Earlier this month, the public became aware of a convoluted arrangement involving central government, the Guyana Revenue Authority and the National Insurance Scheme for the gigantic, ill-starred CLICO building on Camp Street.
This deal if proceeded with will result in a waste of taxpayers’ money and seriously calls into question the judgement of the government and the GRA. There is no doubt that in its conceptualizing, the ultimate objective of this deal is to help rescue the NIS from the parlous financial state it is in – a condition that this government has allowed to worsen by not heeding actuarial and other reports.
After having recklessly permitted the NIS to invest $5.8B in CLICO which money will not be seen again, the government is on the horns of a serious dilemma. It has given words of comfort to the Scheme for this $5.8B which if restored to the NIS will see taxpayers having to foot the bill. Now, in a year where the NIS’ outflows will likely exceed its intake, the government has concocted a breathtakingly absurd way to have the cash-rich GRA help out the NIS.
The public might recall that the NIS acquired the CLICO building earlier this year for the price of $600M. Why it would invest in this location that has had a blighted history was not clear at the time. After all, the maintenance and the upkeep of a building of that size would be horrendously expensive. The reasons became much clearer when it was revealed that the NIS would pay nothing for this building but that the transaction would be considered as an offset for the $5.8B owed by CLICO to the NIS. That in itself was a problematic development as according to the rules governing liquidation the proceeds from the sale of assets had to be placed in a pool to extinguish liabilities to creditors in the order of ranking.
The question then remained what would the NIS do with this building? All was revealed several months later when it was disclosed that the GRA would occupy the building and it would be customized for its purposes. The devil was in details. The public is now being told that the government will fork out $227M for the re-jigging of the building to accommodate the GRA which is spread out all across the city in various buildings. The GRA would then pay the NIS a hefty rental every month. Presto, the NIS would boast a relatively well performing asset helping to improve its bottom line while having recaptured $600M worth of its loss to CLICO.
Our talented sixth formers can do a far better job of coming up with a business plan for a new GRA HQ. As with NICIL and the various protestations over what is a private company and its relationship with the government one has to question what exactly is happening in this transaction. By virtue of its planned occupation of the building, one would expect that the GRA is driving this transaction with the NIS. However it would appear more likely that the long-serving Chairman of the NIS and Head of the Presidential Secretariat, Dr Luncheon is the person behind this deal.
Since the fully autonomous GRA is the intended occupant of the building one would have expected that when the CLICO building was placed on the market it would have immediately been snapped up by the revenue body for some pre-existing plan to consolidate all offices in one building. The GRA was apparently napping and the NIS transacted for the building. That doesn’t explain however why the GRA is willing to pay a hefty monthly rent for the foreseeable future when it would have made much more sense for it to purchase outright the CLICO building or have another building purpose-built. At first, Dr Luncheon said that the monthly rent would have been $10.5m month. Following several media reports on this deal, he stated that he had made a mistake and that this sum was “quite inflated”. This was even more surprising as prior to Dr Luncheon’s disclosure of the inflation, the $10.5M rental had been justified and defended by the GRA’s Commissioner-General Mr Khurshid Sattaur.
Now, it seems that some lower rent will be fixed. If this transaction is to make any sense at all, the $227M to revamp the building should form part of the GRA’s purchase of the building from the NIS as would be the case with any transaction of this type. To have $227M of taxpayers’ money sunk into this building and another hefty amount of taxpayers’ money going on a monthly basis to NIS defies common sense.
Has the GRA’s board authorized this deal? If so we would humbly suggest that it be immediately reviewed and that all steps be taken to ensure that there is no wastage of taxpayers’ hard-earned money. Has President Ramotar considered the ramifications of this deal and whether it makes good sense?
