In August 2014, after a series of articles in the Guyanese media about Chinese company Bai Shan Lin’s logging operations, a Guyanese PhD student wrote to the Norwegian government with a simple question: Is the Low Carbon Development Strategy just a sham?
He asked three other questions: Is the LCDS really achieving its purpose? Are the Norwegian authorities really conducting due diligence on officials in Guyana? And if so how are atrocities like the exploitation of the forest by Bai Shan Lin allowed to take place?
Six months later, he got this response from Marianne Johansen, an adviser to Norway’s International Climate and Forest Initiative:
Fra: Johansen Marianne
Sendt: 20. februar 2015 14:23
Kopi: Eynden Maarten van der
Emne: Re: Is the LCDS just a sham?
Thank you for your email dated August 13, 2014. Please accept my apologies for not coming back to you sooner.
Norway signed an MoU with Guyana in 2009. Norway pays Guyana for keeping the deforestation low. The payments are based on annual reports on Guyana’s deforestation rate (based on satellite data) published by the Guyana Forestry Commission (GFC) and independently verified by consultants procured by Norway. It is currently the Norwegian company DNV-GL which is verifying Guyana’s deforestation report. We have verified deforestation rates from Guyana for 2010 (0,056%), 2011 (0,054%) and 2012 (0,079%). The numbers for 2013 is currently being verified but reported by the GFC to be 0,068%. Our agreement with Guyana will stop any payment if the deforestation rate exceeds 0,1%, and decrease the payment substantially for deforestation rates above 0,056%. Guyana’s deforestation is one of the lowest globally, in comparison the global deforestation rate in tropical countries has historically been on average around 0,52%.
Norway’s deal with Guyana is made to create incentives for continued low deforestation. If the deforestation increase, payments will be reduced and finally stop completely. The higher deforestation rates reported in 2012 and 2013 was mainly caused by small-scale mining, not logging. On the specifics of the Bai Shan Lin operation we have to refer you to the GFC dedicated website on this: http://www.forestry.gov.gy/news.html. However, logging operations that lead to deforestation of larger areas would be discovered by the satellite imagery and reflected in the deforestation rate, so far we have not seen this effect. Please also note that the reporting and verification process takes around a calendar year to complete. This means that deforestation happening in 2014 would not appear in the official reports until late 2015.
I hope this answered your questions.
Please do not hesitate to contact me if you have further questions or comments.
Marianne Johansen, Ph.D.
The Government of Norway’s International Climate and Forest Initiative
Ministry of Climate and Environment
So (just in case you missed it) Norwegian due diligence consists of passing on a link to the Guyana Forestry Commission website.
On 8 May 2015, the Stabroek News published a letter from Janette Bulkan and John Palmer providing details of ten examples of how Bai Shan Lin has “contravened laws, regulations, administrative procedures and approved policies of Guyana”. It is published here in full:
Stabroek News reported (‘Baishanlin says lack of funds delaying promised wood processing facility’, 02 May 2015) the protests of the Chinese transnational logger Bai Shan Lin (BSL), including the statement that Kaieteur News has carried ‘reports that are erroneous in nature, which fail to highlight, even in a single instance, where the company itself has broken any law or regulation’. This remarkable claim should be corrected because Bai Shan Lin has most certainly contravened laws, regulations, administrative procedures and approved policies of Guyana. Questions of differential treatments by government agencies of enterprises in the forest sector, and persistent allegations of corruption extending from the apex of government, have been increasing in public discussion during the Ramotar administration. The following list of ten illegalities is not comprehensive but should be enough to indicate that the senior management of Bai Shan Lin would have been prosecuted and penalised in jurisdictions where the rule of law was actually applied.
Illegality 1, illegal renting of logging concessions in Berbice – Bai Shan Lin was registered in September 2006, with a 49 per cent share held by the transnational Chinese State-Owned Enterprise ‘Beijing-Uni-Construction Company’ (BUCC). CEO Chu WenZe stated that ‘the new company will initially be depending solely on smaller forestry producers for raw materials, but because of its intended scale of operations, it will be seeking forestry concessions to meet its increasing demand for these materials’ (Guyana Chronicle, 09 February 2007).
