Chinese company Bai Shan Lin has an ambitious investment plan to develop its holdings in Guyana, which includes a forest concession of 960,000 hectares, a 20-kilometre river gold mining concession, a 5km2 construction area for a Guyana-China Timber Industry Economic and Trading Cooperation Park and 400-acres land for real estate development.
And while the company embarks on a number of forestry ventures, Minister of Natural Resources and the Environment Robert Persaud says Bai Shan Lin has guaranteed that the majority of logs harvested would be for local processing since its planned wood processing facility would need a steady supply.
According to a presentation by Bai Shan Lin Chairman Chu Wenze, which was made at the 2nd World Congress on Timber & Wood Products Trade in China last year and recently seen by Stabroek News, the company’s ventures in Guyana are listed as Guyana Bai Shan Lin International Forest Industry Development Co., Ltd. founded in 2005; Haimorakabra Logging Company Inc.; Demerara Timbers Limited; Karlam South American Timber (Guyana) Inc.; Wood Associated Industries Ltd; Kwebanna Wood Products Inc.; Sherwood Forests Inc.; Baishanlin Mining Development Co., Ltd. (2012); Baishanlin Real Estate Development Co., Ltd. (2012); Baishanlin International Shipmaking Co., Ltd. (2012); and Baishanlin Guyana Chinese Products Mall (2012).
There is concern that 400 acres of forested land would have to be clear cut to make way for the housing investment, however, the presentation document focuses largely on the Economic and Trading Cooperation Park—to be constructed at Providence—and the forestry investment.
It explains that the park is a state-level park programme in Guyana to be supported with national subsidy for loan interest and that the enterprises in the park would be entitled to subsidy for carrying back resources. The park is based on the timber industry and planned to contain 50 enterprises, including a ship-making plant, a wood machine processing and manufacturing plant, food and sea product processing plant and a hospital and school.
The park, according to the document, will include an investment centre to provide consultation for Chinese investors on Guyanese policy and legal requirements, provide registration service for Guyanese enterprise, provide customs and tax declaration for Guyanese enterprise, set up a Guyana Investment Visa Service Centre to provide Chinese investors with visa service to Guyana, provide business services, such as exhibition negotiation in Guyana, and provide storage, transportation and security services in Guyana.
It is also envisaged that a joint guarantee company would be established by enterprises in the park as a consortium to provide loan or performance guarantee for investor enterprises in a collective manner in order to support and promote their development.
Meanwhile, to justify its investment in further timber harvesting—said to be in the neighbourhood of US$100 million—the company says in the document that Guyana’s “policy” allows it to harvest 20 cubic metres (m3) per hectare (ha) and it projects a forest tenure profit per ha of US$1,800.
Janette Bulkan said that the focus of the Guyana Forestry Commission (GFC) ought not to be on logging but on helping Guyana to secure greater benefits from what is logged now. “That would include more real support for in-Guyana value-added processing, which has been national policy since at least 1997 and means more jobs, more skills, more tax paid, and more income for Guyanese,” she said in a letter published by Stabroek News, on February 5, 2013.
According to Minister Persaud, Bai Shan Lin has made a number of commitments to the government through the GFC in the forestry sector. “It has been in satisfactory compliance with the GFC guidelines for legal access to state forest areas either through approved joint venture agreements, or via the GFC transparent and public allocation procedures, and guidelines,” he said.
He added that the company has also been complying with the other required permits regarding activities associated with the construction of the wood processing facility.
In responding to questions as to when the investments will materialise and what safeguards were in place to monitor them with regard to job creation and value added processing, the Minister said GFC monitors the company on a routine basis via resident officers/impromptu patrols/Internal Audit controls, to ensure that there is compliance with the GFC’s internationally-recognized guidelines for Sustainable Forest Management (SFM).
“Compliance has generally been found to be satisfactory; however, in some cases the company was in breach of some procedural issues and they were dealt with according to the relevant GFC legislation,” he said.
