Friday, June 27, 2008

ANSWERS, NOT BALM - Kaieteur News Editorial

ANSWERS, NOT BALM - Kaieteur News Editorial. Friday 27 June 2008

A straightforward question demands a straightforward answer. Is there going to be an inquiry into the deaths of the eight miners whose charred remains were found this past week?

Indications are that the government is going to sand dance around this issue as it has done on so many other requests for commissions of inquiry.

Pressed about the establishment of an inquiry at his recent press conference, the President of Guyana was non-committal. He would only say that if there was an inquiry it would involve other killings as well.

This answer sounds like a rejection, an unfortunate one at that, of the call by the Leader of the Opposition for an independent investigation and later, the call by the Alliance for Change for a commission of inquiry.

This is unfortunate since never before in these parts have there been three mass murder massacres in the short space of six months.

Surely, it is inexcusable that each of these developments has failed so far to elicit the establishment of public inquiries.

There is a growing perception within our society that the PPP is averse to public inquiries. Successive PPP administrations have however held inquiries.

Under President Cheddi Jagan there was an inquiry into the disturbances of 1992.
There was also another inquiry into a Sea Defence contract. There was also a commission set up to advise on the University of Guyana.

Under President Jagdeo, there has been a commission of inquiry into the breach of the conservancy at Cane Grove a few years ago.

There was also a commission of inquiry into death squad allegations but this came only after relentless international and local pressure.

What is evident is that the present leadership of the government is reluctant to undertake these public inquiries.

There is a belief that rather than viewing the establishment of these inquiries as a sign of good governance, the government is afraid that the findings of these inquiries would retract on its record.

If this is indeed the case, then this is highly unfortunate because apart from their forensic value in answering critical questions, public inquiries also boost public confidence in the work of the political administration, while entrenching accountability.

After the Lusignan and Bartica massacres there were calls for a commission of inquiry to investigate these incidents which seemed related.

In any other part of the world such an inquiry would have been automatic, yet here in Guyana we had the two worst ever human atrocities (excluding Jonestown) since independence and for some inexplicable reason the government has failed to carry out a commission of inquiry into these gruesome events.

This, we believe, is totally unacceptable and regrettable, constituting a gross dereliction of duty on the part of the government.

Yet again, a massacre has taken place and instead of being decisive and establishing the appropriate commission of inquiry, the government is being ambivalent.

If the reluctance to move forward to do what is expected in the circumstances has to do with the fact that the calls for an inquiry emanated from the opposition, then this smacks of shallow pride and deep insecurity within the government.

We trust that there will be a change of attitude and that the government will move with dispatch to announce a commission of inquiry to probe into the deaths of these eight miners.
The public needs answers, not balm.

Monday, June 23, 2008

Business Page- Are Guyana’s companies built to last?

Business Page- Are Guyana’s companies built to last?
By Christopher Ram
Stabroek News. Sunday 22 June 2008

If we look across the Caribbean we see a number of companies that have extended well beyond their borders with Grace Kennedy, Republic Bank and Trinidad Cement being very prominent, burnishing their Caribbean credentials by cross-listing on the regional stock exchanges. Perhaps reflecting their growing confidence and strength, Trinidad and Tobago companies appear the most enterprising as their domestic market becomes more saturated forcing them to seek new opportunities and markets abroad. With the USA’s plans to follow International Financial Reporting Standards in place of US GAAP it may not be long before we see a Caribbean company seeking listing on a US stock exchange.
Where does Guyana stand among Caribbean companies having established one of the early companies (Banks DIH) to have gone into wide public ownership and with veteran entrepreneur Yesu Persaud regarded as one of the leading private sector persons in the region?
It seems not very far, defying all the hopes that the launch of the Guyana Stock Exchange and a very favourable tax regime for public companies would see an increase in the number of companies listing on the stock exchange, raising money from the public and providing the platform for take-off.
Going private
Instead the relationship between the Guyana Securities Council and leading public companies is at best strained; no company has yet listed and the quality of corporate governance is still strained. In fact, with public companies such as Guyana Stores, JP Santos and Hotel Tower Limited coming under limited personal or family control, it would probably be truer to speak of ‘going private’ rather than ‘going public.’
It may have been pure coincidence that Banks DIH was again in the forefront among local companies to have offered a significant share to a foreign company – Banks Barbados – although the purpose may have had little to do with regional co-operation. It is difficult to say how beneficial the move was to the company as a whole, but it was both bold and novel to see truly outside directors with real clout being placed on the board of any public company in Guyana.
The other major public company with wide-shareholding – DDL – has not only not done well in its overseas ventures, but many of its new ventures have been as private companies not subject to the higher standards of transparency and disclosure applicable to public companies. Worse, the company like so many of its counterparts seems to take the approach of the goldfish, unable or unwilling to see any wart that would restrict its own development, no matter how obvious to even the most casual observer.
Of course the government has abandoned its commitment to widespread public ownership and Guyanese can only dream of a stake in any of those companies which are being given all sorts of goodies to ‘encourage’ them to risk exploiting our natural and sometimes non-renewable resources. While we ask the government to comply with the Investment Act in relation to local private sector companies, we should not lose sight of the danger of worse excesses taking place in relation to foreign companies. These deals which can bind the country for decades should be tabled in the National Assembly in the interest of transparency and to reassure those investors.
Competing at more than cricket
But back to our private sector companies and whether they have what it takes to compete regionally and internationally to take on and beat the Bajans, Trinis and Jamaicans, like we do in cricket – at least some of the time. GBTI is a sound financial institution that can move outside of the Guyana market, but nothing that the directors have said suggests that they are thinking in that direction.
What a boost it would be for Guyana to hear that our own GBTI has taken majority control of another regional financial institution. Or that Bakewell – a private company – has moved into another market. Indeed these are legitimate questions to any entrepreneur who laments the domestic business environment.
Seeking answers to these questions I turned to my favourite and best-selling business book, Built to Last: Successful Habits of Visionary Companies by Jim Collins and Jerry I. Porras, which was followed up by a solo effort by Jim Collins: Good to Great: Why Some Companies Make the Leap . . . and Others Don’t.
Included in Built To Last, are eighteen companies the authors identified as a “visionary company,” defined as one that is a premier institution in its industry, is widely admired by knowledgeable businesspeople, made an imprint on the world, had multiple generations of chief executive officers (CEOs), had multiple product/service life cycles, and was founded before 1950.
Good habits
In a summary of the book the Vance Caesar Group, ‘Premier Leadership Coaching,’ identified as the key question which Messrs Collins and Porras sought to answer as “what has enabled some corporations to last so long, while other competitors in the same markets either struggle to get by, or fade away after a short period of time?” Collins and Porras took as their benchmark 18 well-known, well-established and healthy companies (‘visionaries’), and compared them to a counterpart in their specific area of business using as yardsticks common patterns and differences between their company and the counterpart. The result was a set of guidelines and principles that all companies, large or growing, can use to keep themselves growing, strong, and ahead of the competition.
Here are the outstanding features of companies that are built to last.
Clock builders, not timekeepers – They are focused on building the organisation so it would run “as smooth as a clock.” Visionary companies lead, not follow – build not watch the clock.
Have a set of core values – They began with a set of core values that persist and are practised at every level in the organisation, in good times and bad.
Have a core ideology - While the core value stays the same, the core ideology changes, preventing the company from being left behind and eventually disappearing. This is not the same as responding to every fad that comes around and usually takes place slowly, but fast enough to keep ahead of the competition.
BHAG (Big hairy audacious goals) – Not all shifts are incremental. Companies that are built to last periodically undergo paradigm shifts in products, and have clear-cut, compelling, cutting-edge goals the company sets to climb the next mountain.
Have a ‘cult-like’ culture - Everyone in the company must commit to the same core ideology, must be indoctrinated into the company culture, must develop a tight fit with others in the company, and must think of themselves as the ‘elite’ in their field.
Don’t be afraid to evolve - Visionary companies monitor trends, do their research and anticipate and even create changes. They do not wait on the market or on some other visionary before making their move.
Look inside for top management – Visionary companies have management development processes and succession plans in place to ensure smooth transitions and direction as the company ages. It is not unusual to find a defined succession plan that is more than one level deep, capable of responding to the most dramatic shock without any noticeable disruption.
Constantly innovate – Without this, the company’s products/services become obsolete and lead to a decline.
How have BTL companies fared?
Are the companies identified in the book still considered “Built to Last”? The answer depends as always on who is asked. Converts to the ‘Book,’ which they spell with a capital ‘B,’ would point out that every one of the 18 companies cited is still in business, is still a household name doing what they were doing decades before. Taken as a basket, these companies are also doing quite well in terms of total shareholder return, even though the writers themselves say that the companies were not selected on the basis of stock market performance.
Cynics not only point out that the shares of Motorola and Sony have lagged on the S&P 500 Index while Disney has taken a long time to recover from a long slump, but that the test was so widely framed as to allow too much latitude. At least 7 of BTL’s original 18 companies have stumbled, prompting the question, have companies struggled because they ignored the principles in the book or because they followed them?
Of more direct interest is the book’s relevance to our own entrepreneurs who are mostly self taught in the school of entrepreneurship, and whether the principles that may have contributed to the success of mainly US companies can be applied to Guyana where the business culture seems so different from the Caribbean, let alone the USA.
If Guyana is to compete then our companies – big and medium-sized – would need some paradigm shift in how they see their businesses. How our entrepreneurs respond will shape the Guyana economy for the next few decades.
Next week: Business Page’s response to the statement by the Ministry of Finance on the Queens Atlantic II Group and related matters.
Business Page is dedicated to providing objective information and opinion on issues of interest to the business community and the public at large. The articles in Business Page are prepared and contributed by Christopher Ram who is the Managing partner of Ram & McRae, Chartered Accountants, Professional Service Firm. This and previous columns can be found at

An investigation into the whereabouts of the spy equipment should have been demanded

