REWIND: Mahogany Dreaming

Sunday 10 October 2004 9:00AM

Fiji forests are ready for harvesting, but reporter Ross Duncan found a bemusing tangle of hopes, hype, hard work and red tape. And some very intriguing people.

Transcript

Black Rose song Ross Duncan: This song has been a bit hit for the band, Black Rose, a Fiji success story. It’s a new take on a traditional chant that describes the first arrival of aeroplanes in Fiji.

This week Fiji is celebrating its independence from colonial rule in 1970, and Black Rose are in Australia to perform in celebration concerts for Fijians here.

But today, Background Briefing goes to Fiji. Hello, I’m Ross Duncan, your tour guide.

Suva atmosphere

Ross Duncan: Charles Kingsford Smith made a precarious landing in Fiji’s capital, Suva, on the first flight across the Pacific in 1928. I touched down in Fiji in a 747, but like the pioneer aviator from Australia, was dying for a cigarette."I touched down in Fiji in a 747, but like the pioneer aviator from Australia, was dying for a cigarette." The humidity hit me like an invisible wall, an early warning sign that things could get a little tougher here than I imagined.

It’s four years since a coup shattered the nation. Coup frontman, George Speight, now languishes in prison on a small island just a stone’s throw from Suva. Fiji has a new police commissioner, an Australian. Things have settled down quite a lot. Fiji’s economy has recovered reasonably well, thanks mainly to the number of tourists now flocking back in droves.

Fiji also has a couple of new business successes in designer bottled water, and body care products, but the export industry, sugar, is in serious decline.

There is high unemployment and the growing problem of people migrating from rural areas to the major towns.

Outsiders who stay a little too long in Fiji often ponder what it was that lured them here in the first place. For me, the hook was mahogany.

Fiji is staking a lot on its 40,000 hectares of mahogany plantations. The British brought the seedlings to Fiji from Central America more than 40 years ago, and the trees are now mature enough for harvesting. There are no instant riches. Landowners who gave over their land for decades on the promise that patience would be rewarded with big money, have been restless.

Suva lawyer, Isireli Fa.

Isireli Fa: I think since the mahogany issue has emerged, a lot of the Fijians who own land and who live in the rural areas, are beginning to find that the major stumbling block to their progress is not from the Indians but rather from the government, and the system behind the government, which is putting roadblocks in their way towards greater direct economic participation, and is in fact pushing forward very strongly concepts like trusts and other related concepts which are designed to keep them in their current position but, in name, tell them that they have a greater position than what they really have.

Ross Duncan: In Suva the Sunday market is the place to go. Well, actually, one of the few places to go on a Sunday. It’s a gentle space to recover from a big night at the Bad Dog Café, and Traps Bar, and if you’re up for it, Purple Haze, a favourite hangout for the local transsexual community.

Here at the market, young artists from all over the Pacific, Samoa, Nauru, Kiribati, show off hip jewellery creations and T-shirt designs. A few villagers come in for the day to ply more traditional handicrafts. The curry and roti is not to be missed.

You can escape the headier mix of politics, race and money that dominates weekday life. Like the fact that the Vice President is in jail for treason, an Asian drug syndicate’s just been busted, and the rumours that someone’s getting rich on the profits from mahogany.

Mahogany in Fiji is synonymous with big dreams, schemes, hopes, fears, competing interests and hidden agendas. Not to mention a lot of hype.
"Mahogany in Fiji is synonymous with big dreams, schemes, hopes, fears, competing interests and hidden agendas." There was one man I was told who might really know what was going on.

The taxi ride to his place was a long one. He lives in one of Suva’s more modest suburbs. But just about everyone who’s anyone in this town knows Jim Bastiras, or ‘Jimmy the Greek’.

When I arrived, he was in the kitchen peeling vegetables and listening to one of his favourite CDs. He told me the song playing at that moment was a tale of thwarted passion.

Jim Bastiras: OK, my name is Demetre Bastiras, or Jimmy, as they call me in English, I am 40 years in Australia. In Australia I was doing lots of business, first years I was growing potatoes, onions, peas, tomatoes and some other things, and after a little while I built my own glasshouses. I was working as a distributor for VizyBoard cartons. I always have a lot of fruit markets, fruit shops, together with my sons who used to have a factory or workshop doing the panelbeating and spraying and selling cars and import cars from America and other areas. Till I left Adelaide and I went to Melbourne and I continued to do my business as the biggest fruit markets in Melbourne. After that, I had bad luck with my wife, and I have to come to do business in different areas, which I come to Fiji.

