Author: ChrisRam

Introduction
As yet, other than saying that Atlantic Hotels Inc is a public-private sector partnership, the government and its handmaiden NICIL have been silent on where the money to build a hotel in Kingston to be operated under the Marriott label will come from. We have heard about some group operating in Grenada that has run into problems in that country and have heard that some friends may be interested. The fact is we do not know. Meanwhile NICIL is proceeding with speed to identify a contractor to begin construction of the hotel.

Where indeed is the money going to come from? Last week, in part 2 of this series on the decision by President Jagdeo to build a hotel, I wrote that it would take more than investigative journalism to ascertain the labyrinthine sources from which the funds for the hotel would be derived. That it would take an enquiry with full powers to demand information and explanations. And that it would need to look into the books of the Consolidated Fund, NICIL, Guysuco, the Lottery Funds, and other unknowns at this stage.

The strategy of no systems
As this closing piece argues, the first stage in a strategy of misusing money is either to have no system or to undermine the existing system and then exploit its weaknesses. Add to the mix opaque rules such as those dealing with the Lottery Funds, spice it up with an entity that depends on you for its survival (Guysuco), have a few non-accountable entities at the ready (NICIL) and neutralise with carrots those likely to oppose (the leadership of the opposition) and have ready a sufficient number of persons who would be prepared to execute your work. It would help if the press and the public are uninformed or apathetic. When all these forces serendipitously come together, you are on top of the galaxy, with Zeus and Atlas at your side.

There are sufficient secret or hazy sources which could provide some if not all the funding for the hotel. With the role of the Leader of the Opposition becoming increasingly a sinecure, with so many prepared to do the work out of fear or favour, with the carrots dangled to emasculate individuals and groups accustomed to handouts, the government is almost guaranteed not even a whimper of opposition if it decides to use one of these hazy sources to finance the hotel.

A consolidated mess
Despite the boasts by the government, the Consolidated Fund is in a mess. In its 2008 report, the Audit Office reported that it had received confirmation from the Bank of Guyana that the government was holding in special accounts, outside of the Consolidated Fund, some $35.031 billion. But that was the only certainty. The Audit Office’s assessment of the balances held in the special accounts indicated that thirteen accounts with balances totalling approximately $7.868 billion appear to be funds that are transferable to the Consolidated Fund. Of those thirteen accounts, nine reflected static balances totalling $4.778 billion over the last five years; amounts of $10.980 billion held in Other Ministries/Departments Bank Accounts; and twenty inactive bank accounts.

The 2008 report tells of a new and an old Consolidated Fund and it would be fair to assume that the new would be an improvement on the old. Wrong again. The New Consolidated Fund bank account reflected a balance of $2.376 billion compared with an overdraft of $11.602 billion as stated in the cash book as at December 31, 2008. This represents a difference of fourteen billion dollars but was probably considered not too important and so no effort was made to reconcile the difference in the two amounts.

You would think that there would be some serious effort by the government to resolve this mess. Year after year, even as the quantum of the special funds keeps increasing, the only word coming out of the Ministry of Finance is that it is addressing these matters.

Contingencies Fund and the lottery
Then there is the Contingencies Fund provided for under the constitution and the Fiscal Management and Accountability Act 2003 which allows the Minister of Finance, on being satisfied that “an urgent, unavoidable and unforeseen need for the expenditure has arisen (a) for which no moneys have been appropriated or for which the sum appropriated is insufficient; (b) for which moneys cannot be reallocated as provided for under this Act; or (c) which cannot be deferred without injury to the public interest….” to approve a Contingencies Fund advance. This account has been ripe for systematic abuse, year after year as routine payments are made well outside the criteria set out in the law.

Increasingly it seems that the public interest is determined not by law or the technocrats but by the President and the other politicians. And in any case, if expenditure for Carifesta and Amerindian Month could qualify, then maybe with a little bit of a stretch, so could the President’s Marriott.

