http://www.stabroeknews.com/index.pl/article?id=56520728
Stabroek News
Sunday, May 20, 2007
Dear Editor,
I welcome the further announcements from the Barama Company Limited
(Stabroek News May 12, 2007) of its apparent willingness to put into
the public domain the evidence (which should be duly notarised) which
it believes will exonerate itself and which will answer the catalogue
of failures listed by, among others, the quality assurance
certification body SGS Qualifor in February 2006, by the accreditation
authority ASI in January 2007, and by WWF Guianas (Stabroek News May
05, 2007). Beyond the issue of third party forest certification, the
Barama Company Limited should also now produce the evidence or
arguments to justify its continuing enjoyment of a range of tax and
other concessions, paid for by the Guyanese people, while it continues
to claim never to have made a profit even after 16 years. This claim of
unprofitability is prima facie commercially illogical unless the
profits were being transferred elsewhere.
In his reported press conference on May 11, the General Manager of
Barama said that "Bulkan . . . needs to produce the evidence to back
what she is saying". This I have done over the last year and more.
Stabroek News and other publications have carried letters and feature
articles, including my series of ten articles in the "Guyana and the
Wider World" column in Sunday Stabroek from January to April this year.
The evidence was consolidated into a dossier presented to senior staff
and to the annual meeting of shareholders of the international Credit
Suisse bank in Zürich on 3 and 4 May. Stabroek News has a copy of this
dossier but it is too long to publish in its entirety in this
newspaper. However, the editor has kindly agreed to the following
shortened version, which excludes the exact references. I would be
happy to send the full version, which has been cleaned of duplication
following the meetings in Switzerland, to anyone who writes to me by
e-mail at
janette.bulkan@yale.edu.
The origin of this dossier may be informative. The parent company of
Barama's enterprises in Guyana has re-structured and launched itself on
the Hong Kong stock exchange in early March this year as Samling Global
Limited. The formal names for Barama's two enterprises in Guyana now
include the words "British Virgin Islands", a well known tax haven. The
documents prepared for Samling's initial public offering (IPO) include
analyses by the Singapore office of the Finnish consultancy company
Pöyry. I have drawn substantially on, and fully referenced, the data
provided by Samling itself in the IPO documents. Mention of infractions
against the forest and other laws in Guyana are referenced to those
laws. In this shortened version for Stabroek News, I have inserted an
asterisk (*) to mark the points at which there is a reference in the
full dossier.
The IPO launch in Hong Kong was under-written by three international
banks - Credit Suisse, UK-based HSBC and Australia-based Macquarie.
Both Credit Suisse and HSBC have sustainability policies and due
diligence requirements which should be implemented before agreeing to
under-write such new share offerings. HSBC has had from 2004 a forest
policy whose summary is in the public domain. Credit Suisse is reputed
to have an unpublished forest policy. Both banks have signed up to the
UN Global Charter which contains environmental safeguards and
anti-corruption / good governance requirements. Samling raised US$269
million almost overnight and the three under-writing banks have
certainly shared in that good fortune. In comparison, from 30 June 2003
to 30 September 2006, Barama Company paid only a total of US $2.5
million as royalties and rent to the Government of Guyana and to the
landlording forest concessionaires combined. Civil society
organisations including environmental NGOs have protested about the
banks signing charters of corporate responsibility but then apparently
ignoring their own procedures. HSBC has immediately acknowledged the
need for tighter or remedial measures and has invited external
stakeholders to assist in the review.
Even without sight of its reputed forest policy, Credit Suisse appears
to have violated procedures and my dossier indicates what has not been
implemented. As presented through two Swiss NGOs - Bruno Manser Fonds
and the Society for Threatened Peoples - the dossier mentions -
Samling (Barama) holdings in Guyana
Samling acknowledged in their IPO prospectus that they rent more than
400,000 hectares of concessions from third parties*. This is clear
evidence for large-scale illegal logging since landlording (concession
renting) is illegal according to Guyanese laws. In addition to its
legal control over 1.61 million hectares, Samling mentions "harvesting
rights for a further 445,000 hectares" - this includes 47,000 ha
legally held in State Forest Exploratory Permit (a pre-harvest
feasibility study). The extra 408,000 hectares are illegally rented
from other nominal concession holders or illegally contracted from
titled Amerindian Village Lands*. Sub-letting and renting of all
classes of forest harvesting concessions are against forest law and
concession conditions in Guyana, without special permission*. Such
illegal activities should lead to suspension or cancellation of the
concession*. There is no evidence from the Board of Directors of the
government's Guyana Forestry Commission that special permissions have
been requested or granted in any of these cases, with one temporary
exception.
