Guyana would do better to process logs rather than ship them out
unprocessed
Kaieteur News,
Dear Editor,
I welcome the response from the Forest Products
Association (FPA) which was published in SN on June 24, to my letter,
“Better log-to-lumber conversion rates can be achieved with appropriate
equipment” (SN June 14 2007).
The apparent losses to Guyana from exports of unprocessed logs are so
large that an open debate is overdue. I had pointed out that there are
four national policies plus the 2006 PNCR-1G pre-election manifesto in
favour of local processing of forest products and no national policies
in favour of export of unprocessed logs.
I did not see why the decrepit state of some traditional family-owned
sawmills should be used by the FPA to justify continued log exports.
At the seminar on log exports on 17 February, the
Commissioner of Forests quoted from a GFC study that the national
sawmilling capacity was 504,000 m3 of logs per year. The sole
functioning plywood mill is Barama's and that has a designed capacity
of 235,000 m3 logs per year (even though Barama actually processed only
63,000 m3 logs in financial year 2005-6, running at one quarter
capacity, while exporting 119,000 m3 unprocessed logs in the same
period).
The Commissioner pointed out that the national log production in year
2006 was 380,000 m3, so sawmilling capacity was one third larger than
total log production, leaving aside the capacity of the plywood mill.
Even allowing for the decrepit mills, there must be a substantial
under-used capacity.
Gary Clarke and Ricky Ramsaroop's study on portable
sawmills in Guyana for the Caribbean office of the UN
Food and Agriculture Organisation in 2005 showed that
the mobile narrow-kerf bandmills were capable of up to
70 per cent recovery log-to-lumber and a production of
up to 7 m3 sawn lumber per day on an investment of US$
30-35,000. Using a reduced volume recovery rate of 65
per cent and a grade recovery of 65 per cent A and 35
per cent B grade lumber (derived from Duncan Macqueen
and Andrew Mendes in 2006), the following value multipliers can be
estimated: log cost delivered to sawmill gate (GFC, Barama and Jaling
data), US$80 per m3
value multiplier = 1 declared FOB export price of unprocessed log
(Barama data), US$120 per m3 value multiplier = 1.5
FOB export value of sawn lumber, 65% grade A @ US$ 770 per m3 and 35%
grade B @ US$320 per m3 (Mendes &Macqueen, Barama prices) value
multiplier = 5.0
FOB export value of garden furniture made from this
sawn lumber, US$1170 (a local manufacturer) value multiplier 14.6.
Taking the lower ratio of 0.4 log-to-lumber recovery
from FPA members' mills, the value multipliers for
sawn lumber and garden furniture become 3.1 and 9.0,
compared with the 1.5 multiplier for raw log export.
In other words, it is much better for Guyana to
process the logs instead of allowing them to ship out
unprocessed.
Returning to the 119,000 m3 of logs of fine furniture
and flooring grade timbers exported by Barama in
financial year 2005-6, using the lower log-lumber 0.4
conversion ratio from FPA could result in furniture
worth US$86 million. Using the higher log conversion
ratio of 0.65 could result in furniture worth US$139
million. Instead, the raw logs were valued for
Customs declaration at US$14 million FOB.
It would be astonishing that the old family-owned sawmillers are
generally in favour of continued log exports
rather than conversion locally into fine furniture, if
one did not know that some of these millers are the
chief beneficiaries of the rent from their illegally
sub-let concessions, more than US$450,000 per year
(data derived from Samling/Barama's IPO, March 2007).
The FPA argues that one needs large fixed bandmills and the amazingly
inappropriate sash gang mills to cut
long lengths. But who needs a bed 18 feet long or a
40 foot long table? And why is the FPA referring to
markets in Korea and Japan when data from the Guyana
Forest Products Marketing Council show no exports to
those two countries? The figures estimated above show
that delay in implementing this ban on log exports is benefiting just a
few people, who have in the past
“licked up” credit loans from Gaibank, Inter-American
Development Bank loan LN 633, CIDA I and CIDA II, and
from the European Investment Bank. And these millers
still can't saw the logs profitably. The GFC and
Minister of Agriculture concluded the meeting on 17
February with an expressed intention of implementing a
log export ban. There should be no further delay.
On 26 May, 1993, on the occasion of our 27th
Independence Anniversary, the late Dr Cheddi Jagan
declared, “When in opposition, we condemn the
indecent haste with which the former regime privatised
our national assets at basement prices, and in a
manner that lacked transparency and was not in the
national interest, we will not do the same. Privatisation and
divestment must be approached with due care. I was not elected
President to preside over the liquidation of Guyana. I was mandated by
the Guyanese people to rebuild the national economy and restore a
decent standard of life for all Guyanese. In all my political career, I
did not succumb to pressure to serve narrow partisan interests; I do
not intend to do so now. I will not surrender the interest of the
nation for expediency or short term gain.”
We do not have to wonder at how Dr Jagan would respond
if he were alive today and had to witness the on-going
liquidation of Guyana by the Party he founded.
Mahadeo Kowlessar
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