Then there is the President’s former favourite, the Lottery Funds. I say former because I now believe that his new favourite, based on value and opacity, is NICIL, which I will return to presently. Either as Finance Minister or as President, Mr Jagdeo has unconstitutionally and unlawfully made or authorised payments out of the Lotto Funds totalling $3.097 billion during the period 1996 to 2008. These funds are closely hidden away and spent purely at the discretion of the President on such things as $20 million given to the Commissioner of Police to acquire a steel band; paying to bring Indian cultural groups to Guyana; funding the construction of mosques; Amerindian activities; youth awards; empowerment activities, etc.

If the truth were ever to be told, we might even hear that the Lotto Funds will finance the President’s Buxton initiatives.

The PNC’s black hole
Why the government accounts are in such a mess is hard to imagine. Yes, there was a black hole ten-year period beginning in 1981 when we had no audit reports, and while that in itself was unlawful and unacceptable it did not mean that there was necessarily any major improprieties. But the deteriorating situation over the past five years or so probably has to do with the supine leadership of the political opposition; the departure of Goolsarran from the Audit Office and the quality of staff there; Jagdeo’s increasing boldness if not contempt for accountability and the total failure of the Public Accounts Committee to do any serious work.

Guysuco
This state-owned entity is now pivotal to a matter that is pivotal to a hearing of a matter by the Privileges Committee of the National Assembly. In that matter, the Speaker of the Assembly has ruled that a prima facie case has been made out against one minister of the government. The National Assembly is in recess and it is not known when the matter will come up. Both numerically and qualitatively the composition of the committee weighs heavily in favour of the minister and he may come out of it unscathed. The role of Guysuco in that matter is best left until it is dealt with, not because one attorney-at-law has said – wrongly – that it is sub judice, but for more practical reasons.

What can be said now, however, is that despite a clean audit opinion, Guysuco has not been properly accounting for its land sales. In November 2007 four hundred acres of land were transferred from the corporation to the government and in May 2008 another two hundred acres. The disposal proceeds of those lands do not appear in the books of the corporation. Nor are lands disposed to Republic Bank, GBTI and Demerara Bank.

NICIL
Where did this money go? Even if it was gifted to the government, it should have been accounted for as a distribution. It was not. One probability is that the money went to NICIL which has now replaced the Lottery Funds as the slush fund of choice. It is bigger, more opaque, more convenient and therefore more useful as a fund to be used for anything and everything. NICIL has received hundreds of millions as privatisation proceeds, including lands sold to John Fernandes Limited, GBTI and Queens Atlantic Investment Inc. It is also a rent collector and incredibly an asset fund manager to build roads for the GGMC from which it received $1.8 billion in 2007 and 2008.

The law defines most if not all of these as public moneys which should therefore be placed in the Consolidated Fund. NICIL is many things, but it is not even part of the Consolidated Fund. Its objects set out in its corporate documents do not allow it to do many of the things it purports to do. But it is convenient and, being a private, state-owned company is outside of the formal government accounting rules. The Privatisation Unit that was set up as a department of the Ministry of Finance is not even listed as a budget agency which seems to exclude it from the strictures of the Fiscal Management and Accountability Act. The stage is therefore set for NICIL to do the kind of work which it has been doing for some time and with an increasing sense of impunity.

LCDS: the big one
But even NICIL may be overtaken by another vehicle to channel public moneys into questionable investments. And that is the LCDS funds. As we see with Mr Fip Motilall and the road to Amaila, such funds are already being used by the government, even before their receipt. That I fear is the wave of the future. It would not matter how many lives and jobs in forestry and mining are sacrificed, how many royalties are foregone and how many entrepreneurs and their investments are jeopardized, it is politically expedient for the government to have full control of the LCDS funds.

As a major forester described the matter, the ‘S’ in LCDS stands for sacrifice to be made by the forestry and mining sector as they are strangled by draconian regulations and the commitments by President Jagdeo to the Norwegians. Currently the income from forestry and mining flows to the operators and the government, while jobs are provided for both coastlanders and members of hinterland communities. There is a perception that the persons making the money from these sectors are not supporters of the government, and in consequence, they are dispensable and will be sacrificed to the LCDS.

LCDS funds flow directly to the government which alone decides how they will be spent. If it wants to support a particular project or person, all it has to do is put it in the context of the LCDS as in the case of Amaila and Fip Motilall. And if another project – like a hotel – is not that easy, just prefix the project with the word “green.”

