* Ban on exports of raw timber logs will hit profits
* Move expected to push companies into other sectors, boost
* Forest cover shrank almost a fifth in the two decades
By Jared Ferrie
YANGON, March 21 Myanmar will ban the export of
raw timber logs from April 1, choking off profits in a sector
that provided critical funding to the country's former military
rulers for decades, as a new reformist government steps up
efforts to save forests.
Myanmar has some of Asia's largest remaining expanses of
forests, from the slopes of Himalayan foothills in the north to
steamy rainforest in the south.
But it has been disappearing fast.
Forest cover shrank almost a fifth, to 47 percent of land
area in 2010, from 58 percent in 1990, Forestry Ministry data
Total timber exports of 1.24 million cubic tonnes in the
fiscal year to March 2013 brought in more than $1 billion in
revenue, government figures show.
While timber remains an important income stream for
Myanmar's rulers after a quasi-civilian government took over
from the military in 2011, it is not as critical as before.
To recognise Myanmar's economic and political reforms, the
European Union, the United States and other countries have eased
or lifted sanctions, allowing foreign investment in sectors such
The reforms are now reaching into the forestry sector, with
the government ready to put conservation above profit.
The ban is likely to hurt the forestry industry, which
generates about 90 percent of export earnings from raw logs and
not finished products, said Barber Cho, head of the Myanmar
Timber Merchants' Association.
"Myanmar industry might suffer, some people might suffer,"
said Barber Cho, whose group represents about 900 companies.
"It's a difficult and complicated juncture for us."
Under the new rule, revenues could plummet, forcing forestry
firms to invest in new sawmills to stay competitive.
But the action was necessary, as the former junta had
practiced "legal overproduction" that decimated Myanmar's
forests for decades, Barber Cho said.
Crippled by sanctions, chronic economic mismanagement and
starved for hard currency, the generals gave logging concessions
to their cronies to export raw logs in exchange for the cash
needed to prop up their rule.
Forest products were the military junta's second most
important source of legal foreign exchange and exports earned
$428 million in the fiscal year to March 2005, natural resources
watchdog group Global Witness said.
Among the big companies involved in the business are Asia
World, the Htoo Group, and Yuzana Co.
Htoo Group and Yuzana are the two biggest palm oil companies
in the environmentally sensitive southern region of Tanintharyi.
Yuzana also runs a 200,000-acre (81,000-hectare) biofuel
concession in the world's largest tiger reserve in northern
Kachin state, where the military has contracted with Asia World
to build roads and dams, conservation group Forest Trends says.
"All these renowned companies were granted associated rights
over timber extraction in their project area," the
Washington-based group said in a recent report.
CHALLENGING THE CRONIES
The ban, covering all kinds of trees, will end Myanmar's
status as the only country to export raw teak logs from natural
forests rather than plantations. Exports of teak wood alone
earned $359 million last year.
"Of course, this ban should have been imposed a long time
ago, but it's better late than never," a forestry ministry
official told Reuters.
"We believe it will help encourage wood-based industry and
increase job opportunities," added the official, who declined to
be identified as he was not authorised to talk to media.
From next year, the government also plans to slash by 80
percent the amount of teak it allows to be taken from the
forests, Barber Cho said.
How the cronies will fare is an open question, but it's
clear that Myanmar's notoriously opaque timber industry has long
been a key source of wealth for many prominent businessmen.
Tycoon Tay Za said his Htoo Group, engaged in businesses
ranging from mining to tourism, grew from a humble start, based
on a loan from his mother-in-law to set up a sawmill.
Tay Za said he did not exploit connections to win
concessions, which were allotted through a bidding process, but
he did say his father served with top figures in the military,
including Than Shwe, who ruled Myanmar from 1992 to 2011, while
Tay Za was building his business empire.
"It was a fair competition," Tay Za said in a December
interview. "No need to know the minister, only open
Groups such as Forest Trends and others familiar with the
way the junta worked say tenders were for show. The real
concessions were shared out in backroom deals.
"It was not a tender system, it was a negotiation system,"
said Barber Cho.
Data shows one of Tay Za's firms received a 668,000-acre
(270,000-hectare) tract of rainforest in a proposed national
park in Tanintharyi, one of Myanmar's most biodiverse regions.
Tay Za logged almost two-thirds of another 162,000 acres
(65,000 hectares) of nearby palm oil concessions awarded to him
during the five years to fiscal 2007/8, data shows.
Tay Za, as well as representatives of Yuzana and Asia World,
did not respond to requests for comment.
The log export ban will force dominant forestry companies to
invest in new processes and diversify, said Aung Thura, of the
Yangon-based research and consulting firm Thura Swiss.
"It will have an impact on them, but it won't destroy them,"
he said. "It's in their interest to diversify, not just export
(Additional reporting by Aung Hla Tun in YANGON; Editing by