The forestry sector continues to be an important sector in Guyana, contributing approximately three percent to the Gross Domestic Product (GDP) based on primary production. It also provides direct employment to approximately 22,000 persons, inclusive of over 3,000 residents of the hinterland communities.
Due to depressed markets and the reverting of several concessions to the State, forest sector production, since 2015, has been on the decline, save and except for a slight improvement in 2017.
This has impacted negatively on the Guyana Forestry Commission’s (GFC) revenue collection as well as that of the country at large. But due to prudent financial management, GFC has been able to complete its deliverables satisfactorily in the last two years.
In this piece, we will examine the performance of the timber industry for the last two years, with specific focus on 2016.
PERFORMANCE FOR 2016
2016 was a challenging year in terms of revenue collection. Limited local and export market access, repossession and expiration of some forest allocations, and the non-renewal by the previous largest state forest allocation lessee were the major reasons for this situation.
Production and export were therefore below the desired levels and this had an adverse impact on the revenue position of the Commission. The GFC had projected to collect $1.5B for 2016. But revenue collection was $ 1.250B.
Total GFC expenditure was $1.190B. The main heads of expenses were employment cost (salaries and wages, station allowance, vacation allowance, pension, medical etc.), operational cost (fuel, maintenance, subsistence and other field cost), administrative (training, conferences, scholarships, stationery and office supplies, forestry exhibition and promotion) and financing (support to Forestry Training Center and Forest Products Development and Marketing Council, Directors fees, legal fees, subscription, etc.).
Despite the difficulties experienced in terms of revenue collection, GFC was able to meet most of its financial obligations. Operational and administrative activities were also executed in accordance with the 2016 work plan. However, some capital works had to be curtailed based on cash flow.
Additionally, forestry sector activities registered decline in both production and export in 2016. Total production of Timber products (Logs, Primary Lumber, Roundwood, Fuelwood, and Splitwood) for 2016 was recorded at 353,495m3 and is 21% lower than the corresponding 2015 total. This quantity, summed with Veneer and Plywood production for 2016, recorded a total of 380,659 m3. This compares to 452,954m3 in 2015 for main timber products, and with Veneer and Plywood added, the 2015 total was 483,702m3.
This decline was partly as a result of less than favourable pricing conditions in the global timber trade, as well as production declines from concession that have returned to the State. This included the largest timber concession which was issued to Barama Company Limited, for which the Company opted not to renew following its lease expiration in October 2016.
Furthermore, export of forest products recorded total export value of US$41.9M. When compared to the 2015 value of US$45.6M, this represents a decrease of 8.15%. The leading value earner for 2016 continues to be Sawnwood, with revenue earnings of US$18.8M. This was followed by Logs, which recorded export value for 2016 of US$16.2M. This was then followed by Roundwood, earnings of US$3.1M.
Within this category, Greenheart Piles has been the main contributing product, with earnings of US$2.7M. Splitwood and Plywood also formed part of the export product basket in 2016, although with a lower volume and value than that of 2015.
Of the two Splitwood products (Paling Staves and Shingles), the main value earner has been Shingles, with earnings of US$1.9M. Plywood earnings for 2016 has been recorded at US$1.3M. The main markets for Guyana’s forest products in 2016 remained generally the same as that of 2015, with a few additional markets emerging in Europe and the Latin America and Caribbean region.
Noteworthy,Guyana continues to feel the effects of the contraction in both China and India markets, since these two destinations are the major markets for Guyana timber products. Overall, the general price level for 2016 was lower than that of 2015 for the main forest products. This impacted on the overall export value for the year 2016.
TIMBER AND WOOD PRODUCTS
To strengthen the capacity of the forestry sub-sector to adapt to sustainable production practices, which ultimately will improve international competiveness and our access to foreign markets, the Government of Guyana has committed to become a part of the European Union Forest Law Enforcement, Governance, and Trade (EU-FLEGT) programme.
According to Finance Minister, Winston Jordan, “We are on our way to initializing the Voluntary Partnership Agreement (VPA) of the Programme by the end of this year. Once the VPA is ratified, we can then commence the implementation phase, at the end of which, the aforementioned benefits would be realized.”
In addition, the Government spearheaded the establishment of an Inter-Ministerial Roundtable, tasked with working collaboratively with the private sector, through the Guyana Manufacturers and Services Association, to meaningfully develop methods and initiatives to stimulate growth amongst the various industries of the manufacturing and services sectors.
Jordan said that the forestry subsector was identified by the Guyana Manufacturing and Services Association (GMSA) as the priority industry for the attention of the Roundtable, given the struggle of its players in progressing to value-added production, which would allow for the sector’s true potential for growth and employment to be realized.
While the challenges facing the forestry sector are multifaceted and complex, Jordan said that the Roundtable was able to identify several key issues that were hampering the sector’s transformation. A package of measures has been designed and will be announced soon. The economist said that the Roundtable will continue to meet in 2018 to resolve outstanding issues with regards to forestry and commence discussions on the next priority industry.
2017 PROJECTIONS AND PERFORMANCE
The forestry sub-sector is expected to show some improvement, with a projected slowing of the contraction to 7.2 percent in 2017, from 27.3 percent in 2016. Total production for 2017 was projected at 297,070 cubic meters, 10 percent lower than 2016. The Finance Minister noted that the forestry sector, at the end of the first quarter, has already showed some hope since Government budgeted 318,000 cubic meters but came in at 349,900 cubic meters.