This is a continuation of last
week’s article on the above subject.
The Guyana Forestry Commission (GFC) claims that the forest sector under its management brings significant economic gains to the economy and citizens of Guyana. This claim is wholly undermined not only by the specifics of the deals negotiated in secret, but also on a general scale by policies fiercely defended by the GFC such as the continued export of log exports and that of ‘joint ventures’, which contravene the Code of Practice for TSAs.
Bai Shan Lin (BSL) has been allowed to claim significant FDI tax concessions, including the importation of machinery, and probably fuel, duty free, in return for little or no benefits to the country. One example will be given from seven years ago in relation to purpleheart logs, which were being exported from Guyana at the cost of US$140 – $160 per cubic metre. That same log was valued on import into China at almost US$700 per cubic metre. Calculating freight at a maximum of US$100 per cubic metre, this means that purpleheart – one of Guyana’s most durable and beautiful hardwoods – is being sold for a fraction of its real value. The same goes for all of the country’s other prime, rare and valuable species, which are being selectively harvested and shipped out in a steady, uninterrupted flow. The British website called Global Timber states that:
The Guyana Forestry Commission has not published sufficient recent forest inventory, roundwood production and export data to judge whether, as seems likely, the rate at which a number of tree species are being exploited is leading to their exhaustion – particularly those in which there is substantial interest from China (notably wamara and others).
It gets worse. Historically, during colonial rule, bulletwood was a protected species. This was because of its commercial value as a source of balata, its value to the ecosystem, and its slow rate of regeneration. In the last five years, GFC has started to grant permission to harvest and export this prime, keystone and formerly legally protected species – again at rock bottom prices and without any in-country value-added. In other words, GFC has taken us backward.
Instead of making bland, unsupported statements about economic gains to the country, TIGI suggests that to dispel all doubts the government through its relevant agencies should immediately publicise the specifics of the agreements negotiated with BSL. In addition, they should reveal the volume and declared prices for each kind of timber exported by BSL and its partners, as happened under the Guyana Timber Export Board. That data should match the sales invoices and other export documentation, as well as the amounts of duty and taxes foregone from the inception of the company’s operations. Only then can an informed assessment be made as to any alleged gains, such as employment, training, added value and services generated, as a result of BSL and other multinationals.
When one turns to the guiding policies promoted by GFC then there is cause for profound despair. The disregard of the National Forest Policy and instead approving the wholesale export of logs is of grave concern. For the uninitiated, the export of any resource in its raw, undeveloped state is a practice associated with only the most backward and inept countries. It entails the loss of a resource – in this case a highly prized and valuable one that is not rapidly renewable – in exchange for the lowest possible benefit. Governments and regulatory agencies which possess vision and competence aim to ensure that there is what is called ‘downstream processing’ or ‘value-added’. This simply means the development of industries based on converting a raw resource into usable products. In the case of our forests, this would mean industries that turn logs into sawn and dressed lumber, shingles, and furniture. Such industries create employment, increase skills of the workforce, lead to higher export values, greater revenues from sales, taxes and duties, and in these multiple ways are of demonstrable economic benefit to the country and its citizens.
The PPP in its 1992 election manifesto adverted to the importance of Guyanese having ‘a say on how and to whom your resources are divested, instead of the transfer of ownership at rock-bottom prices to foreign interests’. This was followed up by more talk in 2007, when Parliament approved a national forest policy which acknowledged the myriad benefits of in-country processing. It gets even worse. China, the largest exporter of logs out of Guyana, bans log exports from its own forests. Under colonial rule in Guyana there was very little log exports and a thriving export business in sawn and dressed lumber. The benefits of downstream processing are obvious even to GFC (National Log Export Policy 2012, page 17), yet this agency seems content to allow the export of logs into the foreseeable future, with no end in sight. Its policies have taken us backward by more than 50 years and justify the concern evinced by citizens on this issue.
