Dear Editor,
Bill #14 of 2008 will allow the Minister of Finance to grant tax holidays to value-added wood processing (Christopher Ram’s column ‘The role of the Privatisation Unit in the QAII deal,’ Sunday Stabroek ‘Business Page,’ July 27, 2008).
The Cabinet in Guyana has been granting tax holidays to enterprises linked to forests and wood since the 1970s-80s, when East Germans were designing and building the sawmill at Mabura Hill, now owned by DTL and apparently operated by Bai Shan Lin. Although the Cabinet has kept information secret from the electorate, we know from publications elsewhere that the Barama foreign direct investment arrangement of 1991 was written by the Malaysians, commits Barama to nothing specific, and demands great concessions from Guyana.
We know also that over the years since then Barama has not declared a tax assessable profit but has run down its plywood mill and greatly increased its export of unprocessed logs to Asia, while its special deal from the Cabinet covers the cost of the forest taxes through the incentive drawbacks on imported fuel and equipment. So Guyana handsomely subsidises Barama.
Since the 1991 deal, the declared Guyana Forestry Commission policy on forest concessions (1993) requires them to be linked to wood processing facilities, so that logs which are produced should all be processed in-country, and so that the demands of wood-using factories do not exceed the allowable annual cut from the forests. We know also from the GFC’s Planning and Development Unit in February 2007 at the national seminar on log export policy that there is value-adding capacity installed in Guyana to process the entire annual log production.
So, given the 1993 policy, confirmed in the National Forest Policy of 1997 on balancing production and processing –
a. why are log exports still flourishing in spite of the 2007 agreement by 350 stakeholders at the seminar convened by the GFC for a phased elimination of log exports?
b. what precautions will the Minister of Finance be taking to ensure that he does not grant tax holidays for value-adding wood industries which are not linked to log production quotas set by the GFC, given that the Bill #14 gives the minister administrative discretion to award such tax holidays, without apparently setting any criteria or limits or requiring congruence with existing national policies?
Why is this a matter of concern? Because of the murky deals being done around the public assets in the State Production Forests administered by the GFC.
The Chinese company Ja Lin came in with a promise to build a mill at Port Kaituma. Ja Lin engaged in a restructuring of its enterprise without informing the GFC, contrary to our Forests Act, resulting in some control passing to Bai Shan Lin which is an investment vehicle partly involving the Chinese state-owned enterprise, Beijing Uni-Construction Company.
Ja Lin was censured by the Minister for Forestry at his press conference in December 2006 for failing to comply with investment promises. Bai Shan Lin took over Ja Lin’s interest in the sawmill at Coomaka, Linden. Bai Shan Lin petitioned for a permit to export unprocessed logs in January 2007 and was refused for a 12-month period.
Bai Shan Lin has struck a deal for a technical assistance management contract with DTL, and has requested permission to erect another mill. Bai Shan Lin’s shipping containers are sealed at the Coomacka Mines mill and pass to the Georgetown docks. The Minister for Forestry has failed to confirm that the 100 per cent inspection of timber exports which he promised in December 2006 is actually being carried out.
With such investors around, do we really want the Minister of Finance to be granting tax holidays solely through his own administrative decision?
Yours faithfully,
Mahadeo Kowlessar