China Paper seeks approval for US$205M tree plantation in intermediate savannahs

-project to be exempt from taxes

Paper manufacturing company, China Paper Corporation, proposes to invest US$205 million in a tree plantation in the intermediate savannahs and has applied to the Envir-onmental Protection Agency (EPA) for authorization.

Earlier this month, the EPA said that Standard Agro-Forestry Inc. – which is wholly owned by China Paper – submitted an application for Environmental Authorization to develop a Tree Plantation and Agricultural project on 52,995 hectares of intermediate savannahs situated west of the Berbice River.

“This development will entail cultivating fast-growing trees of the Acacia species which will be harvested to produce pellets for export. The site will also require the construction of houses and roads, felling of trees and the development of a Landing on the west bank of the Berbice River. Tree logs will be transported down the Berbice River to New Amsterdam where they will be processed into pellets,” the EPA said in an ad. The agency said that an Environmental and Social Impact Assessment (ESIA) is required for the project before any decision to approve or reject it since the development may have significant impacts on the environment.

In a document, ‘Com-prehensive development and business plan for fast growing tree plantation and agricultural project,’ Standard Agroforestry Inc. said that its primary objective is to establish and develop a high-yield forest plantation as a stable source of raw materials for wood-based industries. It said that in meeting this objective, it is recognized that Standard Agroforestry Inc. will be operating with the objective of protecting soil and water resources in its area of operations.

The company’s project extends to “degraded” forest in the area. The establishment of plantations on degraded second growth natural forest land will also enable the protection of the environment and downstream agricultural lands, the company said.

It added that the project will also enhance the socio-economic development in the countryside, considering, among other things, the livelihood opportunities in terms of employment and other benefits that may accrue to the local communities, particularly the indigenous communities living within the project area.

Among the company’s specific objectives that will be pursued through the plantation development are the management and protection of 60,000 hectares of forest lands under the Investment Agreement as well as the production of industrial grade species (Acacia) to support wood chip production for export or pulp production for a world scale pulp mill and/or the production of logs suitable for sawn wood and plywood production and other wood products for building construction, for export and to meet local demand.

Other objectives include the establishment of a multi-layer tree plantation of fast growing tree species primarily for the production of wood log, saw timber, poles piles and/or other forest industries purposes and/or for biological diversity; creation of both permanent and seasonal employment in the tree farming and forest industries in the area; and improvement and maintenance of road access. The company also wants to continue research on tree improvement and other silvicultural practices for the fast growing trees species and maximise forest resources utilization by disposing harvest residues, e.g. tops, log ends, trimming and others as needed for biomass production and or related products.

Tax exemption

The company said that after the pulpwood forest base is built, the acacia trees can be harvested in the seventh year. From this point, for up to 12 years, the company projects sales income amounting to US$1.19 billion with the average annual sales income projected to be US$99 million. The company said that with the total average annual cost being US$68.7 million, and given that the project is exempted from company income tax and value-added tax, with the product also exempted from import duty in China, the average annual after-tax profit would be US$30.3 million.

The company had noted that under its Memorandum of Understanding with Guyana regarding the investment, the Guyana government had committed that the project is exempted from company income tax within five years after the first profit, and the exemption can be extended to the second five years.

Meantime, Standard Agroforestry Inc says that the project will generate primary employment for the local population residing near the project sites and elsewhere. “On top of the regular employees that shall be hired by the company, the labor requirement at the peak of the plantation activities alone can easily accommodate up 2000 laborers over a period of three consecutive months. The employment that will be generated by the company will considerably improve and alleviate the unemployment status and the low per capita income pervading among the community in the area and vicinity,” it said.

It had noted that at maximum production, employment will amount to 130 persons in the nursery, 1800 in plantation development and 720 in harvesting and transport.

The company added that the presence of the regular employees on the project site augmented by the additional contractual labor force will create a buying power that will attract and enhance secondary trade in the vicinity of the project area. This will open up further opportunities for the development by attracting investors and by encouraging the local government to improve the infrastructures leading to the project site, it says.

The document said that the main end use objective of Standard Agroforestry Inc is to grow hardwood plantation logs for sale either for consumption by local mills in the region, or for a new pulp mill to be established in the area, or chipped to export for the pulp and paper industries owned by China Paper Corp.


World class pulp mill

With a further feasibility study and environmental permission from the government, China Paper plans to build a world class kraft pulp mill in Guyana which will consume at least 1 million cubic metres of wood logs per year. The new pulp mill will located close to the project area and will generate an additional 500-1000 jobs for the local people, the document says.

In April, Minister of Agriculture Dr Leslie Ramsammy had said that the MOU with China Paper is in its beginning stages, with a preliminary agreement to award the company 10,000 acres of land in the intermediate savannahs to grow trees for paper production. He had noted that the company is also interested in the production of palm oil as well as rubber.

According to a map of the company’s land, a portion has been set aside for palm oil production.

China Paper came to notice here when Stabroek News reported in December that the company was seeking to develop a project in the agriculture sector. Opposition members of the National Assembly have called on government to be more forthcoming with large scale investments by foreign companies here.

In giving a background to the project, China Paper said that in September 2010, the company sent a work group to Guyana for three months, to research and investigate the political, economic and natural conditions, as well as the investment environment. Following that mission, the group concluded that Guyana offered a latent investment opportunity in the forest, pulp, and paper industries.

In April 2011, the company sent another delegation to Guyana who focused on the experimental planting of Acacia in two farms to further determine the technical and economic feasibility of a project. On May 9, 2012, China Paper and the Guyana government signed the MOU for the establishment of a fast-growing tree plantation and agricultural project.

In November 2012, via arrangements made by Guyana’s Ministry of Natural Resources and the Environment, the State Forestry Administration Survey Planning and Design Institute of China sent a panel to Guyana to research the project area. In a period of 20 days, the expert group carried out site exploration and research.

China Paper Corporation’s parent company, China Chengtong Holdings Group Ltd. (China Chengtong), is a large enterprise group under the supervision of the State-owned Assets Supervision and Administration Commission (SASAC) of the State Council, with total assets of RMB 55 billion. It was a board-of-directors pilot for wholly state-owned companies founded and completed by the SASAC in the first batch. It also was a pilot for the companies operating state-owned assets.

Standard Agroforestry Inc. is registered in Guyana and falls under Long Bang Investment Limited (registered in Hong Kong) which is wholly owned by China Paper Corp. In 2013, the registration of Standard Agroforestry Inc. by China Paper Corp. was authorized by the SASAC and the Chinese Ministry of Commerce. China Paper Corp. will conduct its investment and operation through Standard Agroforestry Inc. in the next 99 years, the company says.

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