During 2012-2015, the PPP/C government granted logging company Baishanlin concessions amounting to $1.8 billion despite its failure to fulfill obligations under its investment agreements and this figure is likely to be significantly higher as the firm has been here since 2006.
Forensic auditor Anand Goolsarran who made the finding recommended that the Government of Guyana consider terminating the investment agreements with the company and recover the value of the fiscal concessions granted to it.
Many of the items for which tax waivers were granted were either unrelated to, or significantly more than the requirements for the company’s project, the report on the forensic audit and review of the operations of the Guyana Forestry Commission (GFC) said. Former Auditor-General Goolsarran compiled the report and submitted it to the Minister of Finance on December 31 last year. It was made available on the ministry’s website yesterday.
Chinese company, Baishanlin has long been under the spotlight for exporting vast quantities of logs and benefitting from concessions despite its failure to fulfill its obligations including setting up a wood processing plant. The report said through various arrangements, Baishanlin had access to 627,072 hectares of State forest. In the report, Goolsarran said that according to information provided by the GRA, during the period 2012-2015, the Government granted Baishanlin fiscal concessions on a variety of machinery, equipment and construction materials with a cost, insurance and freight (CIF) value of $7.464 billion, equivalent to US$37.320 million. This was based on investment agreements entered into between the Government of Guyana, represented by then Minister of Finance, Dr Ashni Singh, and Baishanlin for the construction of a wood processing facility in Region 10.
The total value of concessions granted amounted to $1.827 billion and the GRA indicated that it was unable to provide information relating to the earlier years because of computer problems, the report said.
“A review of the list of items of machinery, equipment and construction materials for which fiscal concessions were granted indicates that many of the items were either unrelated to, or were significantly in excess of, the requirements for the construction of wood processing facility,” Goolsarran said. “Indeed, the evidence suggests that the fiscal concessions granted were substantially in relation to Baishanlin’s ownership/control of the five logging companies having TSAs (Timber Sales Agreement) as well as its proposed investment at Providence, East Bank Demerara. This is not withstanding that the investment agreements were exclusive to the wood processing facility in Linden,” he added.
The concessions granted to Baishanlin are likely to amount to several billion as according to figures previously disclosed by the GRA, in 2007 alone, Baishanlin was granted US$1.132 million in tax waivers, equivalent to $226 million. Figures for other years have never been disclosed by the GRA.
The report said that the GRA and/or Go-Invest was/were required to visit the business premises and inspect assets that benefitted from the fiscal concessions but there was no evidence that this was done. The GRA has confirmed that it had not done so, Goolsarran said.
The report pointed out that the investment agreements, which were renewed several times, specifically provide for their termination where, among others, there has been a failure to undertake the business proposal without providing a reasonable explanation. When this happens, the company is required to repay the value of all fiscal concessions granted. “Despite the persistent failure by Baishanlin to honour its obligations under these agreements, and without reasonable explanations, no action (was) taken to terminate the agreements and to recover the value of the fiscal concessions granted,” it said.
The status of the company is currently not clear. In January, Minister of Natural Resources Raphael Trotman said Baishanlin’s forestry operations have stopped as the company seeks further financing.
“It is my understanding that the company’s forestry operations have come to a halt, that they are seeking new and further financing, and that the principal for the company is currently in China meeting with state and private sector officials, and I believe, the China Development Bank about the possibility of receiving further financing so they are at this point in time neither cutting neither are they exporting,” he had said.
According to Goolsarran’s report, the GFC said that Baishanlin and the China Development Bank have indicated that additional financing should be released in early 2016 with the major focus being the construction/ operationalization of the wood processing facility. “Baishanlin expects the China Development Bank to release additional finances in the early 2016 to complete construction of wood processing factory by last quarter 2017,” the GFC said.
In December, Trotman told Parliament’s Sectoral Committee on Natural Resources that the APNU+AFC government was seeking legal advice about whether Baishanlin is able to engage in activities outside of the “wood processing” they originally came to Guyana to do. The minister had previously said that restructuring and lack of financing are hampering Baishanlin in meeting government’s edict to begin substantial value-added production by the end of last year or face the revocation of its contract.
Though Baishanlin has been here since 2006 and benefited from tax concessions, there is no sign of any progress towards value-added processing. Baishanlin has been accused of focusing only on the export of logs while making lofty promises of value-added production. The previous PPP/C government had been accused of facilitating this.
