in Guyana

News from Guyana: Article by Janette Bulkan in the Commonwealth Forestry Association newsletter

News from Guyana: Article by Janette Bulkan in the Commonwealth Forestry Association newsletter

A recent article from Janette Bulkan, published in the Commonwealth Forestry Association Newsletter looks at costs and profits of timber exports from Guyana.

“The commercial advantage to export logs is clear,” Bulkan writes, “when the Government of Guyana fails to use regulation and fiscal measures to make the implementation of national policies for in-country timber processing commercially feasible.”

REDD-Monitor posted three articles from the CFA Newsletter by Bulkan in November 2011 and two more in April 2012. The articles are reproduced with Janette Bulkan’s permission.

News from Guyana

CFA Newsletter, June 2012

In my last report (CFA Newsletter number 56, March 2011, pages 9-10) I commented on the background to the failed log export policy which came into effect in January 2009. Discussions are continuing on a revision of that policy, with no common ground between enterprises trading logs to Asia and enterprises processing timber for the domestic market. In support of the discussions, the Guyana Forestry Commission (GFC) has conducted more surveys of local demand to show which timbers appear to be logged in surplus of local demand and for which timbers there appears to be a deficit in supply in relation to demand. The GFC unfortunately fails to make clear other purposes for a log export policy, which might include:

    a. conservation and better management of the rapidly dwindling stocks of the commercially most desirable timbers from the natural tropical rainforest.

    b. rationalization of local demand, such that government procurement offices do not continue to specify the use of large sizes of prime timbers for purposes which could be satisfied by smaller dimensions and lesser used species. These same offices should also pay more attention to the national building code (1999) which has a whole chapter on specification of hardwoods. Like many government documents in Guyana, this code is little known and not easy to obtain. A meeting in September 2011 concluded that the shortage of local lumber alleged through much of 2011 was really a shortage of the best quality of the best timbers; there was plenty of smaller sizes and lesser quality timber.

    c. attention to the National Development Strategy (NDS, 1995-7) and National Forest Policy (NFP, 1997, and supporting National Forest Plan 2001) which promote in-country processing and value-adding in the forest sector. There are no national policies – that is, debated and endorsed by the National Assembly (parliament) – which support log export. The NFP was slightly revised in 2011 but the draft revision has not yet been debated in the National Assembly. The NFP also mentions the additional employment, skills development and value addition through in-country processing of forest products.

    d. an explanation of valuation of natural resources and the right of governments, on behalf of citizens, to capture as revenue a fair share of the profits from exploitation of these resources. In relation to log exports, this could include a system for splitting the excess profits from exporting unprocessed logs between the log exporter and the Treasury.

The reluctance of the GFC to mention these matters appears to be related to the long period of regulatory capture by log traders. The World Bank noted as far back as 1993 that the GFC was a perfect example of the capture theory of regulation, whereby the regulatory body is controlled by the industry it is supposed to regulate (Colchester, M. 1997, Guyana: fragile frontier, page 102, quoting Stabroek News 29 October 1993).

The data sparsely released by the GFC do not provide support for its conclusion that the log export policy has curtailed some exports. The export commission (tax) on unprocessed logs and squared timber is set far too low (a maximum of 12 per cent of declared FOB value) to influence log buyers, in relation to the huge profits on log exports to Asia. Where there appears to be a decline in production of some species, it could be argued that this is evidence for ‘peak timber’, a decline induced by decades of selective over-harvesting. But the GFC does not release data to compare the pre-harvest inventory with the production records. Piecing together data for the popular hardwood purpleheart (Peltogyne venosa), which grows naturally in clumps, the average stocking in primary forest is 0.5–1.0 m3/ha out of an average commercial stocking of 100 m3/ha. In contrast, the proportion of purpleheart in the output is up to 13 per cent, so perhaps a 25-fold or greater selective over-cutting, as well as an extraordinary over-representation in the proportion of log exports, up to 36 per cent by volume.

Again in support of the log export discussions, the GFC revised and expanded in January 2012 its useful 2006-7 analysis of relative profitabilities of different kinds of product. Perhaps because of the regulatory capture, it did not draw attention to the profits from log export. Building on the GFC analysis, one can see that the costs and profits from preparing timber decking in Guyana for export are almost the same as the costs and profits of logs exported from Guyana to India, where they can be turned into value-added products –

Guyana: Cost and profit of timber exports

The commercial advantage to export logs is clear when the Government of Guyana fails to use regulation and fiscal measures to make the implementation of national policies for in-country timber processing commercially feasible.

Who gains from the present situation? Obviously the log exporters, although they are lobbying hard for reduction or elimination of the log export commission (tax). But also and not obviously the GFC, which has added over US$ 1 million from this tax to its income per year, and that income is not paid into the national Treasury.

Janette Bulkan
CFA Governing Council

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  1. due to politics the Log export policy tax was not implemented in 2012.