State-owned Chinese firm to visit Guyana in May

Takeover of BaiShanLin

Chinese logging company BaiShanLin will soon be bought over by the Chinese Government, which intends to satisfy and expand on the outstanding obligations of the company to Guyana.
With 55 per cent of shares acquired, State-owned Chinese firm Long Jiang Forest Industries Group, the takeover is slated to occur sometime this year.
In fact, the corporation’s vice director Wong Dong Xu along with a delegation of company representatives will be in Guyana by May 2016 to complete due diligence for the takeover.
During his recent trip to China, State Minister Joseph Harmon had met with company officials to discuss the undertaking.
Harmon had explained that he used the opportunity to convey all the concerns and expectations of the government and the people of Guyana with respect to BaiShanLin.
BaiShanLin has repeatedly failed to honour several of its obligations to Guyana, including the establishment of a state-of-the-art integrated wood processing value-added facility in Linden which was to be completed by the end of 2013.
The Guyana Forestry Commission (GFC) had recommended an immediate termination of the investment agreement with government and to force the company to surrender its control of five local concessionaires.
While in opposition, the A Partnership for National Unity/Alliance For Change (APNU/AFC) had expressed its intention to hold BaiShanLin accountable for its many failures however, now in government, their posture towards those forensic audit recommendations are currently indeterminate, given the change of ownership of the Logging Company and its eagerness to maintain a healthy Guyana/China diplomatic relationship.
The Guyana Revenue Authority (GRA) is currently conducting an investigation into the company.
BaiShanLin was granted a State Forest Exploratory Permit (SFEP 01/2011) on November 4, 2011 despite the fact that it did not meet the criteria including: (a) the submission of audited financial statements for the last five years; (b) evidence of technical and financial qualifications; and (c) a history of compliance.
However, a key consideration for the grant was the assurance of BaiShanLin to establish the state-of-art integrated wood processing value-added facility in Linden by the end of 2013.
Additionally, as a condition for the grant, the company was required to carry out an Environmental and Social Impact Assessment (ESIA) before any extraction could begin; prepare a business plan and do a forest inventory.
However according to the forensic audit report, at the time of the expiration of SFEP 01/2011 in November 2014, the company did not honour any of its obligations.
“BaiShanLin contended that it faced a number of constraints, including passing through eight concessions and the need to repair/upgrade roads; and that it had since been able to access the area,” the report explained.
BaiShanLin was then granted an extension of one year to fulfil its outstanding obligations and to set up the wood processing plant.
But the report pointed out that there is no provision in the Forestry Act 2009 for an extension once the expiry date is reached.
The extended permit expired on 4 November 2015 but there was no board of directors in place to address the issue.
The company applied for a further extension of two years to fulfil the outstanding obligations but the Ministry of the Presidency is yet to make a decision.
Furthermore, the report revealed that notwithstanding BaiShanLin’s failure to meet the obligations under SFEP 01/2011, the Commission granted the company a second exploratory permit on 26 April 2013 which covers 73,015 acres of State forest.
BaiShanLin was also granted two State Forest Permits (SFPs) covering an additional 8,170 hectares of State forest.
Moreover as stated in the document, during the period 2009-2014, shareholders/directors of BaiShanLin acquired controlling interest in five logging companies through the acquisition of shares; however there was no evidence the specific approval of the Commission was granted in relation to the change of ownership/control of these companies. These companies hold Timber Sales Agreements (TSAs) covering a total of 441,119 hectares.
As outlined in the report, the Forests Act prohibits the granting a State forest authorisation to two or more persons associated together in a joint venture unless each of them qualifies under the Act for the grant of such an authorization.
In addition, without the written consent of the Commission, the holder of a State forest authorisation cannot engage or be involved in any act that results or likely to result in a change of effective control, including transferring the authorisation or entering into a sub-contracting, sub-letting arrangement.
If this happens, the holder has to give written notice to the Commission and surrender the authorisation. Any such transfer, sub-contacting or sub-letting arrangement is void, and the authorisation is deemed revoked.
Therefore, in BaiShanLin’s circumstances, the holders of the TSAs should have surrendered their authorisations to the Commission because now, the Chinese logging company had access to a total of 627,072 hectares of State forest.