Guyana
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 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[-]. 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.

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.[-]

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, and includes 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

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). Its closure would warrant the withdrawal of those incentives. The mill seems to have been used by Bramara 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.

Barama has been subsidised by (externally supported) technical assistance [ECTF; WWF] and, for almost twenty years (as a consequence of its various de facto legal exemptions), by the people of Guyana. The company's accounts, if filed with the Registrar of Companies, tend to show that Barama's business is unprofitable and on the verge of bankruptcy, despite all this assistance (and its competitive advantage in relation to profitable Guyanese timber companies).

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 logs which it exports.

Barama, formerly also owned by Sunkyong (a major conglomerate from Korea), is now wholly owned by Samling. Samling is a controversial logging group based in Sarawak linked with the "disappearance" of those whose rights are threatened by one of Samling's concessions). Samling's listing in February 2007 on the Hong Kong Stock Exchange embarrassed the banks which arranged that listing - Samling's share price has fallen by half [code 3938]. 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.

Subsequent to a formal review (during 2007) of its relationship with some officials, for illegal logging operations and fraud, Barama has been 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 predicated on the consequent risk of blackmail.

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 nationawide in Guyana during recent years.[p27]

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. 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 Guayana.

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.

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 but has now been arrested in China. Ironically, Guyana might prohibit the export of its most valuable (flooring) species during 2008.

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. It is probable that these changes are not legal. However one of them - landlording - would be legal if officially authorised by the President.

BaiShanLin (part owned by "BUCC", a 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 is currently 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 exageration 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 (BUCC is state-owned). 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] 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 is a jointly-owned subsidiary of BaiShanLin and BUCC established at the end of 2006. 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 - is prohibited. 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.

The depth of BaiShanLin's apparent engagement in Jaling begs the question "what is the linkage between BaiShanLin, China Timber Resources and their backers"?

If the government of China respects the regulation which it published during 2007, "Guide on Sustainable Overseas Silviculture by Chinese Enterprises", which is understood to cover natural forest as well as plantations, then one might expect China Timber Reources (/Jaling) and BUCC (/BaiShanLin) - and their counterparts in neighbouring Suriname - to have already been sanctioned. If enterprises listed on the Hong Kong stock exchange are technically Chinese, then Barama would likewise be subject to that regulation.

Declared imports of logs from Guyana (by India and China)

Source (China): General Administration of Customs of the People's Republic of China
Note: this schedule might assist the authorities in Guyana assess the extent of any fraud in the volumes and export values declared by enterprises which supply logs from Guyana to India or China.