Downsized Barama betting on value-added production

As Barama Company Limited (BCL) continues to downsize its operations, General Manager Mohindra Chand says it will be focusing heavily on value-added production.

Last October, the company decided against renewing its 25-year forest concession agreement and announced that it was going to downsize.

Prior to the agreement ending, BCL had laid off some 180 workers over a three-month period. An additional 320 followed by the end of the year and some 300 workers remain.

“We are still working towards putting the downstream in proper order so that they could have a good programme to run with but we haven’t really sorted out everything as yet,” he told Stabroek News last week.

“We are still in the process of laying off and there are a lot of things to put in place before we can let go of more but the majority have been laid off,” he added.

Addressing the company’s plans, Chand explained that it will be focusing heavily on value-added production. “We just want to operate the plywood and veneering factories and hopefully make it viable,” he said, while emphasising that the country would gain, immediately since at least 12% of total log production will now have a market. “Everyone wants value-added to be enhanced and once we get that going, at Land of Canaan, you will see a market for logs in excess of 12% being opened,” he further said. “So that is one aspect and now loggers will have a ready market for plywood species, which is generally not in high demand for any other use other than plywood. In the past, they would’ve left these species behind,” he added.

While they are still “feeling the water” with the venture, since the company will be operating the plywood manufacturing and veneering factories without a forest concession of its own, Chand said that the unpredictability of a stable supply of raw material would greatly affect how well it performs.  “Providing that Guyana can supply the factory at a level which can make it viable and at the same time we can regain certain market aspects, which we would have been losing against imported plywood,” he said. He noted that the plywood industry is being pressured with respect to the price from the Brazilian, Chinese and Chilean markets. “They have it at a lower cost because they have cheaper energy, cheaper manpower and better access to raw material,” he explained.

Chand said the company will be looking to have a conversation with the government to find out how they can help each other. “Once they [government] have a keen interest in promoting the value-added sector, particularly plywood, then they should look at ways of providing tax relief and incentives and look at the policies to see how best it could work,” he explained, while stating that they would want to establish what the government’s interest in their new venture would be and what support it would be willing to offer to make it more viable since it wouldn’t “be viable by our own doing alone.”

While noting that the timber industry is on the decline, Chand said there is a need to find a way to make the value-added sector attractive, since loggers have to bear the burden of tremendous costs when it comes to fuel, spare parts for their vehicles and other manufacturing inputs.

“So, right now we are focusing on trying to set up everything properly and we still have to do some restoration here [Land of Canaan] because when we go into the full manufacturing, everything will be done here,” he said, while pointing out that in the past, the company would do the first half of the manufacturing at its Buck Hall factory  in the northwest but it wouldn’t be economically-viable anymore since it would not have its own supply of timber.

“It makes more economical sense to consolidate than to be in two locations. Plywood is a volume game. In the past, we had the volume coming from our concession but now everything has to be streamlined to bring the cost down,” he emphasised, while also stressing that when they get fully started, the venture has the potential to be more than four times greater than it was before.

Barama set up here in 1991 in a controversial deal which gave South Korean and Malaysian investors control of a lowland, mixed tropical forest concession of approximately 1.6 million hectares in the Northwest region of Guyana. It had had a chequered history with the authorities, facing fines and questions about limitwas the main reason why Barama chose to end its long run of business with Guyana. “The whole process with engaging with thed value added activities in recent years.

At its height, it employed over a thousand workers.

The Ministry of Natural Resources had announced last year that while discussions for the renewal had started over a year ago and Barama was provided with a draft agreement for review and negotiations, the company communicated its decision to not renew since it had concluded that it was no longer viable to continue in the forestry operations in view of prevailing global prices.

However, while Chand had explained that the company was not blaming the government for the surprising development, a source had explained that the government’s slow pace with the negotiations e government and negotiations took too long and over that length of time the economic situation took a drastic downturn and they were being kept updated on all of that,” the source had explained.