(This is Part Five of a series of five reviewing the reports of the Guyana Forestry Commission for 2005-12 which were tabled in Parliament on November 7th, 2013)
By Janette Bulkan and John Palmer
In the fourth article in this series, we addressed some specific topics raised in the eight GFC annual reports (2005-2012) which were tabled at the National Assembly on 07 November 2013. In this fifth article, we draw attention to a major omission in these annual reports from the Guyana Forestry Commission.
It is conventional for national forest services, which do not manage State Forests themselves but licence the field work to third parties, to provide information in their annual reports about the licensing process and its functionality. During 2009, Guyana began informal contacts with the European Commission about the process for a Voluntary Partnership Agreement (VPA) under the European Union’s Forest Law Enforcement, Governance and Trade programme (EU-FLEGT, 2003). Participation in this process is one of the requirements in the Joint Concept Note under the Norway-Guyana MoU of November 2009. Guyana made its formal application to join the VPA development process during 2012.
A VPA includes a legality assurance system as one component, and the first element of such a system is a legality definition – what is meant by ‘legal timber’ in Guyana? – see also EU-FLEGT Briefing Note number 02, September 2007 edition, ‘What is legal timber’.
In its report ‘Review of Guyana’s Legality Assurance System (GLAS)’, the consultancy, Efeca, pointed out in May 2011 that the draft GLAS did not match requirements of EU-FLEGT. Efeca offered, in its annex 4, an alternative scheme. There is no evidence that the GFC has addressed the points raised by Efeca in a public document. A GLAS acceptable to the EU will be necessary before certificates of verified legality can be issued for forest products to be exported to and admitted under the EU Timber Regulation.
It is surprising, therefore, that the GFC annual report for 2012 does not address the following essential features of a legality definition and show how the process has been applied to logging concessions issued in 2012 –
a. the GFC (or Ministry of Natural Resources and the Environment) had the legal right to issue logging concessions.
b. the GFC has and has applied due process to allocate logging concessions in accordance with the 1993 forest concessions policy and the strategic plan mentioned in section NFP 200 in the National Forest Plan (2001, revised 2011) and Part III (A) (4) Forest Allocation Regulation and Agreement in the National Forest Policy (1997, revised 2011). It should be noted that the 2011 version of the National Forest Policy refers to a law which currently lacks validity. The reference should have been to the Forests Act 1953/1997.
c. the GFC advertised concession areas nationally and internationally (when, for how many days and where advertised; newspapers, etc. named).
d. the GFC conducted due diligence to confirm the eligibility of applicants for logging concessions in accordance with the 1993 manual of procedure and the 1999 manual in respect of State Forest Exploratory Permissions (SFEPs).
e. the GFC contracted specialist accountants to check the eligibility of international applicants, such as Vaitarna Holdings Private Inc. (India) and Bai Shan Lin (China) in previous years – that is why the application fee for SFEPs is US$ 20,000 in US dollars, to pay for such specialist checks.
f. the GFC auctioned the concessions according to best international practice.
g. the GFC published the results of the auctions, including the winning premia which were bid over and above the standard area fees (concession rental).
h. the GFC placed each concession licence in the public domain and drew attention to any special or non-standard features of the licence (TSA/WCL/SFEP/SFP) and to the associated foreign direct investment (FDI) tax incentives agreed by Cabinet and operated by the Guyana Revenue Authority.
i. the Auditor General confirmed that the applicable fees and premia were paid in accordance with due process and that the monies were placed in the appropriate funds.
The GFC did not publish such information in its annual reports for 2005-2012. The GFC will need to do so, and/or to be able to demonstrate that it has and applies such process, for a EU-FLEGT Voluntary Partnership Agreement. The documents available on the VPA sections of the GFC website also do not show that the GFC is making such information available.
The GFC has had a good opportunity to demonstrate its claimed best practice in respect of the concessions issued in 2010 to the newly created local subsidiary of the Indian coffee retailer Café Coffee Day. This subsidiary was first called Dark Forest Company (S) Pte. Ltd. but is now called Vaitarna Holdings Private Inc. (VHPI). VHPI has two concessions.
Using the legality definition checklist mentioned above, and applying it to the two concessions of VHPI, we find the following non-compliances:
Authority to issue concessions? – YES, the GFC and its predecessor the Forest Department of Guyana has had legal authority since 1953 in the Forests Act and associated Forest Regulations (1954).
