Marketing logs cannot fulfil development plans

http://www.stabroeknews.com/index.pl/article?id=56523863

Marketing logs cannot fulfil development plans
Stabroek News,
Thursday, July 5th 2007

Dear Editor,

The letter by the Forest Products Association (FPA), captioned "Those
who demand a total ban on log exports fail to understand the market"
(07-06-24), fails to consider other market opportunities that new
investors could pursue, namely the lucrative markets for hardwood and
bamboo floors, prefabricated houses, wooden doors, furniture and
kitchen cabinets, boats, bridges and parts, storage huts, gazebos, and
so on. This is in addition to the benefits of restraining
deforestation, degradation and other environmental costs that could
impact adversely on Guyana's now emerging tourism industry.

Guyana needs economic transformation to move it forward as an exporter
of manufactured products from its limited stock of hardwood and
softwood. Indeed, new directions in granting tax incentives must be
charted soonest, with a focus on a network of domestic manufacturing
and forestry management capacity development. Exporting logs is
anti-development in terms of human capital development and a network of
sustainable inter-industry development in Guyana-non-forestry products,
tourism, and high valued manufactured products.

The alarm that Forest Products Association is sounding had shifted
Guyana's forestry sector into being a primary producer since 1989. FPA
clearly advocates using tree-cutting capacity to export Guyana's
limited supply of logs and wait until such time that it has milling
capacity to become a player in more lucrative manufactured products
markets.

This is a costly delay for Guyana. New investors or investments are
needed now. Marketing logs cannot fulfil development promises or plans.

FPA is also saying that it has advised the Guyana Forestry Commission
(GFC) that its members support 'adding value to the industry by
converting from reliance on the export of primary product to the export
of processed and manufactured product'. The FPA is clearly disappointed
with progress made with its own advice in moving Guyana out of its
primary-supplier colonial mode into the manufacturing mode. Tangible
investments toward securing milling capacity from the proceeds of the
forestry sector itself should have been forthcoming from re-investments
by profitable forestry operators. It is time to redirect incentives
toward manufacturing and tourism rather than primary logging. Further,
primary forestry production should be taxed on its imputed export
earnings in order to sustain other developing industries in Guyana.

Exporting non-renewable forest logs is inherently flawed. First, a
given production level can be achieved at low or high costs. Second,
profits on the activity is not calculated where production occurs.

Third, tax-exempt status and absence of mechanisms for re-investment in
Guyana has not generated the required milling capacity. Full costs of
production, including the imputed cost of a tree, environmental costs,
internal forestry monitoring costs, and the costs of replanting and
replenishing depleted stocks of logs are not explicitly considered
under intra-company export-sales maximization. Guyana would have been
much higher on the development ladder if manufactured products were
exported rather than logs. That would have created a far higher level
of employment of its skilled labour and managerial graduates from its
higher educational institutions. This did not occur and 83 percent of
its graduates migrate (SN 2007-06-24).

The policies that FPA supported should now be turned into tangible
realities for both human and fixed capital formation in inter-related
industries. This should be the final call by FPA for Guyana to leverage
its forestry wealth for development of its manufacturing sector and for
the creation of a broad value-added tax base in a network of domestic
industries. New directions for lasting development are needed in the
primary forestry sector in order to achieve sustainable development,
dismantle monopoly, and upgrade primary production structures, a relic
of colonialism and exploitation. Moreover, any serious attempt to
develop manufacturing-forestry related, gold and diamond related, and
the tourist industry would recognize the value-added tax regime now in
place and create a corresponding new value-added tax base. An expanded
tax base would spread taxes more evenly throughout the economy,
relieving taxes on low incomes, while funding capacity development.

Guyana has limited capacity to supply logs to any market in Asia or
North America in one to three years. Its stock of remaining logs should
therefore be leveraged now, in order to sustain imports and domestic
capital formation in its own economy and heed the challenges to reduce
deforestation and global warming. The same argument should be applied
to gold stocks and the development of a viable networked jewelry and
tourist industry, using what is left of its pristine forests and
bio-diverse species to attract tourists, scientists, nature lovers, and
other capitalists in the service industry. The red-carpet tax
incentives granted to the primary exporters of logs should now be
shifted or replaced by a new regime of manufacturing and international
income taxes.

Finally, efficiency in production, certification in cutting trees, and
efficient recovery rates are not directly related to capacity building
for milling and processing and technology transfer. Technical
efficiency represents one side of the coin.

A share of primary export proceeds would be needed to finance milling
and processing-capacity in the Guyana economy. It is probable that
current loggers do not see the need for milling and processing capacity
over their years of 'harvesting' logs.

Yours faithfully,

Ganga Prasad Ramdas