Ross Duncan: Jim Bastiras’s mind is as sharp as his dark eyes and black moustache. He likes to get about in loud shirts, shorts and long white socks.

Jim Bastiras: I start to do some fishing business, some logging and timber business. I hear mahogany, a business which was a very big quantity of timber and big money. So I approach a lot of people, sawmillers, and they tell me there is a huge amount of timbers in mahogany. So at that time I knew some people including the Secretary of the Minister for Agriculture and Forestry, and I approached them, and I told them I can do the harvesting of mahogany. At the same time it was in the news, mahogany is worth $300-million, $292-million, $400-million and $136-million from another company. So when I took my 4-wheel drive and I go around and have a look at most of the areas in Viti Levu, I saw mahogany is worth three to four times more.

Ross Duncan: Jim Bastiras decided a few years ago to make the Fiji government an offer he thought it couldn’t refuse. It attracted plenty of publicity.

News Reader: A new twist as the race for mahogany intensifies. The green gold of Fiji is expected to attract more attention than ever. The latest is an Australian-Greek businessman calling himself Jimmy the Greek. He’s offered stakeholders a massive sum.

Jim Bastiras: The existing logs for logging for the next 15 to 20 years are to me one billion dollars, which of that one billion dollars, approximately 80% will go to the landowners, Fiji government, Native Land Trust Board and forestry or who else has some shares inside there. Mahogany in Fiji is one of the biggest businesses. Sugar is gong to finish in the next four to six years.

Ross Duncan: The government-owned Fiji Hardwood Corporation described his offer as ‘pie in the sky’. He persisted, and eventually things got a little heated. In February last year, they sent him a letter.

After listening to you at our meeting and after reading your letter, the only option open to us is to completely ignore you. We do not regard you as someone who can add any value whatsoever to the mahogany issue.

Ross Duncan: And that was the polite bit. Jim Bastiras has gone a little quiet lately, but hasn’t given up hope of getting Fiji’s mahogany business.

Jim Bastiras: I still continue and I will continue till God lets me continue, because he promised me he will not leave me alone. I’m not a crook. I’m honest, and straight. I’m not a superman, I know a lot of things, but I don’t know everything, only God knows. So I ask him to provide me that knowledge. And I ask him every day in my prayers to keep me honest and give me wisdom, so I can do the right thing for those which he create in his image.

Ross Duncan: Different people I speak to in the industry here say they don’t really know what to make of you.

Jim Bastiras: I’m a dreamer in one way, which I dream to help these people which they live in poverty in this country. If they do not take me as serious, they have to try me. I’m here. I’ve got everything ready for them, and they will be surprised, because mahogany in Fiji will reach up to $2-billion, and as they do now, I’m scared to tell you this, they will lose everything.

Ross Duncan: Jim Bastiras is adamant the government has undervalued mahogany and that its decision to leave developing the industry to Fiji Hardwood Corporation will not serve the people of Fiji well.

Time to check out those trees. I hired a four-wheel drive and headed up to a mahogany plantation to see what all the fuss was about.

About 40 minutes drive north of Suva you come to the town of Nausori. On the way you pass through the sprawl of makeshift dwellings that are home to tens of thousands of squatters. Many of the people who live here are displaced Indian sugarcane farmers. More than half are indigenous Fijians who have drifted in from rural areas in search of a better life.

Nukurua, one of the largest and oldest of the 14 mahogany plantations in Fiji is just outside the town of Nausori. The land here, like most of the land in Fiji, is owned by indigenous Fijians and divided among clans.

Almost 40 years ago, the chief of all the clans in Nukurua agreed to lease the land to the government at a nominal rent for the planting of mahogany. In 2002 he took legal action against the government claiming it hadn’t honoured terms of the deal. But the clans here are now divided. I came here to talk to one clan that is now on side with the government, and another that is pushing on with the court case.

A track winds through hills densely packed with the tall and rather forlorn-looking mahogany trees. They’re thin but they are the same species as the native giants found in South and Central America that end up in some of the world’s finest furniture.

Since a clampdown on the extent of logging native mahogany in countries such as Brazil, the word is there’s potential in Fiji’s plantation mahogany as a green-friendly alternative.

The air up here seems a little clearer, and it’s quiet until eventually you come over a rise.

Chainsaw buzz

And hear the buzz of a chainsaw in the distance.

Harvesting of mahogany began two years ago. Here, there’s a small, clan-operated company that has gone ahead with a contract with Fiji Hardwood Corporation and has been felling mahogany.