An investigation into the whereabouts of the spy equipment should have been demanded
Stabroek News letter. 23 June 2008

Dear Editor,
Why senior ministers, the President, opposition assembly members, the press, etc, have not demanded an investigation as to the whereabouts of the spy equipment long ago is a mystery to me. The government continue to be their worst enemy by the way they handle information and criticisms. It is not good enough for senior officials to only say they do not know, but to add that “I will seek to find out the answer to your question and get back to you.” The answer should be pursued up the presidential level. That would be good governance and a freedom of information step in the right direction. There are other issues that require the same treatment.
Yours faithfully,
(Name and address provided)

Sunday, June 22, 2008

Only US govt could have given Roger Khan permission to import spy gear - Jagdeo

Only US govt could have given Roger Khan permission to import spy gear - Jagdeo
Stabroek News news item. Sunday 22 June 2008

The Government of Guyana could not give permission to drug-accused Shaheed ‘Roger’ Khan to import sophisticated computer telephonic surveillance equipment from the Spy Shop in Fort Lauderdale, Florida, into Guyana, it was only the US government, which could have done that, President Bharrat Jagdeo has said.
Speaking on a range of issues at a press conference in New York over the weekend to launch Carifesta at which Minister of Culture, Youth and Sport, Dr Frank Anthony was present, Jagdeo said, “the Government of Guyana can’t give permission to Roger Khan.
“It has to be the US government. It is the US that put restrictions on the export of certain technology. It is only the US government, which could give permission to one of its companies to export, not the Government of Guyana. We did not put a restriction on the export because we don’t have that technology. So it is just so patently false.”
Jagdeo raised the issue of Roger Khan, while accusing one of the NY-Caribbean area newspapers of not carrying the government’s release on the issue on the importation of the surveillance equipment, but nevertheless carrying the PNCR release on the very issue in which it was stated: “The Government of Guyana gave Roger Khan permission to import some sensitive equipment.”
Addressing the issue of race relations in Guyana, which appeared to have attracted much discussion and taking to task US-based Guyanese political activist Rickford Burke, the President said anyone who went out to bars would see young Guyanese of all races and ethnic groups hanging out together.
He said the United Nations Rapporteur on Race, in his findings, did not find any cases of institutionalised racism in Guyana.
He said while much of the racism practiced might be found among the older folks, “young people are moving on with their lives.”
He advised that they study the political history of Guyana including the US Central Intelligence Agency (CIA) report on Guyana and they would trace the attempts by those who ruled Guyana at the time to divide the Guyanese people.
“They did not want us to have independence; they worried that we [might become] a second Cuba in the Caribbean. They even instigated Venezuela to reopen the border issue,” he said, adding that some were so caught up in a mindset of racial prejudices being practiced in Guyana that they did not look to the historical background.
Contending that Burke talks about ethnocracy being alive in Guyana in every statement he puts out, he said that would continue because the decent people did not challenge his statements.
He claimed that Burke said that 200,000 Indo-Guyanese were given weapons, but even PNCR Leader Robert Corbin would not make such outrageous statements. “You will always have extremists in the society,” he said adding that ROAR Leader Ravi Dev in his extremism said that the PPP was not defending Indians rights and on the other hand claimed that the government was discriminating against Afro-Guyanese.
“The answer does not lie in the extreme but in the mainstream,” he said, adding, “if you come to Guyana you will see the mainstream. More than 95% of our people want to work and live together.”
He challenged Burke to put his charges of ethnocracy to the Ethnic Relations Commission, which, he said, was a rights commission set up with bipartisan support. It should be noted that the current commission has not had the support of the main opposition PNCR.
Apart from the ERC, he explained that there were rights commissions along with an overarching human rights commission to be established with bipartisan support. While only the ERC is currently in place, he said, persons did not have to wait for the others to be established because they could take their cases to the ERC.
The ERC, he said, even has the power to bar a political party from contesting an election if that party used race as a factor to do so.
Perception was one thing, he said, adding, “If you have people like Rickford Burke every week speaking of Guyana as an ethnocracy with no one challenging it here, the perception will persist.” To dispel the perception, he said, the heads of the Guyana Defence Force, Guyana Police Force, Central Bank, Presidential Secretariat, Statistical Bureau, and the Prime Minister, to name a few, he said were Guyanese of African descent.
When someone remarked that a US presidential candidate was Black, Jagdeo said, “You will have a Black President. And I will be very happy if you have a Black President. The thing is you never had a Black President before.” He said that in the US Supreme Court there was one Black person and within the US Congress, a limited number of Blacks. Just a few years ago, he said, there was not a single Black or Hispanic person in high office.
“If you go to our judiciary, if you go to my Cabinet, if you go to the Parliament - the three branches of government — you will see what they look like,” he said.

Saturday, June 21, 2008

This is a product of racial politics

This is a product of racial politics
Kaieteur News letter. 20 June 2008

The co relation between the ages of dysfunctional youths, such as those in the ‘Fine Man’ gang and the recent murders of our sisters recently, and the “return of democracy” is testimony to the failure of a system that produces hopelessness.
PPP in power = 16 yrs; ‘Fine Man’ gang members average age = 16 yrs. This in no way exonerates them from the alleged crimes they committed.
It begs the question of how many more youths are out there ready to pick up a gun and go on rampage.
The PNC is as equally responsible for this situation as the PPP, and has been lending support when necessary.
This is what racial politics produces under the disguise of democracy: drug lords, Roger Khans, corrupt police, corrupt politicians, and dysfunctional societies - recipe for disaster.
Guyanese, you need to put an end to this cycle of injustice that is being perpetrated on you.
May God bless you.
K. Persaud

Let the probe called for by the AFC be held

Let the probe called for by the AFC be held
Kaieteur News letter. 20 June 2008

I have an aversion to responding to feature articles written under pseudonyms, such as ‘Peeping Tom’, but I will take exception to the one titled, “Let’s have a full, not a limited enquiry”, (June 18), if only because of the gravity of the issue under discussion.
The writer pretends to support the AFC’s call on the UN to help launch a probe into Roger Khan’s Phantom Squad operations that allegedly claimed 200 lives, but really seeks to negate the impact such a probe can have on the Bharrat Jagdeo regime for apparently “facilitating” the squad’s extra judicial activities, by suggesting the probe be expanded to include the dangerous criminal spree that preceded the Phantom Squad.
Let’s be frank about one thing: we seem to have more damning evidence against Khan and his gang, which seemed to have a dotted line relationship to the PPP regime, than we seem to have linking loosely knitted criminal groups and the PNC.
This does not mean the PNC should be absolved of links, but despite repeated charges by the government, neither it nor the Police have tendered a shred of credible evidence to substantiate the charges linking the PNC to dangerous criminals.
Without hard criminal evidence or even credible witnesses, such as those armed criminals who have been killed out by the Joint Services, how can there be a probe of the criminal gangs? Government keeps shooting itself in the foot when criminals are killed and not arrested! We’ve recovered some of the AK-47s, but no criminal is alive to talk about them!
What evidence do we have so far against Khan? While fleeing the Joint Services en route to Suriname, Khan himself unveiled his role fighting dangerous criminals by financing their extra judicial killings.
The US authorities went one step farther recently and revealed he was responsible for about 200 deaths. Six years ago he was caught with a powerful eavesdropping device that can only be purchased and imported into a country based on approval of a government.
It was confiscated and then reissued for private use in bugging the phones of the then top cop and a PNC official.
Khan’s lawyers went one step farther and revealed the device was purchased in Florida, leading concerned Guyanese to ask, who in the Jagdeo regime placed their signature on a government letter head and authorised the
purchase of this device?
While the US authorities are looking to try Khan for conspiring to smuggle narcotics out of Guyana to America, the preliminary process is opening up a Pandora’s Box of information that is embarrassing to the Jagdeo regime, because even if the regime denies knowledge of Khan’s alleged narcotics activities, how can it extend its denial to include Khan’s extra judicial links and possession or use of the eavesdropping device?
Based on evidence so far, how can he be treated like he was a ghost in Guyana?
The little bit of information we have so far on Khan is enough to demand that the government re-appoints the Phantom Squad Commission to re-open its probe of Mr. Ronald Gajraj, and invite former acting top cop, Mr. Floyd McDonald to answer tough questions about Khan’s allegations that he used cops on the GPF payroll to help rub out criminals, and how he came to be in possession of the eavesdropping device.
If the government fails to do this, it has every reason to fear that more damaging information could surface if and when the Khan case gets underway in New York.
So far, its credibility has taken a severe beating, and no matter how much it tries to keep in the public’s view its vigorous search for the apprehension of ‘Fine Man’ Rawlins and his gang, the Khan issue is going to survive this obvious attempt to distract from what seems to be more damaging than what ‘Fine Man’ Rawlings and his gang have done.
There can be no plausible defence for ‘Fine Man’s grotesque murders, but because the Khan issue appears to have the fingerprints of Government officials on it, this could lead to an international scandal if it can be proven via a thorough probe or in an international court that the government was in bed with him to wipe out criminal elements.
What’s worse is that if most of Khan’s victims were black, then given the government is predominantly Indian and Khan is of Indian extraction, it could pass for a government-approved ethnic retaliation.
It is one thing for a private citizen or a group of private citizens to engage in ethnic defensive/offensive tactics, but it is totally different when the State lends tacit approval.
In 2002-2004, I wrote letters condemning the ethnic-targeted criminal attacks and the physical and psychological trauma on our Indian community.
I also recognised the threat spiraling criminal violence posed to the security of Government and stability of society and urged Government to call in outside help. But now I know why it didn’t.
Nevertheless, when vigilante justice supplants the rule of law, to the extent displayed by Khan and his gang, then since there is no law in Guyana that authorises him to do what he did, this makes him, those who authorised him, and those whom he authorised all criminals just like the criminals they wiped out.
I say, based on evidence to date, let the probe called for by the AFC be held, then we can look at all other cases as the evidence comes to light.
Emile Mervin