Conclusion
The Office of the President has spent scores if not hundreds of millions on LCDS already. It does so without accountability and transparency. The Audit Office has turned a blind eye to that and to the misdeeds of NICIL. The government can count on the office doing the same with LCDS. And if perchance the hotel succeeds, the government can always sell its interest to a friendly partner.

The case for the Kingston hotel then has little to do with tourism and a top-of-the-line, international standards hotel. When built, it will be a monument to the extent to which egomania has gripped President Jagdeo, testimony that civil society is dead and it will explain why Guyana lags far behind even the smallest Caribbean island, barring Haiti. It will be our beacon of arrogance and attitude to spending public funds on the one hand, and the cowardice of a nation on the other.

Introduction
Last week I wrote that the Government of Guyana through the instrumentality of President Jagdeo was about to enter the tourism sector as a major investor while simultaneously getting out of a major lucrative investment in the telecommunication sector from which it, or rather the increasingly infamous NICIL, received some $3,458,000,000 in dividends. Business Page noted that these decisions, are taken in the name of the people of Guyana, without consultation, logic or justification.

The government and its handmaiden NICIL, completely ignoring the calls by the press and the taxpayers of the country for information on the decision, have taken the investment in the hotel one stage further. The Atlantic Hotel Inc, a creature of NICIL of which NICIL’s CEO Winston Brassington and its Deputy CEO Ms Marcia Nadir-Sharma are the sole officers on record, has put out an advertisement for pre-qualification applications from contractors to undertake the construction of a hotel and entertainment complex in Georgetown.

According to the advertisement the works comprise the construction/erection of a 275,000 square foot compound that will include:

(i) A 200,000 square foot hotel facility; and

(ii) A 75,000 square foot “entertainment complex” outfitted with common services areas/amenities that will be the site for a casino, restaurant, nightclub and other unfinished spaces available for retail.

Keeping the promise
Readers will recall that Mr Jagdeo was embarrassed after an earlier attempt to have a Marriott hotel built at the same location, and after substantial sums of money had been forked out by NICIL on sewerage diversion, consultancy and other big ticket items of expenditure. Of course NICIL, which is chaired by the Minister of Finance and includes some top ministers, does not file annual returns, and with its officers failing to provide the press and the public with financial information, accurate figures on the actual amounts expended cannot be ascertained.

Jagdeo is one president who appears not to tolerate being embarrassed. The impression is conveyed that he has pursued a Marriott Hotel because that is what he had announced. One might ask, for example, why it could not have been a Hilton, or an Inter-Continental or a Holiday Inn, each of which might have offered a better deal, including making an actual investment in a hotel.

No FIA, no Procurement Commission
If any Guyanese wants to understand why Jagdeo is not interested in a Freedom of Information Act, just look at NICIL, a company that breaks the law on a daily basis. If any Guyanese wants to understand why there will be no Public Procurement Commission under Jagdeo, just look at NICIL, a company that has flouted the Procurement Act with impunity in the past.

The stage is being set once again for the flouting of the constitutional and statutory arrangements regarding procurement. One taxpayer and citizen has challenged NICIL’s role in the award of the road contract to Fip Motilall. That challenge has regrettably been stalled by a slothful court system even as Mr Motilall’s failure to start the G$3.4 billion contract on time is being tolerated and ignored by the government. In fact, the role of the government has been reduced to periodic bulletins to the nation of the location of the most tracked ship. According to Minister of Public Works and Communication Robeson Benn, the ship, like that of Antonio in Shakespeare’s Merchant of Venice has successfully navigated the storms, is now out of the Bermuda Triangle and should soon be home to help in delivering hydro-electric power to the nation, another of President Jagdeo’s promises.

Even if there was ever a probability that the penalty clause in the road contract would be imposed, Mr Benn has now made the case for its non-operation by a plea of act of God by Mr Motilall. From commencement to conclusion the road contract to Mr Motilall has been tainted. It characterises so much that is illegal, improper, immoral and irrational, in a haste to deliver on President Jagdeo’s promises, including the new hotel.