The other policy now openly promoted by GFC is the one euphemistically styled ‘joint ventures’. According to the Commissioner of Forests, it was developed from proposals by existing concessionaires and approved by GFC because of ‘the inadequate capacity of local concessionaires to beneficially occupy areas and produce sufficient quantities of logs/lumber’ (KN, 8/8/14). Reportedly, joint ventures will be allowed after ‘requisite due diligence’, involving a ‘thorough background assessment’, is performed.
In plain language, what this sanctions is sub-leasing, yet another practice that was outlawed during colonial times and until October 2010 when the Forests Act was assented to. What does it mean and why is it a bad policy? To answer this, we must start with the understanding that a country’s resources belong to its people. This is a legal (and perhaps moral) position. Thus, the benefits of their extraction should accrue to all, which would happen where the revenues earned are paid directly into the national treasury to be spent for the public good. To achieve these ends the law contained – or used to contain – certain procedures and safeguards. For instance, concessions have to be openly and competitively awarded, and the beneficiaries must have technical proficiency, knowledge of the laws, and demonstrated financial soundness in order to carry out the proposed operations. When concessions are awarded, the beneficiaries are required to work them as promised while duly paying the requisite royalties, fees, and other taxes. If a concessionaire cannot perform, this means the country loses the benefit of the resource and logically the award should then be rescinded after GFC’s routine audits.
Ironically, once upon a time this was understood. The 1993 national policy on forest concessions calls for regular audits by the GFC of the actual performance of the concession holders. Clause 6 of the recently revised code of practice for TSAs and WCLs (mid-2014) reiterates from the 1982 wording that ‘The concessionaire shall work the area to the satisfaction of the Commissioner in accordance with the terms of the concession agreement and only in accordance with the Forest Management Plan, as approved by the Commissioner’ (Annex V: general terms and conditions relative to TSA/WCL agreements, pages 195). But it makes absolutely no sense where a concessionaire cannot work the concession for the GFC to allow the award to continue; it is even more absurd for them to extend or renew it.
A policy permitting so-called joint ventures does just that. But it gets worse when one considers that invariably a joint venture is neither ‘joint’ nor a ‘venture’. What usually happens is that BSL or one of the big three Chinese companies simply pays a rent to the local concessionaire – in other words, the Guyanese concession holder sub-lets the concession. As can be imagined, this sub-letting does not come cheap – but any mark-up, which should go to the entire country since the resource is publicly owned, goes instead into the pocket of an individual concessionaire. The experience of Guyana’s forestry is that no venture happens thereafter – all that the new company does is cut down trees and export the logs, with no value-added.
TIGI is justifiably concerned as to why GFC, which should be managing the forests for the benefit of all, should wish to sanction a policy whereby incompetent local concessionaires earn big rents under the guise of a joint venture. TIGI reiterates that if a concession cannot be worked adequately by the original awardee, it ought to be rescinded and then publicly advertised and awarded to a competitive bidder in line with the guidelines earlier discussed. The ‘middle-man’ is therefore cut out, and the entire country is able to benefit from the revenues earned. Sub-letting was once against the law, permissible only by presidential fiat. Now, GFC has secured an amendment to the law to reward incapable concessionaires and facilitate the diversion of rents from the national treasury into private pockets. This is a policy that defies justification and with it, GFC has taken the country backwards yet again.
In light of these concerns, TIGI maintains that its earlier press release did not contain unsupportable conclusions. For a number of years industry analysts have been alerting the public to the pervasive fraud throughout the forest sector. These criticisms are documented by reputable international organisations on publicly accessible websites. The people most harmed by rampant and unmonitored logging – Guyana’s indigenous population – routinely complain about the exploitative practices of Chinese companies, which include discriminatory hiring policies, unfair and one-sided deals, and outright withholding of wages earned. These are not concerns that should be reflexively and arrogantly dismissed as motivated by partisan interests. They concern an international treasure and one of Guyana’s most valuable and beautiful resources. TIGI therefore reiterates its earlier call and that of independent Guyanese for a full disclosure of all BSL-related agreements and a thorough forensic investigation into the operations of BSL, including its export practices.