Due process used to allocate concessions? – NO, the GFC has not demonstrated that it followed national policies and its own procedures in issuing the concessions. I analysed the several errors in a six-part series entitled ‘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?’ which was published by Stabroek News during April and May 2012. [This series has been re-published in the Guyana section of www.redd-monitor.org]
Were the concessions advertised nationally and internationally? – the original two areas bordering the Rewa River were advertised only in Guyana in December 2005, contrary to the policy intention of international advertisement for such large areas allocated under State Forest Exploratory Permit (SFEPs). The Forests Act 1953/1997 Section 6 (12) does not require re-advertising when a SFEP is transferred to a new holder with the written consent of the GFC. In this case, SFEP 03/2007 (392,000 ha) was suspended correctly by the GFC in 2009 for continued non-payment of area fees and inaction over the preparatory works required by the terms of the licence. The SFEP had been transferred to VHPI some time in 2010, and VHPI paid a premium of US$245,000 which was the outstanding sum due to the GFC from the original holder Simon & Shock International Logging Inc. However, it is not obvious that the GFC applied the requirement of the National Forest Policy 1997 that ‘Concessions shall be transferrable to new concessionaires provided that qualifying standards are satisfied’ (Part III (A) (4) (d). No such standards have ever been published. The rewording in the 2011 revision of the National Forest Policy refers instead to the Forests Act 2009 which is currently not valid. SFEP 03/2007 should have expired in 2013 or been converted to a Timber Sales Agreement, but the GFC Forest Resources Allocation map of April 2013 still shows the two areas as under SFEP.
The case of the former Caribbean Resources Ltd. concession TSA 04/1989, now 01/2010 (345,000 ha) is a lot more complicated and was described in the second part of my series, published by SN on 24 April 2012. The GFC has claimed that it did advertise locally in 2010 the rescinded CRL concession. The GFC was unable to produce a copy of the advertisement in 2012. It did not advertise internationally for open, competitive bidding. The non-competitive bid by Café Coffee Day of India did not involve a transfer of ownership as CRL’s holding had been rescinded. Therefore this huge area should have been treated as a new concession, not a transfer, and should have been advertised as a SFEP. Moreover, as with the Rewa River areas, Café Coffee Day/VHPI had no prior experience of sustainable management of tropical forest and should have been disqualified in accordance with GFC procedures. The wholly improper bypass developed by the GFC to circumvent these requirements was described in the third part of my series, published by SN on 08 May 2012.
Did the GFC conduct due diligence checks on VHPI? – apparently NOT. The GFC and Go-Invest spent many months during 2006-2008 on such checks for the predecessor Simon & Shock, much to the annoyance of the then proprietors who complained publicly about the poor service from these government agencies. In a news bulletin from the Ministry of Agriculture on 20 April 2011, item 16, in respect of VHPI the Ministry claimed that ‘a comprehensive due diligence was done . . . the company has sufficient financial resources, and has a track record of carrying out harvesting and processing operation efficiently’. How remarkable for a High Street coffee retailer in India!
It is not clear that the GFC applied similar checks to VHPI, even though it obviously lacked requisite experience. Furthermore, VHPI has claimed that it will develop added-value on-shore processing of timber in Guyana and also, in contradiction, that it will export logs for processing at the Café Coffee Day furniture factory. In practice, as Stabroek News has reported, VHPI is simply exporting unprocessed logs, contrary to the assurances given by the Ministry of Agriculture in April 2011.
Due diligence checks by international accountants? – although the GFC failed to advertise internationally, there should still have been international due diligence checking on the financial state and resources of Café Coffee Day in India. That is what the high application fee for SFEPs is intended to fund. It is not clear that either GFC or GO-Invest had the skills for this work.
g. Auctioning of the concessions? – as the GFC failed to advertise properly in accordance with national policy, there was no competition for the logging areas and thus no basis for auction.
Publication in the public domain of concession licences and FDI arrangement? – not done by the GFC or Go-Invest.
Checks by Auditor General? – not reported in the GFC annual report for 2012.
In summary, the government agencies have performed poorly in relation to the concession licences acquired by VHPI. Substantial improvement will be needed in the process towards reaching a FLEGT Voluntary Partnership Agreement with the European Union.