Guyana’s premium timbers being exported as logs – Bulkan

The trend has been for the conversion of premium Guyana timbers into top quality flooring, furniture in India and China

Stabroek News – December 18, 2011 – Letters |  Comments

Dear Editor,

In mid-2011 there was concern about a shortage of construction lumber on the domestic market.  At the beginning of a new quinquennium of government, and having the election manifesto commitments of the three largest parties, it is appropriate to extract those commitments and compare them with the latest export figures.

The PPP/C reduced its half-page on forestry in 2006 to a single paragraph in 2011– “Encourage more value-added forestry by working closely with all stakeholders on addressing constraints while continuing to support the development of our timber and non-timber resources in a sustainable way consistent with the LCDS.”      

All national policies favour in-country processing and value-addition for forest products, yet the government continues to allow in effect unlimited exports, with logs at remarkably low declared FOB values.  From the latest data published by the Guyana Forestry Commission (GFC) – The average log measures between 2 to 3 cubic metres. The figures above show that the declared average price of exported logs was US$54 in 2010 and US$141 in the first half of 2011. Since 2008 the GFC has suppressed almost all information on the species of logs exported.

The trend until then, and no doubt into the present, has been for the export of the premium hard and heavy timbers of Guyana for conversion into top quality flooring and furniture in China and India. US$154 per cubic metre is a rock bottom price for these timbers. A more usual FOB price for technically equivalent timbers is three times as much, as demonstrated by the price paid for merbau logs in South East Asia, which are equivalent to purpleheart.

The rise in export commission on logs (from 2 to 7 per cent in January 2009, to 10 per cent in 2010 and 12 per cent in 2011) has evidently been far too small and ineffective in preventing rises in both absolute volumes and percentages of exports relative to national log production.

Average domestic log price has risen by more than 50 per cent in the first half of 2011 yet declared average export FOB price for logs has declined.   And a further 30,000 m3 of logs were exported during July-September 2011 (Forest Products Marketing and Development Council for GFC).

Moreover, domestic log buyers have to pay VAT on the logs they process. To put it another way, domestic millers and consumers are penalized while Asian log exporters are rewarded by the GRA. This is what can be called a perverse policy measure.

Using the log-to-furniture conversion value ratios published in a letter (Mahadeo Kowlessar) by Kaieteur News on July 4, 2007,  Guyana could have earned up to US$162 million from furniture in 2010 and up to US$73 million in the first half of 2011, instead of the miserable US$17 and 7 million actually recorded as the log export income.  That is, Guyana could have earned up to ten times the amount from furniture than from the unprocessed logs.

According to surveys from the GFC, there is no shortage of installed capacity to process more than double the recorded total log production.

As the commercial banks are overflowing with liquidity, presumably there is no shortage of cash to invest in upgrading processing machinery?

Presumably also the government investment agency GO-Invest is keen to provide support, although its website has not been updated since 2005, so it is difficult to be sure; see http://www.goinvest.gov. gy/forestry.html.

And how do the opposition political parties propose to address this problem?

The AFC focused on policy issues and did not directly address timber processing.  However, it promised to “Ensure that associations of small-scale loggers are provided with special access“ in the strategic plan for allocation of State Forest Resources.

APNU offered both diagnosis and commitment: “Contrary to all recommendations, there has been a marked increase in the export of logs, rough sawn and poorly dressed green lumber principally to China, India and the Caribbean.  Added to this, value-added and downstream processing has declined significantly.

This has reduced the potential impact of the sector on employment.  The MOU with Norway allows the controlled cutting of timber and downstream processing.  An assessment of the reasons for the sector’s under-performance include the following:

●  Under-capitalisation of entities needed for value-added production

●  Inadequate marketing, facilities, training and technology

●  Export of logs

●  Inefficient and ineffective harvesting

“APNU in government will prioritize and facilitate through incentive a comprehensive and strategic plan to substantially increase value-adding of our forest production.“

Subsequently I propose to look at the production and export of sawn timber, and what stakeholders proposed at meetings in August and September.

Perhaps the GFC could even publish the reports of those meetings on its website, in accordance with the improved transparency in forest governance promised to the Government of Norway?

Yours faithfully,
Janette Bulkan

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Lumber shortage, the data and the forest sector

DECEMBER 20, 2011 | BY KNEWS | FILED UNDER LETTERS

Dear Editor,
In my letter on the alleged lumber shortage and the actuality of log exports, published as ‘Lumber shortage and log exports’ (Kaieteur News, 18 December 2011), I showed how unrestricted log exports were earning only perhaps one-tenth of what could have been earned from in-country conversion to furniture.  Also, the export commission on logs is set by the Guyana Forestry Commission (GFC) at such a low rate that a fair share of the giant excess profit is not being captured as national revenue.
The Government’s failure to implement long-established national policy on in-country processing is related to the similarly and disgracefully long-established regulatory capture by Asian loggers and log traders, as well as to connivance by Guyanese rentier holders of logging concessions, an illegal practice not curbed by the GFC.
I now turn to the alleged lumber shortage.  I summarise the relevant GFC data in the following table –