Just a week later, the GFC’s consultation on a log export policy agreed that ‘only holders of Timber Sales Agreements, Wood Cutting Licences and State Forest Permissions will be allowed to export logs. The logs must originate in their concessions’ (GFC post consultation summary, page 13, March 2007). Bai Shan Lin applied for permission to export logs but the then junior Minister for Forestry (Robert Persaud) ‘declined to grant such a request, and reminded the company of its commitment to become immediately engaged in value added production’ (Guyana Chronicle, 24 April 2007; Stabroek News, 21 and 30 April 2007). Moreover, according to an announcement by the Ministry of Agriculture on 06 May 2007, ‘a commitment was said to be given that the company would not engage in the export of round logs’ (Stabroek News, ‘Jailing forestry deal suspended – following breaches, non-compliance’, 07 May 2007).
The WAICO Timber Sales Agreement (TSA 01/1999) was granted originally to Danny Ameerally. Bai Shan Lin acquired operational control of WAICO and was thus able to comply with the log export policy which came into effect on the first day of 2009. There is no public domain information that either WAICO or Bai Shan Lin obtained prior Presidential consent for transfer of operational control. Under the then valid law, Bai Shan Lin was violating Forest Regulation 12 (1954) – ‘No transfer of any lease or timber sales agreement shall be made by any forest officer without the prior approval of the President where such lease or timber sales agreement grants exclusive rights to any person over an area estimated to exceed three thousand acres or is for an unexpired period exceeding three years’.
Landlording is still illegal under Condition 13 of Timber Sales Agreements – ‘The grantee shall not transfer, sublet, mortgage or otherwise dispose of any interest arising under this agreement except in accordance with the Forest Regulations and any purported disposition made except in accordance with such regulations shall be null and void.’ The Forest Regulations 1954 were transposed to work under the Forests Act (cap. 67:01, 2009, section 85 (1)).
The Board of Directors of the GFC approved a rentier agreement (‘joint venture’) between Bai Shan Lin and WAICO in April 2009 but the Forest Regulations 1954 require prior Presidential approval, so the Bai Shan Lin – WAICO deal was illegal.
Illegality 2, Customs fraud, false names – as the renting of WAICO was illegal, it follows that log exports by BSL using the name of WAICO were also illegal, because a false name is a fraud under Customs law (cap. 82:01, sections 157 and 158). The pretence that small-loggers associations are exporting logs to flooring and furniture factories in China is also Customs fraud, because the loggers have been paid before the logs are loaded, so the name of the real owner/shipper should be on the export documents (Stabroek News, ‘Cocaine in logs shipment may have been destined for China’, 28 March 2011).
Illegality 3, Customs fraud, false values – Customs law requires an exporter to provide an accurate description and valuation of the goods exported. Bai Shan Lin is non-compliant because it declares a uniform FOB price for a shipping container from Guyana to China for particular timber species, without regard for the varying volumes of logs of that species inside the container.
Illegality 4, health and safety violations – Bai Shan Lin took over the Coomacka sawmill of Ja Ling/Karlam South America Timbers, and secured an improvement grant of US$ 10 million from the European Union through LEAP, the Linden Economic Advancement Project (LEAP); this amount was later reduced. During a visit to the sawmill by the Ambassador of the European Commission in August 2007, together with local journalists, violations of the Occupational Safety and Health Act (cap. 99:06, 1997/2009) were observed by the visitors and protested by the Guyanese workers (Stabroek News, ‘Safety violations seen at Coomacka timber works’, 15 August 2007; Guyana Chronicle, ’Deplorable wages and working conditions at Bai Shan Lin Linden operations. Agri Minister insists that the company has to comply with occupational health and safety standards’, 15 August 2007).
The sawmill operated under Bai Shan Lin management for only a few months before being shut down as the company shifted into log exports. The mill compound has subsequently been used for stuffing logs into containers for export shipment (Stabroek News, ‘Baishanlin still logging, no sign of value added’, 08 December 2014). The container stuffing is apparently without routine oversight by the Customs and Trade Administration of the Guyana Revenue Authority.
Illegality 5, illegal renting of DTL logging concessions – Bai Shan Lin (BSL) took over operational control of Demerara Timbers Limited (DTL) (Stabroek News, ‘Demerara Timbers to be taken over by Bai Shan Lin’, 21 August 2007). In spite of a painted sign at the DTL gate at Mabura Hill indicating BSL control, the GFC said that this was not a takeover, merely a transfer of shares and the giving of a technical assistance management contract to BSL. However, this is legally a transfer of interest, and so a violation of condition 13 of the TSA licence. Furthermore, in BSL’s presentation at the 2nd World Congress on Timber and Wood Products Trade at Taicang in China, November 2012, in slides 3 and 6 BSL claims control of 522,297 ha of DTL logging concessions; see redd-monitor.org. Perhaps having denied repeatedly the BSL takeover of DTL in 2007, the GFC in 2013 and 2014 denied that BSL had such control but did not answer then, and has not answered since, the continued BSL claims.
