Deals

Deals
Stabroek News Editorial. Monday May 19, 2008
http://www.stabroeknews.com/?p=14567

The surprise sale of Buddy’s International Hotel and questions about other deals such as those for the Sanata Complex and the Kingston hotel demand careful examination by the people, by Parliament and any other institution that has responsibility in this area.
Frequently, the government has sought to excuse the lack of transparency by saying that the investors are unprepared to have even the most basic of information released. That is not a safe way of doing business and the assets of the Guyanese people must not be leased, sold or disposed of under this shroud.
Were it not for the media, the very secret terms of the deal that was struck between the government and Buddy’s International Hotel prior to construction would not have been known. To wit that Buddy’s had been granted a corporate tax holiday for a period not exceeding five years, that on completion of the project government would sell the plot of land for $8M, that as far as permitted by the laws of the country the state would facilitate the company’s request to operate a casino on the premises – clearly this was the impetus behind the government’s eventual drive for casino legislation and the botched consultations that belatedly occurred - and duty and tax concessions on machinery, equipment, raw materials, etc
By any standard that was a generous cache of concessions; of the type that any serious, local, long-term investor in the hospitality industry could hope to negotiate. The proprietor Mr Shivraj has always held himself out to be a serious player in the hotel/recreation industry and has several other investments in this sector. There was clearly an expectation that he would be in it for the long haul and would simply not dispose of his most munificent investment to date, which bears his name, a year after for a tidy profit. Indeed, the Memorandum of Understanding (MOU) that he concluded with the government said that the company to build the hotel was formed with the “principal object of establishing and operating at the Cricket Stadium Site, Providence, East Bank Demerara an International Hotel in accordance with the business proposal furnished to the Guyana Office for Investment.” It would be interesting to see what that proposal contained. The MOU further said that the officials of the company had represented to Go-Invest that the “Undertaking will contribute to the development of the Hotel and Entertainment Industry and the Overall Tourism and Hospitality sector of the Guyanese economy and have applied to Government for its consideration and support for this project”.
These objectives could hardly have been achieved in a year or so. The manner of the proposal to the government evinced a long-term commitment to the hotel business and recognition of the risk that Mr Shivraj was likely to be taking. As it now turns out, there wasn’t much risk for Mr Shivraj. Debt financing and a generous, inexplicable loan from the government helped see him through the construction phase. For the time and energy he expended in the Herculean task of constructing the hotel he has been rewarded via the sale to a Turkish investor. He is also now insulated from the long-term risk the hotel industry faces. It is not exactly the kind of Guyanese entrepreneur the country is seeking to shape.
The terms of the MOU are transferable to the new investor who will no doubt bring in new financing but about whom not enough is known as yet. What is known is that Mr Sudi Ozkan is very interested in the casino business but there remain very grave concerns about whether or not the country is in a position to manage the money laundering risk from casinos. Further, casinos will not attract the hordes of tourists of the magnitude that Buddy’s needs to survive. Was this why Mr Shivraj sold his hotel? He recognized that he could not turn a profit from this business considering the state of the economy and the dampening effect of crime?
How Mr Shivraj came to be the investor who was so lucky to be asked to build the hotel is another matter that has not been properly explained by the government. Sympathisers of the government and others have said that he was the only person who had the guts and courage to come forward. That is quite debatable. There has never been any evidence presented in the court of public opinion that the government set about in an open and transparent manner to attract a qualified investor to hurriedly build a hotel for cricket world cup.
Where is the public advertisement over a reasonable period – two or three weeks – indicating in general the concessions that would be offered, in particular the eventual sale of the land, and inviting Guyanese here and abroad and others to invest in the hotel for short, medium or long-term purposes? From all that is known it seems that Mr Shivraj was selected for this project and that has its own implications which have now been further heightened by the sale.
Sanata
It is a practice that has been repeated with the Sanata deal where there is no clear pathway to the initiating of negotiations with Queens Atlantic Investment following the unresponsive bids to the tender that was first put out. Moreover, the Queens negotiations were for an upgraded package which was not originally offered to the unresponsive bidders. That was clearly not a fair process.
The failure of the first bid process could not have given a licence for the government/privatization unit to approach the Queens investor. It was incumbent upon the privatization unit to re-tender the proposal including the lease of the entire complex with the 99-year term. Otherwise what is the purpose of having a privatization policy in place and a board?
Defenders of the arrangement have also pointed to the rundown state of the Sanata complex and the equipment therein as if to say Queens was a white knight riding to the rescue of an imperiled venture. Well, the state of the complex is another searing indictment of the government and the privatization unit. It was their responsibility to ensure that the complex was protected, spruced up and the equipment properly preserved. There must have been some residual value to the equipment and possible adaptation to some other use. Little wonder therefore that the initial tender failed. The state of the equipment and the complex must have been an instant turn-off, all the more reason why it should have been properly re-tendered.
Negotiations and information have been murky at best for other investments particularly the one in Kingston which is being presented as a Marriott-branded operation but which has not yet received the imprimatur of the hallowed brand. Who the real investors are and their bona fides are still to be properly established along with whether the presumptive contractor has built such edifices before. The terms of the swap of the National Archives for prime property on Main Street are also quite elusive.
When in opposition the PPP ran an aggressive and quite justified campaign to have the then PNC government lift the veil of secrecy after questionable deals which undoubtedly enabled corrupt acts and fire sales. After 16 years of its own tenure this PPP/C government has to be careful not to commit the same transgressions.