Losing Financial Ground

Losing Financial Ground
Stabroek News Business. Friday 13 June 2008

Rawle Lucas is a Guyanese-born Certified Public Accountant and Assistant Vice President of the Lending Services Division.
Mr. Lucas has agreed to serve as a columnist with the Stabroek Business and will be contributing articles on economic, financial and development matters.
By Rawle Lucas
Personal Decision
Building wealth does not seem to be a top priority of Guyanese living in Guyana or, if it is, they are not demonstrating it very well. Maybe my observation is incorrect but I am not saying this to be flippant or to chide anyone. It is just that what I see from the information at hand makes me conclude that building wealth is not on most people’s minds; nor does it seem to be part of the administration’s policy. But I do not hold the administration entirely responsible for what individuals ought to be doing personally. After all, if the administration is not acting in the interest of the people, Guyanese ought to elect officials who would help them build the type of future they want. That is a personal decision.
Limited Options

Building wealth is better pursued in the private sector and can be done in several ways. It can be done through investment in various types of securities, including mutual funds, treasury bills and company shares. There is no choice among mutual funds in Guyana. Treasury Bills are sold in denominations of G$50,000 or multiples thereof putting them out of the reach of ordinary Guyanese. Investment in real estate can produce significant capital gains that add to the wealth of individuals. Working people in Guyana have the opportunity to save in the National Insurance Scheme and pension programs of employers. I have yet to meet someone who worked and retired in Guyana and lives well on such retirement income alone.
The stock market in Guyana is another story and, at present, does not seem to present real opportunities for Guyanese to invest with confidence. Fourteen companies are listed on the Guyana Stock Exchange; five of the companies are licensed depositary financial institutions, seven others are manufacturing companies and the remaining two are involved in some type of distribution or financial holding activity. Guyanese obtain reports in the daily newspapers on the trading activities of stocks on the Guyana Stock Exchange.
Serious investors are unable to utilize the daily reports of the stocks traded without up-to-date information on the earnings and performance of the listed companies. Earnings information is obtained from Profit and Loss Reports or Income Statements. The information contained in those reports help investors predict the amount of future cash flows and the level of risk or uncertainty associated with those future cash flows.
Financial reports of some listed companies are hard to obtain and information about the financial performance of other companies is based on outdated reports. Also, trades of some stocks appear to take place rather infrequently as if there is no real desire to have ordinary Guyanese participate broadly in this secondary market.
Income Loss

Apart from indirect ownership through the stock market, wealth can be built through personal ownership of a successful business. According to Bank of Guyana (BOG) data, private investment makes up about 20 percent of domestic spending in Guyana. The rate of increase in private investment in Guyana, though, has steadily declined from an annual average of 6 percent between 1994 and 1998 to about 4 percent since 2000. A decision to start a business is not something that people take lightly and many aspiring and established entrepreneurs weigh all the risk factors in making the decision to go forward with an investment. The downward trend in private investment is perhaps indicative of the lack of confidence in the present investment climate in Guyana and the failure of the administration to do a good job of informing individuals and companies alike of investment opportunities and benefits, despite the existence of Go-Invest.
Given its weight in the domestic economy, the decline in private investment represents a loss of nearly G$1 billion in factor incomes every year since 2000. This is income that Guyanese can ill-afford to lose but their nonchalant attitude towards the administration seems to suggest that they are satisfied with their own financial misery and the continued under-performance of the administration. The complacency of Guyanese towards their own financial condition is sharpened by their unwillingness to hold the administration fully accountable for the lack of transparency in private deals involving assets currently owned by them as taxpayers of Guyana.
Bank Savings

In the absence of a wide array of dependable investment options, the opportunities for building wealth for most Guyanese have been reduced to saving money with the commercial banks. Based on BOG data, it would appear that some Guyanese seem to think that saving money with the commercial banks was their best and most effective option. According to the BOG, total deposits with the commercial banks have risen from G$77 billion in 1998 to exceed G$176 billion in 2007. To put this level of savings in perspective, Guyanese can buy all the companies listed on the Guyana Stock Exchange 3 times and still have G$17 billion to spend on other things.
Calculations show that the annual rate of growth in deposits averaged about 11 percent since 1998. With such sustained growth, savings and time deposits continued to make up about 83 percent of the total deposits in the commercial banks during the 10-year period. The sustained growth in deposits and the size of deposits sitting in the banks suggest that people believe that there is some personal benefit to putting their money there.
The sad reality of this practice is that it is not helping to build wealth for the majority of Guyanese. Almost all savings are on a short-term basis. As at December 2007, only an average of five percent of deposits had maturity dates that exceeded 12 months. With interest rates on savings accounts as low as they are, averaging 3.11 percent at the time of writing, depositors will have to wait over 23 years, if they could, before any money that they put in the bank today doubles in value.
The interest that depositors receive from the commercial banks in Guyana is taxed at no less than 20 percent leaving them with an effective rate of interest of 2.5 percent. This means that depositors get less than three cents for every dollar that they put into a savings account. Under such circumstances, the time that it will take for money to double extends to about 29 years. Time is one of the best allies in an attempt to build wealth but such low returns would not help too many Guyanese and certainly not the individuals who have used up most of their working life and are hoping to retire in comfort on bank savings.
Even with time on their side, matters seem to get worse for Guyanese seeking to make their golden years comfortable when inflation is taken into account. The BOG has reported that the consumer price index (CPI) increased about 14 percent between December 2006 and December 2007. With that level of price increase, it means that a G$1 put in the bank at the beginning of the year was really worth 86 cents by the end of the year. When we include the interest of 2.5 cents on every dollar, adjusted for inflation, all the sacrifice individuals make by saving their G$1 add up to about 88 cents.
By saving money in the commercial banks, the money of individuals is losing value instead of gaining value.
This outcome is not the kind of financial situation that helps individuals to improve their lives. Better investment options need to be put on the table so that all Guyanese can be better placed to take charge of their own lives. A good place to start is the stock market where greater transparency and better financial reporting by participating companies are needed urgently. In addition, the administration needs to do a better job of informing all Guyanese of investment opportunities and benefits and of helping them to make the most of those opportunities and benefits.

“Sanatagate” and the EU micro-projects cause angst locally and abroad Is this “much ado about nothing”?

“Sanatagate” and the EU micro-projects cause angst locally and abroad Is this “much ado about nothing”?
Stabroek News Business. Friday 20 June 2008

Karen Abrams holds an MBA from UC San Francisco. She is a Marketing and Small Business Consultant in the US and Caribbean. Karen is also a partner in a party rental business in Decatur, GA.
This week I had serious doubts about writing another article on business matters. As an overseas-based Guyanese with an interest in expanding business in Guyana, several recent developments have caused me significant angst. Those issues happened to be the local furore over “Sanatagate” and apparent arbitrary withdrawal of support by the Government of EU funded micro-projects. These issues have also been the subject of considerable discussion in the international community leaving many confused and seeking answers.
Over the past two weeks, the facts of these two issues have plagued me; I read tons of online comments from Guyanese all over the world, engaged in discussion among potential overseas investors and debated long and hard my comment on these issues. What became clear to me was that, although I had fought the urge to comment on the debate, I realized that to “take a pass” on this issue would be to join the ranks of the less than courageous business elite in Guyana who benefit from a sometimes unfair system and thus are not compelled to work for a more equitable business environment. They will speak up however; one day, when the same system impacts them.
Clearly, trust in the decisions of certain government agencies is lacking by a significant portion of the electorate, simply put the Sanata deal if taken at face value is consistent and almost routine for agencies like Go-Invest. What some find objectionable is the appearance of impropriety which leads a large portion of the electorate to feel that there are “friends and family” investment opportunities available to some and not to others. But honestly, the Sanata building structure has been an eyesore for decades, no one had come forward to pitch a development plan, there were no takers to the initial bidding and thus a decision was made somewhere at some level that a friend was going to be given a deal to develop an eyesore. Yes the “friend” aspect is worrisome but really who else but a friend would invest $28M USD into that building right now?
Consider this folks, the Bidco building on Church Street is an eyesore, the GMC building in Festival-City is an eyesore (and should be revived as a marketplace for the growing population in North and South Ruimveldt and the surrounding area especially in light of increasing gas prices), and I’m sure there are numerous other government buildings around town which are desolate, dilapidated, overgrown and unused. So I encourage all local entities interested in those building to speak to the government right now, stake your claims, and propose development ideas now. That way, you will have a legitimate gripe if the government disregards your proposal for a friend or overseas investor.
The truth is, if the government was more popular, if there was no adversarial relationship between the government and many groups of its people, then this decision would have looked almost common sense and straight forward. I still remember my first Marketing professor stressing to me that in life and in business, “perception is reality and thus the truth often matters very little”. Unfortunately, some say that because of the past abuses by a handful of representatives of the Guyana government, they now have to live with a suspicious and questioning media and electorate.
To be clear however, I do not subscribe to the script of painting the entire government leadership and her public servants with the same brush of ineptitude, corruption and bias. I have interacted with many government representatives who were bright, and professional and who display a level of humility in leadership not usually displayed by their peers. People like Minister Manickchand, Minister Anthony, Mrs Kissoon from Go-Invest, and Nizam Hassan of GMC come to mind immediately as class acts. Sadly, people of this ilk are not the norm in Government offices in Guyana, but they should be and citizens of Guyana should insist on this, and should accept nothing less.
I feel no consternation in my encouragement of the media to root out the inept and corrupt leaders and to shine a light on the dark corners of bias and abuse in Guyana; wherever it is to be found. A democracy needs a courageous and unfettered media. What we must be careful to do in the process of going after the guilty, is to acknowledge the hardworking and talented and support those who work towards empowering communities of all races and income levels. This discussion of course leads to the next topic of recent angst which is the withdrawal of government support for EU funding of several micro-projects in Guyana.
Again, I struggle to be respectful in my assessment of this situation, but how can it be ok on any level, in a struggling economy, with high oil prices, high cost of living, increasing unemployment, and a high migration rate that a program which can aid several small business people to drag their families out of poverty, to hire members in their communities, to provide low cost food and service options to the community; how can it be possible for support of such a program to suddenly wane. Considering the difficulty in getting an international agency to approve the funding of any project, considering the lack of funds available in Guyana for community development, considering how hard the small business people must have worked to pull those proposals together, I am baffled at these recent developments. Recent discussions among Guyanese in the Diaspora have led us to two explanations; gross incompetence or vindictiveness.
We are not naïve, we know that our leaders are human and because of their humanity, there is an urge to retaliate against perceived threats to power, to destroy enemies, to steer resources and opportunities to friends, but government leadership is a higher calling and not an opportunity to plunder. Government leadership in a democracy requires fairness to all, mandates that personal issues be left out of decision making and that leaders respect the rule of law. Clearly, Guyana belongs to the people of Guyana not to some small group of people, who decide to acquiesce or not based on whims, fancies, folly and favor. This idea is horrifying. Leaders should serve the people, not the other way around. Anyone, regardless of race, party affiliation or socioeconomic status should be rewarded if they work hard and play by the rules. Those small business people who applied for EU micro-projects funding worked hard and played by the rules and they SHOULD be rewarded.
Because we are optimistic, we choose to believe that this situation was caused by some administrative mix-up or red-tape and will soon sort itself out. We in the Diaspora are rooting for this scenario and we wait with bated breath for some movement or comment on this issue. The government of Guyana is clearly better than rule by vindictiveness or “God help us all”.