Illegality 6, illegal acquisition of logging rights – BSL claimed in November 2012 to have operational control of 960,000 ha of logging concessions and exploratory permit areas in Guyana. The GFC stated in its Press conference on 18 August 2015 that BSL’s forest holdings were only 627,072 ha (here and here). The GFC has not explained the discrepancy; see also Stabroek News, ‘GFC contradicts Minister’s report on Bai Shan Lin’s operations’, 24 August 2014. My estimation of BSL’s holdings totals over 1.4 million hectares (tabulated in Stabroek News, ‘Would the GFC place documents related to joint venture with Bai Shan Lin in the public domain’, 17 January 2015). The lack of point-by-point response from the GFC suggests collusion between BSL and the GFC in some improper allocation of logging rights, over a long period. This is not to suggest, by any means, that all BSL concessions were acquired illegally.
Illegality 7, non-payment for purchased logs – the log purchases by BSL have been spread over many areas of the hinterland of Guyana. Purchases are rarely supported by written contracts. Payments for the logs are usually in cash at the roadside or log market. In spite of a reputation for being cash-rich, BSL has been negligent in paying independent loggers. Oral agreements to buy are, however, contracts. Amerindians complained about BSL’s non-payment for delivered logs (Kaieteur News, ‘Bai Shan Lin owes Amerindians “plenty, plenty money”’, 17 August 2014). Pressed by the newspaper reports, BSL arranged hasty payments of wads of cash at Kwebanna (Kaieteur News, ‘Under pressure Bai Shan Lin pays monies owed to Amerindians – dead silence on duty free concessions granted to company’, 02 September 2014) but it remains unclear if there are written accounting records of who was paid how much for what.
Illegality 8, non-payment or very delayed payments of NIS and PAYE – the Bai Shan Lin group of companies has been derelict in payments of national insurance and tax for its workers for long periods (Kaieteur News, ‘GPSU warns foreign investors to obey laws’, 12 September 2014).
Illegality 9, illegal extraction of laterite gravel, road building – besides taking logs without payment, Bai Shan Lin has excavated and carried away without authorisation an estimated 47,000 m3 of laterite gravel from Moblissa for road building, foundations for buildings at Conception and for a construction park, vehicle storage and pontoon-building site at Coverden. The BSL vehicles have repeatedly damaged roads in Region 10 and polluted water sources. The Regional Democratic Council, the Guyana Lands and Surveys Commission and the Guyana Geology and Mines Commission have not been able to exert effective authority over BSL activities. Extraction of laterite gravel requires a quarry licence and removal permits (State Lands Regulations (under the State Lands Act, cap. 62:01, 1903/1997), Regulations 75-79 in Part X – Licences for quarrying stone, gravel, kaolin and other clays; Mining Act, cap. 65:01, 1989, Part X – quarry licence, sections 89-96). In addition, section 11 of the Environmental Protection Act (cap. 20:05, 1996) requires an environmental impact assessment, environmental impact statement and an environmental permit for road construction; item 3 in Schedule 4 of the Act.
A laterite pit identified by the Region 10 RDC at Three Miles, Mabura, as source for repairing the roads damaged by BSL near the large Moblissa pit was then further abused by BSL, allegedly removing 144 truckloads but using fewer than 10 to fix the damaged Moblissa road (Kaieteur News, ‘Bai Shan Lin refuses to sign GGMC “cease order”’, 17 April 2013; Stabroek News, ‘Bai Shan Lin banned from laterite pit’, 08 July 2014; Kaieteur News, ‘Bai Shan Lin exploiting Region 10…unable to say how much land under its control – Solomon’, 08 August 2014; Stabroek News, ‘Baishalin building huge water craft at Moblissa – no sign yet of processing facilities’, 08 September 2014; and several more Press articles).
Illegality 10, violation of TSA conditions – the general terms and conditions for Timber Sales Agreements (TSAs) are now given in Annex V of the third edition of the GFC Code of Practice for Forest Operations for Timber Sales Agreements and Wood Cutting Licences (July 2014). Bai Shan Lin has operational control of several such TSAs. Item 6 of these terms and conditions states that ‘The concessionaire shall work the area to the satisfaction of the Commissioner in accordance with the terms of the concession agreement and only in accordance with the Forest Management plan, as approved by the Commissioner …’ (page 194). Presumably Bai Shan Lin needs to comply with all relevant laws, regulations, procedures and approved national policies in order to ‘satisfy’ the Commissioner of the GFC. The same Code of Practice states that ‘Forest utilization should respond to:
- national legal and regulatory obligations;
- the ecological constraints of sustainable ecosystem management,
- notably the optimal protection and conservation of diversity of flora and fauna;’ etc. (section 2.1, page 13).
