Published on February 14, 2008
GUYANA FORESTRY COMMISSION: GUYANA FORESTRY COMMISSION DISCUSSION PAPER Ministerial Committee Addressing the Issue of Log Export February, 2007 BACKGROUND: BACKGROUND The National Forest Plan, National Forest Policy Statement, National Competitiveness Strategy, the International Tropical Timber Organisation (ITTO) Diagnostic Mission Study of 2001, and the DFID Country Report for Guyana, These documents all emphasize the need for sustainable forest management and the development of added value forest production as imperatives for forest sector growth. BACKGROUND CONT’D: BACKGROUND CONT’D Discussion at Governmental Level Several Ministerial meetings with the forestry sub sectors GFC Board Position papers by stakeholders This paper has a national focus aimed at increasing Sustainable Forest Management and added value activities. It’s principle aim is to address the national initiative of forest sector growth and development. Current State of the Sector: Current State of the Sector Slide5: Current State of the Sector FOREST RESOURCE ALLOCATION: FOREST RESOURCE ALLOCATION Slide8: Status Summary Assumptions: Assumptions Slide10: Guyana’s State Forest allocation percentages reveal that most of the easily accessible parts of the State Forest have already been allocated into forest concessions. The majority of these concessions are under-utilized, and some concessionaires enter into sub-contractual operations. Recognizing this, there needs to be optimal utilization of existing concessions, to boost the contribution that the forest sector makes to Guyana’s economy and to increase value. The Importance of Optimal Utilization: The Importance of Optimal Utilization Optimal utilization refers to increasing the value of each cubic meter of log extracted from our forests. This is essential to substantially increase forest sector contribution to the economy. The focus is on value creation per unit extracted. Overview of Primary Sub Sector : Overview of Primary Sub Sector In 2000 – 2003 the market for tropical timber products was developing owing primarily to emerging markets in India and China. (Re: Asian Crisis – prices were low, markets were scarce) Prices were only then beginning to increase. Guyana species were in their embryonic stage of gaining market acceptance. Slide13: Primary forest operations have contributed significantly to employment, social services (health, education), and infrastructure. Forest operators have demonstrated efforts to comply with GFC’s policies and procedures within the ambits of SFM. Overview of Manufacturing Sub Sector: Overview of Manufacturing Sub Sector Forest added-value manufacturing capacity has increased over the years. Some manufacturers have indicated that they have been facing a lack of adequate supply of raw materials. This sub sector has contributed significantly to employment, technology transfer, and social services. Slide15: The economic returns of this sector are significant compared to primary production. Some manufacturers have been able to gain access to niche markets. Domestic employment totals increase significantly, as the value chain extends. Technological advancements in added value manufacturing have been made, including kiln drying, high-end doors and furniture manufacturing, among other products. Slide16: Forest manufacturers have diversified to new areas including niche-market furniture, household components - doors, and kiln dried lumber. These manufacturers have been able to successfully penetrate quality sensitive, environmentally conscious markets. Current Status of International Tropical Timber Trade: Current Status of International Tropical Timber Trade Over the past three (3) years it has been noted that a tremendous potential exists in the international and regional markets for processed timber products, especially sawnwood. This is supported by attractive prices and a growing demand for Guyana’s timber and timber products. Regional Demand: Regional Demand International Demand: International Demand Slide20: The global demand for tropical wood products is at a peak and Guyana is well positioned to capitalize on this demand. China, UK, Denmark, Netherlands, and Vietnam etc. all have very high demand for sawn and tropical wood products which are similar to Guyana’s species. For example, in China, many of Guyana’s wood species are in high demand for use in flooring production and other value added end uses. Assessment of Local Demand & Supply: Assessment of Local Demand & Supply An assessment was done in 2006 to determine the local requirement for lumber, in the processing sub-sector (per month). Current supply, to local value added industry was analyzed, relative to demand. Assessment of Local Demand & Supply: Assessment of Local Demand & Supply Potential supply in the form of logs