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The EIU report derived its questions from comparative data published by the Bank of Guyana

Sunday, July 4th, 2010

The Bank of Guyana and the Ministry of Finance would have had immediate access to the Economic Intelligence Unit (EIU) April 2010 Guyana Country Report. Since these reports are considered mandatory reading for policymakers across the world, it is a reasonable assumption that the Minister of Finance, Dr Ashni Singh and Rajendra Rampersaud of the Bank of Guyana would have read the report some time ago.

If they had concerns with its methodology or contents they kept these quiet. But suddenly, within days of the Stabroek News reporting on the report, the doors of hell are opened wide. Mr Rampersaud pronounces authoritatively on statistics in a letter in Stabroek News of June 28 (‘Empirical data do not support the growth contention by Economist Intelligence Unit’) and Dr Singh on June 26 through GINA abuses everyone about house, mouth and integrity.

For the sake of convenience and brevity, I will respond separately to Mr Rampersaud and Dr Singh.

First Mr Rampersaud:

1. In his haste to respond, he fails to distinguish between Stabroek Business and Business Page or the meaning of “one of only few.”

2. He completely ignores the fact that the EIU’s principal concern is the inexplicable growth in the fourth quarter after negative growth in the first three quarters, and that the report derived its questions from comparative data published by the Bank of Guyana where he works.

3. His claim that production data are difficult to manipulate shows a lack of understanding of assumptions made about the local consumption of rice, the massive under-declaration of gold, and transfer pricing in forestry and bauxite. By implication, however, he is admitting to ease of manipulation in the other sectors that account for an overwhelming share of GDP.

4. Mr Rampersaud fails to mention that the major elements and contributors to GDP derive from sectors that are easy to manipulate – wholesale and retail (13.5%), transportation and storage (7.5%), construction (9.7%) and other services (4.4%) which together account for 35.1% of 2009 GDP. Or that the public sector categories – Public Administration, Education, and Health and Social Services account for 15.2% of GDP.

5. He asserts that agriculture is a key component in real GDP growth. In fact Agriculture is a sub-sector in Agriculture, Forestry and Fishing which as a group contributed 20.9% of GDP at Constant Prices in 2009. If the numbers are disaggregated, he will see that Agriculture contributed 15.0% to GDP, made up by sugar 4.7%, rice 2.7%, Livestock 2.7% and “Other crops” 4.9%. As a policy adviser, he may wish to consider whether the state gets an adequate return from the substantial sums it expends every year on these industries and tell us whether he believes that the Other Crops contribute almost twice as much to Agriculture as rice does.

6. If as he claims the Statistical Bureau is the “official agency charged with dissemination on authentic real sector data in Guyana,” Mr Rampersaud may offer his views on the propriety of the President advertising growth and inflation figures in his end-of-year broadcast, or the inaccessibility of the Stats Bureau to the press, or about the bureau publishing critical data, including those on inflation, only after it has received political clearance.

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Ms Teixeira was incorrect on how commissions of enquiry are set up

Monday, May 24th, 2010

I can only speculate whether it was a momentary lapse that caused Ms. Gail Teixeira to mis-speak about the basis and mechanism of commissions of enquiry (Stabroek News, May 22, 2010: No info, no phantom probe – Teixeira). Faced with persistent questions on the phantom squad for which her government is again under scrutiny, Ms. Teixeira told the media that “the constitution clearly states how a commission is set up to inquire.” That is not correct.

How a commission of enquiry is set up and functions are provided for not in the Constitution but under the Commission of Enquiry Act Cap. 19:03 under which only the President may appoint a commission of enquiry. If Ms. Teixeira truly believes what she said, then she must be confusing commissions of enquiry with the constitutional commissions such as the Judicial Service Commission and the Rights of the Child Commission.

