Click the following links for:
Bai Shan Lin, Barama (Samling Global), Dark Forest Company (DAFFCO / Coffee Day), Demerara Timbers, Jaling and Garner (China TImber Resources), and Sherwood Forrest

Guyana
Neither Guyana Forestry Commission "GFC" reports nor the media appear to mention how and to whom the c.700,000ha increase in Timber Sales Agreements was assigned during the second half of 2010 (presumably from previously Unallocated Forest).[Table 2 and Table 2] This and the other apparently unexplained changes in forest allocations might reflect manipulation by those in authority, and as such might compromise the monitoring of relevant supply chains and assessing their legality.. That the Minster for Forestry is the current President begs interesting questions in this respect.

Guyana is considering whether to negotiate a Voluntary Partnership Agreement with the European Union "VPA". This would require implementation of a Timber Legality Assurance Scheme "TLAS". Remarkably, assessment of such processes (fundamental to governance) as those by which (a) forest has been designated for logging or conversion, (b) concessions have been allocated, and (c) the logging entity authorised, do not seem to be required in the TLASs which the EU is negotiating elsewhere.[Cameroon Congo Ghana] Documents rubber-stamped by relevant officials are deemed sufficient. If such rubber-stamped documentation is deemed insufficient evidence of legality under the EU's Regulation 995/2010 (which requires due diligence to exclude Illegal Timber from the EU market) it would seem to be in Guyana's interest to establish a VPA - from the 3rd of March 2013, that regulation will make it illegal to place Illegal Timber on the EU market, unless consignments (or illegal components thereof) derive from countries which are implementing a VPA.

As the upper chart above shows, the quantity of timber being exported from Guyana has risen strongly since the signing of the MoU between Guyana and Norway (November 2009), particularly as logs whose export is officially discouraged. Under that MoU, penalties will be triggered if timber production annually exceeds the average for 2003-2008[p20] and if the percentage of timber production which is illegal exceeds 15%[p22] (the Illegal Timber content of Guyana's timber exports to India and China is likely greatly to exceed 15%).

Further evidence that Guayana is not serious about reducing deforestation or forest degardation derives both from the number of logging concessions being granted - which has increased - and the nature of the enterprises which have been allocated the new concessions (- see below).

In addition, it appears that cocaine is being smuggled out of Guyana in containers with timber illegally [Aroraima 180m3] supplied by Chinese nationals (linked to well-known restaurant). Disputes about where the different authorities' jurisdictions start or end, and a previous order to reduce surveillance, would be consistent with high level interest. Failure to notice the fraud (illegal timber) tends to indicate that routine monitoring systems being used by the Guyana Forestry Commission are not fit for purpose, and this begs questions about claims submitted by the GFC under the MoU.

Remarkably, the MoU requires that measurment of forest degradation ignores one of the most fundamental chatracteristics of forest vitality - their mix of species (both of trees and their mode of reproduction, including the recycling of their nutrients).[p19-22]

Since late 2009, the only destinations willing to accept Guyana's plywood exports have been local - the former primary markets of the USA or the EU now have or will soon have legislation which in effect prohibits the import of Illegal Timber. The benefits which Guyana has secured from its tax concessions to foreign enterprises in the timber industry seem negligible - though their cost is substantial.

The government of Guyana, a country which is both one of the most corrupt in South America and noted for links to the illegal drug trade, is to receive a grant of US$30 million from the government of Norway. The grant is an initial instalment of a much larger payment which is supposed to reward the people of Guyana particularly for the retention of their forests' eco-system so that other countries can continue causing climate change through their consumption of carbon.

The much larger payment would be made even if deforestation increases - as is likely given plans to construct a controversial hydro-electric project. Norway will reward Guyana for increasing deforestation by between 50% and 400%.[p15]

The Amaila Falls project is to be funded partly by the China Development Bank[-], and likely to use imported Chinese labour rather than Guyanese[-]. Although the ostensible purpose of this project is to substitute for electricity generated by current fossil-fuel power stations, the project might instead supply export-oriented refineries which have yet to be built.[-]

The route chosen for a new road to the project site conveniently passes through a mature forest ecosystem. The likely sub-contractor for the road is one of the three foreign logging groups which supply the great majority of the timber which is exported from Guyana to China and India. The government refuses to publish the mandatory environmental impact assessment of the project and this access road.[-] Norway's initial payments will presumably help commit Guyana to implementing this costly hydro-electric project prior to general elections in 2011...[-]

The Norway-Guyana agreement does not seem to require Guyana to address the primary drivers of forest degradation in Guyana - mining (particularly of gold) and, less lucrative, logging, both of which tend to be not only illegal and unsustainable but also associated with poor governance.

