Mistake or just plain stupid

Go-Invest admits mistake in QA11 deal Gouveia sees need for flexibility with investors

By Miranda La Rose

The Guyana Office for Investment (Go-Invest) yesterday admitted at a long-awaited taxation seminar that it made a mistake in approving two Queen’s Atlantic Investment Inc (QAII) tax holidays when provision was not made for them in the laws of Guyana.

The seminar at Le Meridien Pegasus heard calls from the private sector for transparency, accountability and compliance with the rule of law in government’s transactions with the business community and the public.

Geoffrey Da Silva

In an admission of a mistake in the controversial deal the government signed with QAII promising tax holidays for bio-technology and textiles when provisions were not made for the concessions in the country’s laws, Head of the Guyana Office for Invest-ment (Go-Invest) Geoffrey Da Silva during a brief question and answer period said “We made a mistake. We thought it was covered in the law.”

Ironically, the seminar had been ordered by President Bharrat Jagdeo at the launching of the Guyana Times newspaper to educate the public on the country’s tax laws. Following the President’s statement it was discovered that the concessions were approved despite not being in conformity with the tax laws of the country. A bill paving the way for the two tax concessions is to be debated in Parliament tomorrow.

Asked also how it was that QA11 signed a memorandum of understanding (MOU) with the government in March 2008 when in fact the government signed five supplementary investment agreements in August 2007 and in February 2008 with the group, Head of the Privatisation Unit Winston Brassington said that the MOU spoke of special tax incentives, which he did not elaborate on and which were only concluded in March this year. The MOU which was negotiated among Go-Invest, the Guyana Revenue Authority and QAII, he said, did take a long time to be concluded. The investment agreements had been concluded previously.

Commenting on the same issue, Da Silva said that not all companies sign MOU’s with the government and not all go to Cabinet for approval either. He said that of 285 recently facilitated by Go-Invest just about five were taken to Cabinet for approval. Those that go to Cabinet may involve state-owned lands and applications for concessions.

In discussions with QAII on the five different projects which they had indicated an interest in developing at the former Sanata Textiles complex, Da Silva said they were excited about the planned bio-technology and textile projects. They shared information on these projects which required tax holidays to be competitive on the global market.

Giving a background to the Privatisation Unit’s and Privatization Board’s handling of the granting of the lease for the Sanata Complex to QAII, Brassington said that after the Chinese company which last operated the facility in 2006 handed back the site to the government, the Privatization Unit advertised for those interested in a lease of the textiles plant in late 2006. The deadline for submission of interests was extended to February 2007 after there was no taker. In March the Privatisation Unit then approached Queen’s Atlantic to see whether it was interested. Critics have argued that the unit should have put out a new advertisement inviting general proposals for the site.

When Queen’s Atlantic saw the facility and the potential it held “they were interested,” Brassington said, adding that in April the unit asked them to submit a business plan. On April 26, 2007 when the Privatisation Board met at one of the regular meetings the unit raised the issue of the proposal from Queens Atlantic. The board requested that the unit meet with Queen’s Atlantic and work out a comprehensive business plan with all the relevant documents. Another meeting was convened in May when the business plan was received after which the Privatisation Board met and recommended to Cabinet for approval of the granting of the lease. Shortly after, on May 15, 2007 Cabinet approved the lease agreement. The lease agreement was executed in June, 2007 after which QAII took possession of the land. These agreements, he said were consistent with what is also done at the Eccles and Coldingen industrial estates in relation to long- term leases.

In brief remarks, Minister of Finance Dr Ashni Singh, who left the seminar as soon as he had made his presentation to attend to the business of Cabinet, said that removal of the government and elements of government’s intervention from business have resulted in a new era and climate for investment, wealth creation and poverty reduction through an open and transparent process.

While some have seen tremendous growth and expansion in the hands of private ownership like the bauxite industry in recent years, the New GPC and the Guyana National Cooperative Bank which was taken over by the National Bank of Industry and Commerce and subsequently by Republic Bank, he said there have been a few like the Guyana Power and Light, which changed hands under private ownership and was returned to the government, which were not successful.

Singh said that the government was committed to ensuring that mistakes made will not be repeated.

Long way to go

Meanwhile, Chairman of the Private Sector Commission, Gerry Gouveia, said that in spite of improvements in the country from the 70’s and 80’s when Guyana experimented with cooperative socialism and which resulted in the collapse of a vibrant economy there was still a long way to go to enjoy the benefits of privatization including job creation and better paying jobs, which should have been key policy objectives.
“Regrettably, we are still unable to create enough employment for our people with adequate salaries to compensate for the constant rising cost of living. Regrettable also is the fact that Guyana is now listed as amongst the highest in the world for the brain drain,” he said, suggesting this could be reversed though Foreign Direct Investment (FDI) and ensuring that there is an enabling environment in which investors will feel secure and comfortable with investing their money.

Speaking about an enabling environment for investment, he said that unfortunately, the records show that every major investor in the country over the last 20 years has been the subject of some kind of public ridicule from one section of the society or another. “Where you stand depended on where you sit …never though in the national interest. Consider Demerara Woods, GT&T, OMAI, Barama and the Beal Aerospace port to name a few,” he said.

He said that in business there is need for flexibility to facilitate investors and to broaden the base of ownership and competition since the services of some have since deteriorated.

In spite of all the privatizations that took place over the last decade, he said that the government was still a major player in the economy controlling the Guyana Sugar Corporation, Guyoil, the Guyana Power and Light, the Guyana National Shipping Company, the National Communication Network, the Guyana National Newspapers Limited and to date the government also allows the Guyana Defence Force to use its military aircraft to compete with the private airlines in the commercial market place.

Noting that the Privatization Unit’s role was to protect state assets and resources in the privatization process, Gouveia said that in recent cases privatized companies have indicated that they face very difficult economic times which affect their commitments to the unit.

“Rather than being flexible, constructive and even imaginative, some of our members feel that the PU has adopted a hard line and rather than be a facilitator, seeks to be a collector and revenue earner” he said, adding that “We in the private sector do not see that as a developmental role and are convinced that the PU must see themselves as facilitators, developers, encouragers and helpers of those who may face challenges to turn those previous state entities around.”