Ensure level-playing field in local forest industry—Expert urges new Gov’t

Jun 04, 2015 News

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Mere days after a Minister of Natural Resources was appointed, forestry management expert, Girwar Lalaram, is calling on the new government to accept a series of suggestions aimed at creating a level playing field in the local industry.

Lalaram, who has spent decades in the industry serving in major logging companies, said that foreign companies have been granted overly generous concessions and package deals by the People’s Progressive Party/Civic-led (PPP/C) administrations, while local loggers have been “feeling the squeeze.”
The economist noted that that the reliefs/concessions that have been obtained by foreign companies have more than compensated for the level of investment that they have made in Guyana.
Using two Foreign Direct Investments (FDI), Malaysian-owned Barama Company Limited and Chinese company BaiShanLin as examples, he said that their cost savings on concessions granted is about US$3000 per month; which over a five-year period would amount to US$180,000 (GUY$36M).
These cost savings have not been afforded to Guyanese and this needs to be corrected, Lalaram contended, yesterday.
“The issue is that BaiShanLin and maybe Barama are trying to monopolize the log market trade locally,” Lalaram said. He said that they are doing that by selling at a significantly lower price, particular species like greenheart, purple-heart and other mixed species
He said that those species used to be in high demand in China and India but the demand for these species no longer exist in significant quantities, therefore these international companies have been capitalizing on the local market.
“In other words the local market should have been protected for the locals to supply; by doing so small local loggers who concentrate heavily on upstream forestry are unable to compete,” he said.
Upstream forestry refers to the extraction of logs while processing and sawmilling of logs is referred to downstream forestry.
“The transnational companies can sell much cheaper because of the concessions granted to them in terms of tax holidays, duty free which includes fuel which reduces their cost of production,” the forestry expert explained.
According to the economist, the major cost incidence in upstream forestry is basically fuel, overheads and infrastructure. Local concessionaires, he said, do not have these benefits and therefore their cost of production is much higher; “particularly where they may not have a full complement of equipment and the production is relatively low.”
The major issue here, according to Lalaram, is the transnational companies have more than their full complement of equipment and they are able to produce higher volumes at a relatively low cost, given the concessions granted that usually allow for the importation of equipment and items needed.
Lalaram took note that the former government has over the years defended transnational companies by saying that they are making huge investments. Lalaram reiterated, however, that their investment is being recovered quite easily in a relatively short period by the concessions granted by the government.
He noted too that the deal with the foreign company, BaiShanLin has been shady since no evidence has been presented as to what was agreed and the level of investment. “All we know is that they would have had to build a wood processing plant at an investment of $70M,” Lalaram said as he noted that though they have been here for nearly a decade.
Also, Lalaram accused the company of transfer pricing. “Important also, apart from transfer pricing they have been a practice of profit capitalization for expansion which means they no longer take money out if these pockets, they use what they make out of Guyanese pockets.”
He said the profit made is diverted in other areas of interest, as is the case of BaiShanLin who came with stated interest in the forestry industry but is now involved in goldmining and housing projects.
“From an economic perspective, how can the local concessionaires survive and maintain the levels of local employment?” Lalaram asked.
Lalaram is advocating that the new government gives temporary tax breaks to the local concessionaires and to waive the levy on the export of logs for the local loggers.
He has called too on the administration to give local concessionaires an option to either to import their own fuel or be able to purchase duty-free fuel. Lalaram is also suggesting that it provides the basic infrastructure to the local concessionaires.
“From an international trade perspective, our Ambassadors need to promote our local species of wood or alternatively appoint an international trade specialist to assist local concessionaires in selling their products,” Lalaram continued.
Among the other initiatives that can be taken, he said, is the government need to review the Norway agreement on carbon credits in terms of the restrictive conditions that is being put in place.
“Local concessionaires have been spending a lot more than what Norway is granting Guyana to ensure compliance with international forest management practices such as RED+ and other international certifications that have now become compulsory to export wood products in North America and Europe in particular such as legal verification,” he said.
Lalaram is of the view that these will definitely bring relief to the local concessionaires as well as to the Indigenous peoples. The indigenous peoples, he reminded, are asking for more forest lands.
At present, there are millions of hectares of forest lands allotted to foreign companies that stretch across Amerindian lands and they are not receiving certain compensations. Many indigenous peoples’ villages, he explained, would have been relocated due to the logging operations.

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