Table 11 Current minimum export values and ad valorem export levies in Suriname

Source: LBB

The most significant point about the export tariff and minimum export values set for the export of roundwood and forest products, is that exporters are required to pay these levies in US$ and surrender the value of the exports in US$ to the Central Bank of Suriname. The Central Bank then converts this money into Suriname Guilders at the official exchange rate. This has not been much of a problem until recently, when the market exchange rate has diverged considerably from the official exchange rate. This has, in effect, imposed a massive tax on the export of roundwood and forest products.

For example, Table 12 shows the divergence between official and market exchange rates experienced since the beginning of 1998. Currently the official exchange rate is more than 40% below the market exchange rate, so exporters effectively lose over 40% of their export revenues when they are converted back into Suriname Guilders at the official exchange rate. There is a provision in the import and export regulations that should enable exporters to also obtain foreign currency at the official exchange rate to import the raw materials and capital goods they need to produce their goods. If this worked effectively, then all the analysis in this study could be carried-out using the official exchange rate. However, a common complaint within the forestry sector was that most of the foreign exchange collected is given to traders (and, consequently, subsidises domestic consumption) rather than the productive sectors of the economy. All companies in the forestry sector reported that they had to obtain their foreign currency at the market exchange rate to purchase imported items such as spare parts, tools and machinery. Thus, they effectively pay for any imports they need at a rate of Sf 710 to the US$, but can only get back Sf 396 to the US$ if they export their products. This is a major barrier to trade and has discouraged many of them from exporting their products.

Table 12 The divergence between official and market exchange rates in Suriname in 1998 and the additional "taxation effect" this divergence has on exports of roundwood and forest products.

Source: Larsen (1998)

In addition to the specific export levies charged on the value of roundwood and forest products exported from Suriname, there are also the following two general export levies which must also be paid to the Ministry of Finance:

the statistical levy (statistiekrecht) = 2.00% of FOB value in US$; and

the export consent levy (consentrecht) = 0.01% of FOB value in US$.

These levies are charged in US$ and there are also similar levies on imports.

The only other major tax relevant to this study is the corporate tax rate. The corporate tax rate in Suriname is currently 45% of annual profits. However, discussions with many individuals in the sector suggested that corporate tax collection was not very well developed in Suriname. Procedures for estimating allowable expenses such as depreciation do not seem to be well developed and it was reported that probably many other actions to evade taxes, such as transfer pricing and false invoicing, are common in the country. Generally, it seems that payment of corporate taxes is largely a matter of negotiation between individual companies and tax inspectors. Thus, while the calculations within this study have assumed that corporate taxes are collected effectively, the real level of corporate tax collection may in reality be much lower.

Estimates of other miscellaneous forestry costs in Suriname

There are a range of other miscellaneous costs which some producers in the forest sector have to pay, including: port charges; interest on loans; social costs; insurance premiums; repair costs; and additional processing costs for semi-processed products such as hewn squares. In important consideration is also the level of profit which companies in the forestry sector should be allowed to retain after they have paid all forestry levies (i.e. the "normal" level of profit). A brief description of each of these items is given below.

Port charges are paid by all producers exporting roundwood and forest products. The charge for loading and unloading at the port in Paramaribo is: US$ 4.42/m³ and the charge for using the port is US$ 1.50/m³ (source: LBB). These charges are paid to the port authority. It is not known whether the other major ports in Suriname charge different fees, but it is thought that this is unlikely. Anyway, nearly all roundwood and forest products exported from Suriname go through the port at Paramaribo.

Interest charges vary widely depending upon whether the loan is in US$ or Sf and the financial record of the borrower. Loans in US$ are available from overseas banks (and some local banks) at interest rates of around 15% - 20% per annum. However, these are unattractive because of the exchange rate differential (i.e. they obviously have to be repaid in US$ and, with the exchange rate differential, the cost of servicing such a loan is about 80% higher than if exporters did not have to convert all of their US$ earnings in Sf at the official exchange rate). The interest rates for loans in local currency are between 35% and 50% and most local banks expect a very rapid payback period. Consequently, very few companies in the forestry sector currently have any outstanding loans and local banks mostly lend to traders, where quick profits and early repayment can be realised.

