Leader of the Opposition Bharrat Jagdeo has said that concessions are part of the daily life of a government and that he will not “beat up” on the APNU+AFC administration for giving concessions to any foreign investor whose investment was transparent and administered by the Guyana Revenue Authority (GRA).
“I believe that you have to give concessions and, frankly speaking, be liberal about concessions too,” Jagdeo told a news conference at his Church Street, Queenstown office last Thursday.
Noting concerns expressed about concessions being given to foreign investors, Jagdeo said governments give concessions to make an investment viable or attractive, which includes ensuring a rate of return that is competitive with the rest of the world.
“It could come in land price, in the form of duty-free concessions or in the form of future taxes to make an exercise viable,” he explained.
If the investment does not take place because a government is too paltry with the concessions, he said, the country loses out on jobs and linkages.
He also note that there are lucrative sectors in which the return on investment is high and these have to be treated based on proven financial models. That being said, he charged that the US$460 million pre-contract costs claim submitted to the government by ExxonMobil’s local subsidiary and its two partners was an aberration as the figures were not verified and “the stability clause is also an aberration based on changing circumstances.”
Noting that he saw the Guyana Goldfield pre-contract, he said the company did not want to sign the agreement with Guyana because he, Jagdeo (who was president at the time) argued they should pay an eight percent royalty instead of a five percent royalty.
“They refused to sign the contract for a while and I said, ‘Fine. We are not going to go ahead with the signing,’” he noted.
At a subsequent meeting, he said he questioned the financial model they used to get to their rate of return. It was a number, Jagdeo said, “where the price for an ounce of gold was below US$1,000.” Guyana Goldfields, he added, did not want to pay an eight percent royalty on a model that only kicks in if the price of gold was above US$1,000 and it was not going to lose anything.
“Eventually they signed,” he noted, while saying that is how the country is getting an eight percent of royalty rather than five percent from Guyana Goldfields.
However, he said, “If you don’t give Guyana Goldfield duty-free concessions to bring in their equipment for their project”, there is much the country could lose as numbers often work against them.
In his role as Finance Minister, Jagdeo said, the law was changed to remove the minister’s authority to grant approval of duty-free concessions, and to vest it in the GRA. This was based on a recommendation from the Guyana Office for Investment. After the PPP/Civic took office, he said, that was changed to ensure that no politician was responsible for approvals.
While he said he does not want to scare away investors, Jagdeo added that he has noted that in some companies foreign staff get duty-free concessions.
For example, ExxonMobil, he said, can bring in a foreign driller who can bring in “a whole slew of duty-free goods. That should not be part of any agreement. We had it originally and then we started removing it from the contracts subsequently.”
As a policy decision of the PPP, he said, most of the contracts signed during the PPP era had removed that provision about employees benefitting from it. “They should be paying taxes equally. You cannot bring in a foreign foreman and he gets all these concessions, and a Guyanese foreman does not get it,” he argued.
In Guyana’s case, he said, people often say the government discriminates against local in favour of foreign. “Our policy was always based on the size of investment. It did not matter who the investor was. There was nothing that said that Guyanese are excluded from this concession. It was based on size of investment. So, I will not criticise this Government for granting concessions,” he said.
However, he noted that the government has been making the whole process uncertain and people are going to the ministers they know for favours
“If you drop into a particular minister’s place, he would give you a call to the GRA to say help this man out,” he said. “The ministers are pushing for concessions for a few people. That is not the approach.”