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Apr 26, 2015 Features / Columnists, Peeping Tom
In a country that is rich in greenheart, the price of a BM of this species of lumber exceeds $300. This makes it cheaper for persons to build out of concrete than to construct a wooden house, something that people in other parts of the world find bewildering.
This increase in the price of greenheart is not because of it being scarce on the local market. It is also not because of the presence of the Chinese who are exporting massive quantities of logs. It is not because of the presence of foreign companies in the timber sector.
The price of lumber increased even before the Chinese logging companies arrived. It increased when the forestry sector was still dominated by local producers.
Local forest producers have failed the people of this country. When the housing drive took off just after the PPPC came to office, lumber prices were already high. The increase in demand saw increased prices not because local producers could not keep up with the demand, but because they cashed in on this growth in demand.
Today local forest producers are complaining about discriminatory treatment from the government. They claim that the government is doling out extremely generous concessions to Asian companies. This was the same argument that was made when Hoyte granted concessions to Barama. There was a big hue and cry, including from the PPP, about these concessions granted by the Hoyte government.
Hoyte understood then what the PPP has grown to understand now: the local forest producers cannot grow the Guyana economy. These producers were always too small and too globally unambitious to match the contribution of the Asian companies.
These local forest companies never showed the proclivity to come together as a massive consortium to engage in the scale of operations of the Asian companies and thus to enjoy the same concessions that were enjoyed by these Asian companies. Local forest producers preferred to remain as they were – mainly family-type businesses.
The local forest producers should be the last to complain about concessions. The forestry sector has been a pampered sector. They have always received tax concessions from the government. They have received funding from the government. Given the scale and size of their operations and more particularly their overall contribution to the economy, they were not a disadvantaged sector. They were pampered.
What has been their contribution to economic growth, both before and after the arrival of the big Asian companies? What has been their contribution to taxes in this country? What has been the value of the concessions that have been given to local forest producers?
Hoyte long recognized that local forest producers could not grow Guyana’s economy. And so he negotiated a deal with Barama. But these local producers had political clout. It is the loss of this clout today that is worrying them so much.
Back then, the local forest producers forced Hoyte to include in the agreement with Barama a clause that the Asian company would not sell plywood on the local market unless they separately negotiated a pricing policy with the government. In other words, Hoyte secured the local market for local producers by restricting Barama from selling locally. The local producers had a captive market.
And what happened to the price of not just of plywood but of local lumber as a result of this domination of the domestic market by local forest producers?
Anyone who has been buying lumber for the past thirty years will tell you what has been their experience with the prices of wood in Guyana.
The Chinese companies operating in Guyana are not preventing the local forest producers from moving into value-added production. The problems of local furniture manufacturing did not originate with the arrival of the Chinese loggers.
These problems preceded the investments of the Chinese and had to do with the fall off in global demand triggered by the financial crisis beginning seven years ago. It also originated in competitive advantages which have developed elsewhere.
The Chinese loggers have admittedly created new problems for local manufacturers. That problem concerns the availability of species and the price at which such species are available to local producers. The Chinese are paying good prices and therefore furniture and wood producers are being forced to pay higher prices and have also found it difficult to source some species. This is what is upsetting some of them.
It is a problem for which the government should seek a solution by ensuring that local producers are able to secure adequate supplies. But it is unreasonable to ask the government to help local producers by banning logs. Once this happens, these local producers are not going to pay local loggers, including small scale loggers, the same amount that these loggers are now earning from the Chinese.
In fact, the government should do a favour to the consumers of this country by asking the Chinese companies to sell lumber locally to consumers, because right now the price of local lumber is beyond the reach of the poor.
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