On 23 August 2010, Norway’s Finance Ministry announced that the Norwegian Government Pension Fund Global (GPFG) had blacklisted the Malaysian logging giant Samling from its portfolio. The decision was made after a review by the Norwegian Council of Ethics of Samling and two Israeli companies.
Barama, one of the biggest logging companies operating in Guyana, is a subsidiary of Samling.
A press release from the Norwegian Ministry of Finance explains that
“The Council on Ethics’ investigations have documented what seems to be extensive and repeated breaches of the licence requirements, regulations and other directives governing the company’s forest operations in Sarawak, Malaysia and Guyana.”
Guyana’s Minister of Agriculture, Robert Persaud, reacted quickly to a Reuters article about the Norwegian Pension Fund’s decision.
Kaieteur News reported that Persaud objected to this statement in the Reuters article: “The Ministry said it had excluded forestry company Samling Global based on the environmental impact of its forest operations in Malaysia and Guyana”:
“That statement, according to Persaud, gives the false impression that Barama Company Limited’s (BCL) operations in Guyana have resulted in serious damage to the environment.
“He said that the Guyana Forestry Commission (GFC) which is engaged in continuous monitoring of BCL’s operations has found little evidence to substantiate such a position.”
“I therefore, wish, to respectfully differ with the statement which implies that the operations of BCL in Guyana have caused a negative impact on the environment.”
Persaud’s comment is about a Reuters report – not about the Council of Ethics’ investigation into Barama’s logging operations in Guyana (pdf file 3.4 MB). Had he read that report, Persaud would find it significantly more difficult to differ with the statement in the Reuters article.
The Council of Ethics found that forest management and operational plans were missing. During an audit on behalf of the Forest Stewardship Council in 2006, Accreditation Services International found that “Logging activities were carried out in indigenous lands without prior informed consent of local communities.” The Guyana Forestry Commission fined Barama US$474,000 for illegal logging in October 2007. In the same year, Barama was found to be logging on behalf of other concession holders, which is not permitted unless specifically approved by the President and the Forestry Commissioner. The Council of Ethics comments that “It is, however, not clear whether Barama continues to be involved in illegal subcontracting of concessions.”
The Council of Ethics concludes its report by recommending “the exclusion of Samling Global Ltd from the investment universe of the Government Pension Fund Global due to an unacceptable risk of contributing to current and future severe environmental damage.”
It will be interesting to see what impact this has on Norway’s proposed financing of the Guyana REDD+ Investment Fund. Presumably Norway (and Guyana, despite Persaud’s objections) will now find it difficult to suggest financing for “sustainable forest management” that might involve funding to Barama.
The section of the Council of Ethics’ report about Barama is posted below. The report can be downloaded in full, here (pdf file 3.4 MB).
4.5 Barama’s logging operations in Guyana
Samling’s Guyanese subsidiary, Barama Company Limited, was established in 1991, and was granted a natural forest logging concession the same year. Located in the North-West of Guyana, the concession covers 1.611 million ha and is the largest in the country. It runs until 2016, being renewable for a further 25 years until 2041.
Forest Management in Guyana
The Guyana Forestry Commission is responsible for the administration and management of all Guyana’s state forest land, including developing and enforcing standards for forest sector operations and developing and implementing forest protection and conservation strategies.
As in Sarawak, there is little information available about which requirements the logging companies have to comply with. The Forests Act of 1953, the associated Forest Regulations, and the specific terms of the licence agreement (TSA number 04/91) legally provide the regulations for the timber harvesting in the concession. Barama is subject to an annual allowable harvesting volume determined by the Guyana Forestry Commission, which also imposes restrictions on minimum tree diameter cutting limits. Forests are harvested according to a 40-year cutting cycle, and harvesting plans are approved by the Forestry Commission. According to the company website, Barama’s timber operations are in compliance with the Guyana Code of Practice for Timber Harvesting, but the actual requirements are not further detailed. The Code of Practice sets guidelines and standards for the logging operations, but is apparently not obligatory for the company.