The birth of a hotel
First touted as a government/private sector partnership, Atlantic Hotel Inc is at this stage a 100% state-owned company. You would think then that with a strict Fiscal Management and Accountability Act the task of knowing where the government will find the billions to build the Kingston hotel is an easy one. After all, that Act defines public monies and lays down the rules for their accounting and expenditure. You could not be more mistaken.

It will take more than investigative journalism to ascertain the labyrinthine sources from which the funds for the hotel will be derived. It will take an enquiry with full powers to demand information and explanations. It needs to look into the books of the Consolidated Fund, NICIL, GuySuco, the Lottery Funds, and other unknowns at this stage. It may even reveal that some public officers should be charged for the glaring breaches of the Fiscal Management and Accountability Act. But then reality in Guyana does not work in such structured, legal and proper ways.

Under Cheddi Jagan there was a Privatisation Unit which was a department of the Ministry of Finance. That proved too inhibiting and so NICIL was resurrected as a hybrid called NICIL/PU. But that also required some semblance of accountability. So the twain parted and NICIL became the front for a number of misdeeds. And now NICIL has created its own company, Atlantic Hotel Inc, a company that was born, secretly as from an unsuspected pregnancy. The child will be even more wayward than the parent. It is that child that has now placed the advertisement, apparently convinced that it could ignore section 24 of the Procurement Act. This is what that section states:

(1) Public corporations and other bodies in which the controlling interest is vested in the State may, subject to the approval of the National Board [the National Tender Board which the government uses as the substitute for the National Procurement Commission], conduct procurement according to their own rules or regulations, except that to the extent that such rules and regulations conflict with this Act or the regulations, this Act and the regulations shall prevail.

(2) If funds are received from the Treasury for a specific procurement, then the corporation or other body shall be obliged to follow the procedure set out in this Act and the regulations.

(3) Employees of any procurement entity who by their job description are responsible for procurement shall declare their assets to the Integrity Commission.

The Procurement Act, as readers of this column are aware, covers not only the procurement of goods but also services, including construction services. Maybe the two executive officers and the directors of NICIL wrongly believe that by the creation of a subsidiary they are insulating that subsidiary from the reaches of the law. That by the funds for the hotel coming from its parent NICIL and not the Treasury, the provisions of the Procurement Act will not apply. This may not be how the nation sees it or how the law was intended to operate. But the government has other motives and the force of power on their side. That is all they need in practice, if not in law.

Breach of faith and the CIOG
Before I consider the possible sources of the funding of the hotel some general points seem to be in order. Under this new dispensation of direct government involvement in the economy, no business is safe from unfair competition by the government. The government gave valuable land and support to Buddy’s which realised a vast capital gain by selling out to Princess. Now the Princess, under foreign ownership, is criticised by President Jagdeo as a below par hotel, deserving of competition from the government. Unlike Robert Badal, a Guyanese, the Princess Hotel would feel intimidated to challenge the government on bad faith. But would they have paid such a vast sum for Buddy’s Hotel had they known in advance of the impending Marriott? And indeed would Badal have bought the Pegasus if he had known that he would sooner rather than later be facing stiff competition from the government?

Would any investor feel confident enough to even approach the government with any business ideas and initiatives if it cannot trust the government to keep information confidential, or worse, to use it for its own benefit and against the interest of the investor, possibly as a competitor? Competition is of course necessary and beneficial to the consumer, but that must at a minimum assume that the competition will be fair and proper. The PSC cannot criticise the government on the competition issue only on internal flights because the GDF may affect the business of one of its leaders. It must take a position on principle in relation to all businesses. Its failure to address the issue on principle rather than on the basis of personal interest will seriously affect the country’s image as a credible host country for investment.

That can hardly be the focus and intent of the expensive National Competitive Strategy on which the government spends billions of dollars of borrowed funds and for which the Chairman of the Private Sector Commission is the principal cheerleader.

The raison d’etre of the Kingston hotel has hardly been justified to a skeptical Guyanese public, but it seems that big-time gambling is the new strategy of the Jagdeo administration. The CIOG has arrived at a convenient relationship with President Jagdeo while the Christian community has given the appearance of being more concerned about individual lifestyle choices than by policies that will affect the nation.

