Landowner companies: a money-siphoning scam
22 April 2012
BY ANDREW LATTAS
MY EXPERIENCE OF LANDOWNER COMPANIES in Papua New Guinea (in the Kaliai area and in Pomio where different forestry concessions operate) is that the local landowner company is often made up of different kinds of villagers keen on development.
Some are educated individuals who find the life of gardening hard and arduous; others can be remote villagers who are desperate for some roads; while others are drawn in by the high cost of school fees and low cash crop prices.
Many villagers who initially support logging can change sides once the project starts, when they see the poor quality of the roads and bridges and the low royalty payments.
Generally the initiators of the project are locals who end up being financed by an overseas contractor (often the logging conglomerate Rimbunan Hijau). They will hunt for an interested contractor who is able to fund their legal, travel, accommodation and entertainment expenses whilst in town. The local member of parliament can also put a fair bit pressure on the directors to go with a contractor with which he has existing ties.
My experience has been that the landowner company generally receives a "premium" and even “advance” payments from the overseas logging company to cover its startup costs and its ongoing running “expenses.”
The initiators of the project generally choose the directors and it is often on the basis of their ability to be complicit and silent with regard to the allocation of Premium money within the company.
There are generally no minutes or records of how the money is used and this in turn serves to create an internal culture of solidarity, collaboration and collusion between directors. Some of the money is used to keep junior directors bound in relations of debt to the general manager and other key directors of the company who control the purse strings.
Many directors in the landowner company can be illiterate or only able to read basic Pisin. They will be unable to read legal documents in English and, consequently, will depend heavily on educated directors for information. This will privilege certain individuals and groups within the landowner company, generally, those who have contacts with politicians and the government bureaucracy.
The premium money that the landowner company receives from the overseas logging company is nominally to cover its expenses, but it also operates as gift that co-opts the directors and obligates them to the overseas contractor at the expense of their local ties to villagers.
The landowner company is expected to manage public relations for the Malaysians. It is that the landowner company that should be seen publicly as calling in the riot squad to come and remove road blocks and to arrest those responsible. It is also expected to distribute covertly the necessary gifts to placate opposition and prevent organised protests.
In the Kaliai area, the contractor provided free trips to Malaysia for key landowner company directors for their “good work.” My experience of some of the Arawe directors on the south coast of West New Britain is that "gifts" from the contractor plus a popular critique of the corruption and inefficiency of state development, can generate fierce loyalty by some directors to the overseas contractor. The local landowner directors (especially at the start of the project) can be effective in mobilising people’s discontent with state officials and institutions.
The directors of the landowner company are not so much elected as chosen by each other largely through their perceived ability to work together, that is, to be on side and unquestioning of the key director and the overseas contractor. Sometimes they are local big men or clan leaders but more often they can claim in a token way to represent certain key clans or areas.
Meetings are rare and not advertised, and if votes are held in the local landowner company, they are to ratify agreements achieved beforehand through other means. The overseas logging company can play a key role (through money and legal means) in empowering certain directors so that they become the managers and spokesmen for the landowner company.
The end aim is that the local landowner company operates as the public relations arm for the foreign contractor in its interface with the wider public, and also with local villagers. The latter involves producing a process of divide and rule whereby Melanesians confront each other over their support and opposition to logging. This serves partly to undercut the transformation of economic conflicts into forms of racial conflict between Melanesians and Malaysians.
Above all the local landowner company is not the landowners.
As the project proceeds, the landowner company can meet increased opposition and criticism from local villagers. It does not take villagers long to recognise that the directors are not operating for the public benefit but are a privileged group looking after themselves.
The directors in turn recognise that strong local opposition means that the project might have a limited term and so some directors can then choose to operate on the basis of needing to get whatever they can as quickly as they can.
This generally means subordinating themselves to the most powerful and wealthiest participant, the overseas contractor, who demands quick solutions to local disputes that disrupt production and the export of logs.
The two main ways of ending disruptive disputes are intimidation through the riot squad or through strategic gifts of money, goods, and jobs to key opponents so as to compromise and co-opt them.
