Transparency and accountability in the regulation of Guyana’s forestry sector (Part I)

20120703tigiIn the wake of relentlessly mounting evidence pointing to grave irregularities within the forestry sector, the Guyana Forestry Commission (GFC) has chosen to issue blanket statements in defence of the conduct of operations by the foreign multinationals that dominate the sector. GFC has also charged the Transparency Institute (TIGI) with drawing ‘invalid conclusions’, asserting that all forest concessions are in compliance with the law and that the forest sector under current laws and management bring ‘significant economic gains to the economy and the citizens’ of Guyana. However, as long as GFC continues to operate in secrecy and disclose information selectively, such platitudes cannot resolve the legitimate concerns swirling around its stewardship and the state of our forests. TIGI stands by its earlier press release calling for an investigation into the operations of Bai Shan Lin (BSL), on the basis of a number of abnormalities now in the public domain, some of which are identified below.

 

What is the extent of Bai Shan

Lin’s holdings?

As long as GFC maintains its stranglehold of information, there is no way to verify whether BSL indeed operates within the law. The Foreign Direct Investment (FDI) deal between the Cabinet and BSL was negotiated in secret and Guyanese still do not know the full extent of the benefits that have been heaped upon this company. Only information as to the operations by BSL and its partners, covering facts such as the quantity and value of forest produce exported (from where, when and under what agreements) as well as the revenue gained and taxes foregone, can definitively settle the concerns. Instead, GFC simply falls back on paper provisions in the law and its claimed regulatory capacity, neither of which answers questions as to what is and has been actually happening on the ground. Further, such information as does exist or that emerges from GFC in dribbles actually reinforces the existence of irregularities, as it is frequently inconsistent and even misleading.

For example, more than five years after BSL commenced its operations in Guyana, GFC is unable to provide a consistent and accurate answer as to the extent of the forest concessions controlled by the company. In July this year, the Minister of Natural Resources told the parliamentary committee on natural resources that BSL controls 640,000 hectares of forest, ‘the majority of which is for various studies’ (SN, 15/7/14). Three weeks later, this figure went down by 13,000 hectares as per the Commission’s letter to Kaieteur News on 13 August 2014 in which it claimed that BSL has ‘legal access to 627,072 hectares’ of forest. This is admittedly not a big discrepancy, but neither figure withstands scrutiny and both have been repeatedly contradicted by BSL itself! Statements from the Chairman of BSL in the public domain admit to acquisitions of and partnerships with companies other than those identified by GFC, bringing BSL’s control to a staggering area of Guyana’s forests exceeding 1.2 million hectares. BSL makes these claims in the press, in China, and on their websites, boldly and repeatedly. The Minister of Natural Resources has even called on BSL to retract these claims, but BSL has simply ignored him. In the face of the factual discrepancies regarding BSL’s holdings, combined with the company’s contempt for the Minister and continued operations with impunity, including excavating for laterite, TIGI and all Guyanese remain justifiably concerned about the legality of BSL’s holdings and ‘arrangements’ and the capacity of the government to monitor this company.

Closer scrutiny of the details, such as exist, raise even more concerns. The Commission repeatedly cites BSL as operating a State Forest Exploratory Permit (SFEP) ‘jointly’ with Sherwood Forrests that was issued in 2007. But under the law, exploratory permits can only be issued for three years. It has been seven years since that particular SFEP was issued to Sherwood Forrests – so how (and why) is it still in existence?

It gets worse. The legality of unconstrained log exports under an SFEP is another matter of grave concern. This practice has been publicly defended by Commission, citing section 9(2) of the Forest Act 2009 that permits this, but examination of the terms of that section belies the Commission’s claim. This section permits a person ‘to cut and take specified kinds and quantities of forest produce from the exploratory area for testing, research and limited commercial purposes to the extent necessary to recoup no more than the appointed percentage of costs and expenses (excluding capital expenditure) incurred in the exploratory operations during the life of the permit.’ By definition, an SFEP is a permit for exploratory purposes, and any commercial logging is to be limited to testing, research, and recouping only a percentage of operating (but not investment) costs incurred. Guyanese do not know what BSL is taking from its three SFEPs, and section 9 of the Forests Act does not empower GFC to verify claims for operational costs. So, the recovery of 25 per cent could be infinite.

