Through a glass, darkly

– what’s wrong with an Indian coffee retailer exporting logs of prime furniture and flooring timber from Guyana instead of local processing for added value?

Part 11

By Janette Bulkan

Janette Bulkan is a Social Anthropologist who was Coordinator of the Amerindian Research Unit, University of Guyana from 1985 to 1999 and Senior Social Scientist at the Iwokrama International Centre from 2000 to 2003.

Last week’s article provided the background on the two forest concessions which were secured in 2010 by the Main Street retailer Café Coffee Day of Karnataka, India.  These two concessions were previously held by Caribbean Resources Limited (CRL) in the Bartica Triangle and Simon and Shock International Inc. (SSI) at Rewa Head.  This second article discusses the evidence for compliance and non-compliance with our national policies, laws, regulations and procedures in Guyana’s forest sector with respect to these two concessions.  The text is necessarily dense because of the need to contrast what is stated to have happened compared with what should have happened.

Re-allocation of expired CRL’s logging
concession TSA 04/89

CLICO’s subsidiary Caribbean Resources Limited (CRL) purchased the concession rights in Timber Sales Agreement (TSA) 04/89 for the very low figure of US$ 2.7 million in 1989, from the loss-making Government-owned Guyana Timbers Ltd.  The Government absorbed the debt burden, so that CLICO started CRL debt-free.  CRL also ran up large debts in spite of annual tax concessions awarded by the Guyana Revenue Authority, with output well below the annual allowable cut.  CRL was not complying with section 6 of the second schedule ‘A’ of the Forest Regulations 1954.  This schedule provides the model text for TSA concession licences.  Section 6 says that ‘The grantee [concession holder] shall work the area to the satisfaction of the [GFC] Commissioner in accordance with the terms of this Agreement’.

Even if CRL was not one of those concessions obligated to implement the GFC Code of Practice for Timber Harvesting, it was required to implement other GFC requirements.  In allowing CRL not to comply, the GFC was itself not complying with its own mandate: ‘The functions of the Commission are – (a) to develop, advise the Minister on, and carry out forestry policy’.  Recognising the non-compliance of CRL and its rising debt (US$ 136,000 by the end of 2002) the GFC should have invoked section 16 of the second schedule ‘A’ of the Forest Regulations 1954: ‘In the event of the grantee or assignee failing to observe the terms and conditions of this Agreement . . . the grantor shall have the right either to fix in its discretion such penalty . . . in the event of the penalty not being paid within three months of demand . . . the grantor shall have the right to determine this Agreement and to enter upon the area and take possession of the same altogether . . .’.  Apparently the GFC took no such action.

The 15-year CRL concession TSA 04/89 expired in April 2006, apparently without CRL applying for renewal under section 11 of the Forest Regulations 1954 that requires not less than three months notice.  In the absence of such notice, the concession would automatically expire and should have been immediately rescinded or cancelled by the GFC.  That also did not happen, but CRL’s unpaid debts to the GFC continued to rise.  The GFC was well aware of the situation: ‘The possibility is also open for provisions to be made for debt reduction for repossession of areas which are underutilized or unutilized’ (‘Analysis of forest area allocation to Timber Sales Agreements and Wood Cutting Leases’, GFC, November 2004, page 47).

Although expired, TSA 04/89 was allowed to continue operations under an unpublished ‘policy directive’ dated 05 December 2005 for one-year extensions.  Who issued this directive, and why and under what authority (given that it contravened the 1997 National Forest Policy) was unclear to the GFA Consulting Group in its scoping study on independent forest monitoring in October 2011 (the report of 16 December 2011 is available on the GFC website, see indicator 1.1.1 on page 15 and several other pages).

By February 2009, CRL’s debts to the GFC had reached US$ 9.5 million and the High Court’s judicial management of the collapsed CLICO triggered a letter of demand for that amount.  There is no evidence that CLICO or CRL paid up.  Finally, in mid-2010 the GFC rescinded CRL’s possession of TSA 04/89.  At this point, the future of these 346,000 ha of forest should have been determined by the GFC strategic plan for forest allocation.  The National Forest Plan 2001 makes the GFC ‘responsible . . . for preparing strategic plans for forest allocation and use’ (section NFP200, page 6, Forest zoning and classification, in the 2001 plan and also in the 2011 draft revision).  Either no such plan has been prepared or it has never been published.

An alternative is offered in the National Forest Policy 1997: ‘Concessions shall be transferable to new concessionaires provided that qualifying standards are satisfied’ (section III A 4 (d), 1997).  However, the GFC has never published any qualifying standards, so this alternative is not valid.  The constitutionally dubious Forests Act 2009 is likewise inoperable: in the convoluted Article 16 on transfer of State forest authorisations, sub-Article (5) says that ‘On application in writing by a holder, the Commission shall grant written consent . . . if the Commission is satisfied that the requirements prescribed by regulations are met’.  As there are no Regulations yet for the Forests Act 2009, five years after it was drafted in secret in 2007, this transfer process is not usable.  Moreover, at least by January 2012, the commencement order required by Article 2 of the Forests Act 2009 had not been promulgated.  Anyway, the CRL concession had been rescinded by the GFC so there was no holder to make such an application for transfer.

As the TSA 04/89 had been issued 21 years previously, it would have been appropriate and in accordance with the intentions of the 1993 GFC policy on concessions and the 1996 concept of pre-logging State Forest Exploratory Permits for the CRL area to have been transparently and internationally advertised for open, competitive bidding.  The Government of Guyana had agreed with this proposition in issue A3 (licences and concessions) of the annex to the 1994 project document for the GFC Support Project to reform the GFC: ‘Concession applications – the procedures for applications and awards of licences of all kinds will be revised, to ensure open competitive bidding, and the opening of new logging areas will be according to a rational plan reflecting the national interest …’.

That proposition was reflected in the National Forest Policy 1997: ‘The Guyana Forestry Commission shall develop a fair and transparent framework for the allocation, revocation, renewal and re-negotiation of forest concessions’ (section III B 3 (a), page 12) and ‘Concession licenses and permits shall be allocated through a process of advertisement and bidding or tendering’ (section III A 4 (b), page 10).  The 2011 draft revision of the National Forest Policy changes these two statements to ‘The Guyana Forestry Commission shall continually implement a fair and transparent framework for the allocation, revocation, renewal and re-negotiation of forest concessions’ and

‘Concession licences and permits shall be allocated through a transparent process developed by the Commission’ (same section numberings as in 1997, pages 21 and 23).  The National Forest Plan 2001 states that ‘The Forest Policy requires that all commercial utilization of State Forests takes place under concessions or licences issues by the GFC and that allocation of the resources is made in a competitive, fair and transparent manner’ (section NFP300, page 7, in both 2001 and draft revision of 2011).

So the intentions of the national policies — that is, as approved by the National Assembly in 1993 and 1997, rather than being only GFC in-house policies — seem clear. Non-compliant forest concessions should be rescinded and treated according to a strategic allocation plan. That may involve open, transparent international, advertisement; open, transparent competitive bidding; and full due diligence checks on the applicants. Now that we have established what the national policies say, what actually happened, or seems to have happened, will be described next week.