Pledge not to export logs may have stymied Simon and Shock – Persaud

Simon and Shock International Logging Inc (SSI) had opted, as part of its business model, not to export logs and perhaps this was one of the reasons it could not have moved forward with its investment, according to Agriculture Minister, Robert Persaud.

The Minister made the comment in response to a question as he defended the arrangements with Vaitarna Holdings Private Inc. (VHPI), a subsidiary of Coffee Day Limited of India that sees the company now controlling 1.82 million acres of forest here. Since the deal was reported, there has been an outcry regarding the transparency with which the arrangements were concluded and the Alliance For Change (AFC) yesterday denounced the “secretive manner” in which the forest acreage was awarded “to a company with apparently no background qualification in the forestry sector”.

“What is even more unwholesome is the retrograde arrangement that allows the exportation of unprocessed logs out of Guyana by the new company, when guarantees had to be made by the previous concessionaires to process logs extracted”, the party’s Presidential Candidate, Khemraj Ramjattan said reading from a prepared statement at the AFC’s weekly media briefing.

But according to Persaud, SSI as part of its business model had indicated that it was not interested in log exports. “This company (VHPI) has also made it clear as other companies have done including Barama, that as they seek to start-up their value added in the initial period they would want to undertake some amount of log export and that is provided within our framework of the National Log Export as well as the National Forest Policy”, Persaud said at a press conference on Tuesday. This happens routinely in terms of other investments and is not a new development, he stressed.

The fact that SSI opted not to export logs was its own decision and “perhaps that was one of the reasons why it could not have moved forward with its investment” and found itself in a position of default and had to be more or less rescued by VHPI, Persaud said. VHPI last year acquired the State Forest Exploratory Permit (SFEP) for 391,853 hectares of forest originally awarded in 2007 to US-based SSI, after buying out the company, transferring the shares to a new subsidiary, Dark Forest Company (S) Pte Ltd. (DFCPL).

Subsequently, the company acquired the 345,961 hectares concession which was originally awarded to Caribbean Resources Limited (CRL). The government accepted an offer of $600 million by VHPI for the Timber Sales Agreement (TSA) which had been terminated and re-possessed by the government in 2010 from CRL, because of continuous non-compliance with the terms and conditions of the TSA.  The total area now held by VHPI is 737,814 hectares of forest, around 1.822M acres. According to a report in the Times of India, the company will export logs to its plant in the Asian country to make furniture.

Persaud stressed that companies are allowed to export logs in accordance with the Log Export and National Forestry Policies. “There are also some species that we do not give any permission to export”, he said adding that the aim is to encourage value-added. However, he noted that the processing capacity here is limited.

Further, he said, from time to time before companies export certain species, the Guyana Forestry Commission (GFC) would write to the processing companies which are involved in timber to get their no-objection. “Although there is a commission attached, there is that additional process just to ensure that the local processing sector is fully supplied. And nearly in all instances, they’ve gotten the no objection. I can’t remember an instance whereby a company says no `do not export’”, the Minister said.

For whatever logs VHPI will be permitted to export in accordance with the Log Export Policy, it will have to pay the export commission, he said, adding that VHPI has indicated that it is not here as a logging company and has been mandated to engage in value-added. According to him, the issues being raised were attempts to create “cheap political mileage.”

Demand

Meantime, Ramjattan yesterday questioned why the demand was not made of VHPI that the logs be processed in Guyana before shipment abroad. “It is suspected that there was a pressing desire to pacify irate CLICO policyholders’ months before an election. The national interests matters nil to this Government when there is a potential loss of votes”, he said adding that the AFC is also concerned about the $600M from CRL’s TSA. The question of the company’s experience in tropical rainforest logging was also raised.

“While the AFC is committed to a free enterprise system of economic growth, in which the role of Foreign Direct Investment (FDI) is prominent and crucial, we hold firmly that the natural resources of Guyana; the national patrimony of the Guyanese people must not under any condition or circumstance be subject to foreign exploitation”, Ramjattan said.

He pointed out that processing and upgrading of forestry produce into more value-added products creates numerous upstream and downstream jobs. “Log exportation will only deprive Guyana of a forestry manufacturing base. By opening the door to raw exports, the Government has weakened the business case for local investment in skills and concomitant capacities in sawmilling projects (and tertiary item production such as furniture) in this sector which, without doubt, can bring in huge revenues”, he said.  “Thus, the AFC is of the view that this investment deal lacks the development thrust that is supposed to imbue and guide such investment negotiation”.

The party demanded immediate access for public scrutiny, the terms of the deal.

Persaud said that no logging has started on the concession where VHPI holds the TSA and reiterated the GFC’s strategic goal of having as much as possible if not all of the logs, processed in Guyana. But the take-up capacity has to be looked at, he said, pointing to the gap between total production and what can be used domestically for value added.

As to VHPI’s experience, the Minister said that the company has been involved in furniture manufacture and has a number of timber plantations. “Extracting timber and converting it into furniture isn’t that experience”?, he asked saying that they were just doing it on a different scale, at a different operation and it a different location. The Times of India had reported that a couple of years ago, the Coffee Day Group started a furniture unit to capitalize on the huge depository of full-grown silver oak, teak wood, rose wood and mahogany trees grown in its 15,000-acres of coffee gardens in Chikmagalur, India.

The unit designs multi-purpose furniture for home, kitchen, office, hotels and retail outlets. It also manufactures all kinds of plywood, wood boards, panel sheets and beadings, making use of the wood waste and saw powder. But it has so far remained mostly as a captive unit, serving the requirements of the Group’s coffee outlets and the resorts under the brand name Serai, the newspaper reported.

The report said that the company is planning to ramp up its furniture business in India and will soon float a new company called Dark Forest Furniture Company “that will represent all segments of furniture including modern, classic, ethnic for home, retail, office, lounges and life-style and entertainment furniture.” The report said that logs for the plant will be shipped from here to India.

Meanwhile, asked whether the company has committed to pursuing FSC certification, Persaud said that it has indicated moving to join the legality assurance system that will be employed countrywide and which is akin to FSC.

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