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 3

By Janette Bulkan

The second article in this series, published by Stabroek News’ In the Diaspora on 24 April 2012, described the national policies for allocating forest concessions. In this third article, I describe what happened or seems to have happened in the cases of the two concessions acquired by VHPI, the subsidiary of the Café Coffee Day company of Karnataka, India, in 2010.

Now we come to the obscure part.  On or about 07-08 April 2011, the GFC posted on its website a set of procedures covering the issuing of State Forest Permissions, State Forest Exploratory Permits (SFEP), and Timber Sales Agreements or Wood Cutting Leases (TSAs and WCLs).  These procedures are illustrated by flow charts and are posted on the GFC website as separate documents without the GFC seal, name of the authority issuing the procedures, or dates.  These briefly written procedures lack clarity and refer to other documents not in the public domain such as ‘GFC Board approved criteria’.

Section 1 of the unheaded, unsigned and undated TSA/WCL issuance procedure says that ‘Applicant must have a valid SFEP or have applied for a previously issued concession (TSA/WCL) which has reverted to the State’.  Section 11 of this procedure says that ‘Areas for re-allocation are not required to undergo the SFEP phase . . . TSA/WCLs that are being reallocated are required to submit a plan outlining the GFC makes a request for the issuance of the TSA/WCL to the President of Guyana; the request must be signed by the Chairman of the GFC’s Board of Directors and the Minister of Agriculture with responsibility for forestry; once approved by the President the GFC issues the TSA/WCL agreement’.

In other words, a single letter of request bypasses the entire process of open, international advertisement, competitive bidding and due diligence checking agreed by the Government of Guyana in 1994, built into the 1997 National Forest Policy endorsed by the National Assembly and partly repeated in the draft revision of 2011.

It is presumably not a coincidence that these unheaded, unsigned and undated procedures were posted just after the disclosure by the Times of India on 07 April 2011 that the Indian retailer Café Coffee Day had ‘taken 1.85 million hectares (actually, acres, = 738,000 ha) of Amazonian forestland on a 30-year lease from the Republic of Guyana in South America to start a furniture business in India’, and republished in Guyana by Demerara Waves internet radio.  The GFC clarified in another unheaded, unsigned and undated posting on its website that this transaction referred to the former CRL concession (TSA 04/89 of 346,000 ha) and the former SSI exploratory area (SFEP 03/07 of 392,000 ha).

As the posting of these concession issuance procedures by the GFC took place more than six months after the deals were concluded with Café Coffee Day, there must be some suspicion that the deals were ultra vires and the procedures published in Guyana because of the disclosure by the Times of India.

The transfer of the SSI SFEP 03/07 had been previously published.  Articles in the government-owned Guyana Chronicle and the independent Stabroek News on 15 January 2011 referenced a project summary dated December 2010 on the website of the Environmental Protection Agency which confirmed that transfer of equity control from Simon and Shock International Inc. to Dark Forest Company (S) Pte. Ltd. (DFCPL).  The project summary did not state when the transfer of SFEP control had taken place.  The undated GFC website posting in April 2011 did not refer to DFCPL but to a newly formed Vaitarna Holdings Private Inc. (VHPI), a subsidiary of Café Coffee Day Limited of India.

The GFC website posting said that ‘At the same time [as the approval of the SSI transfer of control], the TSA awarded to Caribbean Resources Limited was also terminated and re-possessed by the GoG in 2010, because of continuous non-compliance with the terms and conditions of the TSA.  GoG accepted an offer of G$600 million by VHPI to re-allocate this re-possessed concession of 345,961 hectares.  This re-allocation was done in 2010’.  CRL’s TSA 04/89 now became VHPI’s TSA 01/10 with a start date of 07 September 2010 and a duration of 25 years, with the possibility of extension.