The logging company started out as a fairly rough and ready operation, using antiquated equipment and poorly skilled workers. But they’ve been getting assistance lately from New Zealand forestry experts. A World Bank accountant is being brought in to sort out the bookkeeping, and they’ve just acquired an expensive piece of heavy machinery called a skidder, which is used to extract logs from the forest.

Sakiasi Rokovucago: And the blade is being used to adjust the centre of gravity, so it can pull more.

Ross Duncan: Clan leader, Sakiasi Rokovucago, has no regrets about signing up to the government’s new mahogany plan. The rent is now better, they’ll get a percentage of money from log sales and other benefits.

Sakiasi Rokovucago: Well we had to start somewhere and I thought that was the only way to start, was to give our land initially for the harvest, commercial trials, and ever since we gave our land, we’ve been involved with the harvesting and the mahogany industry.

Ross Duncan: But just a few kilometres down the road is a clan that is holding out and pursuing a claim for compensation against the government as well as the Native Land Trust Board which administers leases of indigenous-owned land. Rara clan member, Suli Tamanalevu.

Suli Tamanalevu: We are unhappy now because we have seen that we lost a lot in terms of the big trees, the indigenous trees that were poisoned, but we were not compensated, and also one of the clauses of those leases of this land says that when mahogany matures, consent of landowners had to be sought for, and if they are willing, they could be given the first chance to buy back these mahogany plants, and that was what a good number of us were interested in."We are unhappy now because we have seen that we lost a lot in terms of the big trees, the indigenous trees that were poisoned, but we were not compensated…"

Ross Duncan: And that’s basically what the multi-million dollar court case is about, compensation for loss of indigenous timbers and alleged environmental side effects of mahogany such as discolouring of streams.

It’s also claimed the government hasn’t honoured an understanding that landowners would have the right to buy back the trees on maturity.

The case could be heard as early as next year. But the government and Fiji Hardwood Corporation have been on a roadshow in recent months, visiting rural areas, explaining the plans for mahogany, including benefits for landowners. They say most landowners are now on side.

Back in Suva, I caught up with the lawyer running the court case for disgruntled mahogany landowners. The office of Fa & Company, Barristers and Solicitors, is four floors above a popular café called the Republic of Cappuccino. Lawyer, Isireli Fa, looks like he might have played a few games of Rugby in his younger days. Isireli Fa says there’s still discontent among landowners and argues that those who’ve had a change of mind have been worn down rather than won over.

Isireli Fa: The government, we acknowledge, is winning the hearts and minds of some people, and we expect that. We feel disappointed with the way the government has run its campaign because the people who’ve been won over are really people who are on the breadline, people who need to put bread on the table, and because the government’s playing hardball, it’s just taking time to resolve. So we feel that there will be a lot of victims as a result of this, but that does not prevent the remainder who know the way to go, from pursuing the matter.

Ross Duncan: He believes that a win in the case would turn things around.

Isireli Fa: If we win the consequence that will follow is quite clear, in that what it’ll do is it will set up an impediment to the government from continuing to deal with the mahogany in the way it is now dealing with it, and that in a lot of ways it’ll undermine directly the government structure that’s been put in place, because the government structure in fact discounts the landowners completely, and victory in this case will pull the rug from under that structure.

Ross Duncan: Lawyer, Isireli Fa. The lease arrangements between Fiji’s mahogany landowners and government are extremely complex and inconsistent. But I wanted to find out more about what the government is now promising landowners.

Rain falling

Ross Duncan: Just a short stroll in the rain around the corner from Isireli Fa’s office, past the heavily guarded United States Embassy, is the Ministry of Commerce, Business and Development. The secretary ushers me into the Minister’s office. The government has invested a lot of money in the mahogany plantations but Tomasi Vuetilovoni insists the government has the landowners’ interests firmly in mind and the plan will deliver on benefits.

Tomasi Vuetilovoni: The policy is based on the philosophy that whatever is going to be good for the landowners will be good for the government. So we’re putting the landowners’ interest first. The government will benefit from this in the long term, very much in the long term, because you need the support of the landowners to do this. When the government leased the land from the landowners, the rental being paid was really just what they call peppercorn rent, and the landowners weren’t getting, didn’t get the commercial rent that other landowners were getting, for example the sugarcane farmers. "The policy is based on the philosophy that whatever is going to be good for the landowners will be good for the government." So for all these years, 30, 35 years, the rent being received by the landowners was really atrocious and low and so somehow this has to be corrected.