The Customs probe: What the nation expects

The Customs probe: What the nation expects
Stabroek News Business. Friday 20 June 2008

Towards the end of May we learnt that the conclusion of the multi-million dollar Customs-Fidelity Polar Beer scam was a matter of days away. The first thing that should be said about the enquiry is that its findings are a matter of considerable public interest and that these should be made available to the nation in their entirety. Stories about corrupt goings-on inside the Customs Department have been bandied about for years and it is clear from the pronouncements made by both the President and the Commissioner General of the Guyana Revenue Authority that the department is still seen as being closely associated with what, in the language of the streets, is known as “runnings.”
Given the rather elaborate paradigms set out for the investigation by President Bharrat Jagdeo shortly after the Fidelity scam was first brought to public attention, the recent disclosure that the probe was almost at an end was somewhat surprising. The President, it will be recalled, had been detailed and deliberate in his outline of the areas that the investigation would embrace. He had said that the probe would include, among other things, asset investigations and that it would also take account of any complicity in the scam by Fidelity. Significantly, the President also said that the probe would go beyond the substantive Fidelity matter extending into wider issues associated with the probity of Customs transactions. Shortly after the investigation had gotten underway the President also said that expert external help was being sought to support the probe.
Given the various issues which the President said would be included in the investigation, it is reasonable to expect that the probe would have taken a great deal longer. Finding overseas experts, investigating assets and probing the Customs procedures and practices within the Guyana Revenue Authority certainly appear to be time-consuming pursuits and if indeed the investigation was able to accomplish all these things in a matter of weeks then its alacrity is worthy of public commendation.
In the weeks between the start of the probe and the recent disclosure that it was nearing an end we learnt that some GRA officers – the names of those officers are known – have been sent on leave; that a few Customs Officers and other low level officials have been dismissed from their posts and, more recently, that some officers attached to CANU had been subjected to polygraph tests and that those who had failed the tests – including the acting head of the Unit - would be dismissed.
Since it has now been disclosed that the probe is nearing an end, one can only assume that the investigators have covered all of the areas outlined in the President’s ‘terms of reference’ and that something will be said about the promised external help which the President had said will be recruited in the exercise, except it may subsequently have been determined that such help was not necessary after all.
This newspaper – in the face of public disagreement with the position that it took - has argued strenuously and repeatedly that the official probe within the ‘terms of reference’ set out by President Jagdeo should be allowed to proceed. We had also been emphatic in our view that the outcomes of the probe must match the President’s stated expectations.
Crucially – and if the President’s stated expectations are to be met - one expects that the wider Customs investigation would address the effectiveness or lack thereof of those control mechanisms and procedures within the GRA that are expected to protect the state against practices like the Fidelity fraud and how, those systems are compromised and circumvented in ways that allow hundreds of millions of dollars in state revenue to be diverted.
If the commitments given to the nation by the President in the matter of the Customs probe are to be met, therefore, the outcomes of the probe must address all of the issues alluded to by the President. First, there must be full disclosure of the outcomes of the probe including who the guilty parties are, (and this applies both to Customs and to Fidelity) what mechanisms were used to perpetrate the fraud, what action will be taken against those persons who have been fingered in the fraud and what corrective mechanisms are being put in place to prevent any recurrences.
Secondly, the ‘deeper’ probe must address those weaknesses within the GRA that have spawned the institutionalized rackets - to which the President himself alluded - with a view to determining who or what is responsible for those weaknesses and what measures are being taken to correct them.
One thing is clear. The purpose of the investigation would have been completely compromised and the President’s stated expectations left unmet if the report seeks to have us believe that protracted multi-million dollar rip-offs can actually be masterminded by a few extraordinarily clever clerks, cashiers and customs officers who can continually evade detection by both their better-placed supervisors and by the elaborate IT-driven accounting mechanisms available to the GRA. In other words a few sacrificial lambs won’t do since that would leave the President with the embarrassing task of accounting for his own unmet expectations and would deepen the already considerable public concerns about his administration’s commitment to fighting corruption.

Death squads inquiry

Death squads inquiry
Stabroek News editorial. Monday 16 June 2008

It is becoming impossible for the government to plausibly resist a comprehensive, independent inquiry of the death squad phenomena and the violence that gripped the East Coast following the 2002 prison-break.
Each charge and counter charge fired between counsel for Roger Khan and the US government perceptibly creates a clearer picture of what transpired during that period. It is fitting that the revelations are emanating from the US courts so that there is no appearance or likelihood of bias as has tended to afflict proceedings in this jurisdiction.
There is no escaping this inquiry. Denial of it will become an albatross around the neck of this administration as evidenced by the allegation that Khan had imported sensitive spy equipment with the permission of the government.
What led the country to the brink during that period is known by all. The escape of five dangerous criminals and the murderous campaign that they spearheaded against poor and wealthy citizens, law enforcement and the business community led to chaos, panic and bloodletting on a scale that had not been previously witnessed in the country’s history. In a particular stretch of 2002-3 there were slaughters and bullet-riddled robberies on an almost daily basis.
With dozens of policemen eventually dying in carefully orchestrated attacks it appeared that many in the government had come to the conclusion that the Joint Services were incapable of reining in the mayhem on their own. How and who then enlisted extra-legal enforcers to fight the criminals and to prosecute other wars is unclear. What is certainly clear is that after this extra-legal intervention began dozens of suspected criminals – including some of the escapees and their better known cohorts – and others who likely had nothing to do with crime began dropping like flies. There were also high-voltage shoot-outs between rival groups and the bodies of several gunslingers hired from overseas turned up.
If it was the case that government officials had no inkling about what was transpiring how could the state just stand aside and survey the bloodshed from on high without trying to reassert itself? Which government would not want to get a fix on what was happening and take control of the situation? Not unless it was fully cued and clued into what was transpiring and was tactically withdrawing to the sidelines to allow others to take on the fight.
It wasn’t until the self-professed death squad informant George Bacchus’s brother was murdered that the stark outlines of what was taking place broke through the surface. Aside from the talk on the streets and the rumour mill, no one had put names, faces and a framework to what was possibly happening. Bacchus changed that but was ultimately unable to prove his case as he too was mysteriously murdered. His allegations had likely become too dangerous for some. But by then everyone had learnt about Axel Williams and his missions and the distinct possibility that he was finally executed because he knew too much about the extra-legal campaign.
Under unrelenting domestic and international pressure, President Jagdeo finally convened an inquiry with very limited terms of reference that eventually found Home Affairs Minister Gajraj innocent of any involvement in a death squad. The circumstances that attended the inquiry were themselves unsatisfactory as matters such as witness protection were clear hindrances to full disclosure.
The President had however said that there would be the occasion for a full-fledged inquiry into the violence that followed the jail-break. He has not made good on that pledge thus far.
With the US making bold with each passing week to level new allegations against Khan such as executing people who crossed him and with Khan’s own well- publicised claims here that he assisted in the fight against crime, the government can no longer not be interested in this matter.
The image of the country, its democratic credentials and the quality of its governance have all been tainted by these sordid allegations in the last three or four years. It is time that the government purges itself of this clingy film of murkiness.
After fleeing to this country as a fugitive from the US, Khan made a meteoric rise through the wealth rankings under successive PPP/C administrations without this attracting any noticeable scrutiny by the authorities. He was on the verge of securing access to a large forest concession until this was halted following publicity surrounding the deal. His being found in close proximity to sensitive spy equipment and weaponry also did not kindle any undue interest by the government and he eventually won his case and continued with his businesses.
Plot lines like this can lead to any number of Hollywood/Bollywood ventures except that this was real life. It is easy to deny as in the case of the permission for the spy equipment. Chance are, however, that there is more to come from the US courts and that it will impact on the probity of this administration with consequences for its people.
The government cannot be oblivious to this or uncaring. With all-party agreement it must be willing to commission an independent inquiry and let the chips fall where they may.