Absence of required forest management and operational plans
Medium-term and long-term logging concessions are required to have approved forest management plans. The Forestry Commission also requires annual operation plans as a precondition for the issuing of timber tags and log removal passes.
In early 2006 Barama was awarded certification by the Forest Stewardship Council (FSC) for two ‘forest management units’ within its concession in Guyana (Compartments 4 and 5), according to FSC criteria for sustainable forest management. In November the same year an independent audit confirmed numerous serious breaches of FSC’s criteria. As a result, the FSC certification of the concession was suspended. The audit revealed the following:
- The company had failed to produce a forest management plan for one of the 378,000 hectare large compartments.
- Poor oil and diesel disposal had caused severe pollution.
- No measures were put in place to prevent erosion and protect water sources during the construction of logging roads.
- The company had failed to carry out Environmental Impact Assessments prior to
major activities, resulting in significant environmental impacts.
- The company was unable to provide evidence that harvesting rates were not exceeding sustainable supply.
- The company had failed to adequately attend to basic health and safety requirements for workers.
- Logging activities were carried out in indigenous lands without prior informed consent of local communities.
In addition to the obviously environmentally harmful logging practices, the audit confirmed the absence of a forest management plan for one of the two compartments, something that appears to be a clear breach of the law. Barama’s FSC certificate was withdrawn in January 2007 and has still not been reinstated.
In its letter to the Council, Samling comments on this, accusing the Council of not attaching importance to the company’s efforts in improving the forestry operations, something that is necessary in order to be recertified. The company informs that in this respect it has sought the assistance of the WWF and the Guyana Forestry Commission. However, the Council is aware that in January 2009 the WWF made an official statement saying that the organization had cancelled the agreement with Barama, and that this had happened some time ago. According to the WWF, Barama does not have “the managerial or technical capabilities and the company does not seem to be making a serious attempt to deal with the issues.” Reference is made to an excessive number of issues that have not been addressed, and the WWF doubts that Barama will manage to reclaim the certificate. Thus, the Council finds it misleading that Samling refers to a cooperation which was ended more than a year ago, and where it seems evident that it is the company’s insufficient capability or determination to improve the forestry operations that has been decisive for its termination.
Moreover, the company argues that the main reasons why the FSC certificate was withdrawn were related to “staff issues, amenities, buildings and non-timber activities conducted by third parties (mining operations).” Based on the conclusion in the independent investigation of Barama’s concession areas, as described above, the Council does not subscribe to this view.
Fines issued by Guyana Forestry Commission for illegal logging
In October 2007, the Guyana Forestry Commission announced that it had fined Barama 96.4 million Guyanese dollars (USD 474 000) for illegal logging within three of the concessions adjacent to its own, where for some years it has conducted harvesting operations on behalf of third parties. The official investigation brought to light that the company had:
- failed to declare to the government a portion of the logs that the company harvested and removed from the Barakat concession during July 2007;
- harvested without permission a large quantity of logs in an adjacent concession (the Mazaharally concession) and falsely labelled stumps in this concession with tags provided by the Forestry Commission for use in another area; and
- removed logs from the Sukul concession without the Forestry Commission’s permission.
Barama later admitted that there had been a mixing of tree tags between different areas, though it claimed this had been unintentional. It also admitted that it had conducted logging without permits, though it stressed that the relevant permits were being processed by the Forestry Commission at the time. The company claimed that such anomalies were “part and parcel of the operational realities and practices in any dynamic and geographically challenging industry such as the timber industry where operations take place in deep jungle.” Barama believed the fines to be “severe, undeserved and arbitrary,” but eventually agreed to pay them.
In January 2008 Guyanese news articles reported that Barama had been issued with two more fines. The first fine, of 50 million Guyanese dollars (USD 255,000), was said to be for breaches in third party concessions, but no additional details were provided. The most recent fines were issued to a total of 12 logging companies, including Barama, for logging in concession blocks without approved annual harvesting plans. The fines issued totalled 275 million Guyanese dollars (USD 1.4 million). The share of these fines which was issued to Barama has not been made public, nor have specific details of Barama’s failures.