Ross Duncan: The government is offering an elaborate package of benefits. First, the land rental is a big improvement on the old days and landowners will receive a royalty on log sales. Then there’s a gifting of 10% equity in Fiji Hardwood Corporation. The shares will be held by a landowner trust and, the Minister says, landowners will over time be able to increase their stake up to 49%. Landowner companies will have access to financial assistance as well as training in business and forestry skills. They’ll have first option on contracts for forest activities such as logging and cartage.

On top of all that, there’s a lot of talk about landowners receiving 50% of the benefits from Fiji Hardwood Corporation’s activities but it seems no-one has yet quite nailed down what that means.

It doesn’t sound like a bad deal. The question is, will it deliver? I thought I’d see how the Fiji pine industry has been going; it’s been operating along similar lines for 13 years.

Aeroplane

Ross Duncan: I confess I did have an ulterior motive for hopping on a plane out of rainy Suva across the west of the main island of Viti Levu. They say it never rains in the west, but they lie.

Thunder/rain

Ross Duncan: The headquarters of Fiji Pine Limited are at Drasa, just north and slightly inland from the tourist gateway, Nadi. There’s not much at Drasa, except the pine operation. The idea has been that landowners, through dividends from company profits, would buy out control from government. But Fiji Pine has struggled and landowners have not been able to improve on their tiny stake.

The General Manager Operations at Fiji Pine and pine landowner, George Vuki, spent time at universities in Canberra and New Zealand gaining his forestry degrees. Speaking in a sparsely furnished, wood-panelled room, he says disgruntled landowners lighting fires and blocking access to their land is a problem.

George Vuki: Some landowners come back to the company and claim that the area has not been consented for leasing in the first place. Some of those cases are not able to be resolved by NLTB [Native Land Trust Board], some of the landowners also think that the company or NLTB is using a delay tactic to resolve some of their land disputes, and they usually take their anger out by setting fires in the forest. Maybe the head of a clan is not sharing some of those benefits to the members of the clan.

Ross Duncan: George Vuki believes the industry model is basically a good one. Landowners do benefit from running forest companies and generally provide efficient service. But business often comes into conflict with the traditional way of life.

George Vuki: At this point I say there is still more work that needs to be done, to train the forest-based companies or the respective people who run these organisations in commercial forestry management so that they don’t mix the commercial and the traditional issues when it comes to managing their day-to-day running of a business.

Ross Duncan: Do you think those traditional issues that get in the way of commercial success or greater efficiency are really very entrenched in Fijian society?

George Vuki: If you look back say a couple, ten years ago, when you look at some of the Fijian businesses that have come up, some of them have really come up well. It’s usually the individual owners who pretty much manage their business well, are surviving now. Some of the businesses they haven’t done well, they pretty much tend to mix the commercial and the cultural issues together in terms of running their day-to-day business. And that pretty much symbolises the way the Fijian people live. They pretty much live in an extended family type, and they spend most of their time trying to help each other. But in today’s commercial business world, that pretty much does not lie. I mean a typical example is this - if you have a death in the village, the whole logging gang might go home to attend the funeral, which takes up to one week from the day of the death up to the burial. "If you have a death in the village, the whole logging gang might go home to attend the funeral, which takes up to one week from the day of the death up to the burial."So that’s one week of production, which costs the company, not only Fiji Pine in terms of the supply of the logs, but to the forest-based company in terms of its earnings in a week.

Ross Duncan: Landowner ambitions for greater ownership of the pine industry was identified in an independent review three years ago. The report recommended the government write off its $59-million investment in the industry and hand over the running of it to landowners. The government is still considering the recommendations.

Aeroplane takes off

Ross Duncan: Back in Suva there’s tension on the streets as well as rain puddles.

The Vice-President has just been jailed for taking an illegal oath of office in the regime coup leader George Speight tried to set up in 2000.

There are fears of hordes of angry villagers descending on Suva and rioting in the streets. But security’s tight. The new Police Commissioner, an Australian, seems to have things under control.

It’s a reminder though that mahogany had a part to play in the many complex factors and forces behind the coup, including the personal opportunism of coup leader, George Speight. In 1999 Speight, then Chairman of the newly-formed Fiji Hardwood Corporation, was barracking for a United States company to win the government tender for a stake in the mahogany plantations.

The man behind the American bid deposited several thousand dollars into Speight’s Brisbane bank account. Both men later insisted the money was for private consultancy services Speight had provided before he got the Fiji Hardwood gig.

A new government, under Prime Minister Mahendra Chaudry, sacked Speight from Fiji Hardwood Corporation. Chaudry wanted the deal to go to a British company.

