CDB provides $70 million loan for Wood Processing Facility Construction Project (Linked to Project ID#39885)

In November 2012, China Development Bank (CDB) and Baishanlin International Forest Development Inc. (also known as BAI Shan Lin Forest Development Inc. or BSL or Baishanlin) signed a $70 million loan agreement for a Wood Processing Facility Construction Project (as captured via Project ID#39888). The Chairman of the China Forest Industry Group Company Ltd,, Whu Wenze, and David Dabydeen, Guyana’s Ambassador to China, attended the loan agreement signing ceremony. The borrowing terms of the loan are unknown. The purpose of the project is to construct a facility (‘industrial forestry park’) in a 500 hectare area that would process wood and create employment opportunities near the town of Linden within Upper Demerara-Berbice (Region 10). While wood processing was to be the main focus of the park, it was also expected to involve ship building, woodworking, machinery, processing and manufacturing, food and aquatic processing, mining, a school and a hospital. Construction machinery/materials, such as, concrete mixers and steel framing for the facility were originally expected to arrive in July 2013 and construction was expected to end by 2015. This facility was intended to support the logging operations of Bai Shan Lin in the region, who have access to anywhere between 680,000 and over 1 million hectares of Guyanese forest (the figure is disputed between the Guyanese government, Bai Shan Lin, and independent investigators. The most frequently cited figure is 960,000 hectares). Investment into Guyanese timber harvesting by Bai Shan Lin was estimated at over $100 million (captured via Project ID#39885). This was intended to be conducted through a joint venture company, although no record of the establishment of this joint venture currently exists. While Bai Shan Lin has access to this forest, after significant disputes, logging permits have yet to be granted in anything more than an exploratory capacity. However, accusations of illegal logging by Bai Shan Lin and associated companies abound. According to a forensic audit of the operations of the Guyana Forestry Commission (GFC), the facility was plagued by implementation challenges. There is no evidence that it ever reached completion. Initial site works and road access activities commenced. The design of the wood processing facility was also completed. However, as of early 2016, Baishanlin was awaiting further CDB loan disbursements to complete construction of wood processing factory by last quarter of 2017. Baishanlin was legally incorporated in 2006 with the main objective of setting up downstream wood processing operations in Linden and on the East Bank Demerara. On November 4, 2011, the GFC granted Baishanlin a State Forest Exploratory Permit (SFEP 01/2011) covering 104,783 hectares of State forest. This occurred despite the fact that Baishanlin did not meet the criteria for the grant of such a permit, 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. A key consideration for the grant of the SFEP was the assurance Baishanlin had given in relation to the setting up of a state-of-art integrated wood processing value-added facility near the town of Linden within Upper Demerara-Berbice (Region 10). Baishanlin had leased 200 acres for this purpose and had given a commitment to complete the facility by the end of 2013, following which the Government of Guyana would make available a further 100 acres for further value-added processing. As a condition for the grant of the SFEP, Baishanlin was required to: (a) carry out an Environmental and Social Impact Assessment (ESIA) before any extraction could begin; (b) prepare a business plan; and (c) do a forest inventory. However, at the time of the expiration of SFEP 01/2011 on November 4, 2014, the company did not honor its obligations. Baishanlin’s contention was 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. As a result, on October 1, 2014, Baishanlin requested an extension of one year to fulfill these obligations under SFEP 01/2011 as well as to set up the wood processing facility. Baishanlin’s extended permit expired on November 4, 2015, but there was no board in place to address the issue. The Minister responsible for Natural Resources indicated that: (a) the company applied for a further extension of two years to enable it fulfill its obligations under the permit, especially as regards to setting up of the wood processing facility; and (b) the Government was favorably disposed to approving Baishanlin’s request. The Ministry of the Presidency later clarified that the Government of Guyana had not taken any decision and that it has requested information from the company about its proposed business plan and evidence of financing. Upon receipt of this information, Baishanlin’s request would be reviewed and a decision taken. If this second request for extension was approved, the company would have enjoyed the benefit of the grant of an exploratory permit covering a period of six consecutive years whereas the law allows for a maximum period of three years for such a permit. Notwithstanding Baishanlin’s failure to honor its obligation under SFEP 01/2011, on April 26, 2013, the GFC granted the company a second exploratory permit (SFEP 01/2013) covering 73,015 hectares of state forest. This time, the company submitted audited financial statements for the period 2007-2011. However, a review of these statements by forensic auditors indicated that the company was in dire financial straits. In particular, except for 2007, the auditors qualified the accounts of the company because of accumulated losses that cast doubts as to the ability of Baishanlin to continue as a going concern for the foreseeable future without sustained financing. The GFC also granted Baishanlin two State Forest Permits (SFPs), covering an additional 8,170 hectares of State forest. However, it is not clear on what basis these permits were granted. The GFC subsequently advised that one permit was relinquished in March 2015. In late March 2016, Joseph Harmon, Minister of State in the office of Guyana’s President – de facto the country’s second most powerful leader – went on an official visit to China accompanied by “business advisor” B.K. Tiwari, independent press reported. Tiwari is a controversial businessman who had had close links to the previous Progressive People’s Party (PPP)-led government, and is embroiled in a number of court cases with Bai Shan Lin over illegal land deals. Following a public outcry, and before Harmon had returned to Guyana, president David Granger publicly rescinded the “business advisor” appointment that Harmon had apparently conferred on Tiwari earlier in 2016. Shortly after the affair, Harmon reportedly told Guyana Revenue Authority (GRA) officials to abort an ongoing operation aimed at repossessing three luxury vehicles owned by Baishanlin, on account of non-payment of taxes. Again, presidential intervention quickly followed, with the assurance that the GRA would operate without political interference. “The GRA is going to carry out its duties and its responsibilities, and it has recommitted to doing so without fear or favour,” Rawle Lucas, chairman of the GRA said in response to the allegations, adding; “we are all about restoring confidence in this agency and ensuring that mistakes of the past are not repeated.” A photograph also appeared in Kaieteur News, one of Guyana’s two independent newspapers, apparently taken on March 27, 2016 during the China trip, of Harmon in a private jet flanked by Chu Wenze and Chu Hongbo, of Baishanlin, and Su Zhirong, of Rong-An Inc., the second biggest Chinese logger and log trader in Guyana. “The picture by itself, of course, is a very uncomfortable one to look at,” admitted Raphael Trotman, Guyana’s Minister for Forestry. Harmon finally issued a statement which claimed inter alia that the Chinese Ambassador to Guyana had arranged the private jet trip for him to visit Long Jiang Forestry Industries Group, a company based in Heilongjiang Province, in northeastern China. In 2018, the Government of Guyana began attempting to recoup $80 million of the $1.827 billion worth of concessions granted to Bai Shan Lin during this project. These included concessions on a variety of machinery, equipment, construction materials, insurance, freight, and general tax breaks. It is unclear whether this money was ever recouped.

Additional details

1. This project is also known as the Industrial Forestry Park Project and the Guyana-China Timber Industry Economic and Trading Cooperation Park Project. 2. Baishanlin is part of a group of 11 companies operating in Guyana. They are all part of the China Forest Industry Group (Hong Kong). These companies have seven logging concessions in Guyana, covering a total area of 960,000 hectares (about 4.5% of the area of the country). According to the article ‘Bai Shan Lin: the Chinese logger with multiple interests in Guyana’ (05/09/2016. China Dialogue), Long Jiang group is a Chinese state-owned company that acquired 55% of the shares in Baishanlin and intended to fully take over the company in 2016.

Number of official sources

6

Number of total sources

21