Jaling forestry deal suspended -following breaches, non-compliance

http://www.stabroeknews.com/index.pl/article?id=56519765Jaling forestry deal suspended -following breaches, non-complianceStabroek NewsMonday, May 7th 2007Robert PersaudThe government yesterday announced that the Timber Sales Agreement(TSA) awarded to Jaling Forest Industries Inc (JFII) has been suspendedbecause of non-compliance with undertakings.Jaling's sanction comes just over two weeks after anotherChinese-connected company Bai Shan Lin was banned from exporting roundlogs and amid an intense campaign by NGOs and letter writers overtransgressions by Asian logging companies.In a release yesterday, the Ministry of Agriculture said that JFII wasawarded a Timber Sales Agreement for 25 years beginning in January 2005after it had fulfilled all the requirements for a State ForestExploratory Permit (SFEP). This process entailed the preparation of aforest management plan and the implementation of an environmental andsocial impact assessment.After the TSA was conferred, the Ministry said that the Guyana ForestryCommission (GFC) noticed that implementation of key aspects of JFII'sbusiness plan such as the construction of a sawmill, a kiln dryingcomplex and other value-added activities were significantly behindschedule. Several meetings were then convened by the GFC with JFIImanagement "but remedial action taken by JFII was not satisfactory".Minister of Agriculture with responsibility for Forestry, RobertPersaud along with the GFC then held meetings with JFII's seniormanagement and a 12-month period was agreed on for the implementationof remedial action beginning in January, 2007."An evaluation of the degree of compliance with that plan was recentlyconducted, and it was determined that some critical areas are stillbehind schedule."To compound matters, the shareholders of the company JFII wererecently engaged in major transfers of shares which have resulted in aninternal shareholder dispute now being addressed in China. The changein shareholdings was done without the necessary disclosure to the GFC".The release said that as a result of all of these breaches andnon-compliances, the GFC had recommended to the Minister of Agriculturethat the operations and various concessions of JFII be suspended.By notification dated April 16, 2007, the Minister advised Jaling CEODanny Chan of the suspension of operations with immediate effect untilfurther notice.Bai Shan LinOn April 20, an Agriculture Ministry press release said theChinese-owned Bai Shan Lin, "was prevented from exporting round logs,"since such exportation was contrary to earlier commitments given by thecompany to the government.The release said that unfortunately, Bai Shan Lin did not comply withits commitment and after observing requests for the export of logs, thecompany was advised that it was in breach of its commitment.The release said no further export of round logs would be allowed bythe company and all relevant agencies have been advised. The number oflogs Bai Shan Lin exported contrary to its commitments was not statednor the types of logs exported. Bai Shan Lin has been advertisingheavily for the supply of logs to it.The company had appealed to Agriculture Minister Persaud to allow agrace period of 12 months during which the export of round logs wouldbe allowed, but this was denied by the minister."The minister with responsibility for forestry has declined to grantthis request," the April 20 release said, adding that the minister hasreminded the company of the commitment it had expressed to becomeengaged immediately in value-added activities and encouraged it to movein this direction.The ministry release said that during the past six months, seniorpersonnel of Bai Shan Lin held several discussions with governmentrepresentatives including Prime Minister Samuel Hinds, MinisterPersaud, the Guyana Forestry Commission (GFC) and the Guyana Office forInvestment (Go-Invest).At these meetings, the management of Bai Shan Lin repeatedly emphasizedthat its interest was in the promotion of value-added activities in theforestry sector. A commitment was said to be given that the companywould not engage in the export of round logs.Based on these commitments, the government continued to have dialoguewith officials of Bai Shan Lin on the procedures to be followed such asre-acquisition of land suitable for the establishment of value-addedfacilities, and to access forest resources.Earlier this year when it was reported that Bai Shan Lin intended tofocus on "finished" lumber and was investing US$4.5 million in awood-processing plant to process logs cut from the Jaling concession,the partnership of these two companies had been viewed somewhat warilyby some stakeholders since Jaling had been in trouble last year forexporting logs rather then complying with its wood processinginvestment commitments.Bai Shan Lin, it had seemed, had acquired a percentage of the interestsof Jaling and would have been investing in lumber processing on behalfof Jaling.Bai Shan Lin International has the rights to 400,000 hectares of forestfor a period of 20 years, the company website had said. Officials ofthe company in Guyana were reluctant to speak to the press on the logexport ban.The website had noted that the company would be processing logsharvested from the Jaling Forest Industries Inc concession. A sourcefrom Bai Shan Lin had said that in addition to this, the company wouldbe purchasing lumber for processing and resale both locally andoverseas.The government has been severely criticized for allowing foreign-ownedcompanies such as Barama Company Limited, Demerara Timbers Limited,Jaling and Bai Shan Lin to export logs and to breach value-addedprovisions of their management plans among other transgressions.Barama Company LimitedRecently, Barama Company Limited (BCL), owned by Samling of Malaysiahad its Forest Stewardship Council's (FSC) certificate suspendedfollowing a review of activities in parts of its huge 4.1M acresnorthwest concessions. And following another visit (not an auditingone) to the site in February/March, the World Wildlife Fund on Fridayissued a statement calling for BCL and Samling to make a "high levelcommitment to responsible forestry". In response, BCL's