Speight toured the villages, inciting mahogany landowners. They joined in protest marches against the Chaudry government in Suva. They called on the government not to make a decision on the future of mahogany without consulting them. On 19th May 2000, mahogany landowners were again part of a rally in Suva. That day, Speight stormed parliament and took Chaudry and his cabinet hostage.

George Speight: We have secured a civil coup on behalf of the indigenous people of Fiji. The civil coup has resulted in the overthrow of the Labour-led Coalition government in Fiji.

Ross Duncan: The contest between American and British interests fuelled heightened expectations and confusion about just how much Fiji’s mahogany is really worth. The British company said $110-million in Australian dollars, the Americans $320-million. The government had an independent valuation of $130-million. And we’ve already heard what Jim Bastiras thinks: a billion.

Woman: Good afternoon, Fiji Hardwood Corporation, how may we help you?

Ross Duncan: Fiji Hardwood Corporation’s first offices were burnt down during the coup, and things have been unsettled ever since.

Recently, a new Chief Executive Officer has been appointed. New Zealander, Sandy Rae, has been flogging logs for the best part of 25 years and reckons he knows a bit about forest values. He’s been trying to tone down some of the hysteria that’s surrounded mahogany.

Sandy Rae: Yes, well forest valuations are a bit tricky, because there’s no real transaction evidence, and to value anything else, you normally go straight to the transactions. The book value of the trees on our balance sheet is $160-million, and I’ve done enough forest valuations through my life now to know that I feel pretty comfortable about that. It’s really an expression of what it can earn in log sales over time, and I’m talking Fijian dollars here. I can’t see it being much below a hundred, but I can’t see it being much below two hundred. There might be a bit of upside in the log price as we get moving, get more established but I think that’s about it, really. I can’t see how you could possibly get anything approaching half a billion. We’re cutting one third of the sustainable yield now per year, and our gross turnover in log sales is $7-million, Fijian.

Ross Duncan: Sandy Rae is an extremely affable fellow. He’s rather bald on top, and you have to wonder how much of the hair has fallen out since he took over running the mahogany company. Then again, he says he enjoys a challenge.

Sandy Rae: The budget that I inherited when I arrived here was to make a loss of $1.6-million for 2004, and I didn’t think there was much excuse for making a loss when we were cutting 40,000 cubic metres. We are budgeting for the full year to make a profit, but we should be starting to make some serious money next year.

Ross Duncan: So is there any excuse in principle why you shouldn’t be making a profit if you’re cutting 40,000 cubic metres a year?

Sandy Rae: Yes, indeed. The company was formed in 1998 and it was really plucked out of the Forestry Department, let’s say public service philosophy, not really a commercial culture. Stuck into a thing that was called a corporation and told they were now in business. It’s hard to see how from a public service culture, a fully commercial culture could have been developed so quickly, and of course it wasn’t. It was over-staffed, a lot of bureaucracy, and big overheads.

Ross Duncan: What was the previous staff levels at FHCL?

Sandy Rae: It was 130 when my predecessor arrived. He was the one that made the big impact of taking it from 130 down to 50, and I’ve set myself a target of by the end of 2005 to run it back down to about 20, which I think’s about the right level. In my own country we’d run it much leaner than that, but then there’s certain aspects of Fiji that you just have to live - a bigger staff - and also we don’t pay them that well anyway.

Ross Duncan: What were those people doing all that time?

Sandy Rae: Yes, well that’s an interesting question. Our Board’s very strongly of the view that they were prevented from making sales and making money from Day 1 by the political environment they were working in, landowner difficulties and more latterly, the coup.

Ross Duncan: Between 1998 and 2003 the government poured a total of about $16-million into Fiji Hardwood Corporation. The new boss, Sandy Rae, replaced a fellow Kiwi, Philip Langston, earlier this year. Langston had left after less than five months in the job. The official explanation was personal reasons but Sandy Rae says that Langston felt stifled by government meddling.

Sandy Rae: Yes, well, I get a bit frustrated with that as well. I think that’s probably fair to say, I knew Philip very well, we’d known each other for 20 years or more, 25 years probably. The three big impacts he made though to the company were getting it properly funded, securing a loan for working capital, getting some logs moving, and getting the overheads dramatically cut down. So no, there is a lot of bureaucracy around. The issue is highly politically charged, it always has been, I think it always will be.

Ross Duncan: Sandy Rae says he’s working on trying to reduce a lot of the bureaucracy and layers of reporting lines.

