Wednesday, July 30, 2008

Transparency critical to each privatisation – Brassington

Transparency critical to each privatisation – Brassington
Tuesday, 29 July 2008 23:33 Guyana Times

Transparency talk: Mr Winston Brassington (right) addresses the seminar, Monday, July 29. Next to him is Chairman of the Private Sector Commission, Mr Gerry Gouveia. - Private sector says there is need to recognise niche industries

‘We do need new incentive regimes in Guyana since there are new and emerging sectors. We also need to recognise niche industries’ -

Vice Chairman of the Private Sector Commission (PSC) Ramesh Dookhoo

Head of the Privatisation Unit Winston Brassington says transparency is a critical component of each privatisation deal government makes. He said that except in special circumstances, each privatisation transaction is advertised for bids/tenders after which approval of the selected tender is done by the Privatisation Board and Cabinet.

Brassington was speaking yesterday at the seminar on Guyana’s Privatisation and Tax Policies and Practices, which was held at Le Meridien Pegasus. He said that government made clear its intention to retain a number of state entities, “for strategic purposes.”

Brassington said that the preferred method of making property available to investors is through leases and not sales, since leasing allows for clawback mechanisms to be activated, should the investor not comply with the conditions of the lease. The second phase of government’s privatisation programme raked in $23 B from 1994 to 2008 from privatisation of state enterprises and real estate deals at a number of industrial estates.

But not all of the money from those deals goes to the Treasury, since the Privatisation Unit and its parallel entity, National Industrial and Commercial Investments Inc, uses some of it to meet the expenses connected with properties under their stewardship.

The Privatisation Unit, in association with the Guyana Office for Investment (GO-INVEST) and the Guyana Revenue Authority (GRA), organised the half day session to make clear the policies governing privatisation of state entities and assets, and the associated tax incentives to investors. At the launching of this newspaper on June 5, President Bharrat Jagdeo asked that the Privatisation Unit hold the session to educate the public about the privatisation and concession framework.

This was in response to Chairman of the Demerara Distillers Group Yesu Persaud, who, at that forum had called for those concessions made available to Queen’s Atlantic Investment Inc. (QA11) to be given to all investors.

Niche industries

In delivering a private sector perspective on taxation, Vice Chairman of the Private Sector Commission (PSC) Ramesh Dookhoo said, “We do need new incentive regimes in Guyana since there are new and emerging sectors. We also need to recognise niche industries.”

He said that tax harmonisation in the Caricom region has to be fast-tracked. He said too that Guyana’s tax policies must be grounded in reality. He said that legislatively, Guyana has come a long way. “It is important that we think regionally and extra regionally when it comes to tax reform,” Dookhoo said.

In delivering his presentation entitled, “Guyana’s Privatisation Programme – Institutional Framework and Results” Brassington said that Guyana could be divided into two distinct phases: Phase 1 which ended in 2002 and saw the total or partial divestment of 14 entities; and Phase 2, which started in 2003 and resulted in 26 entities being totally or partially privatised.

He said that unlike the general approach used in Phase 1, which was to close down unprofitable entities and liquidate, with only three cases of the privatisation being complete through the sale of the businesses, the Phase 2 privatisation programme’s approach was largely the sale of the businesses.

In his remarks, Minister of Finance Dr Ashni Singh said Guyana’s privatisation programme over the years was, for the most part, successful. Dr Singh said that as a result of the privatisation programme, government has been removed significantly from business.

He pointed out that the companies that had been identified for privatisation were those that had been in financial distress and that were being a burden on the Treasury. Minister Singh made reference to the Guyana Electricity Corporation (GEC) as one of the “un-success” stories of privatisation, with the new entity, the Guyana Power and Light (GPL), reverting to government ownership upon the departure of the investor in 2003.

But he said lessons have been learnt from the GEC/GPL experience and stated that the utility company had peculiar circumstances which made the privatisation difficult. He said that the privatisation process has however evolved over the years and now there is some element of post-privatisation monitoring.

Praising the work of the Privatisation Unit, the Minister said that apart from the work of selling off state assets, the Unit has been instrumental in other activities, such as the Berbice River Bridge project, through the mobilisation of private resources from a number of investors.

The Minister said too that with the evolution of the fiscal incentives, the system has been made more rule-based with the elimination of discretionary powers with the passage of the Fiscal Enactment (Amendments) Act 2003.

He said that Government remains committed to the strictest standards of openness. He said that yesterday’s session provided a very important opportunity for the receipt of feedback and clarification on both sides. Flexibility in negotiations Chairman of the Private Sector Commission (PSC) Captain Gerry Gouveia said that there has been tremendous improvement from the 1970s and 1980s but said that there is still a far way for Guyana to go to achieve all the benefits of privatisation. “We still cannot provide adequate jobs [to match] the cost of living,” he said.

But he noted that the creation of an environment welcoming to investment is not the job of the private sector alone. He charged Brassington to be even handed in the way the Privatisation Unit deals with potential investors. “My view is that we must all expect to give [some] latitude for flexibility as we negotiate.

We have to have a level of trust in our public officers,” he said. Gouveia said that the aim of broadening the base for competitiveness is not always achieved through the privatisation.

Chartered accountant Christopher Ram asked the panel whether the proceeds that the Privatisation Unit collects are handed over to the Consolidated Fund. In response, Brassington told the gathering that the money is used to meet costs associated with properties under the control of the unit.

Brassington was asked why it was that agreements covering the various QA11 investments were signed and approved months before the Memorandum of Understanding. He said that this was so, because of the negotiations were ongoing to settle on the details of the investment.

Commissioner General of the Guyana Revenue Authority (GRA) Khurshid Sattaur said that his agency foregoes $20 billion a year in remitted taxes. But he said that more and more the GRA is coming down on agencies and individuals who breach the conditions of their tax remissions and they are made to pay the amounts owed.

Sattaur made the point that the GRA is culpable in the delay of shipments to be cleared, but he said that sometimes the importers don’t provide accurate information to the Customs and this delays their shipments.

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