General ManagerGirwar Lalaram told Stabroek News on Friday that another audit will bedone no later than the end of July this year in relation to thecompany's FSC certificate and he was confident that the company willpass the inspection.In several recent articles and letters in the Stabroek News and SundayStabroek, researcher Janette Bulkan had said that the Government ofGuyana is not doing enough to sustainably manage the country's forestresources and Asian companies like Barama were getting away with a lot.Bulkan said government neglect has allowed Barama to extend its legalcontrol of 26 per cent of State Production Forest allocated forharvesting by a further and "mostly illegal" seven per cent. The fourlargest Asian-owned loggers control legally, and by renting land-lordedconcessions, well over half of Guyana's allocated State ProductionForests, she said.Bulkan, writing in this newspaper's letters column recently, saidBarama-principal Samling's Initial Public Offering (IPO) documents showthat Barama is preferentially logging outside its own concession andthat in the last five years, Barama has drawn 56 - 72 per cent of itslogs from land-lorded areas and exported almost all of the logsunprocessed to Asia."This log export is entirely against the spirit of the generous taxconcessions given by our government and contrary to the value-addedpolicies of Guyana and of the PPP/C (in its 2006 election manifesto).In addition, the IPO documents show that Barama has no intention ofsustainable forest management in these land lorded areas, reckoning tolog them out by 2015," she said in her letter.When contacted by Stabroek News on these points, the Guyana ForestryCommission (GFC) said it would have been issuing a press statement inresponse to Bulkan's letters and articles on Guyana's policies towardsforestry and the dominance of large, Asian companies whose focusremains log exports.The writer, also a contributor in Sunday Stabroek's 'Guyana and theWider World' column, maintains that Barama's practice of land-lordingis against the conditions of its Timber Sales Agreement and that thegovernment is not doing anything to stop it.According to Bulkan, land-lording is the practice by which the legalholder of a forest harvesting concession gives up managerial controland rents it out to another enterprise."This practice is illegal under Forest Regulations 1953, Article 12,which states - 'No transfer of any lease or timber sales agreementshall be made by any forest officer without the prior approval of thePresident where such lease or timber sales agreement grants exclusiverights to any person over an area estimated to exceed three thousandacres or is for an unexpired period exceeding three years," she said.Bulkan said the recent IPO on the Hong Kong Stock Exchange by SamlingGlobal Limited specifically mentions 445,000 hectares of Guyana'sforest over which it claims to hold timber rights in addition to the1.61 million hectares of its own concession TSA 04/1991. "These 445,000hectares include the Amerindian titled Village Lands of Akawini and StMonica, over which the GFC has no mandate and for which Baramanegotiated "in bad faith" agreements; consequently, under theAmerindian Act 2006, these two agreements are void yet the governmentallows logging to continue! This illegality was one of several whichled to the suspension in January this year of the FSC certification ofBarama," she said.GarnerBulkan is of the view that the diversion of logs to Asia inevitablyreduces possibilities for adding value in Guyana by local companies.She said thatGarner, like Bai Shan Lin, is another player on the"logging-of-prime-timbers-for-export block."Garner, both a forest concession holder and timber trader, has been inthe business of shipping logs to China, including bullet wood(Manilkara bidentata), which is both protected in law and a keystonespecies on which many animal species depend ecologically, Bulkan said.She said Garner's principals have negotiated logging concession(s)under secret FDI arrangements. "In September 2006 when SeapowerResources International Limited purchased 51 per cent equity interestin Jaling Forest Industries Inc. for a consideration of HK$154 million(US$19.8 million), the company also obtained an 'Option' to acquire 51per cent of the shares in Garner within five years," she said.She said Garner's State Forest Exploratory Permit - SFEP number 03/04 -was rolled over into a Timber Sales Agreement - TSA 03/05 - in lessthan a year. "Incidentally this is a violation of SFEP legislationwhich mandates a three-year exploratory lease (Article 7B (2) in theForest Regulations)," she said.Bulkan said a Draft EIA, which was briefly available on theEnvironmental Protection Agency's (EPA) website, contains one referenceonly to the company's principals and there is no public evidence thatdue diligence was done on financial status, probity or goodcitizenship.She said that as part of its deal in acquiring 51 per cent equity in'Jaling,' Seapower secured the 'Garner Forest Option Agreement',according to which "the Guarantor shall not and shall procure Garnernot to conduct, carry out and undertake any business and otheroperations and activities of Garner, including but not limited to theexploratory activities and any logging and forest exploitation,operation and management within a period of five years from thecompletion date."She explained that a Timber Sales Agreement is premised on theunderstanding that its holder will sustainably log the concession tofeed a downstream in-country operation, which creates added value andjobs in Guyana.According to Bulkan, Garner's principals immediately entered into aseparate agreement with Seapower to keep Garner's forest concessiondormant in the interests of profits for Seapower and its shareholders.She said that not only are logs being diverted from feeding industriesin Guyana, they are also being under-priced in Guyana Customs datarelative to Asian market prices.Bulkan said Guyana's forests also underpinned the launch of the parentcompany of Barama on the Hong Kong stock exchange in February 2007, shesaid, adding that Samling Global Limited raised US$280 million throughan IPO of about 25 per cent of the company on the Hong Kong stockexchange.