In so doing, Norwegian taxpayers snub their counterparts in the UK who, particularly during the 1990s, provided extensive funding and technical assistance to the Guyana Forestry Commission in order to help ensure sound management of Guyana's forest and timber trade.

Opportunites to take advantage of poor governance under REDD have already attracted criminal interests.[Interpol] Under REDD, forests are being treated as if they were merely agents for the sequestration of carbon (rather than for their social and environmental services locally and globally) and, as such, tradeable by those who wish to continue to supplement the already dangerously high levels of greenhouse gases in the atmosphere. The Auditor General of Guyana has commented on financial chicanery by the office of the President of Guyana.[-] Instances of a similar character relating to funds disbursed under the MoU between Norway and Guyana are apparent.[-]

Despite major flaws, the government's Low Carbon Development Strategy has some encouraging points.[-] However, a McKinsey report[-] concerning incentives to avoid deforestation in Guyana appears to be based on a flawed appreciation of the potential of Guyana's forest land and the reality of Guyana's forestry sector.[-]

The unit prices cited in the ITTO's fortnightly "Tropical Timber Market Report" indicate that the difference between the unit prices for Guyana's log exports are remarkably small relative to unit prices for equivalent products exported from other producer countries. The difference might well be attributable to transfer pricing fraud. Given that, during 2005, logs account for almost all India's (and half of China's) timber imports from Guyana, and that India and China (primarily India) account for more than half of Guyana's log exports, entities in India and China might be unwittingly party to such fraud. The loss of export revenue attributable to transfer pricing fraud probably now amounts to very approximately US$50 million per annum. Although that amount is substantial in relation to Guyana's official export revenue of US$ 500 million (roughly half of which was then attributable to gold, diamonds and sugar, and a further 10% to timber), Guyana's losses from fraud in the export of gold and diamonds is probably much more substantial.

Such a large percentage in lost revenue should prompt donors to at least claim to be applying effective pressure on the government of Guyana to substantially reduce those losses. Remarkably, donors do not seem to be doing so.

Logs, sawn wood, and plywood accounted for approximately 35%, 45%, and 15% of the RWE volume of Guyana's timber exports during 2009.[-]

It seems likely that an increasing proportion of the logs exported is supplied other than directly from forest concessions - by shops and other small enterprises across the country (run by Chinese immigrants or ethnic Chinese domiciled in Guyana) which, implicitly, have diversified away from the business which they are authorised to conduct. Such informal commerce is unlikely to be acceptable if and when Guyana implements a credible Voluntary Partnership Agreement "VPA" with the European Union under the latter's Forest Law Enforcement Governance and Trade "FLEGT" action plan. Top

Bai Shan Lin
A state-owned timber enterprise from Wuchang (Northern China) was to log Jaling's concessions despite having no experience of tropical forests. It is likely - see the next paragraph - that Guyana BaiShanLin International Forestry Development Co. might have logged Jaling's concessions. These arrangements are akin to "landlording" which is illegal in Guyana (unless officially authorised by the President). The resulting timber was to be exported through a joint venture partly owned by a Mr Chu Wenze - a hardwood floor dealer - who was chief executive of BaiShanLin and who has been arrested in China. Mr Wenze has forecast that BaiShanLin's annual output of processed timber from Guyana would exceed 300,000 cubic metres at its peak.[p5]

It is said that BaiShanLin now (2010) has interests in a concession (which Barama used to log [§5]) under arrangements which include a change in underlying control of the concession (implicitly illegal unless authorised by the President).

BaiShanLin (part owned by "BUCC", a (state-owned) residential housing company from Beijing whose indentured work force in Dubai went on strike during 2007) has also taken over Jaling's operations in Linden (the location of the Karlam mill). Safety for workers and visitors to those operations has been a disgrace and BaiShanLin's workforce is treated badly. There is concern that the timber businesses associated with BaiShanLin and Jaling are using chinese workers (some of whom are indentured/bonded - as in Dubai) instead of employing local counterparts - and withdrawing support for community services.

BaiShanLin was registered during the month in which 51% of Jaling's shares were acquired from the Chan family. Its subsidiary, BUCC Wood, asserts that BaiShanLin has been granted wood cutting licences for 1.2 million hectares of Guyana's forest - an area considerably larger than that of concessions granted to Jaling, Garner and Demerara Timber combined... It is likely that this exaggeration was intended to increase intererst from Chinese investors - i.e. to con them. Alleged financial difficulties helped BaiShanLin to secure (from Guyana's Republic Bank) a US$200,000 mortgage over the Karlam sawmill. BaiShanLin subsequently defaulted on its repayments.