Still at a standstill

Still at a standstill
Stabroek News editorial. Tuesday 17 June 2008

Few security topics have been more discussed over the past decade than narcotics trafficking. But those who hoped three years ago that the talking would have stopped, and that serious action to uproot this crime would have started, were to be disappointed.
Saturday next marks the third anniversary of President Bharrat Jagdeo’s formal launch of his administration’s National Drug Strategy Master Plan for 2005 - 2009 on 21 June 2005. This was Guyana’s third counter-narcotics plan.
The first, entitled Guyana’s Strategy for Dealing with the Drug Problem, was promulgated by the PNC administration since December 1988. It was completely ignored when the PPP entered office in October 1992. The second, the National Drug Strategy Master Plan 1997-2000 introduced during the troubled tenure of Mr Ronald Gajraj as Minister of Home Affairs, remained largely unimplemented. The present plan, launched while Ms Gail Teixeira was minister, has been brought to a standstill and seems set to suffer a similar fate to the preceding plans.
According to a Government Information Agency statement in December last year, Minister of Home Affairs Mr Clement Rohee promised a thorough review of the plan “in the first quarter of 2008.” His intention then was to evaluate those aspects that had been implemented and to examine the areas that needed immediate attention. The first quarter passed. The end of the second quarter is upon us. The plan’s final year is about to begin.
Earlier last year, in response to a claim by the US Department of State’s International Narcotics Control Strategy Report that the government of Guyana had yet to implement important initiatives of its drug strategy, Mr Rohee rather extravagantly announced that “ninety per cent” of the plan’s first-year target had been achieved and promised that the government “will be aggressively pursuing implementation of several important aspects of the five-year programme during this year [2007].” This year’s edition of the US report iterated what everyone already knows: that the administration accomplished “few of the principal goals” laid out in its drug strategy. By this time next year, excuses would have been exhausted, the plan would have expired, and the war on drugs would be at a standstill.
The National Anti-Narcotics Commission chaired by the president himself, and the National Anti-Narcotics Co-ordinating Secretariat, the strategy’s main executive organ, are still not operational. Nor have the plan’s principal arms − the Joint Intelligence Co-ordination Centre, Joint Anti-Narcotics Committee, and the ten Regional Anti-Drugs Units − been activated to function in the manner the plan stipulates. In short, the organisational engine which must drive the entire plan is still not in place.
The country’s two existing counter-narcotic agencies − Customs Anti-Narcotics Unit and Police Anti-Narcotics Unit − have still not been strengthened by the provision of additional resources under the ambitious $650M plan. Better border control facilities and the surveillance of the country’s extensive air and sea spaces are still to come on stream. In fact, the Customs Anti-Narcotics Unit has been eviscerated by the recent purge of its head and several staff members.
Back in September 2006 soon after he assumed office as Minister of Home Affairs, Mr Rohee promised to be “tough on drug lords.” He boasted that he had an ‘international perspective’ of what the fight against drugs, arms smuggling and money laundering entailed and promised to employ his political and international experience to establish contacts with the neighbouring countries. But these promises are still to be fulfilled.
As recently as March this year during a meeting with US Assistant Secretary of State for Western Hemisphere Affairs Thomas Shannon, President Jagdeo repeated a request for the United States of America’s Drug Enforcement Administration to establish a permanent presence in Guyana. But this charade has been going on for over a decade. It is the Guyana administration, not the USA, that curiously has failed to provide appropriate accommodation and assets for a local bureau to function.
Elsewhere, in the absence of a coherent national strategy, the security forces perfunctorily conduct their counter-narcotics campaign by destroying illegal airstrips when they are discovered, desultorily burning a few fields of marijuana here and there and arresting some low-level couriers at the international airport from time to time.
As President Jagdeo himself said, “…at the end of the day, the responsibility to implement the strategy is ours.” This explains why the strategy, like the summer solstice that falls on 21 June, is at a standstill.

Two VAT questions for the Finance Minister

Two VAT questions for the Finance Minister
Stabroek News letter. Thursday 19 June 2008

Dear Editor,
It is heartening that Dr. Ashni Singh, the Minister of Finance has finally addressed the Press on matters concerning his Ministry, even though he was less than forthright on the matter involving the President, Mr. Yesu Persaud and tax concessions.
I am writing to pose publicly to Dr. Singh two straight questions: 1) Is he aware that had the rate of VAT been correctly computed prior to its being set into law, the standard rate would be less than 16%?
2. Would Dr. Singh now be equally prompt in reducing the rate - which incidentally he can do on his own, subject only to an affirmative resolution of the National Assembly?
I would appreciate a timely response from Dr. Singh.
Yours faithfully,
Christopher Ram
Editor’s note: A copy of this letter is being sent to Finance Minister Ashni Singh for any comment he may wish to make.

PNCR blasts ‘secretive’ Sanata deal-urges speedy tabling in Parliament

PNCR blasts ‘secretive’ Sanata deal-urges speedy tabling in Parliament
Stabroek News news item. Saturday 21 June 2008

The PNCR says the Queens Atlantic Investment Inc (QAII) concession agreements with the Government must be speedily laid in the National Assembly since confusion and uncertainty continue to surround the deal which the party described as secretive.
The party said too that the cost of “such unacceptable behaviour” will, in the long run, result in the discouragement of the legitimate and serious investment needed for the development of the Guyana economy.
In a press statement read at the party’s press conference held at Congress Place yesterday, the PNCR said: “As it is, the agreements with Queens Atlantic have already been tainted by apparent bias and conflicts of interest.”
The statement said that it is now in the public domain that the concessions which were promised or granted to the entity were not in accord with the existing tax laws in Guyana. “Scandalously, this has come after no less a person than the President himself publicly declared that they were,” the PNCR said.
The party said that it recognises that this is yet another example which points “to the incompetence and maladministration, tainted by the all too many instances of corruption,” of the Jagdeo Administration. It said that if the agreement with QAII was reached in a transparent manner, “the [embarrassing], unbecoming behaviour of the President and suspicion of the motives of the Administration, would not have been inflicted on our public life.”
The PNCR said that it is disturbed by the perception that even after the controversy surrounding the building and sale of Buddy’s International Hotel, the mysterious “and murky nature of the touted investment in the Marriott Hotel, the Jagdeo Administration continues to get involved in businesses practices which are tainted, by circumstances which give rise to the appearance of being shady and lacking in transparency.”
The PNCR follows on the heels of the Alliance For Change (AFC) which gave the Government a tongue-lashing for the announced plans to amend legislation to accommodate the promised concessions, which it called on the Government to rescind.
Meanwhile the Guyana Action Party/Rise, Organise and Rebuild Guyana (GAP/ROAR), through Member of Parliament Everall Franklin, said that it is giving the Government the benefit of the doubt and assuming that the laws are being changed not just for QAII alone, but for anyone investing in the pioneering industries.
Franklin said: “We all welcome investment, but it has to fall within the laws that we all have to adhere to. If we have to make special arrangements for the investors then those must be made available to all investors making similar investments.”
He said that there should be no ambiguity as to the fairness with which each investor is treated. He feels part of the issue is that the Government does not have a clear investment policy and said that there should be no need for a Cabinet Paper every time some investor needs to make investments.
In a statement on Sunday, Government justified the two ventures as pioneering by saying that it considers that the two Sanata projects earmarked for tax holidays deserve to be granted tax holidays as these activities are currently not performed in Guyana and represent new pioneer projects of a developmental and risk-taking nature with employment and investment benefits to Guyana.
The statement had said that these projects will see the establishment of significant value-added manufacturing operations in Guyana, specifically in the areas of denim textile production and antibiotic manufacturing, and include a joint venture with international partners.
In the statement, the Ministry of Finance said: “On closer examination, the current Fiscal Enactments (Amendment) Act 2003 does not reflect Government’s intent when the said Bill was laid in Parliament. In this respect, Government will be moving to amend the law to clearly provide for all pioneering projects, infrastructure projects, and correct the list of regions eligible for tax holidays.”

Thursday, June 19, 2008

Law to be amended for Queens tax breaks

Law to be amended for Queens tax breaks
Stabroek News news item. Monday 16 June 2008

Government will now have to amend the Fiscal Enactments (Amendment) Act 2003 to legitimize the planned tax concessions to Queens Atlantic Investment Inc (QAII) for its textiles and antibiotics project.

This was announced yesterday in a statement by the Ministry of Finance a week after it was pointed out in the Sunday Stabroek by Business Page Columnist Christopher Ram that the two projects did not qualify for tax concessions under the Act’s definition of pioneering industries.

President Bharrat JagdeoAt the launching of the Guyana Times – one of the QA11 projects at the former Sanata Textiles complex – President Bharrat Jagdeo had berated private sector businessman Yesu Persaud for asking that the tax concessions granted to the investors be accorded to others. The President told the June 5 launching that Persaud’s comment had exposed his ignorance of the tax laws. The President went on to say that the concessions were bestowed on the basis of their pioneering industry status.

Ram in his Business Page column three days later however pointed out that the President was incorrect as the Income Tax (In Aid of Industry) Act described pioneering industries as non-traditional agro-processing, information and communications technology, petroleum exploration, mineral exploration and tourist hotels but not textiles and antibiotics.

When asked by Stabroek News about this last week, Head of the Privatisation Unit, Winston Brassington declined comment. Finance Minister Ashni Singh could not be reached on this point despite numerous attempts.

On the fourth page of its statement yesterday entitled `Government comments on the Sanata privatization and tax concessions’, the ministry said “On closer examination, the current Fiscal Enactments (Amendment) Act 2003 does not reflect Government’s intent when the said Bill was laid in Parliament. In this respect, Government will be moving to amend the law to clearly provide for all pioneering projects, infrastructure projects, and correct the list of regions eligible for tax holidays.”

It added that the rules in respect of taxes have been amended over the last five years to minimize discretion and to move towards a tax system based on principles and rules in law.

“When concessions are granted they must be in accordance with the law and are not discretionary. Indeed, it is because of this openness that persons can point out when matters appear to be inconsistent with policy and law”, the statement said.

It noted the various public statements that had been issued on the QAII deal and argued that the overall principle that guides the government is that tax concessions are not discretionary but based on rules.

Noting that the tax concessions were announced by Head of Go-Invest Geoffrey DaSilva on May 19 at a press conference, the ministry said that the tax holidays have not yet been granted to QAII by “the GRA (Guyana Revenue Authority) and the Minister of Finance”.

