China Paper Corporation is likely to import some amount of foreign labour for its tree plantation in the intermediate savannahs, should the US$205 million project be cleared to proceed by the authorities.
Standard Agro-Forestry Inc. – which is wholly owned by China Paper – has submitted an application to the Environmental Protection Agency (EPA) for Environ-mental Autho-rization to develop a Tree Plantation and Agricultural project on 52,995 hectares of intermediate savannahs situated west of the Berbice River. The parcels of land are located in Regions Five and Ten.
In a document, ‘Com-prehensive development and business plan for fast growing tree plantation and agricultural project,’ Standard Agroforestry Inc. said that its primary objective is to establish and develop a high-yield forest plantation as a stable source of raw materials for wood-based industries. The company’s project covers not only savannah areas but extends to large portions of “degraded” forest in the area as well. According to a map of the company’s land, a portion has been set aside for palm oil production.
In an analysis of the investment conditions, under the heading ‘Unfavorable Factors in Construction,’ the company noted that Guyana’s population is small with the majority living in the city and towns. The document pointed out that the population of the project area and its periphery is relatively less; there are only several villages, private farms and Ituni with a relatively large population. “Therefore, although the local labour cost is relatively low, local labourers have difficulty to serve as main labour sources of the project,” the company said.
It had noted that the project will generate primary employment for the local population near the project sites and elsewhere. “On top of the regular employees that shall be hired by the company, the labour requirement at the peak of the plantation activities alone can easily accommodate up 2,000 labourers over a period of three consecutive months,” it said. According to the company, the employment that will be generated will considerably improve and alleviate the unemployment status and the low per capita income pervading among the communities within the area. It had also noted that at maximum production, employment will amount to 130 persons in the nursery, 1,800 in plantation development and 720 in harvesting and transport.
Criteria for tax exemption
Meantime, the company had noted that under its Memorandum of Under-standing with Guyana regarding the investment, the Guyana government had committed that the project is exempted from company income tax within five years after the first profit, and the exemption can be extended to the second five years. The company had also noted that it is exempt from value-added tax.
In an invited comment, civil society activist and chartered accountant Christopher Ram told Stabroek News that Region 10 is one of the regions named in the Income Tax (In Aid of Industry) Act Cap. 81:02 for which the Minister of Finance may approve exemption from corporation tax (tax holidays). Normally, a tax holiday is for five years but in terms of particular types of activities for up to ten years, he noted, while adding that the activity must, however, be new economic activity of a developmental and risk-bearing nature.
“The question to be answered is whether tree plantation is a new economic activity and whether the activity itself is of a developmental nature. This is a matter of which the Minister will have to satisfy himself while in practice the tax holiday law has been interpreted rather generously in favour of businesses,” Ram said.
“If the project is substantial then it would seem to be well beyond developmental nature but entirely commercial and therefore not eligible for a tax holiday. Similarly if the project is of a type that is not new to Guyana, a tax holiday may not be appropriate, since the Act does not specify that new is restricted to any region,” he added.
Ram, who is also an attorney, noted too that an entity granted a tax holiday under the Act is automatically exempt from Property Tax and the Capital Gains Tax Act. “As for VAT, the law only requires an Investment Agreement with the Minister of Finance which I consider a low threshold indeed,” he said.
Further, Ram expressed concern at the failure of the Auditor General to carry out the annual process audit required under Section 38 of the Investment Act, 2004. “This is something I have written about for years but no one seems in the least (bit) concerned,” he said.
The attorney pointed out that at a wider level, China Paper is another Chinese entity being “imposed” on a region that is already suffering from the effects of the destruction by Bai Shan Lin using their mega-sized lorries transporting logs on the Soesdyke-Linden-Kwakwani Road.
Last Sunday, Stabroek News reported that China Paper Corporation proposes to invest US$205 million in a tree plantation in the intermediate savannahs and has applied to the EPA for authorisation.
“This development will entail cultivating fast-growing trees of the Acacia species which will be harvested to produce pellets for export. The site will also require the construction of houses and roads, felling of trees and the development of a Landing on the west bank of the Berbice River. Tree logs will be transported down the Berbice River to New Amsterdam where they will be processed into pellets,” the EPA said.
The agency said that an Environmental and Social Impact Assessment (ESIA) is required for the project before any decision to approve or reject it since the development may have significant impacts on the environment.
Applied anthropologist/archaeologist Louisa Daggers has expressed concern that China Paper’s proposed tree plantation in the intermediate savannahs could impact significant archaeological sites.
