Unanswered questions about Bai Shan Lin’s big plans for Guyana

Bai Shan Lin, a Chinese logging company, has big plans for Guyana: forest concessions covering 960,000 hectares; a 20-kilometre river gold mining concession; a 500-hectare Guyana-China Timber Industry Economic and Trading Cooperation Park and a 160-hectare real estate development.

Despite the scale of the planned operations, Bai Shan Lin’s agreements with the government of Guyana are not public and there has been no discussion in the National Assembly about the company’s plans.

In Guyana, it is illegal for a logging company to take over another logging company’s operation, unless officially authorised by the President. Yet this is how Bai Shan Lin has come to control such a large area of logging concessions.

Earlier this month, the Starbroek News asked Minister of Natural Resources and the Environment, Robert M. Persaud, some questions about Bai Shan Lin. Two days later, researcher Janette Bulkan wrote to the editor of Stabroek News with some further questions for the Minister of Natural Resources and the Environment. Persaud did not reply, but James Singh, Commissioner of Forests, did. Bulkan wrote to the editor of Stabroek News once again, pointing out the inadequacy of the response.

It is at times a difficult debate to follow, not least because Singh doesn’t respond directly to Bulkan’s individual questions, but groups his answers under a list of five “facts”. What follows is Bulkan’s questions, Singh’s responses and Bulkan’s comments (in italics) to the response. The government’s failure to answer Bulkan’s important questions is clear.

Janette Bulkan: When was such approval [for Joint Ventures between BSL and Guyanese holders of logging concessions] given, for what areas and under what conditionalities? Why were the existing logging concessions not rescinded and then publicly advertised to capture a bid premium at auction, for government revenue to the Consolidated Fund, in accordance with the National Forest Policy 1997/2011?

James Singh: The GFC commenced a case-by-case review and approval/rejection of Joint Ventures (JVs) in the early 2000 period. There was no legal forestry requirement prior to this for same, and to ensure greater transparency and accountability, the GFC went this additional step to put this guideline in place.

Applicants were required to write to the GFC outlining their reasons for wishing to enter into such an arrangement and to provide the GFC with all relevant information, for example – whether there be any change in company name, structure; the amount of the capital being proposed for investment and the source (evidence) of same; employment and training profiles; and corporate social responsibility, amongst others.

Noteworthy is the fact that the GFC was requested to facilitate these arrangements since the local companies complained bitterly that they were unable to engage in Sustainable Forest Management (SFM) harvesting activities due to lack of financial and technical resources, and an inability to source low-cost financing for same.

Additionally, the sector also requested that they be allowed to enter into approved subcontracting activities, if they were unable to source acceptable partners for JVs. This arrangement was with the intention of using the cash flows generated to retool and reinvest. Unfortunately, this subcontracting arrangement was abused and the GFC terminated same a few years after. However, several local companies did enter into board approved JVs which as stated before, were done very thoroughly and transparently.

GFC invites Bulkan again, as well as other stakeholders, to visit the GFC head office for perusal of the relevant documentation. BSL has GFC-approved JVs with WAICO, Haimorakabra, for forest concessions, and with Sherwood Forrest Inc for a State Forest Exploratory Permit (SFEP).

Janette Bulkan: Commissioner Singh does not reply to any of these questions. Instead he says that “There was no legal forestry requirement prior to the early 2000 period . . . for approval/rejection of Joint Ventures.” That is not correct. As I had pointed out, Condition 2 of the Timber Sales Agreement concession licence (in law since 1982) and Section 12 of the Forest Regulations 1954 have required presidential approval for transfers of any kind of interest in a concession, not just the whole ownership. However, the Forest Regulations 1954 did not spell out the criteria for presidential approval or rejection, and the process which Commissioner Singh states was followed from the early 2000 period has not been posted to the GFC website.

The Commissioner refers to the recent acquisition by BSL of the State Forest Exploratory Permit (SFEP 01/2007) acquired initially by Sherwood Forrest Inc. The 1997 revision of the Forests Act did make provision for changes of SFEP ownership but the Commissioner does not say if that procedure was followed. In the absence of more specific information, it is reasonable to conclude that BSL has not acquired control of logging concessions by fully legal processes.

Janette Bulkan: Exactly what are the foreign direct investment arrangements for the various Bai Shan Lin enterprises?

James Singh: BSL has committed to investing over US$40 million in the harvesting phase of operations. The company already has a large fleet of skidders, log loaders, bulldozers, logging trucks, generators, etc. Most of this is new equipment, well suited for Guyana’s terrain and conditions.

BSL has acquired 200 acres of swamp land at Conception, Region 10 on which to build a Wood Processing Facility (WPF). It has commenced the process of site clearing, site filling, and access road construction. Before the end of 2013, it will commence the construction of the WPF.

BSL already has the following machinery for WPF construction on the ground and operational: seven dump trucks, one skidder, five bulldozers, three loaders, two cranes, two excavators. It is also renting additional machinery/equipment in the short term. Within the next two to three months, the following machinery will arrive in Guyana: 20 trucks, three compactors, two motor graders.

By July 2013, construction machinery/materials, such as, concrete mixers and steel framing for the factory will be in Guyana. Construction is scheduled for a 2015 completion. Funding secured for this WPF is US$60 million.

Janette Bulkan: The Commissioner does not say what the FDI arrangements are, nor does he engage with GO-Invest to provide such information. I did not ask how many machines have been imported. What citizens are entitled to know are the details of the tax and other concessions which the Cabinet has approved for BSL, and the conditionalities for such generosity.

Janette Bulkan: Exactly what wood processing will take place, where and when (investment schedule)?

James Singh: The WPF will be an integrated factory, beginning with log/lumber intake and resulting in the large-scale production of high-end furniture; flooring (parquet, multiple layered, outdoor quality); veneers; doors; mouldings; finger jointing and lumber, among others.

