GUYANA TIMBER INDUSTRY LOOKS TOWARD

UNCLAS SECTION 01 OF 02 GEORGETOWN 000294

SIPDIS

BRASILIA FOR ESTH HUB - JAMES STORY

SIPDIS

E.O. 12958: N/A
TAGS: EAGR SENV BEXP ECON ETRD GY
SUBJECT: GUYANA TIMBER INDUSTRY LOOKS TOWARD
SUSTAINABLE FORESTRY, FUTURE



1. SUMMARY: In a bid to achieve recognition for
sustainable forestry, the Malaysian/South Korean firm
Barama Company Ltd. has received Forest Stewardship
Council (FSC) certification, the first of its kind in
Guyana. While the FSC label should allow the firm to
command higher prices in international markets,
questionable enforcement of concession boundaries,
controversial labor practices, tension with miners over
access to logging roads, and concerns about the long-term
value-added continue to challenge Barama and the timber
industry as a whole. END SUMMARY.

--------------
Hope for the Timber Industry
--------------


2. Barama CEO Yaw Chee Ming accepted the FSC designation
in a ceremony March 27. The firm collaborated with WWF
Guianas and the Swiss verification company SGS to obtain
FSC certification, which will allow Barama to market its
products as originating in a sustainably managed forest.
According to the firm's general manager, Girwar Lalaram,
the 570,000 hectare concession--around 37% of the
company's 1.6 million hectare concession--is the single
largest block of certified tropical forest in the world.
The firm is also working towards obtaining Chain of
Custody Certification by mid-year.


3. The timber industry offers promise to heavily-forested
Guyana. According to the International Tropical Timber
Organization (ITTO),forest product exports amounted to
US$48.6 million in 2005, a 12% increase from the previous
year. Timber exports accounted for nearly 10% of Guyana's
overall exports in 2005, with the primary markets for
sawnwood being Barbados, the U.S. and the United Kingdom.
India, China, and Vietnam remain the primary markets for
logs. With such exports increasing, ITTO predicts Guyana
will soon surpass Ecuador as Latin America's largest log
exporter.


4. As a result, the sector has seen substantial
investment activity. In addition to pursuing FSC
designation, Barama commissioned an automated sawmill at
Buck Hall, along the Essequibo River, in February and is
also contemplating a co-generation plant fueled by wood
waste. Barama's strategy has also involved increasing the
number of wood species available for cultivation. The
firm, which has been operating in Guyana since 1991, was
among the first to cultivate baromalli, commonly used for
plywood, in addition to the traditional exports of
greenheart, purpleheart, and mora. A Canada/Hong Kong
venture, Jaling Forest Industries, is also currently
ramping up a US$15 million investment to cultivate timber
in Guyana's northwest.

--------------
A Faustian Bargain?
--------------


5. However, both Barama and the forestry industry at
large have been criticized for failing to bring Guyana
greater returns, both in currency and jobs. Newspaper
editorial pages have been ablaze in recent weeks with
allegations that Barama has benefited from secretive tax
concessions and fixed royalties, questions that Forestry
Commissioner James Singh deflected at a recent press
conference. The firm also stated in a March 27 press
conference that is had not made a profit in its 15 years
of operations, raising questions about the transparency
of its accounting practices. Others have criticized
Jaling for relying on Chinese workers to service its
concession, rather than hiring Guyanese. A third common
criticism condemns Barama's arrangements with smaller,
third party concessionaires, a practice that increases
the firm's holdings in practice but not on paper. The
firm's management counters that such arrangements allow
smaller concessionaires to access its roads into the
interior.


6. These interior roads are also used by the mining
community, which has at times been at odds with the
forestry sector. As SGS' certification report notes, "A
significant issue in Guyana is mineral exploitation that
takes precedence over forestry. If minerals are found in
an area, mining takes priority over forestry, leaving no
scope for implementing sustainable forest management in
the affected areas." While the report found no evidence
of mining activity that threatens the area certified by
the FSC, such tension could impact the promise of
sustainable resource management in other areas where the
industries intersect.


7. COMMENT: A more pressing criticism of the forestry
industry in Guyana is the relative lack of value-added
activity. According to ITTO statistics, only 10% of
Guyana's forest product exports in 2005 were in such
value-added products as furniture, doors and moldings.
Meanwhile, sawnwood amounted to 37% of exports, logs made
up an additional 28%, and plywood made up 23%. Local
furniture manufacturers consistently complain of the
difficulty of obtaining logs in such an export-intensive
market. While the step toward sustainable forestry is a
positive development, a more robust indicator will be
Guyana's success in moving beyond raw timber and sawnwood
extraction to more value-added exports. END COMMENT.

BULLEN