THE PIPER: Forestry normal?

Slowly the noose is being tightened around the neck of Bai Shan Lin without evidently considering the conditions that may be prevalent in the forest industry worldwide and even here in Guyana. It is a fact that while Guyana had several local companies, and one British one, they have been unable to utilise the forest resources in a significant way to the benefit of Guyana. It is for this reason that foreign companies were solicited.

Guyana and Guyanese should now be quite familiar with foreign companies operating in this sector after the floodgates of “liberalisation” and privatisation was ushered in by Desmond Hoyte when he signed on with the IMF “conditionalities” in 1989. As described by Odeen Ishmael who was convinced money had to have passed under the table: “There were indeed some controversial privatisation deals which took place. The one that received the most publicity was the sale of Demerara Woods Ltd. Lord Beaverbrook, a former treasurer of British Conservative Party, bought the entity in February 1991 for £9.7 million. He also negotiated and obtained a 50-year lease for 1.1 million acres of rain forest.

 Just two months later, in April 1991, he sold his interests to United Dutch Company for £61 million worth of equity in that firm. The new entity was re-named Demerara Timbers Ltd. Even though Beaverbrook had up to mid-1992 not finished paying the Guyana government for Demerara Woods, he merged the enterprise into the giant United Dutch Company. This latter company took control of Demerara Timbers of which Beaverbrook remained a major shareholder. By 1992, United Dutch valued Demerara Timbers at £74 million!

…The rainforest concession alone was estimated at between US$160 million to US$206 million. The IMF cited Demerara Woods as a priority item for the state to sell despite the fact the bilateral donors and the World Bank had poured a huge amount of financial aid (including £14 million from the European Community) for the development of Demerara Woods. Furthermore, Demerara Woods’ debt was underwritten by the government as part of the sale agreement. Thus, the citizens of Guyana subsidised the bargain-basement sale of a timber asset to entice foreign investment into the country.”

My Hoyte also brought in Barama in 1991, which is still around, in a deal that one foreign author described thusly: “The Barama agreement grants the company a 25-year lease – automatically extendable for a further 25 years… the Company also enjoys a ten-year tax holiday, including income tax, corporation tax, withholding tax, consumption tax, property tax, and income duties on just about everything, including machinery, fuel, building materials, office equipment, and medical supplies. Export taxes are only payable on greenheart, while royalty payments have been fixed in Guyanese dollars, over the first 20–year period, a gift to the company as the currency devalues.”

“Yet the company is also permitted to hold external accounts, foreign currency accounts within Guyana, employ 15 percent foreign workers (more if local labour with the right skills is unavailable), and, in the event of disputes with the Government, have recourse to the arbitration of the ‘International Centre for Settlement of Investment Disputes’ in Washington DC, in which case the company ‘shall be deemed as a national of a State other than Guyana’ .” For the first 15 years the company claimed not to have paid any taxes and thus did not even pay the 2% tax. Last week it retrenched 274 workers.

Guyana’s policy makers need to take a hard look at the prevalent practices by foreign companies in the forestry sector and balance those realistically against their need to generate employment and jobs.