Congo launches review of logging contracts

KINSHASA Wed Jul 30, 2008 12:32pm EDT

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KINSHASA (Reuters) - Congo, home to the world's second largest tropical forest, launched a review of all timber contracts on Wednesday in an effort to clean up a business rife with corruption and to recoup millions of dollars in lost taxes.

The World Bank-sponsored initiative will look at 156 deals. Most were signed during a 1998-2003 war and subsequent interim government accused of awarding numerous dubious logging and mining contracts.

In 2002, with the country partially under the control of rebels, the Democratic Republic of Congo issued a five-year moratorium on new logging contracts as part of efforts to stem rampant deforestation aggravated by the conflict.

The measure went largely unheeded and companies continued to sign new deals.

Logging and land clearance for farming are eating away the Congo Basin, home to more than a quarter of the world's tropical forest, at the rate of more than 800,000 hectares a year.

Many contracts are expected to be cancelled outright by a review panel made up of government officials and independent experts.

"What I'm hoping for is fewer concessions. What I'm hoping for is more revenues for the state. What I'm hoping for is better management of the forestry sector," Environment Minister Jose Endundu told reporters on Wednesday.

Endundu said last month he wanted to reduce land attributed to logging companies to 15 million hectares from 20 million.

Amongst the biggest timber firms operating in Congo are Siforco, which is a subsidiary of Germany's Danzer Group, and Portuguese-owned Sodefor, a unit of holding company NST.

Together with a third company, Safbois, they account for more than 66 percent of the timber exported from Congo, researchers say.

PROFIT LAUNDERING

Conservation campaigner Greenpeace accused the Danzer Group on Wednesday of employing a system of price fixing and off-shore accounts to avoid paying taxes on timber harvested from Congo and neighboring Republic of Congo.

Greenpeace said the losses to both countries in tax revenues between 2000 and 2006 could top $12 million -- or around 50 times the annual operating budget of Democratic Republic of Congo's Environment Ministry.

"(Congo) is one of the poorest places on the planet and that companies like Danzer Group are looking for ways to avoid paying taxes is simply outrageous," Michelle Medeiros, Greenpeace International Africa Forest Coordinator, said in Zurich.

Responding to the charges, Danzer said the Greenpeace allegations were "totally without foundation".

"They are an absurd, populist gimmick designed to cloud the current public discussion surrounding tax evasion in a misleading Greenpeace report," it said in a statement.

(Editing by David Lewis and Angus MacSwan)

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