It must be concluded that Samling's open claims to these illegally
rented areas provide prima facie evidence that Barama is taking
advantage of persistent and consistent gross incompetence or there is
some hidden explanation; it would not make sense for Samling to make
such claims for illegal renting of concessions unless it feels that it
has "ultra vires" protection. Credit Suisse apparently did not check
the IPO claims adequately against its Due Diligence commitments related
to UN Global Compact Principle 10.
Logging on titled Amerindian
Village Lands
Barama is currently logging the titled indigenous Amerindian Village
Lands of two communities - Akawini and St Monica. This is acknowledged
in the Samling IPO documents*. These lands are not within the mandate
of the Guyana Forestry Commission. Barama uses Interior Wood Products
Inc. (IWPI) as a shell company to arrange logging agreements with these
two communities. The agreements were made "in bad faith"* and so are
illegal*. However, although the government of Guyana is aware of the
complaints by the Amerindian communities no legal action has been taken
against Barama. This is very difficult to understand.
Barama did not secure an Environmental Impact Permit to construct
logging roads in the Amerindian Village Lands, a further illegality*.
Harvesting forest too fast and
unsustainably
The Samling IPO documents show that Barama has no intention of
harvesting these Amerindian Village Lands or the illegally rented
concessions in a sustainable manner. The IPO shows that Barama intends
to log out these lands in a single cut by 2016.
In its own concession TSA 04/1991, Barama is logging at least 40 per
cent too fast* and selectively cutting the prime decorative hardwood
timbers. These are timbers used by in-country timber processing
companies for adding value. Instead, Barama is exporting them as logs
to India and China.
The IPO documents show that Barama is drawing 55-72 per cent of its
total log supply from outside its own forest harvesting concession*,
and thus contributing to local shortages of prime furniture-quality
timbers. Barama is able to do this through abuse of its tax concessions
for imported fuel and logging equipment. These Foreign Direct
Investment (FDI) tax exemptions negotiated in 1991 and renewed in 2001
were intended to support local processing and value-addition of
non-traditional timbers. Barama is illegally using these tax exemptions
outside its own area. There is a high import tax on fuel, and forest
logging requires a lot of fuel, so the FDI exemption gives Barama a
strong financial advantage over locally-owned enterprises.
Non-payment of taxes
In spite of the legal advantages of the tax exemptions, and its abuse
of them, Barama continues to insist that it has made no taxable profit
since its arrival in Guyana in 1991*. This is impossible to accept and
the declaration of volumes of exports, timber names, and invoice prices
need to be very closely examined.
The very favourable FDI concessions provide Barama with a special
regime of resource access taxes, and freedom from several taxes which
are routinely imposed on locally-owned forest enterprises. In spite of
this treatment, Barama has illegally avoided payment of the export
commission on logs obtained from outside its own concession, and is
substantially in arrears in forest access taxes*.
Secrecy in Barama's activities
There is little or no information in the public domain - from the
secrecy shrouding the allocation and control of forest concessions, and
the identity and scope of operation of log exporters operating out of
Guyana to the failures by State agencies to monitor compliance from
FDI-benefitting companies with the terms of their contract, or to
collect even the low natural resource access taxes. None of the
following - Barama's Timber Sales Agreement 04/91, the compartment
boundary and logging block and harvest area maps, the forest management
and other operational plans - are in the public domain. These failures
were noted by Accreditation Services International GmbH (ASI) during
its monitoring of SGS Qualifor's surveillance mission in November
2006*.
