Surinam Wood Exports

Surinam Wood Exports (SURINAM)


          CASE NUMBER:         273
          CASE MNEMONIC:       SURINAM
          CASE NAME:           Surinam Wood Exports


A. Identification

1.  The Issue
     
     Shortly after gaining independence from The Netherlands in
1975, Surinam plunged into a decade-long civil war which ended with
a new government and a depressed economy.  Current Foreign Minister
Subhaas Mungra insists that without a "cash infusion" the current
coalition, headed by President Ronald Venetiaan, could collapse.
(1)  In 1994, the need for economic aid led the Surinamese
government to open huge tracts of rain forest for logging to timber
companies from Korea, Indonesia, and Malaysia.  The proposals for
logging request up to 40% of Surinam's virgin rain forest.  These
proposals have aroused a great debate among international
environmental organizations, the tribal and indigenous populations
of Surinam's rain forests, and the Surinamese government.
Alternatives to logging have largely centered around bio-medicine
and eco-tourism.(2)


2.  Description

     Surinam is a small country on the north coast of South
America, between Guyana and French Guiana, and contains the
"highest remaining percent of tropical rain forest of any country
on earth, at 90%." (3)  The country's population of 400,000
includes six distinct Maroon tribes, of African origin, who have
managed throughout Dutch occupation to retain their own culture,
and seven native Indian tribes who, also have "maintain[ed]
traditional lifestyles." (4)  Both of these groups possess
"extensive knowledge of the value of forest plants as food, fibers,
medicines and other products."(5)  According to Russel Mittermeier,
president of Conservation International, the rain forest, a "vast
panorama" of wild palms, green hearts, purple hearts and other
native trees, offers a "clean slate" for conservation and
"tremendous opportunities for sustainable development."(6)

     In 1975 Surinam gained its independence from The Netherlands. 
The price of independence from the Dutch came in the form of loss
of economic aid.  The subsequent decade of civil war and other
rebellions left many nations hesitant to aid Surinam economically
until "the government of President Ronald Venetiaan puts its
tottering economic house in order." (7)   In 1994, production was
in decline and unemployment was at 20% with an annual per capita
income of $500.  In May 1995, The Washington Post reported
Surinam's annual inflation rate at 500%.  To avoid further unrest,
the government increased its burden with subsidies for fuel, water,
telephone and food.  Spending on social stability resulted in costs
exceeding revenues by 150%.  For the Surinamese government, selling
large tracts of land to foreign logging companies offers a quick
profit with few immediate costs.  Several Asian firms have pledged
to invest $262 million in Surinam's economy, including job
creation.  However, environmentalists warn that, ultimately timber
operations will "drain more money than they yield by burdening a
nation's infrastructure and degrading precious natural assets." (8) 
Environmentalists further argue that Surinam is not being
adequately reimbursed in proportion to the resources lost and the
revenues the logging companies will generate.  

     The first major logging company involved is an Indonesian
firm, Mitra Usaha Sejati Abadi (MUSA), whose initial request for
nearly 1/3 of the virgin forest was denied by the Venetiaan
administration.  Instead, the government granted the use of 11,500
square kilometers for logging, and agreed to reserve another 50,000
for MUSA in return for $1 billion spent by MUSA in "forest
exploitation and woodworking industries."(9)  By August of 1994,
other Asian companies began placing bids.  Berjaya Group Berhad, a
Malaysian investment group, requested rights to 7.5 million acres.
Suriatlantique Industries, a Indonesian conglomerate, issued a
request for 2.5 million acres in May 1995, in response to a second,
similar request by MUSA.  The logging companies are seeking new
land after having "ravage[d] forests leaving eroding hills and silt
choked rivers and barren fields" in Southern Asia. (10)   

     As a result of their destructive behavior in the past,
environmentalists are concerned about the same abuse of Surinam's
rain forests.  Most logging companies employ a clear cutting
strategy, or the removal of all the trees from a particular patch
of land, due to its economic efficiency.  However, clear cutting
leads to the erosion of the soil and a waste of trees because not
all of them are usable.  MUSA was supposed to provide safeguards
for the forests and indigenous peoples; however, they began logging
before specifying how they would abide by Surinam's "strict
forestry code."(11)

     Efforts for wiser cutting strategies have been rendered
futile.  In September 1995, the New York Times noted an
"experimental plan" which aimed to protect indigenous villages and
allow the forest to renew itself in 25 years.  Yet, Surinam lacks
the human and financial resources to effectively enforce the law
and police the contracts.(12)  In September 1995, MUSA was cited as
having "already cut down several acres of the wrong trees.  When
they realized their mistake they just abandoned the logs" and left
them to rot.(13)  None of the logging proposals required replanting
trees or other environmental protection, which, again, Surinam
could not adequately monitor.(14)  Furthermore, Surinam is facing
time pressure from Berjaya, who warn that land concessions should
come soon or it will "take its money elsewhere."  With countries
such as Peru, Chile, Ecuador and Guyana willing to open their land
to foreign logging companies, Berjaya's threats are credible. 
Without action soon, according to the Surinamese government,
Surinam stands to lose the investment and be back where it began.

