FPA notes with concern

http://www.guyanachronicle.com/news.html#Anchor-FPA-21882

FPA notes with concern
Guyana Chronicle, 16 July 2007

The Forest Products Association continues to note with concern the
publication in the Stabroek News of persistent negative criticisms of
the operations of the forest industry leveled by a small group of
persons who have no direct stake in the industry.

The criticisms, in the view of the FPA, promote a narrow minded
advocacy of imposing an immediate restriction on log exports and attack
productive partnerships between foreign and local investors. These
criticisms are less than helpful, appear to be entirely destructive in
intent and offer no constructive alternative proposals.

The Forest Products Association, in correspondence to the Minister of
Agriculture and the Guyana Forestry Commission, and reflected in the
Association’s Press Release recently published in the Stabroek News and
other media, has very clearly set out the Association’s position on a
national policy for forestry development.

The FPA has always welcomed and is committed to adding value to timber
production through the manufacture of finished product in the country.
The FPA has, however, cautioned in favour of a phased approach which
takes account of the actual availability of adequate milling, labour
and skills, markets, and other essential logistics like shipping and
internal transport.

The FPA’s position is that the government’s forest policy must, of
necessity, be supported by incentives which will promote investment and
drive the industry to achieve the aspirations of all of the stake
holders.

The FPA represents fifty eight (58) of the major companies in the
timber industry, both producers and millers, both local and foreign
investors, who from their collective experience, over many years of
building and keeping the industry afloat at their own financial risk,
can speak with authority on matters such as recovery rates and milling
capacity.

For Guyana’s forestry industry to be modernized, developed and
sustained, it will take substantial new financial investments,
international market linkages, technical skills and managerial
resources, which are today not readily available in Guyana. Government
policy must therefore, create the climate essential to attract this
investment.

The FPA is dedicated to working with the government to develop a
comprehensive and substantive forest policy which will include
incentives to attract further foreign and local investors to install
new and modern milling facilities for downstream processing.

Government’s forestry policy, contrary to the purveyors of doom and
gloom, should in fact, encourage business synergies, joint ventures and
approved partnerships between foreign investors and local forestry
industrialists operating in a regulated environment effectively
administered by the Guyana Forestry Commission.

In contrast, any policy centered, as the critics continue to advocate,
on log restriction alone will not spur increased milling and
manufacturing, but, instead, shrink the industry.

The constant criticisms offered by Ms. Janette Bulkan regarding
partnerships between foreign and local concessionaires and the labeling
of these partnerships as “landlordism” and “illegal” and “variant
colonialism” are both narrow minded, misconceived and anachronistic.

Ms. Bulkan would prefer that local industrialists, who have invested
their hearts and souls in their concessions, simply abandon them,
rather than resolve their difficulties through partnerships with
investors having the financial and managerial resources to put them to
productive use to create employment and revenue generation for the
country. This makes no sense from any angle that you look at it.

In so far as the legality of these partnerships is concerned, the
Guyana Forestry Commission has already publicly declared them as legal.
The GFC has the statutory responsibility for and is perfectly capable
of providing the regulatory oversight to ensure that they are so.

If the forestry sector is to have any hope of advancing, Guyana should
welcome business partnerships such as joint ventures, mergers and
takeovers in this sector.

As Guyana has opened its doors to welcome foreign private investment to
develop its gold, diamond and mineral mining and fishing industries,
manage and modernise its sugar industry, explore and drill for oil,
expand and develop its telecommunications and banking capacity and
generally meets its development needs, the forest industry should be no
exception.

No progressive country in the world would seek to impose the kind of
restrictions advocated by Bulkan and Kowlessar.

The FPA has recommended that the GFC consider withdrawing the 2% export
duty on processed lumber and, instead, apply a levy to log exports as a
more practical and much better alternative to restricting log exports.
The levy will serve as an incentive to producers/millers to add value
through processing.

The FPA completely rejects the half-baked notions advanced by another
armchair critic of the industry, Mr. Mahadeo Kowlessar, repeating
specious and unfounded claims that producers are destroying the
patrimony of our forests and are only interested in exporting logs. The
Minister has himself publicly rejected this foolishness when he pointed
out that “notions that we are over-foresting, overexploiting and
chopping down logs…is just a myth”.

Theoretical studies of potential recovery rates and aggregate milling
capacities offered by Mr. Kowlessar, in isolation of practical
application and untested on the ground in Guyana under our conditions,
are hardly a basis for assessing the current conditions in the industry
and its market potential.

Mr. Kowlessar, while enthusiastically supporting furniture manufacture
as the sole alternative to log exports, fails to acknowledge that this
industry utilizes only limited species, grades and volumes of timber.
What do we do with the rest of the species, grades and volumes when
there are hardly markets for them internationally and virtually no
domestic markets? Mr. Kowlessar should know that, even as he writes,
the furniture industry faces its own challenge in attracting markets
and that some have been offered for sale.

The FPA has continued to point out that any sensible, businesslike
forest policy directed by government must respond to commercial market
demand. The armchair critics prefer to distort the market realities.
The facts speak for themselves. In 2006, 380,000m3 of logs were
harvested. Some 50% were exported as logs, virtually all hardwood
unsuitable for peeling into plywood. This indicates that some 50% of
this production was processed. These figures demonstrate that the
industry is already finding its own balance between processed timber
and log exports without any form of legislated intervention.

Further, twenty three percent or 45,728m3 of these exports were
purpleheart. If these purpleheart logs were to be converted to sawn
lumber by the immediate imposition of a ban on log exports, advocated
by Mr. Kowlessar, using a 40% recovery rate, never mind the 70%
recovery rate Mr. Kowlessar believes is possible, it would result in
18,291m3 of different grades and sizes of sawn purpleheart immediately
coming onto the local and international markets.

Anyone in the trade will tell you that even the local door and
furniture manufacturers want A grade lumber only. Perhaps Mr. Kowlessar
should set up a purchasing agency for all timbers which the industry
are not finding the markets.

For our forest industry to convert from log exports and expand into
processed timber, it is essential for our government to first accept
and address the realities of the industry as they are and not as they
might ideally wish them to be. It is essential that both local and
export market demands are assessed and valued and serious incentives
offered to encourage producers to retool and modernize these mills.
Quite the opposite has taken place.

The recent introduction of VAT, for instance, being applied to the sale
of logs domestically to saw mills for processing is a direct
disincentive to adding value to the industry. The FPA has written the
Minister of Finance on this matter and has recently met with officials
of the GRA to point this out. The FPA has also pointed out to the
Minister and GRA that VAT is now applied to a range of industry
equipment which hitherto did not attract consumption tax before.

The FPA wishes to refer to a letter in the Stabroek News from Simon and
Shock International promoting its application to government to invest
in what it describes as the introduction of “a new and practical
approach to milling in Guyana” in which they say that they will “invest
millions of dollars” to prove as “rubbish” the recovery rate of 40% as
indicated by FPA members.

The FPA has not been privileged to see nor have we been consulted on
any marketing plan for the export of finished product by Simon and
Shock International and cannot, therefore, comment on it, other than to
say that any proposal placed before the government claiming to be able
to market any and all processed species and grades of our timber should
be very carefully examined. Nevertheless, we look forward to these
millions in investment becoming a reality and, not, as so often has
been the case with similar proposals, never coming to fruition.