To be continued

The government through the instrumentality of President Jagdeo, is about to enter the tourism sector as a major investor. At the same time, the government is getting out of the telecommunication sector, or at least one of its major investments in the sector. Of course these will be done in the name of the people of Guyana, without consultation, logic or justification. Not that President Jagdeo feels any reason or compulsion to consult with the Private Sector Commission, a large segment of the trade union movement, or with the National Assembly. One leader of the PSC had said that he supported everything done by President Jagdeo. One of the trade unionists has placed a halo over him. The many would-be leaders of the PPP/C are silent, perhaps unable to understand the implications of the personality culture and egomania which now shape economic decisions. Or perhaps they quietly relish the thought of leading a country where the people can be bribed with their own taxes; where state property can be disposed to whomsoever the government chooses; and where an opportunity to visit the Office of the President or dine at State House are now legal tender, in exchange for every scrap of transparency, decency, financial probity, the morality of the people and the soul of the nation.

At their most basic, the business decisions of the Jagdeo administration are not difficult to understand. A hydro-electricity power licence and a road contract to Fip Motilall, single sourcing of billions of dollars of drugs for the national health system and in the first instance illegal tax concessions to the Ramroops, land for hotel housing developer Buddy Shivraj all helped to support and enrich friends at the expense of taxpayers. All the aforementioned persons have many things in common, including class and their closeness to the government, and have succeeded partly because of the generosity of the government to them and the relationship they enjoy with its leader. They have no cause for complaint, and on the contrary would wish if things could just remain the same.

They might even be ‘third term-ites.’

Pegasus v Marriott
The problem for Robert Badal and his Pegasus Hotel is that he has been too independent, too courageous and too successful. Worse is that he not only succeeded in spite of the government, but has outmanoeuvred it at every interaction. That is a grievous fault and grievously must he pay for it. The government accuses Mr. Badal of improperly acquiring control of Guyana Stockfeeds Limited while Jagdeo lashes out at the poor service of the Guyana Pegasus and its water quality. But words are not enough to hurt the Pegasus so that sticks and stones must now be called into action, in the name of competition and tourism.

As Business Page recalls it, some years ago the directors of Guyana Stockfeeds Limited announced a rights issue of shares under which new shares were offered proportionately to existing shareholders. Under the terms of the offer, shares not taken up by any of the shareholders could then be offered to the other shareholders. Whatever may have been Mr Badal’s motive, such an arrangement is not unusual in equity transactions, and indeed was a mechanism often used by Banks DIH Limited. At the time of the rights issue, the government was not interested in further involvement in direct private sector investment and did not take up the shares to which it was entitled. Had the government taken up its allocation the shareholding would have remained unchanged. Mr Badal took up the shares and consolidated his control and management of the company.

No one knows whether the government considered the option of taking up the shares which were effectively offered at a discount, and then making a profit by selling them. No one knows too why the government did not honour its own White Paper on privatisation and ensure that 10% of the company’s shares were reserved for its employees. What we do know is that now that those failures have backfired and now that the President’s friends have failed in their bid to buy the Pegasus, it is time to take up the old fire rage and go after Mr Badal. Ironically, the charge led by the President is taken up by NICIL, the company with one of the worst governance records in the country. For more than a decade it has failed to meet its statutory obligations to file annual reports. It is a closed shop, more tightly secured than Stockfeeds can ever hope to be, despite being a taxpayer-owned company. It is a vehicle for siphoning off state assets, selling them and using public money without parliamentary approval. It operates with all the characteristics of a slush fund under the control of a handful of persons with no demonstrated commitment to accountability and the law under which they operate.

P(rivatisation)Unit
But they are powerful and can act with impunity, which perhaps is the subliminal message of their email address – punit! Having failed to file reports annually with the Registrar of Companies for all those years without suffering the statutory sanctions by the Registrar, NICIL and its CEO Winston Brassington and Deputy CEO Marcia Nadir-Sharma were able in one day last September to file and have incorporated the Atlantic Hotel Inc, which to some rings a troubling chord with the Queen’s Atlantic Inc, the company for which NICIL and the government were prepared to change the concessions laws of the country. From all appearances, Atlantic Hotel Inc will be the owner of the proposed Marriott-run Hotel that will challenge Pegasus for clientele. While Mr Jagdeo would wish us to believe that the project is a government-private sector partnership, the incorporator and sole director of AHI is Winston Brassington, the Company Secretary is Marcia Nadir-Sharma who is also its legal officer. The government, it seems, thinks it entirely appropriate for the state to operate like the most secretive private company and sees no contradiction or irony of calling out Mr Badal on governance.

