As we all know tomorrow’s seminar by the Privatisation Unit was summoned at the behest of President Jagdeo to educate business leaders and others on the tax laws as they relate to concessions. The President had testily ordered the meeting at the launching of the Guyana Times after leading businessman Yesu Persaud had asked that the same concessions extended to QAII – the parent company of the newspaper – be granted to others.
In the days that followed, it became clear to all that it wasn’t the rest of the country that should be given a refresher on the tax laws of the country but the very decision-makers on whose actions the President was incautious enough to stake his credibility.
It so happened that two of the QA11 industries which the President had described as pioneering and were supposedly eligible for tax concessions were ineligible under the law. That blunder alone must call into question the meticulousness and care with which this deal should have been reviewed by Go-Invest, the Privatisation Unit, the Ministry of Finance and Cabinet. It has necessitated custom-made legislation tabled at Thursday’s sitting of the National Assembly to try to repair the damage. As we have said before, since the law at the time did not cater for concessions to these two subsidiaries of QAII the intended concessions should not be granted until there is an independent, de novo review of these two applications. In passing, the legislation now tabled by the government to cover the pioneering industries intends to restore a most disturbing level of discretion in the according of concessions. Hopefully it will result in robust debate in Parliament and the expunging of the regressive provisions.
While the pioneering industries gaffe may be the most egregious example of carelessness in this deal there were others which called into doubt the government’s commitment to transparency, straightforwardness and rectitude in privatisations.
In the first case, the government has thus far failed to convince the public that it properly instituted discussions with QA11 for the US$30M investment deal. Both the government and QA11 have laboured unremittingly to make the point that advertisements for the leasing of the Sanata complex went unanswered for many months. That is beside the point. The awful condition that the Sanata complex was kept in would discourage even the most committed and cash flush entrepreneur. It just was not conducive to any investor coming in. Why it was allowed to deteriorate by the state so disastrously is another matter. However, more importantly, after there was no response to the invitation, the government/Privatisa-tion Unit did not put out a new advertisement to cater for expressions of interest similar to the terms of the deal that have now been struck with QA11. That is a major failing and calls into question the transparency of the deal-making.
The process was not thrown open to all potential investors.
Further, as the Sunday Stabroek business columnist Christopher Ram pointed out, after the conclusion of the deal there was no publicizing of the concessions in the Official Gazette as is required by Section 37 of the Investment Act of 2004.
The government and the major players in this deal cannot lay claim to adhering to the laws of the country and observing the rules on investments if they failed so comprehensively on establishing a clear pathway to discussions with QA11, ensuring that the pioneering concessions were lawful and publicizing the concessions in the Official Gazette. There are also residual concerns about whether the making of the deal was adequately insulated from the aura of friendship between President Jagdeo and one of the principals of QA11. By his own account, the President left a Cabinet meeting that was reviewing the deal so that there could be no appearance that he was having any influence on it. Given the hands-on person he is and his penchant for getting involved in many portfolios it is hard to see how his presence would not be felt in this deal; it is hard to see how his colleagues at Cabinet would go against an investment that involved one of his friends.
And the questions continue to surface. As yesterday’s Sunday Stabroek column by Mr Ram pointed out the rent of the complex for the first five years is far below what has been celebrated by government spokesmen. Moreover, compared to a recent sale to John Fernandes Limited the valuation of the Sanata land is low.
Further, QAII has now said that Guyana Times is not being published by its Global Printing & Graphics Inc which attracted concessions. It says that a separate company is responsible for the Guyana Times. If so, it would possibly mean that there are two presses at the Sanata complex where the newspaper is being prepared: one for non-newspaper printing and one for the newspaper.
This could no doubt be easily verified by those whose responsibility it is to ensure that these agreements are being honoured and perhaps QA11 would be willing to clear this matter up beyond the shadow of a doubt. QA11 would also have to explain how it is ensuring that the Guyana Times does not benefit from the tax concessions that have been awarded to its sister companies embedded at the same Sanata complex considering their conjoined use of infrastructure and other facilities at the site.
How will it be able to separate and delineate these businesses to ensure that there is no concession overlap? Are the employees of Guyana Times part of the 600-plus cohort that QA11 has said will be given employment under this investment by the five companies? The public would like to know.
In recent weeks, the Public Accounts Committee (PAC) of Parliament has alighted upon another facet of the government’s favourable disposition towards QA11. Since 2003, the Health Ministry has been making major direct purchases from QA11 subsidiary, New GPC without having to go to tender. The government’s explanation has not satisfied the PAC or anyone else. The government must now ensure that the relevant information on the quantum of purchases from NGPC from 2003 to 2008 as a proportion of the total health sector purchases be made available for scrutiny along with the prices at which these items were purchased.
There must also be an immediate overhaul of these arrangements to ensure competitive purchasing.
Stabroek News continues to welcome investments of all types in this country as long as they adhere to the rules governing such investments. This deal, however, is scarred by the type of opaqueness that attracts the attention of organizations such as Transparency International.
With its congress being held this week, the ruling PPP/C should seriously consider whether the QA11 deal is the type of transparency it and President Jagan committed to when the party took the reins of government in 1992. We think not.
