Month: November 2010

Posted on

The new constitution of Kenya: An analysis

Introduction
The disputed Kenyan Presidential elections of 2007 sparked horrendous clashes among supporters of the incumbent President Mwai Kibaki and his losing challenger Raila Odinga. With the blood and death of over one thousand persons on their hands, the imminence of a civil war and the prospect of an apocalyptic future, the country’s political leaders, with support from the continent spearheaded by former UN Secretary General Kofi Anan, decided that a new constitutional model was the only way to save the society and address the unequal distribution of opportunity and resources in their society.

Two years later, Kenyans now have just such a Constitution. One does not need to be a cynic to recognise that the Constitution of a country is only as good as its impact on the lives of its citizens. If this new Constitution works, the future for Kenya is assured and the dancing in the streets that followed the overwhelming popular vote for its existence would be vindicated.

Criticisms and comparisons
There are two criticisms of the Kenya Constitution that I think have considerable validity. The first is that it may overreach, that it may be too advanced for the objective circumstances of a country only now trying to rid itself of a colonial structure, riddled with ethnic, religious and tribal differences, still bearing the scars of a civil war that almost tore it asunder four decades ago. In one sense the constitution may be too perfect for fallible humans. This criticism has merit. I was even told that the chief fault is that it may be too good. That is a fault that many might like to possess.

The second and some may even say more serious criticism is the substantial powers of the presidency that are not unlike those in Guyana’s 1980 Constitution. Like in Guyana, the President is both the Head of State and Government. He chairs Cabinet meetings and directs and co-ordinates the functions of ministries and government, exercising executive authority of the country with the assistance of the Deputy President and Cabinet Secretaries. He is also the Commander-in-Chief of the Kenya Defence Forces and confers national honours.

Unlike the case of the 1980 Guyana Constitution however, Kenya’s has a number of countervailing measures that are designed to prevent the kind of abuse that is all too common in Guyana. Devolution of power and their separation at the national and regional levels, including national and county governments, a bi-cameral legislature, and clear rules on revenue sharing, are expressly spelt out in the Kenya Consti-tution.

Ministerial overload
While the Kenyan President chooses his Cabinet Secretaries – our equivalent to Ministers – that Constitution sets a minimum (14) and maximum (22) number of ministers. In Guyana, with 0.5% of Nigeria’s population, we have more ministers than that.

Their Constitution also provides for simple rules for the removal of anyone of those persons in the event of misconduct. It is unlikely therefore that our gun-toting minister, or the one implicated in buying and supplying spy equipment to a drug dealer, or some of those engaged in what seem clear cases of misfeasance in public office, could have remained ministers under the Kenya Constitution.

Just last month, Kenya has witnessed the sacking of its higher education minister from the Cabinet following a Constitutional Court ruling on a six-year-old corruption case accusing the minister of illegally selling land to a state corporation. By contrast, in Guyana, the more likely scenario is for state lands to be sold illegally to members of the Cabinet and those in the political elite.

The Kenya legislature cannot pass legislation like the president’s benefits bill which excludes Jagdeo and all other presidents in Guyana from the payment of taxes. Nor could there be a situation where Acts of Parliament are held up by the President, to be assented to as and when he feels like.

Insights and ideas
So as we in Guyana seek institutional solutions to our endemic problems, Kenya’s 2010 Constitution offers some interesting and innovative insights and ideas. It is a model for the devolution of power, for respect for citizens, for preservation of the rule of law and for the development of each region in the country.

It is an audacious document, repealing and replacing the entire former Constitution and containing two hundred and sixty-four Articles and six Schedules. Article 10 sets out the national values and the principles for governance that include national unity, sharing and devolution of power, the rule of law, democracy and participation of the people; human dignity, equity, social justice, inclusiveness, equality, human rights, nondiscrimination, protection of the marginalized, good governance, integrity, transparency, accountability and sustainable development.

Article 11 on culture requires Parliament to enact legislation that ensures receipt by communities of compensation or royalties for the promotion and use of cultures and cultural heritage and recognises and protects ownership of indigenous seeds and plants, their genetic and diverse characteristics and their use by the communities of Kenya.

Bill of Rights
Chapter 4 contains forty-one Articles and includes a Bill of Rights that guarantees enjoyment of the rights and fundamental freedoms for every person, binds all state organs, provides for implementation of rights and fundamental freedoms, and for the enforcement of those rights and freedoms. In respect of these rights and freedoms, the locus standi rule does not apply and any person can bring an action on his own behalf, or on that of another person, as a member of, or in the interest of, a group, or, in the public interest.

The Constitution guarantees twenty-six specific rights and makes it a fundamental responsibility of the State and every organ of the State, to observe, respect, protect, promote and fulfill the rights and fundamental freedoms set out in the Bill of Rights.

In addition to the usual rights to life, liberty and association, the Constitution guarantees such rights as privacy, consumer rights and access to information held by the State; the freedom and independence of the press; the right to a clean and healthy environment; economic and social rights including to social security provided by the State; the use and enjoyment of one’s own language and culture; the right to marry a person of the opposite sex based on the free consent of the parties; equal rights at the time of, during and on dissolution of the marriage; and administrative action that is expeditious, efficient, lawful, reasonable and procedurally fair. If a right or fundamental freedom of any person has been, or is likely to be, adversely affected by administrative action, that person has the right to be provided with written reasons for the action.

