Corporate power in the forests of the Solomon Islands

IN THE FIRST HALF OF THE 1990s, Malaysian investors, backed by Japanese and Korean buyers, pushed log production in the Solomon Islands to more than t hree times higher than the estimated sustainable level. Japanese log purcha ses alone in 1995 and 1996 were greater than the sustainable yield in the S olomon Islands. If log production had continued to escalate at the mid-1990 s rate, these aggressive investors and traders would have depleted the Solo mon Islands of commercial trees in less than a decade. The crash in demand for tropical logs following the 1997-98 economic downturn in Asia has slowe d this looming environmental catastrophe. Although this could well be a tem porary respite, this does provide the government of Prime Minister Bartholo mew Ulufa'alu, which took power in August 1997, an opportunity to reform ti mber management. This paper examines the most important issue and the great est obstacle facing reformers: the environmental and economic impact of mul tinational companies on natural forest management.(1) Cheap forest resources that externalize environmental and social costs lure investors and traders, even into areas with little infrastructure. Once th ere, these corporations generally harvest logs as quickly and cheaply as po ssible. Logically, they do not function within the bounds of formal laws or policies but rather within the bounds of state and societal rules that are actually enforced, persistently trying to bend these rules in their favour . They strain state capacity to manage forest resources, pressure and entic e state officials to develop policies that maximize corporate profits, cons truct complex corporate structures that reduce accountability and transpare ncy, and evade taxes and timber royalties. Corporations also generate finan cial incentives that stimulate unsustainable production, harvest concession s illegally and destructively, break or distort obligations to communities and landowners, make informal deals that lower export prices, and construct trade chains that depress consumer prices and stimulate wasteful consumpti on. These practices seem to suggest that corporations in the Solomon Island s are mischievous or devious resource exploiters. In some ways they are. Bu t often they are rationally responding to market signals, the viability, pr ofitability and uncertainty of operations, and the extent of state and soci etal controls. The paper begins with a brief discussion of the theoretical literature on t he environmental impact on natural resources of multinational corporations. The second section provides essential background on commercial forest reso urces, environmental policies and forest institutions in the Solomon Island s. The third, fourth, fifth, and sixth sections examine the actual impact o f these policies and institutions on the behaviour of multinational investo rs. The seventh section analyzes the effect of corporate buyers. The conclu sion reflects on the importance of the findings in the Solomon Islands for understanding the effects of timber corporations on environmental managemen t in tropical regions.