Controversial Chinese logging company, Baishanlin yesterday vowed a court fight after the GFC signalled the yanking of its forest concessions following years of questions over its activities here and the absence of promised wood processing.
Baishanlin International Forest Development Inc (BIFDI) pledged to challenge the Guyana Forestry Commission’s (GFC) decision arguing that there is “no firm ground for cancellations of anything”.
The Chinese company is said to control 1.3m hectares of local forests, a major portion of which has been described as the illegal acquisition of concessions held by others. Stabroek News was told by a GFC member that it was all of the company’s concessions that the commission would be repossessing.
Baishanlin had acquired Timber Sales Agreements (TSAs) via links with Demerara Timbers Ltd, Wood Associated Industries Ltd, Kwebanna Wood Products, Karlam South American Timber (Guyana) Inc, Haimorakabra Logging Company Inc and Puruni Wood Products Inc. Baishanlin also has access to State Forest Exploratory Permits (SFEPS).
Yesterday, an official of the BIFDI expressed shocked that the GFC would issue it with a repossession notice when they would have informed government, through Minister of Natural Resources Raphael Trotman, of the difficulties they are facing in securing a potential investor to take over their operations.
Stabroek News make efforts to contact Trotman yesterday to no avail and was told by his assistant to send an email. The email was sent but up to press time no reply was had.
A visit to the office of the Head of the GFC, James Singh, seeking an audience, was also made but his secretary pointed to Trotman saying that Singh does not speak with the press and all questions should be directed to the minister.
This newspaper contacted Chief Executive Officer and owner of BIFDI Guyana, Hongbo Chu, who informed that while he was aware of the GFC’s notice to his company, he was not in the country and therefore could not speak at length on the issue.
Instead, he referred this newspaper to the company’s lawyers Satram and Satram to give the company’s perspective.
“All these things will be challenged. We won’t surrender anything and if it means that we will be tied up in litigation for 10 years so be it. We will take it right up to the CCJ (Caribbean Court of Justice) if need be. We will seek orders prohibiting them from issuing these concessions to anybody else, while the court proceedings are pending. They (Baishanlin) have invested over US$100M and the shares held in this company was used to secure loans, which the company received from the China Development Bank and other institutions,” Attorney for BIFDI, Visal Satram told Stabroek News in an interview yesterday.
“We wrote the Minister of Natural Resources Raphael Trotman on the matter of delay…the purpose of the investor coming here was to be assured that if they invested money that the concessions would not be taken away because Baishanlin invested US$100M and they take it away. The reports about the terminations of the concessions and so on have basically scared the investors. The investors cannot come to take over something that isn’t there,” he added.
In a statement, on Wednesday evening, the GFC noted that BIFDI was incorporated in September 2006 under the Guyana Companies Act 1991 with the main objective of timber harvesting and establishing downstream wood processing operations in Linden.
The GFC said that its decision to repossess came after the company failed to deliver on agreed steps to introduce investors to the Commission and having been given time to prove that it had an acceptable plan to clear an approximately $80M debt to the GFC. In an effort to conclude the matter, the GFC said that representatives of the BIFDI were invited to a meeting on April 8, 2016 to provide an update on its plans to clear the debts.
“During the meeting, representatives noted that the BIFDI had suffered financial constraints which affected the establishing of the wood processing facility and that the company was engaging a new partner that would contribute significantly to their investment in Guyana. The GFC Board was assured of the financial strength of the new partner who had committed to paying off the debt owed by the company to GFC.
Disputing the reason for the termination of the concessions as cited by the GFC, Satram said his clients were not told of the debt to the GFC as the cause.
Instead, he said that correspondence on September 1stth signed by GFC’s Corporate Secretary Jacy Archibald informed BIFDI of repossessions of “basically all” of their affiliates namely of Kwebanna Wood Products, Sherwood Forest Inc., Waico Inc., Haimorakabra Inc. and Puruni Wood Products Inc. The reason cited was because the GFC claims it was not notified neither had it granted approval of the transfer of equitable rights and interests in and over the timber sales agreements of the companies. The September 1st GFC letter did not cite the dates of the transfer of the rights in the various TSAs.