The Europen Commission (under its Linden Economic Advancement Programme) has subsidised China's timber industry with a US$10 million loan [p19] to promote the export of flooring strips from a controversial sawmill in Guyana.[Karlam p23]. China can easily afford to provide such susidies itself. The enterprise in which the loan is now invested, BaiShanLin [p18], is related to the government of China. Given this and BaiShanLin's track record, it is remarkable that the European Commission continues to support this enterprise - indeed it is unlikely that BaiShanLin's products would be acceptable for import into the EU under the EC's proposed [p9] Timber (due diligence) regulation.

During April 2007, BaiShanLin was prohibited from exporting logs, partly as a consequence of its failure to comply with its obligations. Two weeks later, Jaling's Timber Sales Agreement was suspended due to non-compliance by whoever was then logging on behalf of Jaling.

BUCC Wood, established at the end of 2006, is a jointly-owned subsidiary of BaiShanLin and BUCC. It claims to sell 200,000m3 of imported logs annually (the maximum Wuchang expected to extract from Jaling's concession) and to process some of this into veneer and flooring in Beijing. BUCC Wood gives the impression that Guyana is its sole supplier, that its logs enter China through ports near Zhangjiagang, Shanghai and perhaps Tianjin, and that at least some of the products made from those imports are subsequently exported. However, China declared the import of little more than 60,000m3 of logs and 4,000m3 of sawn wood from Guyana as a whole during 2007.

BUCC Wood appears particularly to promote logs of locust wood (Hymenaea courbaril) from Guyana in its marketing material. The export from Guyana of logs of this species - and crabwood/andiroba (Carapa guianensis) which BUCC also markets - has been prohibited since 2002, both for reasons of conservation and in order to safeguard supplies for Guyana's furniture industry. Authorities in China have been obliged to "correct" the statistics of imports from Guyana which they declare to the ITTO so as to exclude reference to this species. BUCC Wood also markets logs of bulletwood (Manilkara bidentata) from Guyana - a protected and ecologically important "keystone" species, for which the Guyana Forestry Commission nevertheless quite readily grants permission to log.

Since 2007, the government has allowed the export of these species provided that consignments are first offered for sale in the Guyana. The restrictions are ridiculed by those who export to China, the logs being advertised in the press occasionally, typically at much greater than the local market price and without mention of quantities.Top

Barama (Samling Global)
During early 2006, Guyana's largest timber enterprise, Barama, received an FSC certificate pertaining to the management of 570,000ha of its forest concessions. This FSC certificate was withdrawn in January 2007 after it became apparent that Barama had failed to comply with improvements required to maintain that certificate. Of Barama's 218,000m3 log production during FY2005/6, only 28,000m3 were FSC-certified and 156,000m3 derived from the 445,000ha of forest (and a further 60,000ha or so of Amerindian lands) over which Barama claims harvesting rights. Given that Barama's 1.6mi hectare concessions expire in 2016, it is remarkable that such a small proportion of Barama's log production derives from its own concessions. However, the window of opportunity for such exploitation is short (such "rights" tend to be illegal and they expire prior to 2016), making it unlikely that management of these forest areas is sustainable. Indeed, Barama has stated that it has no intention of managing these areas sustainably [§12] (which is contrary to the law). It is probably from these areas that it fells most of thelogs which it exports.

Barama is now wholly owned by Samling, its former joint owner Sunkyong (a major conglomerate from Korea) having withdrawn. Samling, based in Sarawak, is a controversial logging group (particularly due to its record for disrespecting native customary rights) which has recently been blacklisted by one of the world's largest investors - the government of Norway. Samling's listing in February 2007 on the Hong Kong Stock Exchange[code 3938] embarrassed the banks which arranged that listing. Most of Barama's key workers and labourers are Malaysians and Indonesians - some of whom are said to have worked for Rimbunan Hijau in Papua New Guinea - fuelling resentment within Guyana.

Such employment practice, allegations of economic crime (concerning transfer pricing fraud and the granting of the very large area of its forest concessions and its remarkably generous tax treatment), failure to respect the rights of workers and indigenous people, and procuring wood from dubious sources, all in relation to Barama, breach "A Guide on Sustainable Overseas Forest Management and Utilization by Chinese Enterprises" - which is said to be applicable to enterprises operating from Hong Kong as well as mainland China.

Subsequent to a formal review of its relationship with some officials which investigated illegal logging operations and fraud, Barama was penalised with a token fine and by having some of its operations suspended. More recently, Barama has been further fined - for failing to submit credible forest inventories and operation plans. It seems that Barama has not paid all its fines. It would appear that Barama's continued operation in Guayana - including without even having a forest management plan [CAR.SGS.FM.2006.14] - is consistent with high level corruption and the consequent risk of blackmail.