Janette Bulkan: The Commissioner repeats what BSL has stated as its manufacturing intentions but does not give the time schedule. His Minister will recall the problems of failures to implement investment promises in 2006/7 by Bai Shan Lin’s earlier incarnation as Jai Lin, and Barama running its plywood mill at 11 per cent of designed capacity during January-June 2012 but receiving 100 per cent of tax concessions from Guyana.

Janette Bulkan: What raw materials will input to these wood processing facilities – species, dimensions, volumes, qualities of timbers?

James Singh: Based on the results of research already being done on the Lesser Used Species (LUS), additional products can also be produced. Value-added equipment already in Guyana include dryers and planers.

Janette Bulkan: The Commissioner utterly fails to answer this question, other than saying that additional products from Lesser Used Species “can also be produced.”

Janette Bulkan: What kinds of products will be produced which are not already milled in Guyana – species, volumes, values, intended markets?

James Singh: The WPF will be an integrated factory, beginning with log/lumber intake and resulting in the large-scale production of high-end furniture; flooring (parquet, multiple layered, outdoor quality); veneers; doors; mouldings; finger jointing and lumber, among others.

Janette Bulkan: The Commissioner fails to answer this question, other than saying that flooring will be produced and that finger jointing will be used. The other products are or have been milled in Guyana already, so BSL would be adding nothing new.

Janette Bulkan: What is the agreed schedule to phase out exports of unprocessed logs (such exports being contrary to national policies and to PPP election manifestos in 2006 and 2011) – species, dimensions, volumes, qualities of timbers?

James Singh: The WPF is intended to do in-country processing of over 80 per cent of BSL’s leased concessions.

Janette Bulkan: The Commissioner says only that BSL “intends to do in-country processing of over 80% of BSL’s leased concessions,” without mentioning any time schedule. And why 80%, why not 100 per cent?

Janette Bulkan: What is the training programme for Guyanese at all operational and managerial levels of BSL to replace imported staff?

James Singh: BSL is already in discussion with the Board of Industrial Training (BIT); the government technical institutes; Forestry Training Centre Inc (FTCI); the Guyana School of Agriculture (GSA); the GFC; and the University of Guyana (UG) to embark on a comprehensive training of current and potential employees at the vocational, technical, and professional levels.

Additionally, BSL has committed to establishing a “Training Facility” inside the WPF. This facility will have technical staff from China who will do training for BSL’s employees, as well as the sector.

Janette Bulkan: The Commissioner says that BSL is in discussion about comprehensive training of current and potential employees, and such statement must be welcomed. BSL/Jai Lin has been in Guyana for over six years, so one could have expected that by now its operations would be fully staffed with Guyanese, but clearly they are not. So again it is reasonable to ask for the time schedule for the new training programme.

Janette Bulkan: How many foreign workers have been brought into Guyana, and how many more visas are being processed?

James Singh: The company has 180 local staff employed as chainsaw operators, machine operators, in forest Inventory, forest management and business management, including senior management. The ratio to Chinese is currently high because of the need for the critical expertise in this start-up phase. However, the company has committed to employing an additional 200 Guyanese by the end of 2013, which would further increase the percentage of Guyanese employed to 74 per cent. By 2017, the ratio of Guyanese to Chinese will be 85:15.

Janette Bulkan: The Commissioner evades answering this question, and our diplomats in Beijing also do not know the answer.

Janette Bulkan: [I]f BSL is going to consume an additional 300,000 m³ of timber per year, this will massively exceed the threshold set for log production in the Norway-Guyana MoU of November 2009 and will demonstrate the continued bad faith of the Government of Guyana in implementing this MoU. [Minister of Natural Resources and the Environment Persaud told Stabroek News that Bai Shan Lin’s wood processing facility “will require a minimum of 300,000 m³ of raw material per year”.]

James Singh: The Memorandum of Understanding (MoU) between Guyana and Norway actually refers to an interim group of indicators, which will be phased out by 2014 when the national-scale Monitoring, Reporting and Verification System (MRVS) becomes fully operational; BSL will certainly not achieve a harvesting intensity of 300,000 m³ by then. It is therefore incorrect to state that the MoU will be breached.

The above facts clearly outline a very important fact – it is absolutely vital that these types of sound investment be encouraged for the accelerated development of the forest sector. Ms Bulkan and others have been constantly bemoaning the fact that little is being done by the GFC to reduce log exports, stimulate the manufacture of added-value forest products, and generate employment opportunities/training opportunities for Guyanese, and encourage mechanisms for the transfer of appropriate technology.

However, when this is actually being done in a very open, transparent and legally allowable manner, these individuals try to create the impression that something is amiss; this has been especially so in relation to the “Asian” managed companies.

In closing, GFC reiterates that it is an organisation that operates in keeping with the relevant legislation and guidelines and welcomes the opportunity to meet with stakeholders directly, to provide any relevant clarifications.

Janette Bulkan: Commissioner Singh apparently knows, or has been authorized to disclose, little more than is available in BSL’s publicity video. This dribble of information is incompatible with the assurances given by the Government of Guyana in items 10 and 23 of the REDD+ Governance Development Plan agreed with Norway in June 2011. If the government and its agency the GFC are serious about acquiring a Voluntary Partnership Agreement with the European Union under the Forest Law Enforcement, Governance and Trade action plan of 2003 then a freer flow of information will have to become a habit for government agencies.

It is time that the Natural Resources Sectoral Committee of the National Assembly asked serious questions of the ministry and GFC and Bai Shan Lin, and insisted on full disclosure in the answers as the committee is entitled to under the Legislative Bodies (Evidence) Act (Cap 01-08).