Questions in the Press in April 2011 were raised about the process by which VHPI acquired concessions over 738,000 ha of State Forest.  Stabroek News carried a report of the statements by Minister Robert Persaud at a Press conference on 12 April 2011 (Stabroek News, 13 April 2011 – ‘No big export of logs by Vaitarna – Persaud’).  Minister Persaud said –

QUOTE

“Even before the concession leased to CRL was repossessed, GFC had indicated to both CRL management and other concession holders that this concession would be repossessed unless a suitable joint venture or complete takeover was effected by some company. Unfortunately, no company took up the offer”, he said.  Persaud related that after it took over SSI, VHPI then approached the government and the GFC and applied for the concession to be reallocated to it and this was after it was already public knowledge that the concession was being repossessed.

Responding to questions later, Persaud said that not because someone doesn’t hear of it means that something has not been public. The stakeholders particularly those companies adjacent and those operating in the forestry sector were made aware and the GFC from time to time would also have outreach meetings, he stated. The Minister also said that ads are placed in the media from time to time inviting persons who are interested, to come and uplift information on particular concessions, SFEPs and areas that are to be allocated and this is done constantly. He said that he was puzzled by the suggestions of secrecy.

GFC Head James Singh said that in the case of CRL’s TSA an ad was placed in the media sometime around last July [2010].  “This company heard, knew about it, probably saw the ad in the newspaper and came in”, Persaud added.

UNQUOTE

In such a sensitive case, it seems surprising that the Commissioner of the GFC could not remember exactly when an advertisement was placed (presumably for one day only and presumably only in the government-owned newspapers) for a logging concession of 346,000 ha in the richest forest of Guyana.  No subsequent statement or evidence has backed the claim of the GFC Commissioner.  In its editorial on the subject on 25 April 2011, Stabroek News commented “. . . had there been a functioning Access to Information Act as promised umpteen times in the breach by the government the media might have been able to unearth much earlier and progressively, information on this transaction thereby helping to obviate concerns that the deal was secret and with dark underpinnings.  After more than 18 years in office this government remains deaf to the manner in which agreements of this type ought to be publicized”.

Even if that advert was placed, it does not comply with the 1994 agreement and its obscurity was contrary to the National Forest Policy (referenced above) for transparency.  It is also surprising that a coffee retailer in India with no previous experience of logging in tropical rainforest or of Guyana should have been able to respond to the TSA advert and to secure a transfer of ownership of the failing SSI SFEP at or about the same time.

The lack of transparency of these two deals is contrary to the call for transparency and improvement in forest governance in the Norway-Guyana MoU signed in November 2009.

Transfer of equity control of the expiring SSI State Forest Exploratory Permit SFEP 03/07

The process of transfer of equity control from the Michigan-based SSI to the Karnataka-based Café Coffee Day presumably took place sometime in the second half of 2010.  The transfer process was described in the first part of this series, published by Stabroek News’ In The Diaspora column on Monday 16 April 2012.  It is unclear if Café Coffee Day was aware that SFEPs are for a maximum of three years and there is no provision in the forest law for extension or renewal.  The SFEP 03/07 expired in January 2011, before the news broke in April of the Café Coffee Day involvement.  So Café Coffee Day appears now to be holding an expired SFEP, unless the time between the suspension of the SSI contract in 2009 and the completion of the equity transfer process has been added to the original period.  Even so, with that addition, the SFEP should have expired by now.

This complicated story recalls the poetic lines ‘Oh what a tangled web we weave/when first we practise to deceive’. The deception also hides Asian dominance of Guyana’s forests. According to available GFC data, 77 per cent (or 5.6 Mha) of forest concessions are large-scale, long-term concessions. While there is no information on the ownership of concessions in the public domain, the former President informed in his LCDS that 70 per cent of forest companies were foreign-owned, and that he intended to keep it that way (Office of the President 2008, page 26). It seems likely that with the VHPI takeover, all the foreign companies in the forestry sector are now of Asian provenance.

In the fourth article in this series, I will discuss the due diligence which should have been carried out prior to giving concessions to Café Coffee Day.

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