Fiji Hardwood is also keen to borrow some money to finance its operations, but that’s proving difficult at the moment. It can’t put up the forest assets as security because the plantations have never been properly surveyed. Getting landowner consent for that is just one of the issues Fiji Hardwood is now trying to iron out with landowners.

At the moment, Fiji Hardwood’s only business is selling logs. So it doesn’t receive any money from processing. No logs are exported but about 70% of mahogany leaves Fiji in the relatively unprocessed form of rough sawn timber. The government wants to change that, and ensure most of the money to be made stays in Fiji. The buzzwords are value-adding and downstream processing. The ultimate vision is for most of Fiji’s mahogany to leave the country in the form of finished products such as furniture.

Commerce Minister, Tomasi Vuetilovoni.

Tomasi Vuetilovoni: The government policy is to do all the value-adding, here in Fiji because that’s really where the money is. "The government policy is to do all the value-adding, here in Fiji because that’s really where the money is."And we had illustrated this by saying that if we harvest and export logs or sawn timber, all we’re getting will be about $50-million a year, but if we do the value-adding we’ll be looking at almost $200-million a year.

Ross Duncan: The Minister, like a lot of people, is keen to get a strategic partner on board sooner rather than later.

Tomasi Vuetilovoni: Fiji Hardwood Corporation will look at the appointment of a strategic partner, because we need to have a strategic partner as we go down the value-adding process. You need to have the expertise, you need to have expertise and know-how, you need to have the marketing skills, and you also need to have the capital to assist the Fiji Hardwood Corporation Limited.

Ross Duncan: And when do you see that happening, or when would you expect that to happen?

Tomasi Vuetilovoni: Well as soon as possible. We would have liked a strategic partner to be in place last year. However, quite rightly, the Fiji Hardwood Corporation believes that it should strengthen its operation first before it looks around for strategic partners, strengthen it in terms of the people and also in terms of its balance sheet and the finance side of it.

Fiji news report
Reporter: When the sixth highest Chinese government official met local Chinese and Chinese businesses in Fiji today, for some reason the media, unlike his other meetings, were kept out. It was expected to be an ordinary courtesy call, but the Chairman of the National Committee of the Chinese Political Consultative Forum didn’t hesitate to talk shop.

Local Businessman: He expressed that there should be a good opportunity for increase of trade, taking into account that that we do have some natural resources which could be developed further.

Reporter: It was obvious from the beginning that such a large and powerful Chinese delegation didn’t come to Fiji with only political ties on their mind. It seems the real agenda behind the visit is now starting to come out. Although China has a lot of money invested in the country’s South Pacific Games facilities, it seems they’re also looking at how they can benefit from Fiji.

Chinese Delegation Spokesperson: Fiji has huge resources in timber, in the fish resources, also in tourism. So that’s three fields very attractive to the Chinese people.

Reporter: Trade talks were always expected to be on the agenda of the visit, but the Chinese are talking specifics.

Local Businessman: He has expressed quite a lot of interest in the timber resources, particularly those resources that are not available in China.

Reporter: Mahogany?

Local Businessman: Didn’t … specifically, I don’t know if China… mahogany.

Reporter: Could mahogany be one of the timber resources that China is looking at?

Chinese Delegation Spokesperson: It’s specially for the wood, for manufacturing the furniture… Mahogany, yes, yes. So that we might explore the possibility, how to have value-added products by using your timber to make furnitures and export to other countries.

Reporter: Make them here?

Chinese Delegation Spokesperson: It’s a possibility, you know, for both sides to look at.

Ross Duncan: China is keen to expand its influence throughout the Pacific and has been courting Fiji. China provided about $25-million to build a multi-purpose sports complex in Suva which was opened at last year’s South Pacific Games. The two countries signed a Memorandum of Understanding on information and communications earlier this year. Fiji has established a mission in Beijing and last month China granted Fiji approved tourist destination status. When Fiji’s Prime Minister visited China in June, mahogany was on the agenda. But Commerce Minister, Tomasi Vuetilovoni is non-committal.

Tomasi Vuetilovoni: Everyone is showing interest, including China. At the end of the day it will be the Fiji Hardwood Corporation and they will have to make that decision who they will have as their strategic partner. But China’s showing interest is quite a positive sign for us. Particularly in China there’s a big market in there, so the field is wide open at the moment.

Ross Duncan: Tomasi Vuetilovoni. Not all the mahogany leaves Fiji as rough sawn timber. Tropik Wood Industries is the manufacturing arm of the government-owned Fiji Pine Limited, but is now also processing mahogany. General Manager, Australian Justin Fuller, says that anyone who wants to make furniture is more likely to go to China than Fiji.