Mr Ramesh Dookhoo, Chairman of the Private Sector Commission, an organisation dedicated to the promotion of the private sector was able in one breath to support the government’s decision to get involved in the tourism sector while calling for more but unspecified information. There was sufficient ambiguity in Mr Dookhoo’s statement to leave everyone guessing without incurring the displeasure of the government, one of the apparent overriding if unstated goals of the PSC.

Poor service
Over the past couple of weeks I have witnessed the poor standard of service by the country’s tour operators and domestic airlines. It is shocking to see how they treat their customers. They accept bookings for flights and then cancel because they do not have enough passengers to make the flight economic. No one visiting Guyana for a few days wants to experience the wait at Timehri while the operator decides whether or not to bother with the flight. If any person wishes to guarantee a flight to Kaieteur, then they had better charter the plane from one of these very service providers who enjoy lucrative space at national facilities financed by the taxpayers of the country.

A decade after the launch of the Tourism Authority visitors and residents alike find it impossible to access basic information on where to go, how to get there, what it will cost and what may be the facilities and amenities that are available. Visitors’ security and safety are vital considerations but it does not seem that this is evident to the government. One cannot but help noticing too that absent from all of the discussion and exchanges about the need for hotels is the Minister of Tourism Manniram Prashad, a long-time friend of the President. Mr Prashad was for several years a director of the Guyana Pegasus and both his political role and well as his experience with the Pegasus would have qualified him to make an informed contribution.

Irrational and illogical
But when decisions are taken on grounds that are as irrational and illogical as they are in the case of Amaila and the new hotel, standard policy formulation and experience become irrelevant and counter-productive to the motives that drive the decisions in the first place. No longer is there a natural role and obligation on the government to provide the infrastructure for the development of the sector, and for the private sector to invest in hardware, jobs and services, and to pay taxes to fund development. It is, like the case of the withdrawal of government ads from the Stabroek News, act first and justify later. The cheerleading band stands at the ready – all set to go. By the time the falsity of the reason is exposed, it is no longer important, and in any case, new and perhaps more sinister motives will have driven more blatantly irrational actions that arouse more but fleeting interest. And so the cycle goes on, despite changes, as in the case of the PSC.

In the days leading up to the Cricket World Cup the government successfully pushed the private sector into hotel property development. The efforts were so successful that there in now over-capacity in the sector. That makes the case for new plant hard to sell, so the President wants to figuratively knock down what exists and invent reasons for a special class of hotel. It seems logical that if such a need existed, the private sector would have responded. They have the flexibility and the profit motive. They know that in tourism the product that is sold is first the country. If someone tells you he is going on holiday s/he tells you the country of destination, not the hotel. Let us first sell Guyana and its rich eco-tourism potential in our many falls and waterways, our mountains and valleys, our flora and fauna. Put money and imagination into the Tourism Authority and the soft infrastructure in the sector. Those will be strong incentives for the private sector to invest in new plant.

Conclusion
Let us recall that the President justified the introduction of casinos as the need to attract tourists. Let him now tell us how many new tourists actually visit Guyana because of the casino and how many are Guyanese who hold foreign passports. But no, we have moved on and the spurious reasons are now irrelevant. It may not be too late for the Economic Services Sector Committee to request that the government present its case for its investment in the hotel.

Mr Dookhoo probably wants the government to present the nation with a financial justification for the [mis]/use of taxpayers’ money for the financial adventures of the President. If so, he needs to be more direct. But the PSC needs to ask a more fundamental question: what is the government’s policy with respect to entering into direct competition with businesses generally and Guyanese businesses in particular. Today it is hotels, tomorrow it is telecommunication, the next day it is agro-industry, etc. The environment becomes increasingly uncertain.