Jagdeo blows hot and cold
Kaieteur News – In October and November 1991, the World Bank sent an economic team to Guyana. Based on that team’s assessment of the state of the country’s economy, a Report was published in 1993, entitled “Guyana: From Economic Recovery to Sustainable Growth.”
The Report criticized Guyana’s fiscal incentive system, noting that it gave companies a tax holiday of paying company tax, import duties and consumption tax. The Report said: “The system includes a wide range of discretion and although based on the level of employment and added value from the investment, the application of these criteria is not transparent … It also giving new companies in the industry an unfair edge over existing companies. ”
The World Bank went on to observe that the financial impact of the concessions is significant and is estimated to be around 15 per cent of 1991. Revenue, more importantly, noted that the system of tariff protections and fiscal incentives cost the country [read taxpayers] G $ 150,000 for every job created and G $ 360 for every dollar of foreign exchange saved.
At that time, the exchange rate was US $ 1 = G $ 40. This meant that for every job created by giving these fiscal concessions, it cost you and me, the taxpayers of Guyana, almost G $ 4,000, and for every dollar of foreign exchange earned, the country cost US $ 9. So foreign investors are not doing us a favor.
Since then, the value and volume of concessions has increased exponentially. The Guyana Investment Office (GOINVEST) is now a concession application factory with businesses flocking to it, to be recommended for fiscal concessions. Foreigners enjoy very generous government concessions in the agreements, signed by them with the government.
The APNU + AFC and the PPP / C often defend these dubious bargains by arguing that these investments will create jobs for Guyanese and gain foreign exchange for the country. But what they don’t say is that taxpayers have to bear the burdens of creating such jobs and for the foreign currency earned.
The World Bank Report, mentioned above, recommended a major overhaul of the country’s tax system including adjusting the structure to eliminate differences in incentives and to generate more revenue. He specifically urged the removal of special exemptions and revenue-reducing fiscal incentives and suggested limiting fiscal incentives for innovative industries.
ExxonMobil is being considered by Jagdeo as an innovative investment. And so, it’s blowing hot and cold. On the one hand, it criticizes the topical agreement signed with the company but on the other hand notes that, as an innovative investor, ExxonMobil deserves borderline terms. That is, it justifies the excessive terms given to Exxon on the basis that it is an innovative investment.
The World Bank, 25 years ago, said nothing about giving excessive concessions. It suggests that fiscal concessions should be restricted to innovative industries.
Jagdeo, in this columnist’s estimation, has become an apologist for the oil companies. He argues, for example, that Guyana has no means to explore for oil, pointing out that the total assets of the local banking system are around US $ 5.6B, while Liza Phase One alone would cost an estimated US $ 3.5M.
It suggests that we need Exxon as we do not have the resources to source our oil. This is such a baby debate. Exxon needs to bend over to let that company break us into two different things, something the Vice President seems indifferent to.
Guyana is not unique in that it requires foreign investment to develop its oil and gas. All developing countries, which have found oil, have faced that situation. But of the countries surveyed by this newspaper, Guyana got the worse terms.
It is not necessary to look far to realize how self-defeating Jagdeo’s argument is. Suriname is next door to Guyana. Suriname has secured better terms than Guyana, much better terms, and it also lacks the financial resources to extract its own oil.
It’s time for Vice President Jagdeo to stop blowing hot and cold. It cannot condemn the concessions granted to Exxon and at the same time say that Exxon is entitled to frontier terms as an innovative investor. He cannot use the country’s relatively small financial sector as an excuse for suggesting that we have limited options when dealing with the oil companies.
(The views expressed in this article are those of the author and do not necessarily reflect the views of this newspaper.)