As a former Minister of Home Affairs and now one of the country’s hugely expensive political contract employees paid to advise on governance, Ms. Teixeira is expected to know the contents of the Constitution. It forms the basis of the country’s governance system. Her statement suggests that despite her long association with the PPP/C which in opposition criticised the Guyana Constitution as creating a dictatorship, Ms. Teixeira never understood the Constitution, and as Minister and now advisor on governance, still does not.

If Ms. Teixeira has any interest in good governance, she would be advocating the removal of those dictatorial elements in the Constitution, and supporting those calling for the abolition of the dictator-creating executive presidency. More practically, she should be ensuring that all the constitutional commissions – including the Public Procurement Commission – are appointed, provided with adequate resources and functional, and the post of Ombudsman filled.

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Wall Street Journal not Economist

Sunday, May 16th, 2010

In early January this year, Stabroek News reported on a Wall Street Journal/Heritage Foundation 2009 Index of Economic Freedom. That sparked the usual outrage from the government led by President Jagdeo, and supported by the usual letter writers including Ms Marissa Lowden, whose contributions have dried up since her departure from Dr Prem Misir’s office. For some reason, the Kaieteur News only recently carried a report on the same index.

The government reacted as it knows best – instinct over common sense and power over brain, again led by the champion driver, this time supported by the three doctors Ashni Singh, Prem Misir and Randy Persaud, and Marissa’s ghost. The fact that none of them recognised that the later report had no originality was bad enough. If they had, they would have had the upper hand and precious state resources could have been better used elsewhere. But lead letter writer Dr Randy Persaud in the Stabroek News of May 8 (‘Organizations like the Heritage Foundation and the Economist are attempting to usurp the authority of the multilateral institutions’) combined a pedantic and political approach, concluding with a professorial pronouncement on the report’s perceived authors as well as its imagined “basic mistakes” which he claimed even a sixth grader would have recognised, even though he himself seemed unable to identify any. This cleverness backfired with several serious errors in his letter.

Here are some of those errors with elaborations inserted for Dr Persaud’s enlightenment.

1. The report was an international index, not a country report as suggested by Dr Persaud.

2. For this particular index, Heritage partners with the Wall Street Journal of the USA, not the Economist of the UK.

3. The index is available free online, with methodology and all. Therefore, it is inaccurate to state that there is no transparency in the index’s publication and that the index is a commercial venture.

4. The Economist might be an institution but it is not an organisation, nor does it publish a country report. The Economist is a weekly news magazine. Also, the Economist Intelligence Unit, a leading research and advisory firm, in addition to consulting, publishes quarterly Country Reports for subscribers.

5. The IMF and the World Bank, among other multilaterals, are endowed with authority to provide reliable economic data and analyses. In fact these institutions rely almost entirely on the “official” statistics published by governments, including Guyana’s. Perhaps Dr Persaud could be encouraged to tell Guyanese who endowed them with proprietary authority that others can usurp. Or why his President rejected the World Bank’s “authoritative” index and analysis in their 2009 ‘Doing Business’ series, which was less than complimentary about Guyana’s business climate.

6. The rankings, Dr Persaud claims, are not based on actual performances, but biased towards narrow ideological criteria. Again, if Dr Persaud would break ranks and tell the nation about the government’s actual performance on corruption, it then could be able to test how ideological or biased is the index’s Guyana’s percentage rating of 26.5 in ‘Freedom from Corruption.’ The cynic might argue that that score reflects a pro-government bias!

7. The organisations he identified (Heritage and Economist) have their roots in the Cold War era. The reality is that the Economist first appeared one hundred and three years before the Cold War began in 1946 and that it is the IMF and the World Bank which are rooted in the Cold War, formed in the US by the West, as their tools of economic colonization and control. (See Cheddi Jagan’s West on Trial.)

I once wrote in a response to another letter that I had never seen so many errors in a single letter. I now need to review that assessment. Other than the above, I share with Dr Persaud an ideological dislike for the conservative, pro-capitalist Heritage Foundation.