My experience of landowner companies is that they use an ideology of democratic representation and nationalism to perpetuate some of the most exploitative relations on behalf of foreign companies.
They are a scam that siphons off money that might otherwise go to villagers, and instead the landowner company looks after key local players, namely, politicians, local big men and vocal opponents who are bought off by the landowner company’s gifts.
The landowner company can also use its substantial financial resources, motor vehicles, boats and personnel to become powerful political brokers at election time.
This is now the looming threat in Pomio where the existing member who is being investigated for corruption has been a strong supporter of logging, oil palm development and the appropriation of land through lease-lease back agreements
See my article on landowner company politics in the Kaliai area 2011: ‘Logging, violence and pleasure: Neoliberalism, civil society and corporate governance in West New Britain’. Oceania 81(1): 88-107
Professor Andrew Lattas is attached to the Department of Social Anthropology at the University of Bergen Fosswinckelsgt in Norway
One can only live in the hope that the local people of Pomio, who are suffering the most from the police and the loggers, have educated wantoks who can help them elect a new local member who will want to help them regain their ownership of their land and forest resources.
Posted by: Mrs Barbara Short | 23 April 2012 at 01:49 PM
Professor Lattas - I wonder if there might be some lawyer in PNG with a social conscience who might take up this issue on a pro bono basis and immediately lodge an injunction against further dealings by the main company involved?
Posted by: Harry Topham | 23 April 2012 at 01:48 PM
Pomio is noted for its nonviolence, and many villagers blame their commitment to Christianity and to the Tenpela Law (Kivung followers) as having made them an easy push over for the police and the loggers.
There is some truth in this self-observation.
In the men's houses there is a great deal of discussion of the Bougainville crisis and the legitimacy of the armed struggle that emerged around land and resources.
At the level of popular discussion there is more and more talk by villagers that they will be pushed into needing to fight and even of needing to take up sorcery against the Malaysians, local landowner company directors, and the local member.
Many attribute their success against the Japanese in World War II to their use of customary sorcery powers.
What has been heartening is the actions of organisations like Greenpeace in supporting local protests and in internationalizing those protests.
The emergence of blog sites has also taken critical discussion away from the mainstream newspapers and the legal threats that RH has been using there to control public criticisms.
There is a new kind of popular politics emerging using mobile phones and the internet that is allowing villagers to connect with educated kin in the cities and with their formal and informal networks.
These new forms of communication are going to come into play in the forthcoming election and offer the possibility of making it a different kind of election.
There is a new kind of politics emerging with villagers connecting to their urban kin and their access to international networks.
Things are changing, there is a great deal of anger and a growing recognition that things cannot be allowed to proceed any further.
Posted by: Andrew Lattas | 23 April 2012 at 01:18 PM
Thank you, Professor Lattas, for this further explanation of what has been happening in PNG.
From my study of PNG over the last few years I had come to realise that the bureaucracy seemed to have lost its role and that the local member was starting to control everything.
Can anything be done to reverse this trend?
It has obviously led to the local member giving jobs to his wantoks which should have been overseen by the experts in the relevant government department.
These wantoks have been able to get away with making huge profits for themselves and leaving government work undone.
It is good to hear that the village people do understand what has been happening.
Now, I guess, the answer lies in electing new members to parliament who will work against all of the corrupt ways that have crept in.
I wonder if that is something even possible! Maybe the Asian culture of gifts/bribes and the ancient Melanesian culture of gifts/reciprocity are going to dominate.
But I feel there are many educated Papua New Guineans who believe that it is wrong.
Posted by: Mrs Barbara Short | 23 April 2012 at 12:52 PM
Yes, there are many similarities and continuities with the 1990s and 2000s, but there are also major new differences in the contemporary situation that should not be lost sight of, for things are changing rapidly.
The lease-lease back schemes are taking everything in a new direction, for it no longer just the appropriation of timber but also of land.
This will fundamentally change things forever, with villagers very conscious of the fact that it threatens to transform them into dispossessed labourers.
This is producing a certain radicalisation of people on the ground, an anger that is yet to find all of its points of articulation.