If Barama, the owner of the country's only plywood mill, finds it more profitable to export logs rather than plywood then this might partly explain why Guyana's plywood exports have collapsed - and would tend to reduce management effort in the mill, causing the quality of Barama's plywood to deteriorate. Barama's ill-repute will have contributed to a reduction in buyers' interest in that plywood. That collapse might also be attributable partly to exhaustion of suitable species in Guyana's forest - reflecting unsustainable management and a failure of government oversight. The mill processed logs from numerous sources.

As indicated in the table below, the volume of plywood entering end-use each year within Guyana has fluctuated around an average between 5,000 and 10,000 cubic metres.

The mill was a fundamental component of the very generous investment incentives granted by the then Guyana government to Barama (Barama commenced operations in 1991). The mill seems to have been used by Barama as a political tool. Soon after being convicted for several illegalities (and perhaps in response), Barama threatened to close the mill. The reason cited - insufficient supplies of logs - (refuted by the government) implies an unwillingness to buy in suitable logs, and has previously been given (perhaps when negotiating access to concessions which it had not been granted). Given Barama's ownership by a major tropical logging group whose operations include plywood production, it would be odd if Barama had offered to build a mill whose capacity exceeded the likely supply of suitable logs and/or that it so overestimated potential log production from its own and others' concessions. However, it might have done so as a (fraudulent) tactic to secure favourable terms of engagement in Guyana. Similar tactics may explain why the Independent Technical Report prepared for the Samling Global IPO in 2007 (see below) states that there are plans to expand the mill from 108,000 to 153,000m3/a - the increase being in stark contrast to the publication a few months later of plans to close the mill, and the steep decline in production by the last decade (see table below). The government forced Barama to close its Buck Hall mill during 2010 subsequent to the death of an employee in the mill's timber shredder.

Barama closed its mill for the foreseeable future during October 2010, subsequent to damage to part of the mill which had a fundamental design fault.[1.] The President has expressed willingness to renew the subsidies from which Barama has benefitted for many years despite their cost to Guyana especially if the plywood mill is reopened.[-]

Barama has been subsidised by (externally supported) technical assistance [ECTF; WWF] and, for almost twenty years (as a consequence of its various tax and de facto legal exemptions), by the people of Guyana. It has been said that the set of company accounts which Barama submits to the Registrar of Companies tend to show that Barama's business is unprofitable, despite all this assistance (and its competitive advantage in relation to profitable Guyanese timber companies). Like most timber companies listed on the Hong Kong stock exchange, Samling Global is incorporated in a British Overseas Territory (Bermuda), presumably for reasons of transparency and tax efficiency.

Despite the above, it would not be surprising if, prior to standing down during 2011, the President were to renew Barama's financial priveleges for a further ten years.

Comparison between the import statistics of China and India and Samling's export statistics[slide 36]suggests that, during 2009, Barama supplied one third of the volume of logs which were exported from Guyana to China and two thirds of that supplied to India. Samling plans to produce 220,000 cubic metres of logs during 2011,[slide 16] not much less than the total produced nationwide in Guyana during recent years.[p27] Top

Dark Forest Company (Simon and Shock; Caribbean Resouces)
An Indian enterprise Vaitarna Holdings has, through a local subsidiary - "Dark Forest Company" - acquired Simon and Shock's business in Guyana - which consisted of a State Forestry Exploratory Permit (valid for up to three years) for concessions of total area c.392,000ha.[p6] It has also acquired the former concession of Caribbean Reources Limited (part of the CLICO group) whose area is c.346,000ha.[-] It is not legal for the government to transfer concessions in this way. These transfers, which took place during 2010, do not appear to have been made public until 2011.[-]

It is also not legal to allocate concessions to enterprises - like Dark Forest Company - which have no experience of tropical forest logging. Further, it is not legal for a concessionaire to subcontract the logging of its concession (unless authorised by the President) - as the Minister implies [ ], and even more questionable if the two concessions were to be logged by affiliates of Barama or Bai Shan Lin. The Minister responsible for forests (the president' nephew-in-law and his party's preferred successor) would appear illsuited to his role given that, as Minister, he has implied that cultivating tree crop monocultures on accessible plantations requires similar experience as logging in remote, bio-diverse forest.[-]

