Half the timber produced last year was processed locally, the industry is finding its own balance.

http://www.stabroeknews.com/index.pl/article?id=56524603


Half the timber produced last year was processed locally, the industry is
finding its own balance
Saturday, July 14th 2007

Dear Editor,
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 centred, 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 for 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.
Yours faithfully,
Mona Bynoe
Forest Products Association of Guyana