The Code of Practice mentions the GFC’s ’deliberate attempt to ensure that merchantable trees remain in the stand after harvesting operations, and that the rate of harvesting does not exceed the growth rate of commercial species’ (section 2.3.6 on page 22) and ‘The Annual Allowable Cut is constrained by the quantity that can be removed per hectare in response to productive capacity of the resource (specifically the rate of volume increment of the commercial species)’ (page 23). Potential crop trees (which should form the harvest for the next felling cycle) and seed (mother) trees are defined on section 4.4 page 51 and their protection is mentioned several times in the Code.
Given such rules, it is not clear how Bai Shan Lin can focus felling in the logging concessions which it controls on the very small number of timber species which it exports as logs and squares to China. BSL’s purchases from other concession holders and contractors, also focused on this limited range of timbers, encourage rule-breaking by those operators.
Investment promises not implemented – in addition to the outright illegalities, Bai Shan Lin has repeatedly given assurances about the breadth and depth of its intended investments in Guyana, in terms of monetary added-value and the scale of local employment. Most of these assurances have not been implemented, although BSL has benefitted from exemptions from import duty on equipment, vehicles and fuel, and other investment incentives negotiated at Cabinet level or higher but not through Go-Invest. Instead of value-added processing as promised, the company has focused on highly selective logging of timbers preferred for traditional furniture and flooring in China, on gold mining and on luxury real estate development.
In its early years in Guyana, BSL indicated its parent company BUCC as the source of external finance, and mentioned approximately US$ 100 million (Stabroek News, ‘New Chinese forest company pledges to invest US$100M’, 09 February 2007). Soon afterwards, BSL secured a grant from the Linden Economic Advancement Programme (LEAP) which was administering a project funded by the European Commission for Linden’s diversification out of bauxite (Stabroek News, ‘Mixed reviews for LEAP – next two years seen as crucial for Linden scheme’, 18 June2007). BSL was to have converted the former Ja Ling sawmill at Coomacka to produce flooring strips for export to China, where BUCC has a flooring factoring in or near Beijing. But this conversion never took place, and it is not clear that BSL repaid the grant.
There was a rumour from China in mid-May 2012 that credit to BSL was limited or had been withdrawn, but by November 2012 the Guyanese Ambassador to China witnessed the signing of BSL’s loan from the China Development Bank. BSL’s large-scale proposals were described to the Chinese investors at the Taicang exhibition mentioned above, and outlined to the Government of Guyana in January 2013 (Kaieteur News, ‘Chinese logging firm signals interest in establishing wood products park’, 10 January 2013). Ten days later, the investment was quantified as the first phase of a projected total of US$ 500 million (Stabroek News, ‘Bai Shan Lin sets sights on operating 183,740 hectares of forest here’, 20 January 2013). The US$ 100 million intended investment was mentioned again in mid-2013 (Stabroek News, ‘Bai Shan Lin holds 960,000 hectares of forest’, 05 May 2013; Stabroek News, ‘Forestry commission says large amount of equipment already here for Bai Shan Lin US$100M investment’, 08 May 2013). The GFC stated that BSL had US$ 60 million in secure finance (Kaieteur News, ‘Questions abound over mega investments by Bai Shan Lin…Govt promoting company without full disclosure’, 28 May 2013).
During the three months of Press exposure in July-September 2014 of the massive selective logging by Bai Shan Lin and its suppliers for export to Asia, the Chinese Ambassador to Guyana noted that BSL ‘took big loans to initiate the investment’ (Stabroek News, ‘Baishanlin still in start-up phase, took big loans’, 05 September 2014).
Now again (see globaltimber.org.uk) BSL is in trouble with its creditors. BSL is attributing loss of confidence of its creditors to the publications in the independent Press in July-September 2014, without mentioning the casino preferences of BSL senior management. Yet BSL continues to enjoy tax and other investment benefits in Guyana which cannot be accessed by the Guyanese-owned enterprises which do invest locally in value-added transformation of forest products, do provide local employment and do train their Guyanese workers. Given the catalogue of illegalities and broken promises almost since BSL arrived in Guyana, why is the Government so enamoured of this group of companies and so reluctant to provide equivalent incentives to its own citizens?
Janette Bulkan and John Palmer