Despite granting it millions in concessions, Government is receiving ‘extremely disappointing’ returns from the forestry sector, says Finance Minister, Winston Jordan.
In an exclusive interview, Jordan added, “There has been a level of disappointment in the forestry sector, particularly from foreign investors.”
“Huge concessions have been given out and this refers to both natural and fiscal concessions and the returns have not been great at all. It is extremely, just extremely disappointing and when you challenge some of these investors, you get all kinds of excuses like ‘I can’t do it now and I will put it in two years from now.’
The Finance Minister said that the only “rock-solid” factory involved in value added production which government has seen from any foreign investor is the one that has been established by Barama Company Limited. He said that this is the only company he can attest for in this regard as it has been involved in plywood production and other value added services in the forestry sector for over 20 years.
“With all the concessions given out and you look and you see what the sector contributes to the Gross Domestic Product (GDP), it would be observed that it contributes in a very minimal way.”
The GDP is one of the primary indicators used to gauge the health of a country’s economy. It represents the total dollar value of all goods and services produced over a specific time period.
On this premise, the Finance Minister reminded that government will be reassessing the forestry sector, “Because the level of concessions we have given out and continue to give out every year it is not worth it. Its contribution to GDP is very small and when people get the concessions they say within x amount of years they will do this and do that and you do not see it.”
He was then reminded that after 10 years, Chinese logging company, BaiShanLin has failed to establish its promised wood processing factory and has even recently requested a two year extension to finally get it done. Though government has not granted the company’s request, Jordan said, “Well you will encounter these kinds of problems but we need to do closer monitoring of these entities when they come, and closer monitoring of our fiscal concessions that we give away and of course we need to do far closer monitoring of the forest.”
In the 2015 budget, Jordan had said that following two years of negative growth, in 2011 and 2012, the Forestry sector rebounded in 2014, growing by 14 percent. Logs accounted for 75 percent of the industry’s output. This is in spite of investment agreements that speak of re-investment into downstream value-added industries.
He noted too that the Manufacturing Sector grew by 10.7 percent, thanks to improved performances of rice, sugar and other light manufacturing. He said that this sector continues to hold the promise of massive expansion and robust growth, and this can be realized when downstream activities especially in the forestry sector are implemented.
But based on the problems and issues encountered in the forestry sector, the Finance Minister had said that the Government has indicated an intention to undertake a thorough review of the Investment Agreements for this sector, to ensure that there is compliance with Regulations and the Agreements and to ensure sustainable harvesting of the forestry product.
He had said, “I have seen that the original projection in January was for the 2014 production levels to be sustained in 2015. Suffice to say that at the half year, forestry production was down by 9.8 percent. As a consequence, the sector’s performance for 2015 has been downgraded from January’s projection of zero growth to a negative 1.3 percent.”
Presidential Advisor on Sustainable Development, Dr. Clive Thomas, has said that it would be an “unwise and reckless” move for Chinese logging company, BaiShanLin, to be granted any further extension on the construction of a long awaited wood-processing facility in Guyana.
“I feel it is time that sanctions be imposed,” the Economist added.
Word of BaiShanLin’s request for a two-year extension to fulfill its promise first came to the fore during a press conference with Governance Minister, Raphael Trotman a few weeks ago.
It was there that Trotman was questioned about his threat some months ago to reveal the action to be taken by the end of October, should BaiShanLin and others fail to make any moves to add value to Guyana’s lumber exports.
The Governance Minister also said that when he last spoke with the company (and this was three weeks ago), he was informed that the Chinese logging company was in no position to have the mills that it said it would have imported within the next ten months.
“They have asked for two years and we have had discussions with them about an alternative mill and that is on board. But as I said, much depends on BaiShanLin securing the financing.” But Dr. Thomas had said that it would be highly “reckless” should BaiShanLin’s request be approved.
He said, “Given their horrible track record, as the Presidential Advisor on Sustainable Development, I would deem it unwise to grant them this. They had ten years to get it done. What’s their excuse for not getting it done then?
“It was clear that it was not priority for them and now they cry financial difficulties. I do not agree with any further pardon because they have shown utter disregard over the years for the country’s laws and have benefitted from millions worth in concessions.
“I believe, too, that some amount of order needs to be injected into the logging industry. It is time that companies, whether local or foreign, get the message that value added production is important and that the government will no longer compromise on this.
“Besides, you cannot have a playing field where one company is making efforts to start, as is the case with Vaitarna and then BaiShanLin is making requests to get started later. It would not send good signals in that area.”
“Guyana cannot continue to be giving out hundreds of millions of dollars worth in these tax breaks or concessions and we aren’t benefitting from value added operations. If companies make a commitment to do so then the ethical thing to do is to deliver what was promised. If not, their concessions should be taken away,” the Economist had said.
BaiShanLin had given conflicting reasons in the past to justify the delay for establishing this wood-processing facility.
In 2014, BaiShanLin blamed the Guyana Office for Investment (GO-Invest) for delaying its application for its wood processing factory. In one of its advertisements, the company stated that in 2008, it applied to the “Government of Guyana, through the Guyana Office for Investment (GO-Invest) and other agencies, to lease lands to set up a factory to process logs and engage in value-added production, such as the making of furniture, craft and hardwood flooring.”
It had said then that it was experiencing delays.
Kaieteur News later reported that GO-Invest had no such application. BaiShanLin had nothing to say when this was revealed. This caused many, including the then Opposition, to challenge the former government to make public the investment agreement it signed onto with the Chinese logging company. This was never done.
In April, the company then blamed the “hostile” media reports during 2014 for dispiriting financiers.
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