There should be no further delay in implementing the log export ban

http://www.stabroeknews.com/index.pl/article?id=56523447

There should be no further delay in implementing the log export ban
Stabroek News
Thursday, June 28th 2007

Dear Editor,

I welcome the response from the Forest Products Association (FPA)
captioned "Those who demand a total ban on log exports fail to
understand the market" (07.06.24) to my letter captioned "Better
log-to-lumber conversion rates can be achieved with appropriate
equipment" (07.06.14). The apparent losses to Guyana from exports of
unprocessed logs are so large that an open debate is overdue. I had
pointed out that there are four national policies plus the 2006 PPP/C
pre-election manifesto in favour of local processing of forest products
and no national policies in favour of export of unpro-cessed logs. I
did not see why the decrepit state of some traditional family-owned
saw-mills should be used by the FPA to justify continued log exports.

At the seminar on log exports on February 17, the Commissioner of
Forests quoted from a GFC study that the national sawmilling capacity
was 504,000 m3 of logs per year. The sole functioning plywood mill is
Barama's and that has a designed capacity of 235,000 m3 logs per year
(even though Barama actually processed only 63,000 m3 logs in financial
year 2005-6, running at one quarter capacity, while exporting 119,000
m3 unprocessed logs in the same period). The commissioner pointed out
that the national log production in year 2006 was 380,000 m3, so
sawmilling capacity was one third larger than total log production,
leaving aside the capacity of the plywood mill. Even allowing for the
decrepit mills, there must be a substantial under-used capacity.

Gary Clarke and Ricky Ramsaroop's study on portable sawmills in Guyana
for the Caribbean office of the UN Food and Agriculture Organization in
2005 showed that the mobile narrow-kerf bandmills were capable of up to
70 per cent recovery log-to-lumber and a production of up to 7 m3 sawn
lumber per day on an investment of US$ 30-35,000. Using a reduced
volume recovery rate of 65 per cent and a grade recovery of 65 per cent
A and 35 per cent B grade lumber (derived from Duncan Macqueen and
Andrew Mendes in 2006), the following value multipliers can be
estimated:

*log cost delivered to sawmill gate (GFC, Barama and Jaling data), US$
80 per m3 value multiplier = 1

*declared FOB export price of unprocessed log (Barama data), US$ 120
per m3 value multiplier = 1.5

*FOB export value of sawn lumber, 65% grade A @ US$ 770 per m3 and 35%
grade B @ US$ 320 per m3 (Mendes & Macqueen, Barama prices) value
multiplier = 5.0

*FOB export value of garden furniture made from this sawn lumber, US$
1170 (a local manufacturer) value multiplier 14.6

Taking the lower ratio of 0.4 log-to-lumber recovery from FPA members'
mills, the value multipliers for sawn lumber and garden furniture
become 3.1 and 9.0, compared with the 1.5 multiplier for raw log
export.

In other words, it is much better for Guyana to process the logs
instead of allowing them to ship out unprocessed.

Returning to the 119,000 m3 of logs of fine furniture and flooring
grade timbers exported by Barama in financial year 2005-6, using the
lower log-lumber 0.4 conversion ratio from FPA could result in
furniture worth US $86 million. Using the higher log conversion ratio
of 0.65 could result in furniture worth US$ 139 million. Instead, the
raw logs were valued for Customs declaration at US $14 million FOB. It
would be astonishing that the old family-owned sawmillers are generally
in favour of continued log exports rather than conversion locally into
fine furniture, if one did not know that some of these millers are the
chief beneficiaries of the rent from their illegally sub-let
concessions, more than US $450,000 per year (data derived from Samling/
Barama's IPO, March 2007).

The FPA argues that one needs large fixed bandmills and the amazingly
inappropriate sash gang mills to cut long lengths. But who needs a bed
18 feet long or a 40-foot long table? And why is the FPA referring to
markets in Korea and Japan when data from the Guyana Forest Products
Marketing Council show no exports to those two countries? The figures
estimated above show that delay in implementing this ban on log exports
is benefiting just a few people, who have in the past "licked up"
credit loans from Gaibank, Interamerican Development Bank loan LN 633,
CIDA I and CIDA II, and from the European Invest-ment Bank. And these
millers still can't saw the logs profitably. The GFC and Minister of
Agriculture concluded the meeting on 17 February with an expressed
intention of implementing a log export ban. There should be no further
delay.

On May 26, 1993, on the occasion of our 27th Indepen-dence Anniversary,
the late Dr Cheddi Jagan declared, "When in opposition, we condemned
the indecent haste with which the former regime privatised our national
assets at basement prices, and in a manner that lacked transparency and
was not in the national interest, we will not do the same.
Privatisation and divestment must be app-roached with due care. I was
not elected President to preside over the liquidation of Guyana. I was
mandated by the Guyanese people to re-build the national economy and
restore a decent standard of life for all Guyanese. In all my political
career, I did not succumb to pressure to serve narrow partisan
interests; I do not intend to do so now. I will not surrender the
interest of the nation for expediency or short-term gain."

We do not have to wonder at how Dr Jagan would respond if he were alive
today and had to witness the ongoing liquidation of Guyana by the party
he founded.

Yours faithfully,

Mahadeo Kowlessar