Justin Fuller: Obviously to manufacture furniture, you need to manufacture in competition with the rest of the world markets, and all over the world, all the world markets are defecting to China as quick as you can look at them. Most of the furniture manufacturing companies in China are American. Fiji has the climate and the economy to compete in that market but unfortunately previously it hasn’t quite had the reliability to enable it to do so. In order for mahogany to be 100% utilised here you would have to attract furniture customers, and that’s certainly not an overnight task.

Ross Duncan: There’s speculation though that China could just possibly be interested in setting up shop in Fiji to help consolidate its influence or so it can gain access to the timber. If not, it may be 20 years before Fiji has a fully value-added mahogany industry, if at all. Instead, the future may be in investing in local companies producing products like mouldings or furniture components.

Tropik Woods boss, Justin Fuller was feeling a little homesick but he seemed pretty happy about the way some decking his company now makes and sells into Australia is going.

Justin Fuller: Yes, bloody wonderful so far. The decking market in Australia is huge, obviously tends to follow and tail along with the housing market in Australia. It has been large, always will be, just even replacement of decks will always be large. The large portion of decking in Australia is obviously treated pine, or it has been traditional Australian hardwoods. Now most of those hardwoods in Australia have been closed up, obviously jarrah is almost non-existent these days. The alternatives have come from Indonesia. Indonesia is undergoing very large reforms, so hardwood out of Indonesia is also becoming very difficult to get.

Ross Duncan: There’s another Australian doing a bit of mahogany business in Fiji. Forty-one-year-old, Chris Donlon, was happy to hook up and talk timber. A few days later when I called again, he was on his way to see his lawyer and he suggested we meet there to record an interview. His lawyer is Isireli Fa who I’d spoken to before about the legal actions between the landowners and the government. It was just another reminder of what a small town Suva is.

Chris Donlon: If we’re studying the history of Chris Donlon, probably easier if I deliver it. Christopher Donlon, born in Byron Bay in 1963, educated Mullumbimby High School, St Joseph’s College, University of Sydney, studying economics and law. Developed into the financial community, and I guess after the ’87 stockmarket crash, determined in my own mind that one should disinvest from financial instruments and into resource-based industries, whether that be in mining, forestry. I invested in the company called Red Anchor Resources Limited, I’d invested in a company or a group of companies which is actually the spearhead of investments in Fiji and the Solomons, called the Axiom Group, and Axiom Investments Limited, which then owned Pacific Timber Development Limited, which in turn owned Vusena Forest Corporation.

Ross Duncan: I knew a little already about one of the companies Chris Donlon mentioned. In 1990 Red Anchor Resources raised $1.5-million to fund gold mining exploration in Papua New Guinea, and managed to spend or lose most of the money in a year. In 1996 Chris Donlon was fined a total of $13,500 for being knowingly concerned in Red Anchor financing the purchase of its own shares by another company, misusing his position as a director, and making false and misleading statements to auditors.

His brush with Australia’s corporate watchdogs concerned Fiji’s Immigration authorities.

Chris Donlon: It in fact created a problem for me where I was asked not to be in Fiji for a period of about six months while we worked through those issues. Whether that’s part of sour grapes in a reverse manner and people picking on you, or whether it’s the authorities applying an appropriate amount of discretion and audit, either way, yes, that certainly occurred and has affected my status here in the past; if indeed errors were made, then hopefully everyone does watch me.

Ross Duncan: Chris Donlon acknowledges he’s been through some tough times, and he’s learned a lot. He has a slight limp and wears a trucker’s cap. He says he came to Fiji to recover money he had loaned to a local timber company. He now runs a company called Sustainable Forest Industries, or SFI. Its website says:

SFI has received the concession harvesting rights for the Fijian Mahogany plantations from the Fijian Hardwood Corporation.

Ross Duncan: In fact, Sustainable Forest Industries has no rights to harvest Fiji’s mahogany. Chris Donlon says he didn’t personally write the website. His company does buy logs from Fiji Hardwood Corporation and processes them into sawn timber for export. It was Fiji Hardwood’s first customer. The two companies recently settled a dispute in relation to about $600,000 Fiji Hardwood claimed it was owed for log sales. Sandy Rae says the problems were in the early days when both sides were finding their way.

Sandy Rae: The whole thing was a bit of a sorry mess, really, as I saw it. I don’t want to be assigning blame but it did look like the relationship was really dysfunctional from a very early stage in its career. Look, it’s going all right now, but it certainly didn’t have a good start. I suppose being charitable, we could just put it down to learning curve stuff right at the beginning of a project that no-one knew a great deal about.