Logging on behalf of other concession holders
Samling Global’s 2007 IPO Prospectus disclosed that Barama at that time conducted harvesting operations on behalf of other concession holders in an additional 0.445 million hectares. According to Guyanese legislation, subcontracting forest concessions belonging to other concessionaires is not permitted, unless it is specifically approved by the President and the Forestry Commissioner. The Commissioner has argued that Barama is acting in the confines of the law when it harvests timber from outside its own concession. To the Council’s knowledge, however, no such permission from the President and Commissioner for these subcontractual agreements (under which Barama harvests 72 per cent of its logs) has ever been made public. When Barama was fined in 2007, the company was also instructed to immediately stop all forestry operations in concession areas of third parties (Mazaharally, Sukul and Barakat).
Figure 22: Map of Barama (Samling) concession and adjacent subcontracted harvesting areas in Guyana. As of early 2007, of the adjacent concessions in the map above, harvesting agreements had been signed for all except Barama Housing Inc, which was in process.
In its letter to the Council, Samling states that all subcontractual agreements were terminated by the end of 2007, due to a “change in policy of the Government of Guyana. Prior to that, all subcontractual arrangements were undertaken with the full knowledge and support of the Guyana Forestry Commission (GFC) the regulatory authority. BCL [Barama] acted at all times under the guidance and approval of the GFC. The change in policy was that the GoG no longer wished to allow subcontractual arrangements, and forest concession holders are required to make more direct investment into their forest concession operations instead of outsourcing parts of their operations.” The Council notes that Samling attributes the ending of the subcontractual agreements to a change in government policy, which in this case may imply that the authorities have enforced the legal provision. Samling does not provide information as to whether it has had the necessary presidential approval for renting concessions.
It is, however, not clear whether Barama continues to be involved in illegal subcontracting of concessions. The Council has been informed that Barama in 2008 paid the fine imposed on Toolsie Persaud (see map) after this company refused to pay. Since the fine was imposed because of the logging by Barama in that concession, in blocks which had not been approved by the Forestry Commission, it seems likely that Barama was renting this concession.
Barama is said to also have failed in the past to pay a 2 per cent export tax on logs harvesting in third party concessions. It is thought that the company’s initial 1991 agreement with the Guyanese government exempted it from paying these taxes, but that this exemption does not cover logs harvested outside its own concession. Reports from the Commissioner of Forests to the Board of Directors of the Forestry Commission apparently stated that such taxes were outstanding.
 ^ Samling Global IPO Prospectus, p. 144 and p. VI-68.
 ^ http://www.forestry.gov.gy/index.html.
 ^ Samling IPO Prospectus, section on Business, p. 144.
 ^ http://www.baramaguyana.com/eng/about/overview.htm.
 ^ The Code of Practice (second edition 2002) could be made obligatory but the President (as Minister of Forests) has not amended the Forest Regulations to do this. Communication with John Palmer, 16 December 2009; on file with the Council. See also Trevin, J. og R. Nasi 2009: Forest Law Enforcement and Governance and Forest Practices in Guyana. CIFOR and Iwokrama International Center for Rainforest Conservation. Commissioned by the Norwegian Ministry of Environment’s Climate and Forest Initiative.
 ^ Bulkan, Janette and John Palmer, 14 February 2008: Illegal logging by Asian-owned enterprises in Guyana, South America. Briefing paper for Forest Trends, 2nd Potomac Forum on Illegal Logging & Associated Trade, House Washington D.C.; available at http://www.illegal-logging.info/approach.php?a_id=135.
 ^ According to its website, the Forest Stewardship Council is an independent, non-governmental, not-for-profit organization established to promote the responsible management of the world’s forests. FSC is a certification system that provides internationally recognized standard-setting, trademark assurance and accreditation services to companies, organizations, and communities interested in responsible forestry; see www.fsc.org.