With lease-lease back, the state is becoming the intermediary in guaranteeing this transfer of land, this is a new relationship of the state to its citizens and a much more direct backing of large scale industrial forms of agriculture against ordinary subsistence villagers.
Another new development is the training and arming of the mobile squad by Australian aid which has produced a large dedicated private army for the Malaysians.
The police have nice new large 4 wheel-drive vehicles in town, automatic rifles and clean uniforms. They are not the rough rastas of the 1990s with their post-holocaust look that I saw in the Kaliai area.
The riot squad has its own new internal structures of command where particular commanders in Port Moresby are linked up to the Malaysians, bypassing more local chains of command at provincial headquarters and also bypassing the ability of villagers to use one-tok systems within the police force to control the actions of the state against them.
Above all the state is changing, the bureaucracy has lost its authority, its auditing culture and internal formal chains of command, and the personal power of the local member has grown enormously as have the informal networks operating within the state.
The internal disciplinary structures within the state have not so much disappeared as become realigned, producing a new kind of porous state, where capital (especially new large scale Asian capital) has powerful informal direct links into the state that can cut across other informal alliances (involving language, kinship, regional ties).
It is not just a question of corruption and its continuity but of a new kind of state being produced by particular kinds of capital that do business in a particular way.
The corporate culture of Asian capital with its bribes-gifts merges with the exchange-gift-patronage networks of modern Melanesian politicians to produce a new form of informal power structure that is difficult to confront and combat because it is so nebulous yet all pervasive.
It is also wrong to believe that villagers on the ground are misinformed and do not know what is happening, it is more the case that most of the institutional structures which they could otherwise use have been co-opted by these informal networks of power.
All of villagers other avenues of redress, including them just reaffirming their own customary property rights, become redefined as crimes, as law and order problems.
Posted by: Andrew Lattas | 23 April 2012 at 11:57 AM
There needs to be a lot more than talk. Political education and savvy has to get down to the villages so that people both know about what's happening and what they can do about it.
Therein lies the rub. Who in power is going to effect this education? I remember an old kiap mate of mine who stayed on at a large rural outstation after 1975 and tried to keep things going.
The people started to come to him and ask him for advice about what options they had.
Tom explained what happened next:
A plane landed and the local member hopped out and handed Tom a cheque.
"That's your final payment' he was told. 'Thanks for all you've done but now it's time to go. Goodbye!'
Posted by: Paul Oates | 22 April 2012 at 05:14 PM
Thanks to Prof Lattas for explaining the whole corrupt process. Thanks also to Michael and Frank for their affirmation that this type of corruption is taking place.
PNG needs people who can explain to the common folk how they are being tricked.
PNG village folk do not have a good understanding of the world of "big business". So many of the recent politicians have abused the power given to them and used this lack of understanding on the part of the village people to make a fortune for themselves and rob the true landowners.
PNG needs new politicians who are not going into politics for their own financial gain or advantage in any way. They need to elect people who will work out ways to get rid of the corrupt ways, which sadly are now so numerous and often accepted as the correct way of doing business.
A good ICAC is needed desperately. The Ombudsman seems to have been silenced. The police and law courts have to take a bigger role in helping to restore justice.
The journalists, bloggers, educated thinkers, church leaders, public servants, former public servants etc all need to speak up and work out ways to solve these problems.
There needs to be a lot of tok tok!
Posted by: Mrs Barbara Short | 22 April 2012 at 02:24 PM
This is exactly what is happening in the Sepik region, West Sepik (Sandaun) in particular.
Belden Namah accumulated wealth through the same means, but he went an extra mile by actually hijacking the power of attorney from the illiterate bush people to make him all the more powerful.
I do hope PNG wakes up to this rot killing this country.
Posted by: Frank Pokanau | 22 April 2012 at 12:49 PM
To Lattas, yu no mispaia! Precise, accurate and thorough.
Thank you for your frank and revealing article.
What makes this state of affairs so sad is that most, if not all, PNGians know that what you have described is the usual way of conducting business in PNG. It's become a standing joke.
Posted by: Michael Dom | 22 April 2012 at 11:23 AM