All transactions engaged in by Baishanlin should be reviewed before any takeover by a new firm and the investment agreement should not automatically be allocated to the successor company, attorney Christopher Ram says.
“We need to review all transactions before any takeover by a new company,” he declared. Recently, Stabroek News reported that the Long Jiang Forest Industries Group, a Chinese state-owned company had acquired 55 per cent of the shares in Baishanlin and intends to fully take over the company this year.
Minister of State Joseph Harmon made this disclosure following a controversial trip to China during which he was photographed with officials of Baishanlin in a private jet. In attempting to explain, Harmon had said that Vice Director of the company, Wong Dong Xu, in the presence of officials of Baishanlin, gave the assurance that the company’s officials will be in Guyana by May 2016 to complete due diligence for the takeover, and “to satisfy and expand” on the obligations of Baishanlin to Guyana.
However, questions have arisen regarding the details of the company’s plans which have not been made available. It is not clear when Long Jiang Forest Industries Group acquired majority shares in Baishanlin. Further, at various times in the past Baishanlin officials had indicated that China, through various state-owned companies have had some amount of shareholding in the company so in effect, China would have had a role in the company not fulfilling its obligations here.
Additionally, some observers have pointed to Regulation 12 of the Forest Regulations and have said that the President needs to approve the transaction. The regulation states that “No transfer of any lease shall be made by any forest officer without the prior approval of the president which such lease grants exclusive rights to any person over an area estimated to exceed three thousand acres or is for an unexpired period exceeding three years.”
Moreover, Condition 13 of Timber Sales Agreements (TSA) states that “The grantee shall not transfer, sublet, mortgage or otherwise dispose of any interest arising under this agreement except in accordance with the Forest Regulations and any purported disposition made except in accordance with such regulations shall be null and void.”
According to Guyana Forestry Commission (GFC) data, Baishanlin’s TSAs include Haimorakabra Logging Co Inc covering 52,896 hectares and Sherwood Forrest Inc covering 167,075 hectares of forest. Further, Baishanlin is the majority shareholder in Kwebanna Wood Products Inc, Puruni Woods and Wood Association Industries Co whose TSAs cover 221 108 hectares of forest in total.
Noting the purported joint ventures engaged in by Baishanlin, Ram questioned whether the GFC has undertaken a due diligence. “Every one of them should be subject to review,” he said while noting that while Baishanlin has used the term joint ventures, it has practically taken over those companies which could possibly be illegal. He added that he believes the new Board has the capacity and should be allowed to do the review.
The attorney said all the transfers should be suspended until the due diligence is carried out and if any illegality is revealed, the concessions should revert back to the State.
Ram also pointed out that Harmon has apparently has given his blessing to the change of ownership in Baishanlin and questioned whether he has the power to do so.
The attorney emphasised that a review needs to be done before any takeover by a new company.
In terms of the investment agreement, Minister of Natural Resources Raphael Trotman had said that termination lies within the bosom of the Ministry of Finance because the agreement was inked between the former Minister of Finance and the company so coming out of that agreement, “forest concessions were given so even if the concessions are taken away, the agreement is still in existence.” It is for the Finance Minister to make that determination of termination, he emphasised.
Ram pointed out that Baishanlin did not meet its obligation under the investment agreement and it should not automatically go to a successor company.
Since coming here in 2006, Baishanlin announced big plans in various sectors for Guyana but concerns have been raised by some analysts that its primary interest is logs for export, with little downstream processing. The company has failed to live up to commitments to do value-added processing despite benefitting from billions of dollars in tax concessions.
It had told the GFC that in the early part of this year, it expects financing for its operations but it is now apparently being taken over by Long Jiang Forest Industries Group.
In 2014, China had halted commercial logging by state firms in forests in its Heilongjiang province and Long Jiang Forest Industries Group was one of the firms affected. The UK Guardian newspaper had reported that Heilongjiang province is home to much of the country’s timber industry and the ban affects two important state-owned logging firms, Long Jiang Forest Industry and Daxing Anling Forestry Company with the two firms together managing 18.45 million hectares of forests, covering 39% of the entire province of Heilongjiang.