     Charges of corruption and bribery surround the debate.  In the
Solomon Islands a Berjaya executive was expelled after offering to
bribe an official to approve logging rights (see Soloman Case).(15) 
Berjaya also put business man Surendre Mungra in charge of its
local operations, in return for which his brother,  Surinam's
foreign minister Subhaas Mungra, cast his lot on the side of the
loggers.  Such corruption is the result of the Indonesian and
Malaysian companies aggressive campaign for approval of logging
rights.  Much of the bribery is to encourage officials to "ignore
Surinamese law forbidding foreigners from receiving land
concessions above a certain size unless agreed upon by
legislature."(16)   

     Passing the proposals through the legislature has been less
problematic than anticipated since government officials are among
the proponents for selling the land as the best way to revive the
economy.  However, the World Resources Institute (WRI) suggests
that the corruption, bribery, inadequate environmental safeguards
and tax incentives inherent in the proposals and contracts,
ultimately decrease the revenues expected by the Surinamese
government.  Moreover, the WRI argues that current logging
proposals offer Surinam far less than what the timber is worth,
citing prices of $3/acre as opposed to ten times that amount
elsewhere. (17)  Finally, the profits turned by Surinam are "hardly
representative of the potential earnings" for the individual
logging companies.  In November 1994, Surinam asked the US for
technical assistance in negotiating the logging contracts.  US
experts concluded that the draft proposals "had so many loopholes
that Surinam would make only a fraction of the anticipated revenue"
suggesting discrepancies of $2 million annually for 25 years to the
government versus $28 million to the logging companies.

     Environmental organizations have been the most vocal opponents
of the over-logging in Surinam.  Washington-based Conservation
International (CI) aims to show impoverished nations that logging
is not the only way to get money out of the forest resources. 
Alternatives proposed by CI include bio-medicine and eco-tourism. 
Specifically for Surinam, CI President Russel Mittermeier offered
a threefold plan to boost the failing Surinamese economy and asked
international donors for aid to implement it.  The plan recommends
the development of an eco-tourism industry; places emphasis on
"research for medicinal plants," which could ultimately yield a
large and stable economic return; and urges Surinam to take control
of the management of its own forest industry (as opposed to
auctioning the land to foreign firms). (19)  Already local people,
the government and a Surinamese pharmaceutical company have been
linked by CI to US-based Bristol Meyers Squibb.  Under the
agreement, local people "benefit from an established Forest Peoples
Fund; in turn their knowledge of rain forests helps in the search
for medicines." (20)

     Other groups and organizations have tried to aid Surinam. 
Both Britain's and San Francisco's Rain Forest Action Network
joined the opposition to logging. (21)  Roger Gamble, US ambassador
to Surinam, organized opposition among the diplomatic community. 
In May 1995, the Clinton administration sent a delegation to argue
against the logging proposals.  The Clinton delegation expressed
concern over the large tracts of land certain proposals requested. 
The World Bank encouraged the slowing of logging and the search for
alternatives.  Also in May 1995, Inter American Development Bank
President Enrique Iglesias offered an aid package to President
Venetiaan in return for a delay in logging plans.  However,
reaction among the Venetiaan administration to such offers has been
"tepid." (22)  

     For the opponents of the logging in Surinam, it is more than
trees that are at stake.  A project by US medical researchers to
find cures for cancer and other diseases would be in danger. 
Surinam is also home to "exotic and unique" flora and animal
species that will not survive the logging.  The bad road system and
use of heavy machinery will destroy the soil quality, accelerate
erosion, increase run-off and disrupt drainage, which will provoke
rising rates of malaria and "other water born diseases." (23)  The
river systems will become seriously polluted with silt, which could
prove devastating to "an already frail fishing
industry....Siltation may affect navigation, port access and reduce
the life of hydro-power reservoirs." (24)

     Concern also exists for the indigenous and tribal populations,
who have voiced their objections to the logging plans. There are
six distinct Maroon tribes, of African origin.  Until the
'invasion' by the logging companies, the Maroons retained their
traditional African lifestyle.  The loggers' forced relocation of
the Maroon tribes "is reminiscent of earlier uprooting by slave
traders" and threatens their culture. (note)  Seven native Indian
tribes "have also maintained their traditio