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Questions have made many in government uncomfortable

Wednesday, May 5th, 2010

This letter was submitted to the Guyana Chronicle as a response to an extensive article captioned, ‘Finance Ministry slams Christopher Ram’s latest journey of speculation and misleading statements.’ Seven days after it was sent in, it still has not appeared.

The only reason I can think of for the three-page April 20 response by the Ministry of Finance (which appeared in GC on April 21) to my letter appearing in the Sunday Stabroek and the Kaieteur News of April 18 is that my exposure of the corrosive effect of first and second generation corruption, conflicting actions within Low Carbon Development Strategy (LCDS) policies, the questionable award of the Amaila Falls Road Project contract to Synergy, a mini-company owned by a political friend, Mr Fip Moitlall, the dubious role of the politically-directed National Industrial and Commercial Investments Limited (NICIL) and the repeated, costly and embarrassing mistakes by Finance Minister Dr Ashni Singh, has made many personally uncomfortable, to the extent that a rancorous public rebuttal became necessary. I refuse to reciprocate by descending to that level. Instead, out of respect for the Guyanese public’s right to the truth, I will rebut, point by point the April 20 diatribe by the Ministry of Finance.

The ministry challenges me on the LCDS implications of the NICIL-awarded road contract given to a friend of the political family, so reminiscent of another such case involving the Ramroops, friends of the President. In that case, tens, and possibly hundreds of millions of dollars of tax concessions, rent reduction and other benefits were engineered for the Ramroops by NICIL whose board is chaired by Dr Singh.

In a famous misunderstanding of the law, the concessions were subsequently approved by Cabinet and granted under the hands of the same Dr Singh.

When Mr Yesu Persaud asked for such concessions to be made widely available, President Jagdeo publicly abused him, directing NICIL’s CEO Winston Brassington to lecture Mr Persaud about the tax laws. Two days after Jagdeo’s abuse, in Business Page I examined for readers the relevant concessions legislation and pointed out that it was the President, Drs Luncheon and Ashni Singh, Messrs Winston Brassington, Geoff DaSilva and the entire Cabinet and Board of NICIL that needed some tax education. No one should harbour more embarrassment from that exposure than Dr Singh who, wearing three different hats, should have been aware of the provisions of the legislation and of the extent of his powers to grant such concessions. Synergy seems to be a case of history repeating itself.

Neither of the two drafts of the LCDS contains any calculation of the carbon emissions from the construction or operation of any of the development schemes outlined in the second draft.

Under the Guyana-Norway Agreement, there are two penalties which could apply – one for increasing deforestation, and the other for the timber cleared for the access road to the dam site. How I arrived at the USD 14.2 million for a road-associated potential penalty is technical and takes up valuable editorial space.

I have posted the details on my website chrisram.net (see box below), but I doubt that the Ministry of Finance is concerned about facts and figures.

Note on Penalty calculation
In the two drafts of the LCDS there is no calculation of the carbon emissions from the construction or operation of any of the development schemes outlined on pages 25-36 of the second draft, December 2009. It is not possible to derive the Ministry’s statement today from the single paragraph on Amaila Falls on page 25 of the LCDS document.

Under the Agreement, there are two penalties which Norway could levy. One penalty is for increasing deforestation, and one penalty is for the timber taken off the upgraded 85 km and new 110 km of all-weather access road to the dam site. The 110 km of new road would generate 0.19 MtC (million tonnes of forest carbon). The MoU values the forest carbon at USD 18.35/tC, and the penalty rate is four times the value, so the road-associated penalty is USD 14.2 million. This penalty is due if the deforestation from the roadworks pushes our total for 2009-2010 above the generous Norwegian allowance of 0.45 per cent of total forest area. As the draft LCDS does not discuss the deforestations associated with the development projects listed on pages 25-36, and the President’s Office of Climate Change has issued no calculations, we should be prudent in pointing out this hazard.

