 November 2020. 48 ACT NOW! interview with landowner representative, Kokopo, September 2023; Letter from Mengen Resource Owners to PFMC, 7 August 2020. 49 ACT NOW! interview with landowner representative, Kokopo. 50 Letter from Mengen and Extended Mengen Landowners to National Forest Board, 10 November 2020. 51 Letter from Mengen and Mengen Extension Land Owners to Member for Pomio Open electorate, 16 March 2020. 52 Letter from Mengen and Extended Mengen Landowners to National Forest Board, 10 November 2020. 53 Project Proposal, pp. 30 and 80. 54 UNESCO, “The Sublime Karsts of Papua New Guinea”, https://whc.unesco.org/en/tentativelists/5064/ (accessed 26 October 2023). 55 Letter from James Cook University academics to National Forest Board dated 6 May 2020, regarding Renewal of TP 15/49 within the Inland Pomio TRP. 56 Project Proposal, p.55. 57 Conservation and Environmental Protection Agency, Environment Permit issued to “Mengen Resources Limited”, 18 November 2019. 58 Letter from Executive Officer for the Pomio MP to Provincial Police Commander, East New Britain Province, 22 October 2020. 59 ACT NOW! interview with landowner representative, Kokopo. 60 Project Proposal, p. 21. 61 Certificate of Good Standing, “Westenders Limited”, 13 March 2023, accessed from PNG Investment Promotion Authority on 15 October 2023. 62 Project Proposal, p. 28. 63 Most companies have been grouped within the KK Connections corporate group based on having common shareholders and directors (see Figure 6). Tian Suyn Limited is considered a member of the KK Connections corporate group as it is a subsidiary of one of KK Connections’ largest customers (Ningbo ND Import & Export Co Limited), and because Kuok Tiang Ling and Han Hook See were directors and shareholders of Tian Suyn until 2021. PL Connection Limited is considered part of the KK Connections group as it is wholly owned by PL Jaya Limited, which is co-owner of KKC Veneer Limited, and shares a registered address with KK Connections Limited. 64 ACT NOW! and Jubilee Australia Research Centre, The New Timber Barons: The Companies Logging the Rainforests of Papua New Guinea, Port Moresby and Sydey: ACT NOW! and Jubilee Australia, available at: https://actnowpng.org/sites/default/files/publications/The%20New%20Timber%20Barons%20- %20October%202022_0.pdf p 7 65 Letter from KK Connections to National Forest Board, 30 September 2021; Letter from Managing Director, PNG National Forests Service, to Managing Director, K L Connections, dated 27 October 2021. 66 For more detail on this and other corporate connections see ACT NOW! and Jubilee Australia, The New Timber Barons, p. 7. 67 ACT NOW! and Jubilee Australia Research Centre (2021) The Money Behind the Chainsaws: How Commercial Banks Support Destructive Logging in Papua New Guinea, Port Moresby and Sydney: ACT NOW! and Jubilee Australia, https://www.jubileeaustralia.org/resources/publications/banks-logging at p 39-40.
68 Commission of Inquiry into SABL, Transcript of Proceedings, 16 November 2011, at p. 19, available at: https://landmatrix.org/media/uploads/actnowpngorgsitesdefaultfilescoi_sabl_46_waigani_16_november_2011pdf. pdf (accessed 15 October 2023). 69 Prime Minister James Marape, Facebook post, 13 August 2021, available at: https://m.facebook.com/PNGPRIMEMINISTER/photos/a.104198830988519/603531077721956/ (accessed 27 October 2023) 70 Donald Nangoi (2023) “Veneer mill to boost local economy”, Post Courier, 15 March, https://postcourier.com.pg/veneer-mill-to-boost-local-economy/ 71 Project Proposal, p. 25. 72 Forestry Act 1991 (as amended) s 90A(f) 72 Project Proposal, p. 14. 73 Project Proposal, p. 14. 74 Forestry Act 1991, Preamble. 75 Project Proposal, page 25. 76 BSP (2022) “Environmental and Social Risk Management (ESRM) Disclosure Statement” available at; https://www.bsp.com.pg/media/1cvncpzp/environmental-and-social-risk-management-disclosure-statement.pdf 77 See ACT NOW! (2022), “Banks Move to Stop Logging Finance but Gaps Remain”, ACT NOW! Blog, 21 September, https://actnowpng.org/blog/blog-entry-banks-move-stop-logging-finance-gaps-remain (accessed 2 November 2023). 78 Project Proposal, pp. 22-23. 79 Email from ANZ PNG to ACT NOW!, 23 October 2023. 80 Email from ANZ PNG to ACT NOW!, 8 November 2023. 81 ACT NOW! and Jubilee Australia (2023) Lending to the Loggers: How the Non-Bank Sector is Financing Forest Destruction in Papua New Guinea, Port Moresby and Sydney: ACT NOW and Jubilee Australia, available at: https://actnowpng.org/sites/default/files/publications/Lending%20to%20the%20Loggers%20WEB.pdf 82 PNG Personal Property Securities Registry, Records of Security Interests, G88 Limited (25 October 2023); K L Connections Limited (25 October 2023); KK Connections Limited (8 May 2023). Available at: https://www.ipa.gov.pg/str/index.aspx (accessed 26 October 2023). 83 Information on this company is available at the website of subsidiary Jiuhe Landscape Wood Industry, which appears to share an address with Ningbo Yongli Lumber Co. See: https://jiuheningbo.cn.china.cn/company- information.html (accessed 27 October 2023). 84 See: ACT NOW! and Jubilee Australia, The New Timber Barons, page 7. 85 Frederic Mousseau and Peiley Lau (2016) The Great Timber Heist: The Logging Industry in Papua New Guinea, Oakland; the Oakland Institute. 86 IRC (2023) “Major Logging Operator Charged K140M For Tax Evasion , 26 June, https://irc.gov.pg/news/media- releases/major-logging-operator-charged-k140m-for-tax-evasion (accessed 18 October 2023). 87 Global Witness (2020) Bending the Truth, London: Global Witness, at p. 8. 88 Global Witness (2018) A Major Liability: Illegal logging in Papua New Guinea threatens China’s timber sector and global reputation, London and DC: Global Witness, at p. 13-14. 89 PNGFA (2017) “Summary Report Papua New Guinea Forest Authority Retreat”. Port Moresby: PNGFA at p. 26 and 32. 90 ACT NOW! and Jubilee Australia Research Centre,Ten Years Without a Crop. 91 Public Notice dated 22 February 2023.
A NEW FOREST GRAB: THE MENGEN INTEGRATED AGRICULTURE PROJECT 31
ACTNOWPNG.ORG
