The Chinese investors who were supposed to arrive in the country last month to conduct due diligence for the takeover of controversial logging company Baishanlin have not come, several officials have said.
Chair of the Guyana Forestry Commission (GFC) Board Jocelyn Dow recently told Stabroek News that no official from the Long Jiang Forest Industries Group had contacted the GFC while a senior government official said that no representative of the State-owned firm had arrived. Efforts to contact Minister of Natural Resources Raphael Trotman on the matter over the past few weeks have all been futile, despite the minister’s insistence that he is always available for comment.
It is not clear what the status of the deal is now. Several of Baishanlin’s projects have ground to a halt as the company faces financing difficulties despite benefitting from billions in tax concessions from the Guyana Government.
Baishanlin has failed to fulfill several commitments made under its investment agreement here and Stabroek News had previously reported that it was to be taken over by Chinese state-owned forestry company Long Jiang Forest Industries Group.
That firm has acquired 55 percent of the shares in Baishanlin and intends to fully take over the company this year, Minister of State Joseph Harmon had said in April.
Following an uproar over a photo of Harmon and officials of Baishanlin in a private jet in China, 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.
Details of the company’s plans 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 has 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.
A number of questions have been raised about the proposed deal. Attorney Christopher Ram has said that 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.
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.
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.