Whether or not the road does cause that excess deforestation, the second penalty may apply. Under the MoU, the total timber extraction should not exceed the mean national total for years 2003-2008 (total extracted volume, in table 2 on Enabling Indicators of the Norway-Guyana MoU and Joint Concept Note). That mean total is 481,226 m3 and includes raw logs, roundwood (poles and posts), and chainsaw lumber converted to its roundwood equivalent with the conversion factor of 0.4 used by the Guyana Forestry Commission. If the logs from the roadworks do not lead to log production rising beyond that agreed limit, then is log production elsewhere in Guyana being limited to make space under the limit for the Amaila Falls road logs? No agency in the government, nor the Forest Products Association, has indicated an intention of localised restrictions on log production. Page 39 of the LCDS indicates presidential assurance that large-scale loggers can continue their business-as-usual.

If they were, they would also take note of Janette Bulkan’s letter published by Kaieteur News on March 29, in which she pointed out that the Environment Impact Assessment (EIA) of 2002 on the Amaila Falls project available on the website of the Environment Protection Agency was for a much smaller project.

The document acknowledges that an expansion of capacity would require a fresh EIA, but that would get in someone’s way.

Further, the ministry’s attempt to confuse my stated concern about the Synergy road contract with hydro is artful, and even dishonest. The two are clearly separate but have come to represent the modus vivendi of this ministry in particular, and the government in general.

As a private company, NICIL is not subject to the stringent rules of the Procurement Act and the Fiscal Management and Accountability Act (FMAA). It is subject to lower standards of accountability under a political board that includes Drs Luncheon and Singh and Messrs Robert Persaud, Geoff DaSilva and Winston Brassington. To divert attention from “NICIL/ Government,” the Ministry of Finance in its April 20 statement conveniently introduces the Ministry of Works, which was not once mentioned in the Amaila Project Request for Proposal issued by NICIL.

That unholy combination is not unlike the Privatisation Unit/NICIL hybrid, which allows it, chameleon-like, to be and act like a government department when it is convenient, as in this case, and like a private company when it does not want the constitution, the FMAA and the rules of accountability to apply.

Let me correct some of the other issues which the Ministry of Finance chose to distort.

Queens Atlantic
I had objected to the illegal concessions granted to that company. To the extent that a person fails to honour his/her investment commitment, the concessions should be revoked. The only investment of substance by QA has been the newspaper which was not even included in its investment proposal seeking the hundreds of millions of concessions. But if the Lord gives, who else dares take back?

The Berbice River Bridge
My objections were all of a financial nature. They were:

(1) Winston Brassington’s attempts to have me withhold a Business Page article for one week. It turned out that he needed that week to get the Roger Luncheon-led NIS to invest in the bridge.

(2) The massive tax concessions given to everyone involved, even tangentially, in the bridge.

(3) The fact that despite these concessions, a Berbician car owner pays twenty times as much to use the Jagdeo Bridge as his Demerarian counterpart pays to use the Burnham Bridge. I did not realise at the time that unlike the Burnham Bridge, cyclists and pedestrians in Berbice could not cross their bridge.

RUSAL
In negotiations led by the President and Mr Brassington, we have given away our bauxite to a company owned by a Russian oligarch Oleg Deripaska, a man with a reputation for strong tactics and for lavishly entertaining foreign officials, and who like some of our own top people, has had his own visa problems. (See London Guardian, October 31, 2008.) RUSAL is now actively engaged in union-busting in Guyana and yet earns the tacit admiration and undisguised support of this administration.

Arising out of its secret negotiations with President Jagdeo and Mr Brassington, RUSAL has been granted exemptions from just about everything, including the bauxite levy.

But to divert attention, the Ministry of Finance chooses to speak of jobs. As if Mr Deripaska came to Guyana to provide employment, rather than obtain free bauxite for his Russian plants, acquired under circumstances that can still excite!