Social costs include the cost of medical care, sickness benefit and, sometimes, housing and other benefits, paid to employees. Often, some of these benefits (e.g. medical care) cover the employee's whole family. Discussions with forest managers suggested that these costs are roughly an additional 40% on top of direct labour costs. However, it is not known exactly how many employers actually provide these benefits. Certainly, it seems unlikely that they are paid to members of local communities working for logging operations. But, some of the larger operations said that they pay for visits by medical workers to their forest areas and some (e.g. Bruynzeel) even have clinics at their forest camps.

Insurance costs include the cost of insuring buildings and equipment. LBB estimates that annual buildings insurance premiums are roughly 7.5% of the building's replacement value and annual equipment insurance premiums are equal to 10% of the replacement value of the equipment. These costs seem rather high, for example the annual insurance cost of the FAO Project's 4WD pick-up trucks is only 3.5% of their value. This figure is probably a better indication of the cost of equipment insurance. As with social costs, it is not known how many forest operations actually insure their buildings and equipment, but it is suspected that probably very few do.

Repair costs include the cost of all major repairs, but exclude the regular replacement of items such as filters, undercarriage, tyres, and winch cables (which have been included elsewhere as consumable items). Ideally, repair costs should be split into parts and labour costs, because the former are likely to be mostly items paid for in US$, while the latter will be paid in local currency. Only one forest operator had this information readily available and provided the information shown in Table 13. It is not known whether these costs are typical for the whole of the forest sector in Suriname but, given the current condition of much of the machinery seen, it is suspected that many operators probably spend a similar amount on maintenance and repairs.

Table 13 Repair cost budget for 1998 for one forest logging operation in Suriname

Machine		Annual repair cost (in Sf per machine)
	Parts		Labour	Total
Bulldozer for road building	1,200,000		900,000	2,100,000
Bulldozer for skidding	1,200,000		900,000	2,100,000
Wheeled skidder	1,200,000		900,000	2,100,000
Wheeled loader	1,200,000		900,000	2,100,000
Logging truck + trailer	1,000,000		900,000	1,900,000
Light truck/crew bus	750,000		50,000	800,000
4WD Pick-up truck	500,000		50,000	550,000

Source: Interview with one local logging company

Additional processing costs include items such as the cost of debarking poles sold as telegraph poles, cutting hewn squares and treating poles with preservative (sawnwood production costs are discussed separately below). Most of these costs are thought to be negligible, except for the cost of cutting hewn squares and treatment with preservative. Discussions with one forest manager producing hewn squares, suggested that the additional cost of cutting hewn squares is about Sf 10,000/m³. Treatment costs are unknown, but are thought to be about roughly the same as this.

Normal profit is the level of profit that is just sufficient to make investing in the forestry sector attractive to entrepreneurs. The level of normal profit will depend upon a range of factors such as the level of profits generally earned in other sectors of the economy and the risk associated with operating in the forestry sector. Identifying the level of normal profit is important for the calculation of forest levies because this variable has a major effect on deciding how much of the economic rent from forestry activities should be taken by the government (as owners of the resource) and how much should be left for the companies working in the sector. If it is decided that the normal profit level should be quite high, then this would suggest that forestry levies should be set at lower rates than if a lower level of normal profit was thought to be acceptable. Discussions with a range of stakeholders in the sector suggested that a rate of 20% was probably an acceptable level of normal profit for the forestry sector in Suriname.

The previous section gave a very detailed description of the cost of all the various inputs used in forest management and harvesting activities. Two other important pieces of information are required to calculate the total production cost per m³ of roundwood or product and these are: the rates of consumption of some of these items (e.g. consumables and capital costs); and the rates of productivity for each activity.

In order to calculate the economic rent from forest operations, it is also useful to have information about the cost of producing value-added products such as sawnwood and plywood. This is because, if mills are buying roundwood at very low prices, there may not appear to be very much economic rent in the roundwood production sector. But, at such prices, the economic rent from harvesting the roundwood may actually be being captured in the processing sector. Therefore, in order to properly calculate the economic rent in the sector, it is necessary to calculate back from the product selling price (i.e. by subtracting its production costs), the processing sector's ability to pay for the roundwood it consumes (which may be more than they are currently paying).