Dear Editor,
The time has come for Guyanese both local and in the diaspora to invest in tax-exempt bonds for infrastructure.
The Guyanese diaspora to varying degrees welcomed the change of government following the 2015 elections; however, the likelihood of the government staying in power for some time depends on it keeping its election promises of significant reforms, including transparency. Victory parades and parties are not good enough to guarantee the success of radical reforms intended to produce prosperity for all Guyanese. So I am going to start with those of us in the diaspora who have a lot of opinions but no action. Despite the fact that we live mainly in America and Canada, and may have become naturalized citizens of those countries, yet, we talk everywhere and to everyone about being Guyanese and about the “happenings” back home. Therefore I am calling on the “we are Guyanese “crowd” to put their buck where their mouth is.
Let us suppose for argument’s sake there is a population of 1,000,000 Guyanese living in the diaspora. So buying a US$1,000 bond to invest in Guyana’s crumbling infrastructure should yield US$1,000,000,000. This not a new idea; Israel and India have been issuing bonds to their respective diasporas for many years.
For this reason, I propose the ultimate litmus test for the ‘big up Guyana crowd’: the issuance of infrastructure bonds to the diaspora in the amount of US$1 billion. The interest and principal payments on the bonds will be tax exempt and will be payable in Guyana dollars. The bonds will be structured in various series depending on security, ie, the more collateral backing the bonds have, the smaller the interest paid, which would also be affected by the maturity dates. Zero coupon bonds should be part of the series of bonds as well as inflation adjusted bonds. These tax-exempt bonds should be rated by a rating agency for added comfort on the part of the investing diaspora.
Denominations would be in US$1,000, while terms and maturity should be as long as 30 years and as short as 20 years, because you don’t finance long-term assets with short-term debt. In addition, the interest rate should be competitive with at least the US Treasury. I personally would like the ability to arbitrage my principal and interest payments (convert on the cambio) when my bonds mature or if I need money in US dollars. But that’s another issue because of complexity.
So as a first step, the Minister of Public Infrastructure should report to the public as soon as humanly possible the projected total costs of repairing, replacing and constructing mega-infrastructure projects. Next, the government should run a parallel marketing campaign to gauge the level of interest in investing in these bonds. My guess is that interest should be significant among those who are indifferent and not wedded to the entrenched politics of yesteryear. On the other hand, the population that is inclined to support the development of Guyana for the next several decades could contribute indirectly to investing in projects by the non-consumption of goods and services that add no value such as alcohol and imported salmon, just to name a few.
Similarly, a significant portion of the over US$400 million in annual remittances should be divested to purchase the aforementioned bonds; the intended recipients will benefit from the interest payments, which is stable income. Priority should be placed on investing in long-term assets, not only roads with toll lanes and bridges, but also building more institutes of higher education, including advanced technical schools. Another proposed mega-project is the resettlement of those residents who constantly suffer both financially and mentally from coastline flooding, to the interior of the country. This entails building viable townships using modern materials and technologies interconnected with the already proposed highways and airports.
I am careful to stress that the cost benefit analysis from investing in costly infrastructure projects where the benefits are enjoyed over a long period of time is a scenario not likely to go over well with politicians or ruling parties who have a short time to campaign for the next election. However, let’s think to some extent of generational benefits while earning interest payments in the short term. How is the government going to pay interest on the bonds? The government would have to designate interest and principal payments as exceptional, and guarantee them under the constitution with regard to the budget. One example would be the guarantee under the constitution of tax revenues designated for the annual funding of the operations of the Guyana Revenue Authority. Other forms of taxes should be levied on remittances over a certain dollar amount ($5,000 and up) or luxury goods such as homes over 3,000 square foot or vehicles over 1,600 horse power, to name a few. Owners of empty land in excess of 3 acres should also pay a special tax to avoid eminent domain actions by the government.
Those taxpayers who may have to pay the aforementioned taxes can mitigate some of the costs by investing in the tax exemption bonds. For taxation to work fairly, it must be enforced indiscriminately across all citizens without regard to their socio-economic status. So concurrently with infrastructure investments, the revenue authority has to be revamped to address the challenge of efficient and effective tax collections. Separately, the authority’s commissioner should not be a political appointee, but be voted by the people for one 7-year term. He or she could be recalled by the people if there is a certified petition of 150,000 or more citizens who are registered to vote. Most importantly, the department’s audited financial statements must be available for public scrutiny via the authority’s website.
Countries such as Guyana have benefited tremendously from new technologies such as the wireless phone and the internet. One such benefit does not incur the huge costs of laying copper lines as in the case of telephone services. Another cost saving is the declining marginal costs as a result of investing in information technology.
As such, to demonstrate its commitment or to show that it has skin in the game, government should divert all savings to the mega-projects, as result of employing cheaper and better technologies in other areas of development. The time has arrived for Guyanese to embrace visions with regard to mega-projects. By the way, our neighbour Brazil can build us anything mega, and have it shipped and reassembled. Nevertheless, we need the good paying jobs that come with these projects.
I expect to see the first tax exempt bonds in 2017.
Yours faithfully,
Keith Bernard