exports, converted to lumber, (at current level of recovery – 40%), was also analyzed. This assessment covered an 18 month period, by geographic location, size of operation, and filtered for any over/under estimation of demand Summaries of total potential supply and demand survey are presented. Demand Survey Summary: Demand Survey Summary Assessment of Local Demand & Supply: Assessment of Local Demand & Supply There is existing local added value demand for identified species. There is, in some case, an identified surplus after having satisfied the local added value demand – e.g Greenheart. There is, in some cases, an identified deficit in supply even if all logs exported were converted into lumber – e.g Purpleheart Situational Analyses: Situational Analyses The guiding documents for the forest sector have recommended the development of the sector through value added production. These documents also talk about providing incentives for those who engage in added value forest activities. Slide28: These documents further emphasize the need to reduce log export and engage in added value activities. There has however, been a marked deviation from this, as shown by a significant increase in log export from 2003 – 2006. Slide29: Most of these species are Prime Species: 56% of log export in 2005 and 57% of log export in 2006 were from the Special Category. 31% in 2005 and 29% in 2006 were from Class 1. The remaining 13 - 14% for both years were from Class 2 and 3 together Little evidence that the Prime Species are carrying the LUS Slide30: Most of the easily accessible forest areas have already been allocated. Based on the clear benefits, there is a need for optimal utilization of logs extracted. Slide31: Recognizing that the primary forest producing sub-sector has experienced initial difficulties, there has been noticeable change in this situation: market has expanded and grown, huge local, regional and international demand and high prices currently prevail in the market. There is an unsatisfied demand in the local market for sawn lumber. A huge unsatisfied export market also exists in the Caribbean, North America, Europe, and Asia. Slide32: For the following species, demand exceeds supply of sawn wood. Logs exported, when converted to lumber still leaves a margin of unsatisfied demand. In addition, international demand in terms of end use application is high. Purpleheart Red Cedar Letterwood Bulletwood Cow Wood Crab Wood Locust Tatabu Kabukalli Shibadan Tauroniro Washiba Hububalli Tonka Bean Darina Slide33: Prime species identified as having tremendous potential for added value Slide34: For the following species demand exceeds supply of sawn wood but in most cases, logs exported when converted to lumber, can cover this gap, leaving a surplus for export. Greenheart Brown Silverballi Itikiboroballi Determa Wamara Hakia Mora Dukali Kereti Silverballi Wallaba Fukadi Futui For Itikiboroballi, Hakia, Dukali, Keriti Silverballi, Fukadi and Futui, these species showed an existing unsatisfied demand. However, for these species the end use application, and demand are not as significant as those identified before. International Situation: International Situation International forest trends, focused on promoting and ensuring sustainable forest management, indicate growing occurrences of restriction on export of logs, especially in tropical timber producing countries, and in some cases, restriction of harvesting entirely, of natural forests. Below is a list of countries which have so far, taken steps to restrict the exportation of logs, and harvesting of logs from natural forests. Slide38: Peninsula Malaysia commenced the restriction of export of logs in 1972. In 1985, Peninsula Malaysia instituted a complete ban on log export. In Sarawak, a quota on log export was instituted in 1985. In Sabah, there was a complete ban of log export from 1993. Similarly, Gabon from 1st January, 2007, instituted a log export quota system to restrict log export and has increased its export levy to 20% of FOB export value on logs. Congo is currently moving towards log export restriction. In Papua New Guinea, certain species of logs are banned. In addition, the Untied States, Canada, New Zealand, Bolivia, and Costa Rica have taken similar initiatives to restrict the export of logs. Options: Options Recognize that added value forest production is essential for forest sector development, supported by favourable market, government investment regime and industry conditions. An outcome of the Ministerial Committee established to address the issue of log export, has pinpointed a possible ban and/or restriction of the exportation of logs as an imperative for added value forest production. Several options were discussed at the level of the Committee and the two extreme options will be presented. RECOMMENDATIONSOption 1: