In the wake of a flurry of critical letters and concerns about log exports, Commissioner of Forests James Singh yesterday disclosed that a probe is already being done of allegations of transfer pricing in the industry and it was also disclosed that two producers have pledged to push value added output.
Singh also vowed to take action against log exporters found guilty of transfer pricing.
Speaking at a press conference yesterday at the Agriculture Ministry boardroom, Minister of Agriculture Robert Persaud and Singh responded to several concerns raised by letter writers and others in this newspaper over alleged non-compliance by Jialing Forest Industries Inc and Barama Company Ltd (BCL).
Meanwhile, Singh, head of the Guyana Forestry Commis-sion (GFC), told Stabroek News in an interview following the press conference yesterday that the issue of transfer pricing came up several months ago and an investigation is ongoing. "Action will be taken against companies for transfer pricing," he said.
He added that although persons wanted the GFC to make a statement on the issue it could not be done before the investigation was completed. One letter writer (see page 6 of today's issue) quoted the actual export price declared to the GFC for purple-heart logs as US$130 per cubic metre, while the import price at Guangzhou City in China for the same logs was US$569, a large difference. The investigation is expected to uncover if this practice indeed exists as if it does, it means that Guyana is losing millions of US dollars on levies that should be paid on these log exports.
Meanwhile, Persaud told the media that Jialing has exceeded the allowance for foreign staff established by the government, which is 15%. But he said BCL had kept within its allotted number. At a Forest Products Association (FPA) press conference last month BCL had said that the government had set the allowance for foreign staff at 20%.
However, Persaud explained that international logging operators are allowed to keep 15% of foreign workers for three to four years depending on the size of the operation. It was noted that numbered among the international staff were usually skilled persons to install and assemble machinery.
Asked to comment on the working conditions of the international logging operations under question, the Agriculture Minister said: "Working conditions need to be improved [they do] not meet the expectations of local employees."
Persaud added that pledges were made to improve workers' conditions. Barama unlike Jialing has unionized workers who would register complaints with the company. Several letters in the press have accused logging companies of perpetuating poor working conditions in the interior locations.
Representatives of the FPA and the Guyana Manufactur-ers' and Services Association (GMSA) in separate meetings on November 17, 2006 came to a consensus on several proposals made by the minister. Among the proposals was that the FPA and the GMSA would nominate two representatives each to be part of a committee that would be convened by the GFC. Following this, position papers would be submitted by both bodies to examine the issue of log exports and raw material supply on the local market.
The GFC managed committee would then develop a position paper that would form the basis of a public consultation in January, the minister said, adding that four public consultations would likely be held, which would allow for participation from interior locations. "Following the public consultation, the government will then refine its position on the exportation of logs and other related matters."
It was also noted that with regard to the availability of raw materials the government had earlier taken action giving State Forest permits to manufacturers and others totalling some 80,000 acres.
Non-compliance by Jialing and BCL
The Agriculture Minister referred to a meeting with the management of Jialing on November 23, where he emphasized that the business plan submitted to the government must be complied with and requested a detailed proposal to remedy non-compliance. Jialing had been severely criticized for exporting logs while not adhering to its original investment plan. A company official had later told Stabroek News that the log exportation was for market testing purposes.
"Jialing submitted a 12-month plan beginning January 2007. This plan will see the completion of the sawmilling [and] veneer and kiln drying complex by December 2007," Persaud said. Work was already to have started on the sawmilling plant.
The proposal also outlined a projected total extraction of 60,000 m3 for 2007. Of this 47.7% will be sold to Karlum South America Sawmilling Complex in Linden which exports floorboards. Another 30% is expected to be converted into squares and 22.3% will be sold locally.
Jailing is also proposing to increase the level of local employment to a ratio of 80:20 (local to expatriate) for 2007 and in 2008, a ratio of 85:15, extending its deadline for compliance as regards its foreign workforce to 2008.
In the case of BCL a meeting was held with representatives on November 29 and the minister proposed that its log exportation be reduced and a detailed proposal be submitted to address its non-compliance with the implementation of the Buck Hall complex.
BCL in its proposal commits itself to the installation of kiln drying facilities and a finishing plant by March 2007. In addition, the proposal stated that the veneer plant would be installed and two barges constructed by September 2007. Installation of a co-generation facility is to be completed by September 2007 and from January 2007, the sawmill at Buck Hall will produce 3000 cubic metres of sawn lumber on a monthly basis. BCL said these developments would reduce its log exportation.
"The GFC will be increasing its presence at these operations to ensure strict compliance in accordance with the commitments made by the companies. Should there be any breaches, the government will be forced to re-examine the terms of concessions granted," the minister warned.
The minister said that the GFC will expand its capacity to monitor the implementation of the business plans by loggers and some 41 officials will be added to the monitoring team.
The two logging companies must submit quarterly updates of their attempts to institute the changes they have pledged to make.
"Further, the GFC will be carrying out, with immediate effect, 100% verification of all exports to ensure that species such as Locust and Crabwood are not exported," the minister said. Commis-sioner Singh had also indicated that concessions which are under-utilized will be repossessed.