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Are Hong Kong bankers clearing a path for forest destruction?
22/03/2007
Environmental protesters are charging that HSBC and Credit Suisse have
violated their own forest sector guidelines in cooperating in the
public listing of a Malaysian logging giant with a record for
environmental despoliation.
Samling Global Ltd has long been criticized for the destruction of
tropical rainforest across the world and in fact early this year lost
its only Forest Stewardship Council (FSC) certification less than a
year after it was issued. It began trading on the Hong Kong Stock
Exchange on March 7 at a 15 percent premium to its IPO price, giving it
market capitalization of US$1.2 billion.
Credit Suisse managed the public listing as global coordinator and was
joined by HSBC and Macquarie Securities as joint bookrunners, the
institutions responsible for structuring and pricing public offerings
and bringing in other underwriters. Both HSBC and Credit Suisse
subscribe to forest sector guidelines that seemingly preclude assisting
in an IPO for companies with records like Samling's.
Credit Suisse said in a statement that the bank's business
relationship with its client 'was put through a comprehensive review
process, during which compliance with local environmental regulations
and international standards of sustainable management of natural
tropical forests was a particularly important issue. We concluded, in
line with the other banks involved, that the client's activities are in
compliance with these standards. Controversial topics were raised with
the client and discussed.'
Samling's Guyana subsidiary lost its FSC certification two and a half
months ago, on Jan. 7. It remains suspended although, according to its
prospectus, 'we continue to produce and sell logs from our forest
concession, but such logs will not be sold as FSC-certified.'
Asked about Samling's environmental record, a spokesman for HSBC in
Hong Kong said any discussion would violate client confidentiality and
referred to the bank's website. In 2003, according to the website,
'HSBC adopted the Equator Principles, a set of voluntary guidelines,
which apply to project financing. In accordance with this, and our
general approach to lending, HSBC will follow the International Finance
Corporation Safeguard Policies in respect of forestry.'
In particular, the bank said, 'We will not provide facilities and
other forms of financial assistance, including any involvement in debt
and equity capital markets activities and advisory roles, in respect of
commercial logging operations in:
- Primary Tropical Moist Forest
- High Conservation Value Forest
- Logging operations that are in violation of local or national laws
in respect of illegal
logging
- Logging operations that include any species listed in the Convention
on
International Trade in Endangered Species of Wild Flora and Fauna.
In its prospectus for the IPO, Samling said that 'we have achieved
numerous internationally recognized certifications for different parts
of our forestry management and production operations.' In particular,
the company said, it was the first privately managed company in
Malaysia and the only one in Sarawak to have obtained forest management
certifications covering 56,000 hectares of Malaysian timber stands from
the Malaysian Timber Certification Council.
On the ground, however, environmentalists say, the company's
operations make a mockery of the certification scheme, and the chapter
on risk factors in Samling's prospectus notes that 'as of the latest
practicable date, we had not obtained any forest management
certifications for our tree plantations in Malaysia of a gross area of
approximately 438,000 hectares, or for the gross area of approximately
445,000 hectares in Guyana over which we hold harvesting rights…'
If the company is unable to reinstate the existing certifications or
successfully obtain additional ones, 'we may not be able to compete
effectively in the sale of certified wood products against competitors
able to sell certified wood products in greater amounts in markets with
demand for such products, thereby adversely affecting our business,
revenues and results of operations.'
Samling in particular has carried on a three-year confrontation with
the indigenous Penan tribe of Sarawak over the blocking of a timber
access road into a logging area that has been called one of Malaysia's
last primary forests. The blockade was broken a few weeks ago when
police accompanied by Samling's logging tractors and bulldozers came in
to knock down the barricade.
Ironically, the breaking of the blockade came just five days before
representatives of the three governments with jurisdiction over the
ecological jewel that is the island of Borneo signed what they called
the 'Heart of Borneo' declaration, promising to conserve one of the
most important centers of biological diversity in the world. The pact
was designed to conserve and provide sustainable management for almost
a third of the island -- approximately 220,000 square kilometers of
equatorial rainforest
The Samling group is well connected, particularly in Sarawak. A whole
panoply of friends, family members or political allies of Abdul Taib
Mahmud, the long-serving chief minister of Sarawak, sit on the boards
of Samling timber concessions. Yaw Tek Seng, the ethnic Chinese
patriarch who heads Samling Global, is related by marriage to a Sarawak
state minister. Yaw is close to James Wong, the now-retired Sarawak
State Minister for Environment and Local Government, who for many years
has been roundly criticized by environmental pressure groups for his
closeness to the timber companies that have been accused of raping the
North Borneo state
As an indication of Samling subsidiaries' closeness to Malaysian
authorities, according to the Forests Monitor, a watchdog website
dedicated to monitoring logging companies, when 70 Penan tribesmen went
to Samling Plywood's operations to petition them to cease operations on
their ancestral land, 'the Penan were met by a group of the (Sarawak)
Field Police Force, armed with machine guns, tear gas and knives, who
verbally abused the Penan and then assaulted and beat them with machine
gun butts, boots and knives,' and arrested four of them for
trespassing.
The Samling group of companies, headed by the family of timber tycoon
Yaw controls an estimated 4 million hectares of tropical forest in
Sarawak, Guyana, Cambodia, China and other areas. In the past the
company was also active in logging in Papua New Guinea, where it was
allegedly involved in illegal logging activities. According to the
prospectus it issued at the time of the IPO, it has business operations
in Malaysia, Guyana, New Zealand and China and sells its products in
more than 30 countries and territories.
According to its website, the FSC was created in 1993 to establish
standards for promoting global sustainable harvests in the world's
forests. Its standards have been applied in over 57 countries across
the world – including Guyana, where a Samling subsidiary in January
2007 was proved to be noncompliant with the standards and its
certification for its forest concession was suspended. Samling
subsidiaries have also been blamed by environmentalists and
non-government organizations for being involved in illegal logging in
Cambodia and Papua New Guinea.
As long ago as 1996, the watchdog website, Forests Monitor, stated the
company was involved in attempting to obtain signatures on so-called
'goodwill agreements' from Sarawak communities that would allow it to
operate with impunity. Logging operations have been described as having
destroyed land, fruit trees and other forest products and polluted
rivers, the publication charged.
In Cambodia, where the pressure group Global Witness cited Samling
with buying illegal timber cut in the Snuol Wildlife Sanctuary, the
Ministry of Agriculture charged Samling's subsidiary SL International,
with starting to cut without receiving a permit, cutting in areas not
approved by Forestry Department officials, cutting undersized trees and
continuing to exploit its concessions despite a 1996 ban on logging.
Although Samling hasn't been implicated by name in reports of abuses
in Papua New Guinea, it is one of the biggest logging companies in the
jungled country, whose tropical rainforest encompasses land more than
twice the size of the British Isles. According to a report funded by
the British government in 2005, quoted by Greenpeace:
• People have been forced to sign (logging) agreements at gunpoint and
threats of imprisonment and even death.
• Armed police officers have backed logging company employees
• Police 'mobile squads' quell any industrial unrest among logging
company
employees.
• Firearms-toting logging company managers threaten and intimidate
local people.
• Local people face torture, physical abuse and unlawful detention by
police officers 'employed' by the logging company.
• Female employees have allegedly been raped by logging company
managers and police.
©Asia Sentinel (Hong Kong)
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