RECOMMENDATIONS Option 1 Slide41: B. The following species to have a ban of squares (dimension 8” X 8” and greater) commencing January 2008: Purpleheart Red Cedar Letterwood Crabwood Locust Kabukalli Shibadan Washiba Hububalli Tonka Bean Slide42: C. The following species to have a 50% ban of logs in 2008, a 75% ban of logs in 2009 and 100% ban of logs in 2010: Greenheart Brown Silverballi Itikiboroballi Determa Wamara Hakia Mora Dukali Kereti Silverballi Wallaba Fukadi Futui RECOMMENDATIONSOption 2: RECOMMENDATIONS Option 2 A. The following species to be banned in the export of logs from January, 2008: Purpleheart Locust Crab Wood Red Cedar Washiba Tonka Bean Letterwood Bulletwood Cow Wood Tatabu Kabukalli Shibadan Tauroniro Hububalli Darina Slide44: B. The following species to have a ban of squares (dimension 8” X 8” and greater) commencing 2009: Purpleheart Red Cedar Letterwood Crabwood Locust Kabukalli Shibadan Washiba Hububalli Tonka Bean Slide45: C. The following species to have a 50% ban of logs in 2008, a 75% ban of logs in 2009 and 100% ban of logs in 2010: Greenheart Brown Silverballi Itikiboroballi Determa Wamara Hakia Mora Dukali Kereti Silverballi Wallaba Fukadi Futui Slide46: The options presented are extreme options for consideration. Other options can be considered, but must be in keeping with the general thrust of the two options presented. Implementing Mechanism: Implementing Mechanism The mechanism of the phased ban in log export will be set and monitored by the GFC. Monthly lumber price publication, distributed free of cost to the sector. Close monitoring by the GFC to ensure that system is working effectively, recommending adjustments and making adjustments where necessary (as appropriate). Implementing Mechanism cont’d: Implementing Mechanism cont’d Only holders of Timber Sales Agreements, Wood Cutting Leases and State Forest Permissions will be allowed to export logs. These logs must originate from their own concession. A complete revision of this system by 2012. Implications of Log Export Ban/Restriction – Advantages & Disadvantages: Implications of Log Export Ban/Restriction – Advantages & Disadvantages Option 1 Advantage: Boost in added value in 2007 Disadvantage: Limited time for transition by Forest Producers Implications of Log Export Ban/Restriction – Advantages & Disadvantages: Implications of Log Export Ban/Restriction – Advantages & Disadvantages Option 2 Advantage: A transition time of at least 8 months would be available for forest producers Disadvantage: The trend of log export may continue in 2007 especially for the prime species. Other Implication of a Log Export Ban/restriction – Past Example: Other Implication of a Log Export Ban/restriction – Past Example Positive impact on export revenue, forest sector GDP and added value forest production. In 2000, Locust and Crabwood were restricted in the export of log form. Following this restriction, there has been a steady growth from 2000 to 2006 in both volume and value of sawn wood exported. Volume increased by approximately 719% and value increased by 929%. This is illustrated below: Other Implication of a Log Export Ban/restriction – Current Analyses: Other Implication of a Log Export Ban/restriction – Current Analyses Positive impact on export revenue, forest sector GDP and added value forest production. Creation of more job opportunities in the forest sector. An additional US$9M (G$1.8B) in export earnings could have been realized, had the logs exported in 2006 alone, been converted into lumber. Mill Capacity: Mill Capacity Having examined the possible implications of a log export ban on Guyana’s timber industry, one area that needed to be examined is the existing installed milling capacity. The Guyana Forestry Commission conducted a survey of existing mill capacity. Based on the findings, the following were observed: Slide57: Aggregate Existing Sawmill capacity: 42,000m3 per month (504,000m3 per year) of logs can be processed Aggregate Existing Plywood capacity: 15,000 m3 of logs per month Aggregate milling capacity amounts to 42,000m3 + 15,000m3 per month= 684,000 m3 p.a. Slide58: Total log production in 2006 was 380,000 m3. Aggregate existing processing capacity is 684,000 m3 (inclusive of plywood processing). This represents only 55% of total installed capacity. Slide59: With the aggregated existing processing capability, the impact of the log export restriction ban will not have a detrimental effect in terms of stifling the processing sub-industry in the forest sector. The processing industry can therefore consume the additional sawn wood processing requirement which would become available. Slide60: Currently, there is a restriction on Locust and Crabwood, in the exportation of logs There is currently, no restriction or ban on the exportation of species in the form of squares.