A US$30 million plymill purchased by the now defunct Case Timbers Limited (CTL) in the mid-1990s was sold last August to Barama for US$180,000 to be used primarily for spare parts, CTL’s former managing director Hamley Case has disclosed as he highlighted again the hurdles the company faced from government that eventually killed the investment.
In a letter in yesterday’s Stabroek News, Case again outlined the runaround he faced which ultimately resulted in the value-added project never getting off the ground. Case, in his letter, referred to one from Prime Minister Samuel Hinds headlined ‘There is no fire sale or looting of Guyana’s national resources’ in which Hinds agreed with a view of former Commissioner of the Guyana Forestry Commission (GFC) Clayton Hall that Guyana’s forests could not support even one plywood factory.
Hinds, in his letter, had referred to the proposed investment by the CTL/Unamco group and said that he has been in error “about the not-so-bountiful nature” of Guyana’s forests. According to Hinds, when in 1993 or 1994, the CTL/Unamco group applied for forest areas upon which to base a second plywood factory in Guyana, he thought that Hall was being much too conservative with his position that Guyana’s forests could not well support, even one plywood factory.
“I do not think that Clayton has found it consoling that time proved him to be correct. The Case-Unamco (Timber Sales Agreement) TSA areas languished for many years despite a bright start, with lots of money put into the Case-Unamco road from Kwakwani, past Parrish Peak, and as the plywood factory remained in containers for more than a decade,” Hinds said.
The Prime Minister had noted the criticism of the slow move to value-added, particularly by foreign-owned timber companies but argued that “the export of logs to existing processing and manufacturing facilities, which are al-ready supplying wood products to the potentially new markets, is probably the most prudent and practical approach, but it takes time – it could be a work of ten years.” According to Hinds, each tree logged in Guyana’s forest “requires an average of about half-mile of trail” and it is “a real challenge to sustain commercial activity at an acceptable standard of prosperity for stakeholders.”
Government has come under criticism because, despite the higher returns that can be realised from the value-added processing of logs locally, the authorities have not moved with alacrity to compel major logging firms to do so and as the companies continue to export huge quantities of logs annually, Guyana has been foregoing millions of dollars. Numerous promises have been made by the government and foreign investors about value-added operations but this has not happened and the promise of value-added has been seen as sugar coating to enable the export of large quantities of logs, particularly to China and India, even though there is little job creation here or value enhancement.
In his letter, Case detailed the “extremely tedious” process which took close to two years to resolve to have leases for close to one million acres of forest in the North West District, relocated to the Upper Berbice region. He emphasised that CTL did not apply for additional forests for the plywood project but for the company’s leased forests to be relocated to land that was not permanently under water.
Case wrote that when CTL/Unamco decided to invest in a project to manufacture plywood (or sliced veneers), they applied for duty and tax concessions matching those the administration of the late President Desmond Hoyte had granted to Barama Company Limited in 1990-91. He recalled that Hinds had heavily criticized the Hoyte concessions to both Barama and Omai Gold Mines Limited and said that if this was his party’s position it would explain why the administration of former President Bharrat Jagdeo never granted CTL/Unamco the concessions it needed to produce plywood on a level playing field with Barama its major local competitor.
Crippling
Case related that he was managing director of CTL/Unamco at the time, and he was given the royal run around during his campaign to obtain concessions equal to Barama’s.
“Chronic delays and crippling bureaucracy were the order of the day. Over a process lasting several months I was advised to consult with the late Minister of Trade Shree Chan, the Head of Go-Invest Dr Ivor Mitchell, the Junior Minister of Finance Bharrat Jagdeo and eventually Ms Sandra Baptiste, a government adviser,” he wrote.
According to Case, he had no less than 23 meetings with the individuals mentioned and Baptiste was the most helpful and came close to paving the way for the concessions to be made available. He said that Mitchell gave him a letter to give to then junior Finance Minister Jagdeo in which he recommended that CTL be granted the duty and tax concessions it applied for.
Case wrote that at his brief meeting with the junior finance minister, Jagdeo made “disparaging comments” about Go-Invest and threw Mitchell’s letter into the wastepaper basket. “By this time my Malaysian partners and I were referring to this revolving process as the “carousel.” It is true that during the ‘carousel’ period some of the CTL forests languished, but government lethargy in granting the requested concessions was not the only problem,” Case wrote.
He said that the brand new plymill had cost CTL/Unamco over US$30 million to purchase and apart from concessions equal to Barama’s, the investors were unwilling to make the US$20 million investment to assemble the plywood factory unless government converted the State Forest Exploratory Permit over the CTL forest to a 15-year TSA lease before construction started.
“This started another carousel and a lot of time was lost trying to convince government that no prudent business person invests millions in a project based on rented assets or assets given on approbation. Yes, with at least 2 carousels turning simultaneously, the CTL/Unamco forests did languish,” Case said.
Personal assurance
The former CTL official said that eventually, he and his Malaysian partner went to see the late President Cheddi Jagan and he advised them to proceed with the project giving his personal assurance that the SFEP (SFEP 198 for 346,416 acres) would be converted to a full TSA in due course. “The project investors had great respect for President Cheddi and were about to proceed with the investment when, sadly, he passed. The forests then continued to ‘languish’,” Case said.
He added that the forest assets remained idle when they ran into problems in preparing the Environmental Impact Assessment (EIA) for approval by Office of the President. “We were being guided through this process by a government officer. The process and forest both languished as the officer kept on insisting on a US$30,000 personal gratuity to do his job,” he said.
He also related that in 2001, some six months before general elections, he met Jagdeo who by that time had become president, on a BWIA flight from London. “Roughly half way across the Atlantic Ocean he said to me, ‘Those plywood concessions you keep asking us for…I’m now willing to give them to you…that is providing you make an announcement within the next few days telling the nation that my government has granted you the concessions you asked for and construction of the new plywood factory will start immediately’,” Case wrote.
“I was flabbergasted as this conversation came out of the blue and was contrary to what the President had recently told me when he was Minister of Finance. Respectfully, I thanked him and let him know I would inform my Malaysian partners and majority shareholders as soon as I arrived at my house that night. When I called my Malaysian partners with the ‘good news’, what they advised me to tell my President cannot be printed here,” Case said.
Suspicious
He asserted that part of the problem was that by this time they had become so suspicious and wary over many years of unproductive government interventions, ‘Letters of Intent’ and ‘Memoranda of Understanding’ that they were unable to take a ‘Mid-Atlantic plane promise’ seriously. “The result of all that I mention above is that the CTL/Unamco forests did languish as our learned PM posits in his letter,” Case said.
He recalled that on May 25th, 1999, then American Ambassador to Guyana James Mack gave an investment speech in which he mentioned the CTL matter.
“We all know the story of an investor who in 1996 brought into Guyana all the equipment to set up a plywood manufacturing plant. If it had come to fruition, this project would have created noteworthy new employment opportunities and the prospect of valuable export earnings. Today that project is dead in the water, maybe forever; and the equipment remains in crates because Government took too long to work out an agreement with the investor on duties and taxes. Every day that equipment stands idle costs the businessman money. It costs Guyana as well, in the direct loss of jobs, taxes, and export earnings going unrealized. It also costs Guyana in ways impossible to measure, because other business people will look at that situation and decide to send their investments elsewhere…Chronic delays, reports of corruption, and seemingly arbitrary or capricious tariff assessments keep foreign investors at bay,” Case recalled the diplomat as saying.
Case said that government and the Guyanese people may want to know that in August last year, CTL’s US$30 million plymill was sold to Barama for US$180,000 to be used primarily for spare parts.