Barama's contraventions of environmental precautions - UN Global
Compact Principles 7 and 8, and Credit Suisse policies
It should be mentioned again that in its first years Barama showed that
it had the technical ability to operate to standards of good forest
stewardship*. During the 2005-6 evaluations by SGS Qualifor and ASI,
the following contraventions were noted; this is not a complete list.
These 14 contraventions are listed in relation to the criteria of the
quality assurance Forest Stewardship Council (FSC), and are given by
FSC Criterion number* -
FSC Criterion 1.1 - illegal operations (described above)
FSC Criterion 1.2 - taxes not paid (described above)
FSC Criterion 1.6 - absence of commitment to sustainable forest
management and failure to comply with FSC policy and intent on partial
certification of large ownerships
FSC Criterion 5.6 - over-cutting (described above)
FSC Criterion 6.1 - absence of environmental impact permit
FSC Criterion 6.2 - failure to demarcate conservation zones in logging
blocks (Logging Compartment 5 is entirely high-conservation-value
forest)
FSC Criterion 6.5 - poor standards of road construction and
maintenance, leading to soil and water pollution
FSC Criterion 6.7 - lack of care in disposal of toxic residues, leading
to soil and water pollution
FSC Principle 7 - failures in forest management planning
FSC Criterion 7.4 - no public summary of forest management plan
FSC Principle 8, especially Criteria 8.2 and 8.5 - several failures in
monitoring forest harvesting operations and lack of reconciliation with
planned forest management
FSC Criteria 9.3 and 9.4 - failure to manage forest of acknowledged
high conservation value.
Barama's contraventions of social
precautions - Credit Suisse policies
FSC Criterion 3.4 - Barama engages Amerindians for their good knowledge
of trees and timbers but pays them badly and does not have employment
practices which match the Amerindian way of life. Barama does not
specifically compensate for traditional knowledge.
FCS Criterion 4.1 - local forest employment. Barama had emphasised in
1991 the employment which it would bring in, but it has followed
practices like hiring Amerindians and other Guyanese briefly, getting
them to train Asian workers, then terminating the employment of the
Amerindians, but claiming that Barama has hired a total of so many
Guyanese. Skilled jobs are almost all reserved for foreign contract
workers, or local sub-contractors. Barama is keeping to the overall
(FDI-agreed) limit of 15 per cent expatriate workforce by counting its
unskilled local workers at the plywood mill and 'log landings'
(including low-paid cooks and security guards). Foreign workers are
paid in US dollars, generally deposited in their bank accounts in their
home country, and pay no local income taxes while in Guyana*.
- Barama abuses the technical training provided under ITTO and other
multilateral funding to the Guyana Forestry Training Centre (FTC) by
sending foreign-recruited workers with interpreters for training, in
preference to Guyanese. The foreign workers cannot move to other
employers, while Guyanese might move to other better-paying enterprises
after such training.
- Barama provides employment to only 5 percent of all forestry workers
in Guyana while legally holding over one-quarter of the best-stocked
forests*. The Barama Company employs only 1,100 people in total in its
logging (400 workers), milling (100 workers) and plywood factory (550
workers) operations*. Barama has downsized its plywood processing
operation in Guyana while accelerating its log exports. It has reduced
its workforce by three-quarters in the plywood mill in a decade - from
1,900 in 1995 to 1,750 in 1996, to 1,000 in 1997 and 550 in 2005.
Barama's plymill operates at 10-20 per cent of its rated capacity.
- Salaries - Guyanese employees generally work 12-hour shifts, 27 days
on, 4 days off. Both foreign and Guyanese workers are said to be on
one-year contracts, if any, renewable at the discretion of expatriate
management, without any assurance of annual increment or cost-of-living
increase. Guyanese allegedly are paid much less than the foreign
workers for the same kind of job. Wage labour rates seem to start at G$
26,000 per month (US$ 130) for Guyanese. The food allowance for foreign
workers is more than double that of the Guyanese - G$ 15,000 per month
(US$ 2 per day) versus G$ 7,000 per month (US$ 1 per day). This
allowance for food can be taken as canteen-supplied food, or as a kind
of credit voucher which can be spent only by list-ordering from a
company-tied shop*. On 21 March 2007, Stabroek News reported Akawini's
Councillors stating at their press conference, "IPWI enticed it with
the prospect of good employment and the promise that at least 80
persons from the village would be doing skilled jobs for salaries as
high as G$80,000. In reality only 12 persons were employed to do menial
work for very little reward. In some cases, persons earn as little as
G$17,000 per month, it said".
