What about those concessions granted to subsidiary companies of Barama Co. Ltd?

Jun 23, 2008 Letters

Dear Editor,
The nation owes a debt of gratitude to Christopher Ram for informing us of some of the provisions of the Income Tax (In Aid of Industry) Act Cap 81:02, the Investment Act 2004 and the Financial Administration and Audit Act (FAAA), and of the requirement for beneficiary investments to be located in administrative Regions 1, 8, 9 or 10 (SN, June 8, 2008: The President, ‘scraps’ and concessions).

I was pleased to read that the Minister of Finance responded to Mr. Ram’s column (SN news item, Monday 16 June 2008. Law to be amended for Queens tax breaks), and am now emboldened to also ask the Minister of Finance, through you, Mr Editor, about the nature of the fiscal and other foreign direct investment (FDI) concessions granted to two subsidiary companies of the Barama Company Ltd.

I ask also if those concessions qualify under the Income Tax (In Aid of Industry) Act Cap 81:02, since neither of the two companies is located or operating in Regions 1, 8, 9 or 10.

In October 2003, the Barama Company Ltd. registered a subsidiary company named Barama Housing Inc., and on 15 April 2005, yet another subsidiary company, Barama Buckhall Inc.

Barama Housing Inc. was granted a large-scale State Forest Exploratory Permit, SFEP 02/05 for 47,000 hectares, formalised later as a Timber Sales Agreement.

In the case of Barama Buckhall, the following excerpt from a GFC press conference is specific on the issue of concessions:

“In the case of BCL a meeting was held with representatives on November 29 [2006] and the minister proposed that its log exportation be reduced and a detailed proposal be submitted to address its non-compliance with the implementation of the Buckhall complex.

“BCL in its proposal commits itself to the installation of kiln drying facilities and a finishing plant by March 2007. In addition, the proposal stated that the veneer plant would be installed and two barges constructed by September 2007.

Installation of a co-generation facility is to be completed by September 2007, and from January 2007, the sawmill at Buck Hall will produce 3000 cubic metres of sawn lumber on a monthly basis. BCL said these developments would reduce its log exportation.

“The GFC will be increasing its presence at these operations to ensure strict compliance in accordance with the commitments made by the companies. Should there be any breaches, the Government will be forced to re-examine the terms of concessions granted,” the minister warned… The two logging companies must submit quarterly updates of their attempts to institute the changes they have pledged to make (SN, Saturday, December 9, 2006. Forestry transfer pricing probe on -Commissioner Singh – Barama, Jialing to come under closer scrutiny).

Interestingly, one of the two named directors of Barama Buckhall Inc. is Yaw Chee Ming, who gave Barama’s HQ — ‘Land of Canaan, East Bank Demerara, Guyana’— as his residential address in the ‘Notice of Directors’ form in the Deeds Registry. Mr. Yaw Chee Ming has never lived in Guyana.

Indeed, in 2007 Forbes magazine named the 47-year-old Yaw Chee Ming as the 15th richest man in Malaysia, worth US$370 million (http://www.forbes.com/lists/2007/84/biz_07malaysia_Yaw-Chee-Ming_9B8S.html). His father, Yaw Teck Seng, the founder of Samling Logging Company, was said to be the 13th richest man in Malaysia, worth US $460 million.

This local registration thus appears to be false, and that should have been noted during due diligence checks required by the GFC’s own procedures since 1996.

It is my understanding that the original FDI arrangement in 1991, agreed for Barama with the PNC administration and confirmed by the PPP administration in 1991 and 2004, was for significant on-shore capital investment in forest products processing of a kind which local enterprises could not undertake.

Moreover, such investment would be associated with provision of employment and skills enhancement for Guyanese. The recent report of 168 vacancies at the Barama mill at Buck Hall is for low-level jobs; Barama is still using Malaysians and other foreign staff for the higher level posts, and not fulfilling its FDI promise to train Guyanese.

At the same time, it is continuing to export our prime timber logs of flooring and furniture grades in large quantities, without processing.

The parent company, Samling Global Limited, has recently purchased a flooring factory in China.
Samling must still be rubbing its eyes in amazement at the treasure trove it continues to accumulate virtually free of cost in our dear land of Guyana; as the FDI fiscal incentives cover the cost of Barama’s forest taxes.

The Government’s incompetence associated with fiscal concessions for the Queens Atlantic Investment Inc. enterprise is of the same order as that uncovered for the Barama negotiations, incompetence and secrecy going hand-in-hand.

Mahadeo Kowlessar