The statement then recounted the history of the laws governing tax holidays. It noted that tax holidays were reintroduced in 1998 giving the subject minister the discretion to grant concessions whereas the amendment to the relevant Act in 2003 defined the specific circumstances under which the minister could accord concessions and set out which sectors could be considered pioneering. It also cited the Explanatory Memorandum of the 2003 bill which said that the amendments limited the corporate tax exemptions to new firms that create new employment in depressed regions and firms that undertake economic activity in specified fields.

“It has always been, and continues to be, Government’s intention to treat with pioneer industries that create employment regardless of location, and large investments in identified regions regardless of the sector of investment. The current articulation in the law is not exhaustive with respect to the policy areas that the Government is seeking to encourage investment and employment via tax holidays.

“Government considers that the two Sanata projects earmarked for tax holidays deserve to be granted tax holidays as these activities are currently not performed in Guyana and represent new pioneer projects of a developmental and risk taking nature with employment and investment benefits to Guyana. These projects will see the establishment of significant value-added manufacturing operations in Guyana, specifically in the areas of denim textile production and antibiotic manufacturing, and include a joint venture with international partners”, the statement added.

It then listed a number of deficiencies in the Act and said “While the law sought to make this specific in terms of geography and sector, on both scores the law contains omissions and inaccuracies, and the lists articulated in the Act should have been illustrative and not exhaustive.

“Additionally, the current wording in the law does not provide for tax holidays for infrastructure projects (eg. the Berbice Bridge tax concessions which had to be provided for via special legislation, and the upcoming Amaila Falls Hydro project which would also very likely require concessions similar to the Berbice Bridge).”

The statement further contended that the government has been open on its policies in respect of privatization and taxation and noted that President Jagdeo has called on the Privatisation Unit to host a tax workshop on all privatizations. This workshop is now scheduled for July 9, the statement said.

Ram in his column had said he hoped to be invited to the seminar and recommended that members of the Cabinet, the President’s advisers and investor friends also be invited.

The columnist had also pointed out that under the Financial Administration and Audit Act, the authority for the issuing of the concession was expressly delineated. He said that the Finance Minister had an obligation to tell the nation whether any Cabinet paper had been submitted under his name recommending the concessions and quantifying the cost to the country.

This was not addressed in yesterday’s statement. Ram had said that “If there was no such paper it would be a serious indictment of the President, the Minister and the entire cabinet”. The tax concession was the latest in several controversies over the Sanata deal. Critics have previously questioned how the government and the Ramroop Group initiated direct talks without an advertisement inviting business proposals for the Sanata site.

The cost of the 99-year lease to Sanata and the general granting of concessions were also raised.
In addition, the friendship between President Jagdeo and one of the principals of the Ramroop Group has raised concerns over its impact on the subsequent decision-making.

QA11 investment will resuscitate dilapidated complex –Finance Ministry

QA11 investment will resuscitate dilapidated complex –Finance Ministry
-criticises SN report
Stabroek News news item. Wednesday 17 June 2008

The Guyana Government says it is firmly of the view that the planned investment of US$30M by QAII will result in new industries that will revive the previously dilapidated Sanata complex and will create over 600 jobs.

Its latest defence of the deal was contained in statement which criticized yesterday’s report in Stabroek News (SN) on the deal which was derived from a four-page statement that the Ministry issued on Sunday.

The statement yesterday took issue with the SN report for repeating the query by Sunday Stabroek business columnist Christopher Ram on whether a Cabinet paper had been submitted.

The Finance Ministry statement yesterday said that this was clearly addressed in the Sunday statement where it was said that the recommendation made by the Privatisation Board and approved by Cabinet contained the following language: “tax incentives being allowed by the Guyana Revenue Authority and Go-Invest provided they are allowed in law and subject to an Investment Development Agreement and in accordance with applicable practice”.

Yesterday’s statement said that under the institutional framework for privatization, the Privatisation Unit prepares papers and following endorsement by the board these are submitted to Cabinet for approval under the signature of the Minister of Finance, Ashni Singh who is also the Chairman of the Privatisation Board.

It pointed out that the approval arose from a meeting of Cabinet from which President Bharrat Jagdeo voluntarily excused himself, citing his friendship with one of the principals of QAII.

The statement yesterday also said that the SN report attempts to suggest that the need to amend the law arose solely to facilitate the concessions to QAII and sweeps aside the current deficiencies in the law by failing to publish what was in the Sunday press release as if to suggest that those shortcomings were unimportant.

The Sunday statement had said:
“Furthermore, Government has noted that the 2003 Amendment to Section 2 of the Income Tax (In Aid of Industry) Act contains a number of obvious deficiencies including:

* With respect to regions, specifically in section 21, paragraph (1)(a), subparagraphs (iv) (v), and (vi) are omitted [see above extract];
* With respect to economic sectors, specifically in section 21, paragraph (1)(b), subparagraphs (v) (vi) and (vii) are omitted [see above extract].

* Incorrect description and omission of regions, in section 21, paragraph (1)(a)(ii), Region 8 is described as Cuyuni-Mazaruni, which geographical description actually corresponds with Region 7, while Region 7 is omitted from the list [see above extract].

“The current Fiscal Enactments (Amendment) Act 2003, therefore, contains various inaccuracies and omissions in relation to both the sectors and regions identified. It was Government’s intent when the Act was amended in 2003 to maintain the element of pioneer industries. While the law sought to make this specific in terms of geography and sector, on both scores the law contains omissions and inaccuracies, and the lists articulated in the Act should have been illustrative and not exhaustive.

“Additionally, the current wording in the law does not provide for tax holidays for infrastructure projects (eg. the Berbice Bridge tax concessions which had to be provided for via special legislation, and the upcoming Amaila Falls Hydro project which would also very likely require concessions similar to the Berbice Bridge). “

Yesterday’s statement also notes that the issue of the cost of the lease which was previously raised by Ram was referred to again in the SN report. The Ministry said that on numerous occasions in the press the government had stated that the rent for Sanata was denominated in US dollars and is indexed for US inflation. It said that the Privatisation Unit had also provided examples from other privatizations and made it clear that the QAII rent was attractive when compared with other privatizations. It said that SN was still to acknowledge publicly the misleading assertions it had made on the rental issue.

It said that ultimately the question that has to be asked is whether these investments are a positive development for the country.

“Regrettably, Stabroek News has chosen not to discuss the merits of the investment, but instead to preoccupy itself with other issues. One would certainly hope that this apparent bias is not as a result of the launching of a new competitor newspaper which, incidentally, received no fiscal concessions”, the Ministry of Finance statement said yesterday.

Private sector awaiting gov’t steps to legitimize Queens tax concessions -Calls for public apology to Yesu Persaud

Private sector awaiting gov’t steps to legitimize Queens tax concessions -Calls for public apology to Yesu Persaud
Stabroek News news item. Wednesday 18 June 2008

The Private Sector Commission (PSC) says it looks forward to the steps that the government will now take to give legal cover to the concessions announced for the investors in the Sanata Complex and it also urged that a public apology be made by President Bharrat Jagdeo to businessman Yesu Persaud.

In a statement yesterday on the controversy which has swirled around the Sanata deal, the PSC called on President Jagdeo to issue a public apology to Persaud for the hostile manner in which he responded to the latter’s proposal that others benefit from the same type of tax concessions granted to Queens Atlantic Investment Inc (QAII).

The PSC also said that it was pleased to note that the Ministry of Finance has considered it necessary to publicly clarify the Government’s position on the privatisation of the Sanata Complex to QAII and the announcement that certain tax concessions were to be granted to the investors.

“It appears from the Ministry’s statement that the Government has now acknowledged that the decision to proceed with the privatisation of the Sanata Complex, including the granting of tax concessions, does not conform to the requirements of our existing tax laws.

“The Private Sector Com-mission considers it regrettable and unfortunate, therefore, that when Yesu Persaud, a highly respected and prominent member of the business community on the occasion of the official launching of the Guyana Times on 5 th June, proposed that other businesses should similarly benefit, His Excellency the President saw it fit to respond in a hostile manner.

“The Private Sector Commission believes that, in the circumstances, it would be appropriate for a public apology to be issued,” the statement said.

The PSC said that it looks forward with considerable interest to the steps which would now be taken by Government to further amend the tax laws in order to give legal expression to the intentions declared by Government in the Ministry’s statement with regard to the granting of tax concessions to investors.

The Ministry of Finance in a statement on Sunday said that the current Fiscal Enactments (Amendment) Act 2003, contains various inaccuracies and omissions in relation to both the sectors and regions identified.

This was in response to a Stabroek News article based on the findings of columnist Christopher Ram, who raised a number of issues about the concessions, mainly questioning the legality of the two QAII pioneering industries as identified by the President. Ram had stated that the two industries – pharmaceuticals and textile manufacturing – were not covered in the sectors eligible for tax holidays.

It said that it was Government’s intent when the Act was amended in 2003 to maintain the element of pioneer industries and that while the law sought to make this specific in terms of geography and sector, on both scores the law contains omissions and inaccuracies, and the lists articulated in the Act should have been illustrative and not exhaustive.

The statement said that additionally, the current wording in the law does not provide for tax holidays for infrastructure projects like the Berbice Bridge tax concessions which had to be provided for via special legislation, and the upcoming Amaila Falls Hydro project which would also very likely require concessions in a similar fashion to the Berbice Bridge.

Port Georgetown gets F in World Bank report

Port Georgetown gets F in World Bank report - ‘…it still takes 35 days to clear customs and 11 documents were necessary to complete a transaction in 2007’
Stabroek News news item. Thursday 19 June 2008

Several Caribbean ports, including Guyana’s, have received a failing grade in a global survey on seaports and customs effectiveness called the Logistics Performance Index (LPI), said the BBC in a report.
The study was carried out by the World Bank and is contained in a report called titled “Connecting to Compete: Trade Logistics in the Global Economy.”

