NAIROBI, May 25 (Reuters) - Tanzania is losing millions of dollars a year because of poor management and corruption in its forestry sector, an international conservation group said on Friday.

A study conducted in 2005 in southern Tanzania by Traffic International and the Tanzanian government showed that over half of 28 export companies studied had some form of link with senior Tanzanian or foreign government officials.

Bribery, nepotism and cronyism were rampant in the sector, it said.

"Of greater concern than bribery were apparent high levels of direct senior government involvement in timber harvesting from southern Tanzania," the study said.

The report said Tanzania lost $58 million in timber royalties during 2004 and 2005 alone.

"Income from a sustainably managed timber industry should be assisting national development ... not ending up in criminals' bank accounts," Steven Broad, Traffic International's executive director, said in a statement accompanying the report.

Methods used to evade paying taxes and sneaking timber out of the country include cutting trees in unauthorised areas, using bogus export documents and transporting logs at night in violation of traffic rules.

The study cites an example of how China imported 10 times more timber from Tanzania than is documented by Tanzania's export records, implying a 90 percent loss of revenue in 2004 and 2005.

According to the study, uncontrolled timber harvesting in southern Tanzania grew rapidly from 2003, largely because of increasing overseas demand, especially from China.

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