Guyana And The Wider World

http://www.stabroeknews.com/index.pl/article?id=56516380

Stabroek News


Guyana’s Poverty
Reduction Strategy Programme (PRSP)
and the forestry sector

The Guyana Poverty Reduction Strategy Paper (PRSP),
crafted out of nation-wide participatory consultations
and published in 2001, set out the parameters of
poverty in Guyana, analysed the contributory factors
and detailed a road map for poverty alleviation or eradication.
President Jagdeo announced late last year that “Guyana will
commence negotiations with the IMF next year, with a view to
coming up with a successor programme to the just concluded
Poverty Reduction Growth Facility (PRGF)” (Stabroek News,
December 24, 2006).
At the turn of the millennium, Guyana was still suffering
from a continuing high incidence of poverty: “In 1999, Guyana
completed a Living Conditions Survey [which] indicated a
reduction in poverty levels. The proportion of the population
living below the poverty line was found to be 35 per cent
with 19 per cent living under conditions of extreme poverty”
(PRSP, p. 5). While no more recent data on poverty have been
published, the Guyana economy has not grown in the ensuing
years.
The PRSP set out the causes of poverty thus: “Although
no one factor, or group of factors, may be singled out as the
cause and effect of poverty, the evidence in Guyana suggests
that low and/or negative economic growth accounted for
the pervasive and persistent level of poverty in the country.
This, in turn, stemmed from (i) poor economic policies; (ii)
poor governance; (iii) non-complementing growth-oriented
infrastructure; and (iv) deterioration in the quantum and
quality of social services” (PRSP, p. 7).
Like all other national policy documents, the PRSP
celebrated Guyana’s natural resource endowment. According
to the PRSP, most of the poor in Guyana live in the interior
Regions, coterminous with Guyana’s forest cover. This article
begins to consider the question: Why is there persistent poverty
in the interior alongside the parcelling out of Guyana’s best
endowed forests in large-scale forestry concessions? Do the
reasons for persistent poverty, as diagnosed by the PRSP, apply
to the forestry sector? This article examines the fi rst two causes
of poverty according to the PRSP.
Poor economic policies
During the late 1960s and early 1970s the UN’s Food and
Agriculture Organization (FAO) assisted the Guyana Forest
Department with reconnaissance inventories of forests.
Compared with much of African and Asian tropical rainforests
the forests of Guyana have low stocking and a high proportion
of hard and heavy timbers.
Almost uniformly the FAO specialists believed that these
limitations called for economies of scale, with low intensity,
low cost, low impact logging at long intervals, with value
added through effi cient industries, undertaken by private
sector concessionaires and managed with much greater
technical understanding and marketing skills than the local
timber industry then displayed; what might now be termed ‘a
knowledge economy.’ FIDS also suggested provision for smallscale
operators having limited capital, but the main emphasis
was on economy of scale.
In the middle of these technical developments, in 1970, the
then government took control of ‘the commanding heights of
the economy’ and civil servants were appointed to run private
sector operations.
As the economy faltered, massive and ill-advised ventures
such as the Demerara Woods enterprise at Mabura soaked up
money. Loans and credits from Canadian CIDA failed to restore
profi tability to the majority of private logging operations
or sawmills that lacked political connections. Spare parts
and working credit were so scarce that the forest industry
became moribund. The almost unbelievable decision by local
sawmillers to install sash gang saws (suitable for perfectly
sound conifer logs but entirely inappropriate for defective
tropical hardwoods) contributed to loss-making enterprises.
Liberalisation of the economy after 1985 was not
accompanied by an understanding of the national safeguards
for foreign direct investments (FDI). OECD guidelines for
multinational enterprises and on transfer pricing were
apparently overlooked when the give-away arrangement with
Barama was negotiated in 1991.
Although they are not in the public domain, the later FDI
arrangements for other foreign-owned loggers seem to have
been equally incompetent, judging by the way in which the
expatriates have been allowed to export unprocessed logs
instead of demonstrating best practice in timber processing.
The 1997 National Forest Policy (NFP) provides for operation
of small mobile in-forest sawmills, but only very recently is
this policy being put into practice in any notable way.
Poor governance
The second criticism in the PRSP concerns the weak and
inconsistent application of law and policies. Studies for the GFC
during 1994-6 showed that resource access taxes had failed to
be adjusted for the falling exchange rate and for infl ation and
were then amongst the lowest in the world. Political lobbying
has prevented correct updating of taxes, so the country is
receiving only around ten per cent of the volume-based tax
revenue from resource access rights compared with Malaysia.
It gets worse. Even our low taxes are not actually collected
effi ciently by the GFC and over US$ 1 million was owed by the
major logging companies up to August 2005. The NFP requires
the GFC to pay area-related forest taxes into the Consolidated
Fund, but external reviewers confi rmed that up until 2001
the GFC had not done this. There is no report on whether
the Ministry of Finance has demanded its due or whether it
demanded the 20-year backlog of taxes. The 1979 GFC Act
requires the Minister of Finance to tell the GFC what to pay
into the Consolidated Fund but the NFP requires the GFC to
take the initiative.
The 1980 national constitution and four national policies,
plus the PPP/C’s own 2006 manifesto, all promote in-country,
value-added processing of our natural resources. However,
what we see is an increasing proportion of prime hardwood
timber logs being exported without processing. Of course this
is the most profi table action from the point of view of personal
private gain. But national policy requires our natural resources
to be used for maximum net social benefi t, the public good,
not private gain. Until we invest in modern machinery and
marketing for furniture and fl ooring, highest technical
effi ciency in transformation from timber log to furniture may
be achieved by exporting logs to the modern mills in China
and the ramshackle but integrated industries in India. But
economic theory then requires that we tax the excess rent
obtained through log exports, so that it is the nation rather
than the foreign logger who benefi ts most.
This is not happening. The proposal of the Minister of
Agriculture for “forming a ministerial committee to look at
developing and advising on a log exporting policy for Guyana”
in the future does nothing to solve the increasing problems
today (‘No evidence so far of forestry transfer pricing -Persaud,’
Stabroek News, Monday, January 29, 2007).
Janette Bulkan
CFA Governing Council
guyanaforestry.blogspot.com


Source :
Commonwealth Forestry Association Newsletter number 36, March 2007, pages
8-9.