Jamaica sold short with sugar deal, says Clarke
(Jamaica Observer) Agriculture Minister Roger Clarke yesterday accused the former Jamaica Labour Party Government (JLP) of selling the country short in the divesting of three of the five state-owned sugar estates to Chinese company Complant International two years ago, with arrangements for tax waivers lasting up to 20 years, among other concessions.
In 2010, the Cabinet of the former JLP Administration gave approval for final negotiations to begin with Complant to acquire the Frome, Westmoreland; Monymusk, Clarendon; and Bernard Lodge, St Catherine, estates, after it trumped three other business interests who had also thrown their hats in the ring to acquire the entities with a J$774-million offer. Then agriculture minister, Dr Christopher Tufton, said that with the approval the way had been cleared for the finalisation of negotiations and specific agreements as it related to the three estates.
Yesterday, Clarke in making public the contents of a letter dated July 2010 and addressed to the Board of Directors of Complant International in Beijing China, said while the present Government was happy about the divestment, the country stood to gain little from the sale. The letter, signed by then Minister of Finance Audley Shaw, was copied to Aubyn Hill who led the divestment process.
“As much as we have been able to divest those sugar estates, having this document come to hand… I said to myself, I wonder [if] we will ever be able to get anything which will be of benefit to the country away from some employment,” Clarke said yesterday to sounds of dismay from Government members of the House, with some muttering that “Cabinet did not know about that”. The minister was making his contribution to the 2012/13 Budget Debate.
According to the letter, the agreement involved relief from corporate income tax for 20 years, effective on the commencement of operations of COMPLANT and or its subsidiaries in Jamaica, with an option to apply for renewal. It said if COMPLANT substantially complied with all its obligations under the agreement in all material respects, its application for renewal would not be withheld.
The former Administration also agreed to relief from withholding tax on interest payments on loans or advances to COMPLANT for 20 years from the date of commencement of operation with an option to apply for renewal. Again, it said if COMPLANT complied with all its obligations under the agreement in all material respects, its application for renewal would not be withheld.
The firm was also offered relief from stamp duty or transfer tax on the acquisition of assets or any lease or sublease by COMPLANT and its affiliates with effect from the date of the agreement.
The then government also promised a waiver of the General Consumption Tax (GCT) in respect of the business or purchase of goods, local or imported, of agricultural goods and materials of all kinds of equipment and supplies in relation to the sugar manufacturing business and agricultural machinery for 20 years.
COMPLANT was also offered GCT waiver for the procurement of services from local providers, lease of property, including intellectual property or goods or financing obtained locally for 20 years.
The approval, however, did not apply to purchases of services such as telephone, car rental, hotel accommodation or petroleum products.
COMPLANT was also granted relief from customs duty on equipment for 20 years in respect of items of equipment, agricultural materials and supplies, among other things.
The then Administration also said as soon as the agreement was entered into the appropriate letters reflecting the agreed incentives would be sent to the Commissioner of Customs, Inland Revenue and the Taxpayer Audit and Assessment Departments.
Yesterday, Clarke insisted that he had not made the disclosure to stir up controversy but because he was more concerned about fair play. “I have brought this to the attention of the House in the name of transparency and to take into account the fact that the other players in the industry have been complaining for a long time that the playing field is not level; those arrangements are a little different. At a later date, I will bring to this honourable House what those arrangements are,” Clarke said. In the meantime, the agriculture minister said he was still waiting for COMPLANT to deliver on the deal it was given.
“I have been looking at figures, but with all the investments there has been a downward trajectory… we expect them to live up to expectations,” Clarke said.
Yesterday, Opposition Spokesperson on Transport, Works and Infrastructure Karl Samuda, in response to Clarke’s statement, said the relief had been approved by Cabinet, adding that Clarke was making “a cheap political point” at the expense of the former finance minister.
In addition to the J$774 million for the factories and lands, Complant was expected to lease some 18,000 hectares of cane lands for US$35 per hectare per annum. The country was expected to gain revenue of J$828.6 million in the first year of the agreement and $54.6 million per annum from lease payments after.
The other two entities — the St Thomas and Trelawny sugar estates — were divested in 2009 to the Golden Grove Sugar Company and Everglades Farms Limited, respectively.