Kaieteur News – In October and November 1991, the World Bank dispatched 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 Sustained Growth.”
The Report criticized Guyana fiscal incentives system, noting that it granted tax holidays to firms from the payment of company tax, import duties and consumption tax. The Report stated: “The system includes a wide range of discretion and while it is based on the level of employment and value-added by the investment, the application of these criteria is not transparent… It also gives to new firms in the industry an unfair edge over existing firms.”
The World Bank went on to observe that the fiscal impact of the concessions was considerable and estimated at about 15 percent of 1991 revenues. More importantly it 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 through the grant of these fiscal concessions, it cost you and me, the taxpayers of Guyana, almost G$4,000 and for every dollar of foreign exchange earned, it cost the country US$9. Foreign investors are therefore not doing us a favour.
Since then, the value and volume of concessions have increased exponentially. The Guyana Office for Investment (GOINVEST) is now a concession application factory with businesses flocking to it, in order to be recommended for fiscal concessions. Foreigners enjoy extremely generous fiscal concessions from the government in the agreements, which they signed with the government.
The APNU+AFC and the PPP/C often defend these dubious deals by contending that these investments will create jobs for Guyanese and will earn foreign exchange for the country. But what they do not tell, is that it is taxpayers who have to shoulder 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 modification in the structure to eliminate disparities in incentives and in order to generate more revenues. The Report specifically urged the elimination of special exemptions and fiscal incentives that reduce revenues and suggested limiting fiscal incentives for pioneering industries.
ExxonMobil is considered by Jagdeo as a pioneering investment. And so, he blows both hot and cold. On the one hand, he criticizes the lopsided agreement signed with the company but on the other hand indicates that as a pioneering investor, ExxonMobil deserves frontier terms. In other words, he is justifying the overgenerous terms granted to Exxon on the grounds that it is a pioneering investment.
The World Bank, 25 years ago, did not say anything about granting overgenerous concessions. It suggests that fiscal concessions be limited to pioneering industries.
Jagdeo, in this columnist’s estimation, has become an apologist for the oil companies. He argues, for example, that Guyana does not have the means to explore for oil, pointing to the fact that the total assets of the local banking system is about US$5.6B, while Liza Phase One alone would cost an estimated US$3.5M.
He is implying that we need Exxon since we do not have the resources to bring up our oil. This is such an infantile argument. Needing Exxon and bending over to let that company violate us are two different things, something that the Vice President appears indifferent towards.
Guyana is not unique in requiring foreign investment for the development of 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.
One does not need to look far to realize how self-defeating is Jagdeo’s argument. Suriname is right next door to Guyana. Suriname has gotten better terms than Guyana, far better terms, and it too, does not have the financial resources to extract its own oil.
It is time Vice President Jagdeo stop blowing hot and cold. He cannot condemn the concessions granted to Exxon and at the same time say that as pioneering investor, Exxon is entitled to frontier terms. He cannot use the country’s relatively small financial sector as an excuse for implying that we have limited choices when dealing with the oil companies.
(The views expressed in this article are those of the author and do not necessarily reflect the opinions of this newspaper.)
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