FSC Criterion 4.2 - ASI noted several health and safety failures.
Barama was charged with responsibility for death of a mining worker. At
the Barama Company Limited's Public Stakeholder meeting on February 28,
2005, the then Commissioner of Geology and Mines (now the Minister of
Public Works) and the employer of a dead gold miner held Barama
responsible for the latter's death after the company's refusal to allow
him passage on a road running through its concession. There is no legal
concept of a private road on public lands in Guyana (legal advice
provided 16 February 2007, in relation to the Public Lands (Private
Roads) Act cap. 62:03).
FSC Criterion 4.4 - no social impact assessment undertaken.
FSC Criterion 5.1 - transfer pricing and tax exemptions. Barama
maintains that it has not made a profit in 15 years*. The company has
not been paying the 2 percent export tax on the declared value of logs
extracted from areas outside of its formal concession, from 2003 by its
own admission (but quite likely earlier). The company has not been
fined, nor has it yet repaid the levied US$ 70,000 in export taxes owed
since 2003*. Barama is allegedly in negotiation with the Office of the
President on this matter. Barama's abuse of duty-free import allowances
and its non-payment of due taxes mean that Guyana actually subsidises
log exports.
- Guyana's resource access taxes have not been adjusted for the falling
exchange rate and for inflation since 1996 and are among the lowest in
the world. The country is receiving only around ten per cent of the
volume-based tax revenue from resource access rights compared with
Malaysia. Even the low taxes are not actually collected efficiently and
over US$ 1 million was owed by the major logging companies, allegedly
including Barama, up to August 2005*.
FSC Criterion 5.2 - local harvesters of non-timber forest products
(NTFPs) in the Upper Pomeroon River who supply nibi and kufa,
tree-growing vines used in manufacture of "cane" furniture, allege that
Barama prevents them from travelling along timber roads in order to
carry out their traditional harvesting. The GFC Code of Practice for
Timber Harvesting (second edition, November 2002, section 2.2 forest
use zoning, page 7) says that "Consultation with local stakeholders
during the planning process is required to identify whether and where
certain tree species are in demand for their use as NTFP-producers
(non-timber forest products). Species to consider are… Similarly,
consultation should take place in relation to harvesting of Kufa and
Nibi. The Code of Practice for Kufa and Nibi Harvesting [a separate GFC
document] sets standards on the felling of host trees and sharing of
information on the planned coupe six months in advance to allow
harvesting of these NTFPs before logging". The foreign forest workers
destroy all the nibi and kufa in their path while Pomeroon nibi and
kufa harvesters have had to re-locate to less productive forests along
the Linden to Kurupukari Road*.
FSC Criterion 5.4 - starving of in-country downstream processors of
wood supplies. The intensified export of unprocessed prime log species,
particularly since 2000, had resulted in the reduction of local
supplies. The smallest wood processors have been driven out of
business. Larger factories spend increasing amounts of time and
resources trying to access raw materials. During this period of
Barama's extension of control over State Production Forests, from 26 to
over 33 per cent, the contribution of forestry to GDP has declined from
4.8 percent in 1995 to 3.3 percent in 2003, and to 4 percent in 2005.
Barama is the largest timber exporter in Guyana. The Asian market
absorbed 98 percent of the total volume of logs exported from Guyana in
2006. Log exports as a percentage of log production increased from 35
percent in 2005 to 44 percent in 2006. 82 percent of all log exports in
2006 went to India (41percent) and China (41percent). 16 percent of the
remainder was purchased by 7 other Asian countries.
In addition to this dossier, I propose to offer a further analysis,
also based in part on the data in the public domain from Barama's
parent company, which will show how Guyana has failed for years to
extract a fair rent from Barama (and all other loggers).
Yours faithfully,
Janette Bulkan
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