The allocation to Simon and Shock was made during January 2008 on condition that it established a major sawmill before carrying out any logging. No such investment appears to have been made. Although Dark Forest indicates that it might establish a mill, the enterprise seems intent on exporting logs (contrary to Guyana's forest and export policies) for the foreseeable future.[p2] It is unclear why the Guyana Forestry Commission has not withdrawn either the concessions acquired by Dark Forest. Having taken three years to carry out the requisite checks on the original owners of Simon and Shock (an established timber business), it is odd that the GFC does not appear to have carried out similar due diligence concerning the eligibility of this enterprise. Further, it is unclear to which CLICO policy holders the G$600mi payment on which has been made on behalf of the Coffee Day group for CRL has been allocated.[-]

It transpires that Dark Forest Company is an afifliate of an Indian group whose core business is the management of cafes - Coffee Day - which seeks to expand its (currently in-house) furniture business, DAFFCO. Its plans to do so and float DAFFCO will presumably benefit from investments made during April 2010 by the private equity funds of Standard Chartered and KKR.[-] Perhaps these funds and those involved in promoting the flotation (including the relevant stock exchange) are unaware of or have discounted the reputational risk to which they are or will be exposed given the probable illegality of the furniture which DAFFCO presumably intends to make from wood supplied by its logging business in Guyana - a business which would seem to belie and threaten the integrity which underpins Coffee Day's brand. Top

Demerara Timbers
The owner of Guyana's second largest timber company, Demerara Timbers, might still be Prime Group - a holding company related to owners of the Malaysia's notorious Rimbunan Hiijau group. Demerara Timbers' Malaysian-born chief executive, S K Chan, used to be chief executive of (Malaysian-owned) Barama.

However, BaiShanLin (see below) has an agreement with Demerara Timbers inter alia to assist in marketing, upgrading the equipment of the latter's saw mills at Mabura and broadening the range of products which it manufactures. Demerara Timber has an associate company (named Rich Resources) which rents a Guyanese-owned concession - which is illegal unless it has the explicit approval of the President. Demerara Timbers' own concessions total 552,000ha.

SK Chan is understood to have seized control of Guyana's Forest Products Association in order to use this as a front to lobby the government. A particular concern is his plan for government to rescind all underperforming concessions (/"Timber Sales Agreements" - annual access to which are currently "negotiated" with the Guyana Forestry Commission instead of being under contract for 25-years as required by law) to a foundation which will control and sub-let viable areas for logging. Given the supposed unprofitability of the timber businesses which Mr Chan has operated in Guyana, it would be remarkable if those areas would be logged to the benefit of Guyana. Top

Jaling and Garner (China Timber Resources)
Jaling Forest Industries and Garner Forest Industries have forest concessions of 164,800ha and 92,737ha respectively. An almost bankrupt, persistently loss-making investment company with no experience of forestry, China Timber Resources (listed on the Hong Kong stock exchange but incorporated in the Cayman Islands and, until May 2007, known as Seapower Resources International) owns 95% of Jaling and 100% of Garner through subsidiary shell companies - Wide Resources (also referred to as Wild Resources) and Vastrich respectively. Ownership of Jaling and Garner had previously been fronted by the (ethnic chinese) Chan family which has interests in the Karlam saw mill at Linden. Mr Danny Chan is chief executive of Jaling. China Timber Resources increased its ownership of Jaling from 51% to 95% by acquiring shares from a Mr Liu Feng Lei who, remarkably, had acquired those shares from the Chan family subsequent to it loosing apparent ownership control of Jaling in September 2006. Seapower had, during 2005, had an arrangement with the government concerning the exploration and exploitation of oil and mineral in Guyana[p14].

Perhaps coincidentally, a Mr Liu Feng Lei was a major shareholder in Seapower Resources at the time when another Mr Chan (Chan Chun Hing / Kenneth Chan) was the company's financially controversial chief executive and principal owner.

Prior to acquiring Jaling and Garner, Seapower made an arrangement with the government of Guyana to explore for and exploit petroleum, natural gas and mineral resources in Guyana.[p14]. Perhaps coincidentaly, China Timber has appointed to its Board of Directors Neil Bush, a member of the family of two recent Presidents of the USA who has been Director also of an enteprise managed by a son of Jiang Zemin, a former President of China. Top

Sherwood Forrest
Sherwood Forrest was granted a 167,000ha concession shortly after it was established. It has no experience of logging and plans to subcontract logging to Bai Shan Lin - which is likely to constitute "landlording". One of its key directors Chu Hong Bo (understood to be a relative of Chu Wenze) is also a director of Bai Shan Lin. Another director has frequentlty been used as a consultant by the Guyana Forestry Commission.[-]

A partly Malaysian enterprise UNAMCO has been obliged to leave its former concession (TSA) in the same region as Sherwood Forrest, having failed to compy with the terms of its concession. Top