Finally, let me remind the Finance Minister that I have challenged his knowledge of the sinister history of the VAT rate, conflicts of interest involving his ministry and the Audit Office, and his veracity in the National Assembly over a $4 billion payment to GuySuCo. No space was found in his ministry’s three page production to enlighten citizens on where he stands on any of the issues raised, or, on where any of the issues raised stand.

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The economics of the Amaila project do not add up

Sunday, April 18th, 2010

Last Thursday, Dr Roger Luncheon, Head of the Presidential Secretariat was asked for further details about the award of the multi-billion contract to Synergy Holdings for the construction of a road to the Amaila Falls. Dr Luncheon who placed the contract “within the provisions of the Procurement Act,” said that the persons who were raising doubts about Synergy and its ability to implement the project, were by extension raising doubts about the procurement process, and accused them of being part of a sinister agenda. It was also said that the award was based on the fact that Synergy had submitted the lowest tender.

The facts show that it is Dr Luncheon who is being sinister – and less than forthcoming – in attempting to mislead the public, which is asked to pay more than G$3 billion to build a road by a company that has zero experience in such a project. Dr Luncheon must know that National Industrial and Commercial Investments Limited (NICIL) is a state-owned private company that does not fall under the Procurement Act; that Synergy did not meet any of the pre-qualification criteria for the contract and its tender should therefore have failed at the first hurdle; and that the project’s Request for Proposal states unambiguously that there was no obligation to accept the lowest proposal. Yet, Synergy is now foisted on the nation as the only road to shining light, compliments of NICIL, chaired by Finance Minister Dr Ashni Singh, with a supporting cast of other ministers and political appointees of the President.

As a private company, NICIL is a vehicle of convenience to award the road-building contract as a precursor to giving a preferred company an even more lucrative contract – the construction of a hydropower plant valued at hundreds of millions of US dollars. Dr Luncheon’s government pretends to be blissfully unaware that the economics of the Amaila project do not add up, and may end up like the decision to spend more than US$200 million on the Skeldon Sugar Modernisation Plant, financed by loans on which GuySuCo has defaulted, requiring a government bailout.

Moreover, Dr Luncheon did not tell the nation about the source of this initial US$15 million. The 2010 Budget anticipated a G$6 billion from the Norwegians under the MOU. That money has not arrived, and indeed many key conditions of the MOU for its receipt are yet to be met by Guyana. Ironically, the four million square metres of tree-clearing operation required under the Synergy contract is likely to cost some US$14 million of penalty under the very MOU, reducing by approximately 48% the G$6 billion budgeted to be received from Norway this year.

The budget already has a $28.6 billion deficit which will increase as more money is put into GuySuCo to keep it afloat, and political spending accelerates in preparation for the 2011 elections. Of course, it is the hapless Guyanese taxpayer who is saddled ultimately with the related implications of, and responsibilities for, deficits brought about by government’s caprice.

Taking a different tack, there is also the possibility that this project is being financed from the NICIL fund created out of moneys diverted from privatisation proceeds and huge sums from various public entities. By these unlawful and unconstitutional means Parliament and the Consolidated Fund are bypassed in favour of NICIL, a company which for several years has not been filing its annual tax returns, or having its accounts prepared and audited in accordance with the law.

All in all, the choice of NICIL to do this piece of midwifery is not surprising. It has been at the centre of many highly questionable transactions involving this government, including: 1) the RUSAL bauxite give-away; 2) spending for the phantom hotel; 3) the NIS investment in the Berbice Bridge Company; and 4) facilitating, most egregiously, the Ramroop’s Queens Atlantic Investment Inc deal which included unlawful tax concessions.

This Synergy deal continues a pattern, and the parliamentary opposition and the people of Guyana should demand an enquiry into this outrage, potentially the largest single financial transaction ever undertaken in Guyana. This must be stopped.

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