He said that the company also is currently in the site clearing/site preparation phase for the construction of an integrated wood processing facility in Region 10. He said that this project was slightly delayed but a new time frame for completion of the facility and its functioning has been set at early 2015.
“Some machinery and equipment for construction, processing and value-added activities for this facility are already in Guyana, as well as a substantial amount of harvesting equipment for forest operations,” Persaud said.
He said that government controls are maintained on employment levels which are stipulated at 15% of expatriates. “But in the initial phase of construction this number may be increased to allow for the sourcing of necessary skills,” he said, noting that the company has recently launched a massive local recruitment drive to satisfy its current demand for construction/site works. “The Ministry of Natural Resources and the Environment’s GFC will monitor progress with plan implementation; funding has already been assured for the harvesting and construction of the facility,” he said.
When asked about the size of the area the company had access to, Persaud said that these were acquired through “legally approved JV [Joint venture] arrangements.” “Bai Shan Lin has access to three concessions where full scale harvesting operations are being undertaken,” he said.
He noted that while Bai Shan Lin currently has direct access to 83,307 hectares, it also has legitimate access via State Forest Exploratory Permits (SFEP’s) to 345,865 hectares.
“These SFEPs can be converted to Timber Sales Agreements upon satisfactory completion and GoG acceptance/approval of a comprehensive Environmental and Social Impact Assessment (ESIA), Forest Inventory and Strategic Business Plan. In addition, they have expressed strong interest in getting involved in legal Joint Ventures with other existing large concessions,” he said.
Persaud said that based on Guyana’s guidelines, and the resource needs of the integrated wood processing facility, access to a large forest estate following the principle of an Annual Allowable Area and Annual Allowable Cut is a necessity. He said too that concessions are usually issued for 25 years, subject to renewal based on satisfactory compliance with the initial agreement.
Asked what percentage of the logs cut will be exported in raw form, he said that company has made a commitment to abide with the guidelines of the GFC, inclusive of the National Log Export Policy.
“Additionally, the wood processing facility when operational will require a minimum of 300,000 m3 of raw material per year. There will also be a need to keep an inventory of raw material always in reserve to guarantee the functioning of the mill.
Thus it makes little business sense for the company to engage in the large scale export of logs; rather, it will have to ensure its own supply for the facility,” he said. “As such, the Company has guaranteed that it will be processing the vast majority of logs harvested, in country,” said Persaud.
Meanwhile, according to the Chu Wenze presentation, the FOB [Free On Board] harvest cost per m3 is US$120, average FOB price is US$250, profit per m3 is US$130 and minimum profit is no less than US$100.”
On the basis of 20 m3 harvest according to relevant law, the harvest profit per ha is US$2,000, the world market forest tenure price is no less than USD$500-1,000 per ha and the enterprises in the park are entitled to forest tenure purchase price of USD $200 per ha, it said.
It said that on the basis of a projection of 20 m3 timber output per ha and forest tenure profit per ha of US$1,800, a second “harvest” of cut areas is allowed after 25 years.
The company pointed to a number of geographic and policy advantages that make Guyana an ideal destination for their investment.
It said that geographically, Guyana is adjacent to South America and Caribbean area and is the only English-speaking country “with easier market access, which has signed bi-lateral and multi-lateral trading agreements with US, Canada, EU, Venezuela, Columbia and Caribbean countries.”
“Guyana is neighbouring Brazil and Venezuela, the two biggest economies in South America. With its advantageous geographical location, Guyana is an easy access to the 277 million consumers, the over US$130 billion USD export market and over USD $2 trillion in total,” the company said.
In identifying the policy advantages, the company said that China and Guyana have established a series of economic and trading cooperation mechanisms and signed a large number of cooperation agreements.
It noted that three bilateral agreements in execution and these are: China-Guyana Visa Exemption Agreement signed on July 20, 1998; China-Guyana Governmental Trade Agreement signed in Georgetown on September 17, 2001; and the China-Guyana Agreement on Encouraging, Promoting and Protecting Investment signed in Beijing on March 27, 2003.