 ^ Barama was evaluated by SGS Qualifor and awarded a combined forest management / chain of custody certificate under the Forest Stewardship Council (FSC) in February 2006. This award was protested by civil society. Accreditation Services International GmbH (ASI) carried out a field inspection audit of SGS Qualifor’s certification of Barama for FSC in November 2006, issuing a critical public summary report in January 2007. SGS Qualifor subsequently suspended the FSC certificate for Barama.
 ^ Accreditation Services International, FSC Annual Surveillance of SGS for 2006, Forest Management Audit to Barama Co Ltd (BCL), Guyana (SGS-FM/COC-2493), Date of audit: 20 to 25 November 2006, http://www.fsc-watch.org/docs/SGS_suspends_Barama_certificate_ASI_report.pdf.
 ^ See footnote 84.
 ^ http://www.baramaguyana.com/eng/ec/certification.htm.
 ^ Samling’s letter to the Council, dated 12 February 2009.
 ^ The company here refers to Barama Company Ltd’s FSC Certification dated 30 April 2007; available at http://www.panda.org/who_we_are/wwf_offices/suriname/?100160/WWF-Statement-on-Barama-Company-Ltds-FSC-Certification.
 ^ http://www.stabroeknews.com/2009/stories/01/11/wwf-has-%e2%80%98disconnected%e2%80%99-from-barama/
 ^ Guyana Chronicle, 23 Oct 2007: Barama fined $96.4M – forestry staffers dismissed, sanctions imposed on three firms. The three concessions were issued to A. Mazaharally & Sons, N.Sukul & Sons, and Barakat Timbers Ltd. See also Samling Global Ltd, 26 Oct 2007: Clarification of matters in respect of sanctions imposed on Barama Company Ltd by the Guyana Forestry Commission; http://www.hkexnews.hk/listedco/listconews/sehk/20071026/LTN20071026004.pdf
 ^ Stabroek News, 25 Oct 2007: Barama: Fines will send workers home; http://guyanaforestryblog.blogspot.com/2007/10/barama-fines-will-send-workers-home.html
 ^ Samling Global Ltd, 26 Oct 2007: Clarification of matters in respect of sanctions imposed on Barama Company Ltd by the Guyana Forestry Commission, http://www.hkexnews.hk/listedco/listconews/sehk/20071026/LTN20071026004.pdf
 ^ See footnote 92.
 ^ Stabroek News, 15 Nov 2007: Barama agrees to pay $96.4M forestry breaches fine; http://guyanaforestryblog.blogspot.com/2007/11/barama-agrees-to-pay-964m-forestry.html
 ^ Stabroek News, 15 Feb 2008: Loggers to mount legal challenge to Forestry Commission fines: source; http://www.stabroeknews.com/2008/business/02/15/loggers-to-mount-legal-challenge-to-forestry-commission-fines%E2%80%A6source/
 ^ Samling IPO Prospectus: Business section, p. 145. Annex VI of the prospectus (p. VI 70) shows that logging on rented concessions amounted to 72 per cent of Barama’s total logging volume for the budget year 2005-2006.
 ^ Bulkan, Janette and John Palmer 8 June 2007: Lazy days at international banks: how Credit Suisse and HSBC support illegal logging and unsustainable timber harvesting by Samling/Barama in Guyana, and possible reforms; available at http://www.illegal-logging.info/uploads/Samling_Barama.pdf. Logging in subcontracted concessions is illegal under Article 12 of the Forest Regulations of 1953, Condition 13 of Timber Sales Agreements and Condition 2 of State Forest Permissions.
 ^ Stabroek News, 8 July 2007: Barama harvesting legally outside its concession – Commissioner of Forests; http://guyanaforestryblog.blogspot.com/2007/07/barama-did-not-sub-lease-from-other.html.
 ^ See footnote 92.
 ^ E-mail from John Palmer, 11 December 2008 and 16 December 2009; on file with the Council; see also http://www.stabroeknews.com/2008/stories/08/30/tpl-to-pay-80m-forestry-fine-timber-operations-to-resume/
 ^ Stabroek News, 30 Jan 2007: Letter to the editor from Janette Bulkan, http://www.illegal-logging.info/item_single.php?it_id=1907&it=news.