Ross Duncan: Chris Donlon readily concedes he doesn’t come from a forestry background. But he is critical of present clear-fell logging practices. He believes that a second generation of younger mahogany trees that spring up naturally in the forest are of superior quality and should be allowed to mature. The theory doesn’t hold much water with Fiji Hardwood’s Sandy Rae.

Sandy Rae: There’s been a lot of talk about selection logging in various quarters, but the talk’s never been from foresters, it’s been from people that don’t really have a good feel for what it’s all about, but we’ll have a look at it, we’ll see what other people are doing. There’s a big area of plantations in Indonesia, they’ve got actually a bigger area, or meant to have a bigger area than we have. The quality’s not meant to be quite so good, and I know they’ve been doing a lot of work in the three native countries where the native comes from, Brazil, Bolivia and Peru, so we’ll certainly have a look at those areas, and see if we can learn anything from them.

Sandy Rae acknowledges however, that more work needs to be done on improving logging practices generally.

Sandy Rae: Really the standards that have applied in the past on indigenous logging are a long way away down from the standards that need to apply to a modern commercial plantation forest. "The thing that frightened me most when I got here, was the standard of our logging."That was the thing that frightened me most when I got here, was the standard of our logging. So I’ve spent a lot of effort, and getting outside advisors and getting some real sort of proper advice right at the grassroots level. When I got here we found the felling techniques were very antiquated, really the training just wasn’t there. So one thing the landowners have appreciated a great deal is the effort we’ve put into providing training and technical knowledge for them. Felling techniques, hauling techniques, the whole thing. But it’s a long, long way away from where I’d like to see it though. The first time I saw a logging operation here in the mahogany I nearly had a fit, I thought we’re going to kill people here for sure.

Ross Duncan: Sandy Rae. There’s another good incentive, apart from saving lives, for Fiji Hardwood to do some serious work on logging standards. There’s money in it.

If Fiji logs its timbers properly, it can get what is called Forest Stewardship Council certification. It’s a badge that says the product comes from an environmentally friendly, socially beneficial and economically viable forest.

A mahogany marketing strategy is also now being developed. Clever marketing, trading on Fiji’s image as a pristine paradise and tactics like product placement, has resulted in phenomenal international success for the bottled Fiji Water brand and the Pure Fiji range of body care products. Sandy Rae says he hopes also to be able to trade on the reputation of mahogany, but it will be one tentative step at a time for the industry from here.

Sandy Rae: You’d never think you were completely out of the woods. This whole project is still quite fragile in a way, but I feel that every month that goes by that we have a successful month of production it’s a little less fragile.

Ross Duncan: Sandy Rae had packing to do. He was heading back to New Zealand for a couple of weeks’ rest. It was a fine, sunny day in Suva. I wandered downtown, strolled along the sea wall, looked out to the Pacific Guardian anchored out in the shimmering harbour. The ship plies the South Pacific, repairing underwater communications lines.

Fiji’s mahogany may not prove to be the bonanza everyone once dreamed of but there’s still potentially plenty to gain. Or to lose. Landowner, Suli Tamanalevu.

Suli Tamanalevu: The Fijian culture Ross, is based on sharing. Your white man’s wealth may be money Ross, but traditional Fijian wealth is sharing, but that doesn’t mean that we have to go on without money. But we must be sure that greed doesn’t creep into us to bring about bad relationships amongst us, the Fijian brothers."We must be sure that greed doesn’t creep into us to bring about bad relationships amongst us, the Fijian brothers."

Ross Duncan: And the man who offered a billion dollars for the mahogany is not standing still either. Jim Bastiras is working on plans to open a restaurant downtown.

Jim Bastiras: The plans for my restaurant is very nice plans. It’s a three-storey floating restaurant, will create approximately 80 to 100 jobs. We’ll have lolo which they cook in Fiji and some other small things, Indian. All the rest of the cuisine is going to be Greek, Italian and Mexican. Right, so it’s going to be something which is missing from Fiji for the tourist. I will be one of the best in the prices. For example, if you go today to have a pizza, a family sized pizza it costs you $23, $24; my price will be half of that. Why? That’s my secret again.

Ross Duncan: Background Briefing’s Co-ordinating Producer is Linda McGinnis; Research, Elissar Mukhtar; Technical Operator, Mark Don; Executive Producer, Kirsten Garrett. And I’m Ross Duncan.

This is ABC Radio National.

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