The GFC move, Satram said, has left the company barehanded as he referred to the SFEPS for Baishanlin itself which were taken away earlier this year. “The basis upon which they claim is that there was a change of control in these companies without written approval of the GFC, when they knew about these changes for years,” Satram asserted.
The letter sent by GFC to the company was seen by this newspaper.
“I write…to inform you that the GFC has been alerted to the fact that your company has failed to report to and receive approval from the GFC on matters concerning the transfer of shares in your company from Mr. Wenze Chu to BIFDI contrary to s.16 of the Forest Acts 67:01,” the letter from the GFC, dated September 1st 2016, stated.
“The said section states quite clearly that if a change in effective control occurs without the prior consent of the GFC, then the holder shall, on becoming aware of the change, immediately give the commission notice of that change and surrender the State Forest Authorization to the commission (SFA) …The GFC acknowledges that written approval was given for a joint venture arrangement between Haimorakabra Inc. and Wenze Chu. However the GFC has unearthed that subsequent to the aforementioned approval; that you transferred the shares issued to the joint venture partner to BIFDI without prior written consent of the GFC. The GFC therefore gives official notice that the TSA granted to Haimorakabra Inc. is revoked with immediate effect,” the letter adds.
GFC also threatened to “take appropriate action” in accordance with s21 of the Act, if BIFDI does not remove all of its equipment from the site, within 90 days.
The legal representative of BIFDI says that the company will not yield to the threats by GFC.
“We will not remove anything. If they want it let them come and take them but we will be going to the court,” Satram said.
He believes that the GFC is being unreasonable because government knows of his client’s intentions to have investors take over its operations and the reason for such delays.
In a letter sent to Trotman in June, Chu stated: “The investor we are in discussions with … is a large company with significant expertise in the manufacture of wood products. The company has assets of in excess of six billion yuans and over 40,000 employees.
“Executives of the company propose to visit Guyana to meet with members of the Government to present a proposal and to be assured that their investment will be supported by the Government. The seizure of our assets and the termination of forest permits has generated some amount of alarm and loss of confidence which cannot easily be restored. It has become very difficult for us to give the investor the assurances necessary for it to invest such large sums of money into our project. I trust that a meeting with members of the Government will serve this purpose,” Chu said.
He added, “Our company has been experiencing difficulties getting visas for Chinese investors willing to invest in Guyana. We do not wish to be embarrassed or for the investor to suffer any further erosion of confidence if difficulties and delays are experienced in the processing of the visa applications. The names of the applicants will be provided to you in due course to facilitate the easy and swift processing of the applications”.
‘No show, no point’
Having established a presence here in 2006, Baishanlin has been accused of making big promises to add value to forestry but failing to do so. Instead, it kept on gathering forests and increasing the export of logs all the while gaining huge fiscal concessions under the former PPP/C government.
During 2012-2015, the PPP/C government granted Baishanlin concessions amounting to $1.8 billion despite its failure to fulfill obligations under its investment agreements.
Forensic auditor Anand Goolsarran who made the finding following an audit commissioned by the APNU+AFC government recommended that the Government of Guyana consider terminating the investment agreements with the company and recover the value of the fiscal concessions granted to it.
Many of the items for which tax waivers were granted were either unrelated to, or significantly more than the requirements for the company’s project, the report on the forensic audit and review of the operations of the Guyana Forestry Commission said. Baishanlin had also embarked on a huge housing project on the East Bank and had also eyed gold mining, initiatives which critics had said demonstrated that it had little interest in adding value via wood processing.
Following the change in government last year, the APNU+AFC administration had come under severe pressure to act against Baishanlin for not value-adding and over the manner in which it expanded its forest acreage.
Baishanlin also became a source of embarrassment for the current APNU+AFC government when Minister of State Joseph Harmon interfered with the Guyana Revenue Authority’s seizure of its assets in settlement of a tax liability. Shortly after, Harmon proceeded on a mystery trip to China where he was photographed with Baishanlin officials. Amid the controversy that swirled over his trip, Harmon would later say that another Chinese company, the China-owned Longjiang had acquired 55% of Baishanlin and would be taking over the company’s operations here. Lonjiang never showed up.