Sawn lumber	Whole year 2010			January-June 2011
	M3	US$/m3	G$/BM	M3	US$/m3	G$/BM
Chainsawn production	77580			28509
Millsawn production (derived from GFC data)	71430			12865
Exported roughsawn; volume and declared FOB, percentage of total sawn production	22495 = 15 per cent	574	270	10079 = 24 per cent	546	257
Exported dressed/profiled; volume and declared FOB, percentage of total sawn production	13725 = 9 per cent	748	352	4508 = 11 per cent	1027	483
Domestic roughsawn lumber; average price		255	120		341	160
Domestic dressed/profiled lumber; average price		331	156		377	177

Millsawn lumber production dropped sharply in the first half of 2011, perhaps because millers switched to the more profitable and unrestricted log exports.
More than 50 per cent of all logs harvested in the first half of 2011 were exported. Exports of roughsawn lumber maintained the same level as in the past year but with less sawnwood overall the proportion of lumber exported has increased.
Exports of profiled or dressed lumber dropped by a quarter while price rose by a third.  Still, only a third of total sawnwood was exported in the first half of 2011.
Note the large difference between the declared export prices and the domestic prices surveyed by the GFC.
Yes, roughsawn lumber increased in price by one third during 2011 compared with 2010, but was still only two-thirds of the export price.
Of course, this summary lumps all species together, since the GFC ceased to report data on individual species in early 2008, so disparities between export and domestic prices may vary greatly by species.
Note that the Alliance for Change committed in its 2011 election manifesto to restoring all production and export records [to] the format used at the time of the Timber Export Board.
This change would revive the international practice (and legality verification system requirement in all other countries) of including accurate timber names and volumes.
The scarcity of lumber in mid-2011 was alleged by the larger building contractors.  The GFC, Ministry of Agriculture and GFC-sponsored Forest Products Development and Marketing Council held meetings on 22 and 26 August and 01 September for a variety of stakeholders, but the key major contractors and Government engineers did not attend.
Small-scale contractors denied that there was a general shortage, but noted that the prime timbers (greenheart and purpleheart) were in short supply.
This is hardly surprising, given that the GFC does not implement its own Code of Practice on Timber Harvesting (second edition, November 2002) under which the GFC should be controlling yields by species or species groups and so preventing over-cutting and thus subsequent shortage.
Even by 2007, it was evident that purpleheart was being over-cut by a factor of 30 times its natural capacity to regenerate, yet the GFC has taken no counter-action.
The small-scale contractors also said that part of the shortage was due to the prescription by Government engineers in construction contracts of the use of greenheart and purpleheart timbers, even when no technical justification was given for such use.
In other words, more available and cheaper timbers could have been used.
Although there is a wealth of data on the technical properties of dozens of Guyanese timbers, the GFC has made no apparent effort to translate the technical data into formats which would be meaningful to Government engineers or their main contractors.
Such lazy prescription is not allowed in Europe, where government procurement contracts must specify the technical properties required (for example, for strength or safety or durability) but cannot require individual timbers by name.
Exceptions are made for historic restorations, where authenticity requires like-for-like replacement, as in restoration of ancient buildings or wooden ships.
The shortage of lumber thus appears to have been partial, and due mainly to the incompetence and laziness of Government agencies.
What were the Ministerial reactions recorded at the meeting on 26 August?
The then junior Minister for Forestry said that one hundred 2-year logging concessions would be issued in 2011 although there were already enough awarded concessions to supply timber.
Moreover, only 28 per cent of the available timber (presumably a reference to the GFC ceiling of 20 m3/ha during any one 60-year period) was actually being harvested.
Minister Robert Persaud promised to restrict log exports but has not actually done so.  The Minister for Transport and Hydraulics felt that the lumber shortage would be relieved by transporting lumber by river rather than by road, and would install toll gates on hinterland roads to pay for their maintenance.
Minister Robeson Benn also wanted to extend the usable life of timber in construction.
Neither Minister appeared to recognize the national policies for in-country processing, or the neglect of laws and procedures which has allowed the alleged shortage to occur.
Representatives of the Guyana Manufacturers and Services Association and the Forest Products Association offered 11 and 8 practical and do-able suggestions respectively.
Three working groups at the meeting on 26 August offered a total of 36 suggestions, with some overlap on those of the GMSA and FPA.  And what has the Government done in response during the 16 weeks since the stakeholder meetings? – apparently nothing.
This situation is a good reason for the new session of the National Assembly to give life and meaning to sectoral select committees.
In other countries, the Natural Resources select committee would have held enquiries into the alleged shortage and required active responses from the relevant Ministers and Government agencies.
Let us see such action from the newly balanced National Assembly.  This is what a parliament is for.
Janette Bulkan

—–Post #971