The article said that of the 150 participating countries, Guyana, Haiti and Jamaica ranked at 141, 123 and 118 respectively.
When contacted yesterday, the Shipping Association of Guyana said that it is cognisant of the shortcomings in Guyana’s shipping. An official of the SAG, Ian D’Anjou, said that the body is discussing the report’s findings among its executive before a formal statement is issued.

The BBC report said that the country with the highest ranking in the Caribbean was the Dominican Republic at 96.
“However, seaports in Trinidad and Tobago, Barbados, Bahamas, the Eastern Caribbean countries and the Dutch and French Caribbean, were not included,” the report said.

The report also ranked countries based on other indicators such as efficiency of customs operations, infrastructure, logistics competence, tracking and tracing and timeliness, among others and again Caribbean countries in general were ranked very low.
The report highlights the fact that the region is failing in its efforts to develop a competitive supply chain framework, the article said.
In an analysis of the findings, Caribbean Central American Action noted that: “one of the most important reasons noted for the low performance of the region is the lack of efficient customs practices in the region.”

According to the BBC report, its Executive Director, Anton Edmunds told BBC Caribbean that as it relates to logistics - the actual movement of goods in and out of the region - the Caribbean ranks relatively low.

He said one of the areas of under performance was the (lack of) speed in which “goods are loaded, off-loaded, customs cleared and get into the market-place. “It’s really where it shows the region is deficient,” he pointed out, according to the article.
According to another World Bank report: “Doing Business 2008” although Guyana has one of the lowest costs to import a 20-foot container, compared to other countries within and outside of the region, it still takes 35 days to clear customs and 11 documents were necessary to complete a transaction in 2007.

In the same report, Jamaica has one of the highest costs to import a container of similar size despite the country’s recent upgrade in customs technology and developing its infrastructure.

The article said that although the number of documents necessary for imports were almost half that of Guyana, it still took at least 22 days before the shipment can be released from Jamaica’s customs.

The slow customs clearing process – from the wharf to the customs house processing – remains a bugbear among businesses which also have to face storage costs and ‘want-of-entry’ charges because of the extended time it takes for them to clear their goods from wharves.

AFC flays gov’t move to amend tax break law -says illegal concessions should be withdrawn

AFC flays gov’t move to amend tax break law -says illegal concessions should be withdrawn
Stabroek News news item. Thursday 19 June 2008

The Alliance for Change (AFC) yesterday lashed out at the Government for its planned amending of the Fiscal Enactments (Amendment) Act 2003 to give legitimacy to several concessions to be made available to Queens Atlantic Investment Inc (QAII).
The concessions are to be provided for two projects described as pioneering: an antibiotics research and development facility; and a textile manufacturing venture.

Minister of Finance Dr Ashni Singh had announced Government’s intention in a press release issued on Sunday. This was after the publication of an article based on a column by Business Page Columnist Christopher Ram who pointed out that the two projects did not qualify for tax concessions under the Act’s definition of pioneering industries.

Speaking to this newspaper yesterday, AFC parliamentarian Khemraj Ramjattan said: “The law is the law and Government ought not to have granted the concessions to QAII.”

He said that the Government is further compounding the situation when they try to blame the law for being badly worded. “They cannot now [go back and change the laws]. That is tantamount to corruption,” Ramjattan said.

“What was given wrongfully should now be taken back. It is retrogression to make a wrong right by amendments,” he said.
In its Sunday statement, Govern-ment sought to justify the two ventures as pioneering by saying: “Government considers that the two Sanata projects earmarked for tax holidays deserve to be granted tax holidays as these activities are currently not performed in Guyana and represent new pioneer projects of a developmental and risk taking nature with employment and investment benefits to Guyana. These projects will see the establishment of significant value-added manufacturing operations in Guyana, specifically in the areas of denim textile production and antibiotic manufacturing, and include a joint venture with international partners.”

In the statement, the ministry said: “On closer examination, the current Fiscal Enactments (Amend-ment) Act 2003 does not reflect Government’s intent when the said Bill was laid in Parliament. In this respect, Government will be moving to amend the law to clearly provide for all pioneering projects, infrastructure projects, and correct the list of regions eligible for tax holidays.”

It added that the rules in respect of taxes have been amended over the last five years to minimize discretion and to move towards a tax system based on principles and rules in law.

Noting that the tax concessions were announced by Head of Go-Invest Geoffrey Da Silva on May 19 at a press conference, the ministry said that the tax holidays have not yet been granted to QAII by “the GRA (Guyana Revenue Authority) and the Minister of Finance.”

Scrutineer ruling against Gecom sets important precedents - AFC

‘Victory without any prize’
Scrutineer ruling against Gecom sets important precedents - AFC
Stabroek News news item. Thursday 19 June 2008

The Alliance For Change (AFC) yesterday said that the Guyana Court of Appeal ruling against Gecom on the apportioning of funds for scrutineers sets important precedents and the party is prepared to challenge any new list generated since its monitors were excluded from the process.

The party executive also accused the Guyana Elections Commission (Gecom) of taking a confrontational approach to it and is now questioning Gecom’s ability to impartially and neutrally administer any election in which it will participate.

AFC Leader Raphael Trotman made these allegations at a press briefing held two days after the Guyana Court of Appeal decision that money ought to have been allocated to Opposition parliamentary parties for scrutineering activities based on the number of seats they held instead of granting the main opposition PNCR a lump sum.

The ruling went against Gecom’s decision to allocate half of the $100M Parliament approved for scrutineering activities to the PNCR only, since it does not constitute the combined Opposition parties, and it upheld a decision handed down by High Court judge, Justice Jainarayan Singh Jr in the matter. Justice Singh had ruled that there be a proportionate allocation of scrutineers’ money to the combined opposition. Gecom had refused to abide by the order and instead appealed.

No contact had been made between the AFC and Gecom at the time of the press conference yesterday, and AFC Chairman Khemraj Ramjattan said that preparations were being made for the order along with an attached letter to be sent to the Commission for discussions to take place. Reading a prepared statement, Ramjattan told the media that the party was always confident that Justice Singh’s decision would be affirmed by the appellate court “otherwise [it] would have been unfair, unjust and most unreasonable, if not wholly perverse.” He then said that though the determination of the case may be a “victory without any prize” for the AFC, the Guyanese people are the biggest winners on two very important legal issues.

Ramjattan said the principle was now firmly established that Gecom as a constitutional entity must act fairly to avoid scrutiny by the judiciary and secondly, that a significant precedent was now established that any public- spirited citizen will have locus standi to institute legal proceedings against any government wrong-doing so as to ensure the upholding of the rule of law. He also contended that Gecom has lost its credibility and should begin a process of rehabilitation in this regard since the court condemned its conduct for not responding to the AFC in the High Court, as wholly unacceptable for a constitutional body of such importance.

Ramjattan said the Commission could start to work towards a genuinely professional and independent culture by first requesting of the PNCR-1G and PPP/C the names of all the scrutineers who worked during the registration exercise and the money paid to each, and publicise this information on its website for public scrutiny.

Sixteen days left

Meanwhile, the House-to-House Registra-tion Exercise comes to a close in just over two weeks. Following the input of data, Gecom will move to create a National Register of Registrants from which the voters list will be pulled for future elections. Yesterday the AFC reiterated that it was possible for them to challenge the transparency of the next voters list since its scrutineers were not involved in the registration exercise. The party said they had no assurance that their scrutineers would have been paid therefore they did not participate.

Further, Trotman said the fact that his party was excluded from the scrutineering process does not bind it to the agreement that all the parties signed prior to the start of the registration exercise. “So we reserve the right to challenge the credibility of any list because the fact that we were excluded does not bind us to the agreement in which we had agreed that we will not challenge the list,” he said. Trotman contended that Gecom has placed itself in a confrontational position with the party making it, “Gecom versus AFC” and so calling into question the Commission’s credibility to conduct free and fair elections.


On Monday, in dismissing Gecom’s appeal, the Court which comprised acting Chancellor Carl Singh and Justices Nandram Kissoon and Yonette Cummings-Edwards said there is no law which says the PNCR should receive the proportion that it was allocated. Opposition parliamentary parties the AFC and the Guyana Action Party/Rise Organise and Rebuild were therefore entitled to proportionate allocations of the money handed out.

Speaking to this newspaper on the day of the ruling, Ramjattan had said that though the registration process has begun the party would seek an immediate meeting with Gecom to advise them of the court’s ruling.
Contacted yesterday for a comment following the AFC press conference, Gecom Chairman Dr Steve Surujbally told this newspaper that the commission had received a letter from the party and it would decide on a day to meet to discuss the issue. “So I find it disingenuous of the AFC to go ahead and make such statements and accusations not having met with us as yet,” Surujbally said when this newspaper told him of some of the AFC’s assertions. (Heppilena Ferguson)

Friday, June 13, 2008

Were Queens ‘pioneering’ concessions legit? -Brassington declines comment

Stabroek News news item. Friday June 13, 2008
Were Queens ‘pioneering’ concessions legit? -Brassington declines comment