The purpose and spirit of a permit issued under section 9(2) are evident – restricted to exploratory purposes only, which explains why it is for a limited period of three years and only allows commercial logging on a minuscule scale. This permit allows a potential investor to scope out an area and test the resources, in order to determine the potential profitability of full-blown commercial operations. None of this is capable of justifying the operations of BSL on the scale depicted, and in relation to Sherwood Forrests – a whole seven years after the issue of the permit. Commercial operations are a linguistic impossibility under a permit named ‘exploratory’, and the fact that the Commission continues to justify BSL’s operations under section 9(2) is another reason why TIGI continues to be concerned about GFC’s stewardship of Guyana’s forests.

 

Scale of BSL’s operations

GFC asserts that the operations of BSL and its joint venture partners are well below the maximum sustainable levels of harvesting allowed; but the gross m3/hectare stated by the Commission in the Press conference of 18 August 2014 does not match what is in the GFC’s own Code of Practice for TSAs. GFC also counters, quite rightly in our opinion, that technical matters cannot be properly assessed by photographs. However, TIGI’s calls for an independent inquiry are not based on photographs alone – though these have raised a troubling prima facie case of illegal logging. It is the photographs published in the media measured against the claims of GFC and the testimony of residents in affected areas that call into question the scale and legality of BSL’s operations.

In a letter to KN on August 8, 2014, the Commission revealed that BSL and its joint venture partners have exported a total of 375 containers between January and June 2014. Dividing this figure by a 5-day week, this works out to 2.8 containers per day. But in one photograph, KN showed 24 containers lined up to be loaded on one day alone. Claims that containers are not transported daily have been exposed as false by residents of Kwakwani, who have been reported as saying that at least 10 to 30 containers belonging to BSL pass through their town daily. Conservatively, this is equivalent to 500 cubic metres of logs per day or at least 250 high-value trees.

It gets worse again. The International Tropical Timber Organisation (ITTO), using GFC’s own data, has revealed that log exports increased by 79% in the first half of 2014 compared to the same period last year, whereas plywood exports increased by a paltry 4.3% over the same period as compared to last year. These figures expose the mismanagement of this sector. First, 375 containers cannot explain a 79% increase, and lest it be said that BSL is only one company – it must be remembered that this is one of only six Asian multinationals in Guyana (Barama, Ja Ling/Garner, BSL, Rong An, Grand Bright and VHPI/Coffee Day) and that BSL now controls over a million ha of forest. Second, a continuation of logging on this scale violates the terms of Guyana’s agreement with Norway, making a mockery of the much touted ‘low carbon development strategy’.

In other words, not only do available export figures confirm that logging is taking place on a massive scale in Guyana – as suggested by the photographs which the GFC trivialises – but those export figures explicitly contradict the statements of various government officials as well as our international commitments. In this murky situation of inconsistent and incomplete statistics and misleading official statements, TIGI remains understandably concerned about the state of the forest sector and GFC’s management of it.

Over the years, industry analysts have repeatedly pointed to other illegalities in the country’s timber export sector – one of which concerns transfer pricing. (See for example, http://www.redd-monitor.org/2012/05/16/through-a-glass-darkly-six-articles-by-janette

bulkan-about-vaitarna-holdings-operations-in-guyana). Transfer pricing means that when logs are exported from Guyana, their value is declared at a very low level and far below the price that they command on the world market. When these same logs are valued in China at the time of import, their declared value rises to a much higher level that exceeds the CIF value (cost, insurance and freight), as shown in ITTO’s fortnightly MIS reports. This pervasive practice of under-declaration of value is consistently dismissed by GFC in spite of the voluminous evidence presented to demonstrate its existence, which points to corruption in the forest sector and the tragic haemorrhaging of a precious natural resource.

TIGI also notes that mere references to provisions in the law or to the number of GFC stations do nothing to assuage doubts as to the government’s capacity or interest in actually monitoring BSL or other companies. If such monitoring actually exists or is competently performed, how can the presence of cocaine in timber exported from Guyana be explained?

Around the Web

Comments