Head of the Privatisation Unit, Winston Brassington yesterday declined comment on whether two of the ventures undertaken by Queens Atlantic Investment Inc (QAII) properly qualified as pioneering industries and were therefore eligible for tax breaks as asserted by President Bharrat Jagdeo.
Columnist Christopher Ram in his Business Page article in the last Sunday Stabroek pointed out that the two “pioneering” industries that were listed by President Jagdeo were not covered under the Income Tax (In Aid of Industry) Act.
This legislation on which basis concessions were issued to two of the entity’s five subsidiaries says nothing about the “pioneering” industries that the President mentioned at the launching of the Guyana Times, one of the entity’s ventures. According to the President, the pharmaceutical research and development facility and the textile manufacturing facility, are the only two ventures to attract incentives but these are however not catered for in the Act.
Ram accused Government of deviating from legislation governing incentives and limits to these. Ram said the Minister of Finance has an obligation to the nation to say whether any Cabinet Paper had been submitted in his name recommending the concessions that QAII benefited from.
This newspaper also sought a comment from Minister of Finance Dr Ashni Singh who was unavailable for all of two days.
The issue has taken on added interest as the President made the disclosure at the launching of the newspaper while rebuking businessman Yesu Persaud over his call for similar concessions to be extended to others.
“This is one of the things I hope this newspaper will correct. This is a profound ignorance of the Tax Act,” Jagdeo said, arguing that the legislation provides for investors to benefit from tax concessions on the basis of investing in certain far-flung geographic locations, and in pioneering industries. He mentioned that when Persaud’s company was involved in medical transcription services, it benefited from tax concessions but that the project failed. “You are falling into the trap of ignorant people,” Jagdeo said.
The President then emphasised that the newspaper is not getting the benefit of duty- free concessions on its equipment and consumables. “The textile and anti-biotics [ventures] will get the tax holiday,” Jagdeo said.
“I have asked Winston Brassington to hold a seminar on the tax laws,” Jagdeo said, stating that Persaud should be one of the persons attending.
Ram in his column explained that the Income Tax (In Aid of Industry) Act gives the Minister of Finance discretionary powers to grant fiscal incentives in only two circumstances, and such concessions are limited to Section 6 of the Financial Administration and Audit Act which states that the said Minister must make subsidiary legislation to waive taxes conceded.
The Income Tax (In Aid of Industry) Act allows the Minister to grant concessions once the activity demonstrably creates new employment in one of the following regions: Region 1 – Barima/Waini; Region 8 – Cuyuni/Mazaruni; Region 9 – Upper Takutu – Upper Essequibo and Region 10 – Upper Demerara/Upper Berbice. Further, the activity will benefit from incentives once it is an economic one in one of the following fields: non-traditional agro-processing excluding sugar refining, rice milling and chicken farming; information and communication technology, excluding retail and distribution; petroleum exploration, expansion or refining; and tourist hotels and eco-tourist hotels.
QAII and its five different industrial ventures in the Sanata complex have benefited from a number of tax holidays and concessions.
Speaking to this newspaper yesterday, Dr Ranjisinghi Ramroop, Chairman and Managing Director of New GPC, for which QAII is parent company, said that in terms of concessions on duty and taxes on equipment, the company didn’t get anything that wasn’t automatically available to anyone investing in manufacturing. He disagrees with Ram on the pioneering industries and said that he didn’t feel there was anything further to be discussed on the issue.
At a press conference held in May by the Privatisation Unit, it was announced that the biotechnology project that QAII will be undertaking – a first in Guyana – will benefit from a five-year tax holiday and based on the performance of this venture, Government may award another five-year tax holiday at the expiry of the first.
This is the same for the textile venture. Customs duty, Excise Tax and VAT have been waived on all the QAII projects.
Government is also granting a waiver of withholding tax on the repayment of loans taken to finance the projects.
Speaking at that press conference, Head of the Guyana Office for Invest-ment, Geoffrey Da Silva had said that his agency was examining how Government can help with the fuel costs to QAII. Da Silva said too that the concessions granted include provision for unlimited losses carried forward and the repatriation of capital overseas. The investors are also allowed to open foreign currency bank accounts, he said.
Ram is of the view that the whole fiasco could have been avoided if the government had complied with Section 37 of the Investment Act of 2004 that requires the publication of fiscal incentives in the Official Gazette.
Observers have also questioned on what basis the Government commenced negotiations with QAII after no bids had been received.
Government is maintaining that the deal was made in accordance with the Privati-sation Policy Framework Paper (PRFP) of July 1993, where an entity has been advertised and no successful bids received, direct negotiations can be held with one of the unsuccessful bidders. But in reality no bids were received after the advertisement for the facility had been extended.
In mid 2007, a proposal to lease the complex was received from QAII and following detailed discussions and negotiations a paper submitted by the Privatisation Unit to the Privatisation Board on May 9, 2007 unanimously recommended approval of the proposal. Cabinet approved the recommendations of the Board in May of 2007.

Wednesday, June 11, 2008

Why were the micro loan projects vetoed?

Why were the micro loan projects vetoed?
Stabroek News letter. Wednesday June 11, 2008

Dear Editor,
May I ask by what process the vetoed micro loan projects for Ithaca, the three West Coast Berbice villages, the women at Blankenburg and the thirty -six other projects reached the level of approval by the European Union? I hope they did not get to that point by seditious means. If they did, will the small developers be arrested and put on remand?
While the rulers seem bent on selling out every inch of choice land, what can be wrong with development-minded small people of the soil being allowed to make or improve their livelihoods? Whatever the cause, the reported decision of the government to cancel or delay the progress is alarming. Even more alarming is the government’s coolness in refusal to comment at a time when they should rush to apologise and withdraw the alleged veto on the projects.
Do these officials know what it is to be scraping and planning and waiting to secure or improve livelihood by work and production? They should welcome these three projects and similar projects. They have teams promoting more of them before the life of the project runs out.
In the first place it is an urgent matter. Livelihood is urgent and immediate. The rulers should stop feeling that they have some right to tamper with the lives of those who try to walk the straight road. It is heartless for the government to feel justified in using its veto on these projects and then think it can say ‘No comment at this time,’ Is it now trying to find the reason?
I withhold further comment in the hope that the Minister or other official responsible will make urgently a full disclosure of the reason or reasons for using the veto on 39 micro projects and the communities affected
Yours faithfully,
Eusi Kwayana

Tuesday, June 10, 2008

An exercise in futility: Trying to prove VAT reduces prices

An exercise in futility: Trying to prove VAT reduces prices
By Dr Clive Thomas
Guyana and the Wider World.
Article taken from Stabroek News. Sunday 8 June 2008
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Every Guy-anese realizes from his or her own daily living experience since the beginning of 2007 that the introduction of the VAT and excise legislation has precipitated much of the inflation in the price level that they have had to face ever since. Nonetheless, with amazing stubbornness the Guyana Revenue Authority (GRA), GINA, other government spokespersons and technocrats employed by the state have sought to “prove” to Guyanese through the public media that the introduction of the VAT and excise tax should lead to a decline in prices and deflation, not rising prices and inflation.

As the so-called “proof” goes, the VAT and excise tax is noted as having replaced existing consumption taxes, which for most items had a higher rate of taxation. Further, the VAT tax is paid only on “value added” at each stage of the production and distribution process. There-fore, as a particular business pays higher input costs because of the VAT tax, that business can claim the VAT taxation back from the GRA as a legitimate credit. The price of the item should consequently rise by the VAT tax (16 per cent) less, the more than likely, higher consumption tax for which the VAT is a replacement.
The fallacy in this argument is astonishingly simple, yet its advocates persist in making it.

The analysis of the tax on a particular business is what economists term a “partial equilibrium analysis.”

Such analyses seek to explain how relative prices are formed. Inflation, however, is a rise in the general level of prices. In other words a phenomenon that can only be effectively explained by general equilibrium analysis.

All partial equilibrium analyses of relative prices operate on the assumption that while the analysis is taking place, other things remain equal.

That is, nothing else changes during the period of the analysis. This is usually expressed with the Latin term, ceteris paribus and this term is introduced to persons immediately they begin the study of economics, even at the high school level.

In persisting with this approach the GRA betrays a lack of understanding of the finer elements of how prices are formed in Guyanese markets and for that matter all markets.

An example

A good example of this can be gathered from the widespread increase in the price of airline travel, which most people including the airlines attribute to the rise in crude oil prices and aviation fuel.

Two considerations show how weak may be this connection. First, most, if not all regular airlines, buy their fuel in future or forward markets, because these purchases are regularly required as long as the airline remains in business. Forward purchases are geared to eliminate price speculation and other erratic trend factors that may be caused by day to day, week to week, transitory supply-demand effects on oil markets.

Second, crude oil is priced in United States dollars. The rise in crude oil prices therefore partly reflects the depreciation of the US dollar relative to other currencies. Indeed, other currencies (for example, the pound sterling and the euro) have appreciated relative to the US dollar. To this extent crude oil prices measured in these currencies have become cheaper not dearer.

What this example shows is that businesses look for opportunities (real or illusory) to seek higher profits. It is plausible, if not entirely candid, for airlines to claim that rising fuel prices have forced them to raise prices. That, in other words they are not practising price gouging!

Applied to Guyana: Trigger mechanism

When one applies this example to Guyana we see why businesses find the VAT tax, a convenient device for the realignment of prices. And, when all businesses react in a similar fashion we get a consequential rise in the general price level.

Businesses do not have to overtly collude or conspire to produce this result. Instinctive knowledge of the price formation process in Guyana leads them to this result.

Thus one cannot undertake an analysis of the effects of the VAT and excise tax on one business in a partial manner, assuming other things remain equal (the ceteris paribus condition). On the evidence, the tax has been a trigger mechanism for an all-round rise in prices.

Next week I shall provide more direct information in support of the contention that the effect of the VAT and excise tax has been inflationary through presenting data on the impact of these taxes on national expenditure and prices.

In conclusion, however, let me observe that in a free market situation, enterprises cannot be prevented from acting in the manner highlighted here. Nothing done in the example cited here is illegal. This is indeed the nature of the capitalist free market economy and the laws, rules, regulations and procedures of the Guyanese economy permit such approaches.

It is the responsibility of governments to moderate excesses. However, to be able to do so, governments must first understand and thus anticipate untoward developments.

Every presentation to the Select Committee on the VAT and excise legislation had cautioned about the potential inflationary effects of the VAT, including myself and the Institute of Development Studies, University of Guyana, where I work.

It was also pointed out that because the Guyana dollar was linked to the US dollar, which was at the time continuously depreciating in foreign exchange markets, this would aggravate the inflationary effect of the VAT as the prices of imported inputs to businesses would be rising.

Article taken from Stabroek News -
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