Special people
The Constitution also has special rights for children who for example may only be detained as a last resort; for persons with disabilities being provided with access to all places, public transport and information (Braille is specifically mentioned); and for youth. The State is also obliged to provide for minorities and marginalized groups to be represented in governance and to provide access to employment and special opportunities in educational and economic fields.

The Constitution requires the government to provide measures for older persons to fully participate in the affairs of society; to pursue their personal development; to live in dignity and respect, free from abuse and to receive reasonable care and assistance from their family and the State. With respect to the environment, the State is required to maintain a tree cover of at least ten per-cent of the country’s land area and the right to a clean and healthy environment is protected under Article 42 and is justiciable under Article 70 without having to demonstrate actual loss or injury.

Article 48 provides that an arrested person must be brought before a court no later than twenty-four hours after being arrested; imposes on the State guaranteed access to justice for all persons and, where a fee applies, for it to be reasonable so as not to impede access to justice. No right or fundamental freedom in the Bill of Rights shall be limited in any way, except by law. Any provision in legislation limiting a right or fundamental freedom must specifically express the intention to, and the nature and extent of the limitation, and must be clear and specific about the right or freedom to be limited and the nature and extent of that limitation. In no case, can any law limit a right or fundamental freedom so far as to derogate from its core or essential content.

Non-citizens may hold land only on the basis of leasehold tenure, and any such lease, however granted, shall not exceed ninety-nine years. On pain of disciplinary action, an officer of the State is duty-bound, in public and official life, to avoid any conflict between personal interests and public or official duties that compromise that official’s public or official interest in favour of a personal interest; or demeans the office held by that officer.

Elections
Responsibility for elections vests in an Independent Electoral and Boundaries Commission which is responsible for ensuring continuous registration across the country. Any person who is not a member of a registered political party is eligible to stand as an independent candidate for elections which are held on the second Tuesday in August every five years.

Political parties must be registered, must have a democratically elected governing body, must subscribe to, and observe, the Code of Conduct for political parties, must have their accounts audited and are subject to restrictions on the use of public resources that promote their political interests.

General election of members of Parliament is to be held on the second Tuesday in August in every fifth year. The electorate of a constituency may recall their Member of Parliament before the end of the term of the relevant House of Parliament.

The legislature
Kenya has a bi-cameral legislature with the Senate representing the counties and their governments and determining the allocation of national revenue among them. There is a guaranteed minimum number of women members of the National Assembly (47) all of whom are elected, and the Senate (16), who are nominated by the political parties. There is also guaranteed representation of two youths and two persons with disabilities in the Senate.

All sittings of Parliament and those of its Committees must be in public, the members of which are guaranteed participation and involvement in the legislative and other business of Parliament and its Committees. Persons have a right to petition Parliament to consider any matter within its authority, including enacting, amending or repealing any legislation. The procedures for accessing and giving effect to this right are to be enshrined in legislation which must be passed within two years following introduction of the new Constitution.

The President has fourteen days to assent to a Bill or refer it back to Parliament for reconsideration. If the President does not assent to a Bill, or otherwise deal with it in accordance with the Constitution, the Bill is taken to have been assented to.

The Executive
The Executive is made up of the President, the Deputy President and the Cabinet, the composition of which the Constitution requires to reflect the regional and ethnic diversity of the people of Kenya.

A person who owes allegiance to a foreign state may not be elected President of Kenya. The powers and functions of the President are not dissimilar to those of the Guyana President, but in Kenya the holder of this office has other obligations that include addressing Parliament at least once every year; reporting annually to the nation; and publishing in the Gazette, all measures taken and all progress achieved in the realisation of the national values; and submitting a report for debate to the National Assembly on the progress made in fulfilling the Republic’s international obligations. During the term of office, which is limited to two terms, the President enjoys immunity from criminal and civil proceedings.

Ministers are designated as Cabinet Secretaries of which there can be no less than fourteen (14) or more than twenty-two (22). Any member of the National Assembly supported by a quarter of all members can propose a motion requiring the President to dismiss a Cabinet Secretary. If the motion is supported by one third of the members of the Assembly, the Assembly must appoint a Select Committee to investigate the matter and report back to the Assembly in ten days. If a majority votes for removal, the President is required to dismiss that person.

Cabinet Secretaries are required to attend before a Committee of the National Assembly when required to do so by the Committee and to answer any questions pertaining to any matter for which they have ministerial responsibility.

Judiciary
A judge shall retire from office on attaining the age of seventy years, but may elect to retire at any time after attaining the age of sixty-five years. The Chief Justice holds office for a maximum of ten years or until retirement, whichever is the earlier. A Judiciary Fund, administered by the Chief Registrar of the Judiciary and funded out of the Consolidated Fund, is to be used for administrative expenses of the Judiciary and such other purposes as may be necessary for the discharge of the Judiciary’s functions.

For adherents of Islam, there is a Kadhis’ court with jurisdiction to determine questions of Muslim law relating to personal status, marriage, divorce or inheritance. The Constitution also provides for the devolution of power including county governments, and the equitable sharing of national and local resources throughout Kenya. The stated objective of devolution is the decentralisation of State organs, their functions and service and enhancing checks and balances and the separation of powers. Every county is headed by an elected governor and has a county assembly and a county executive committee.

Devolution of Power
The Fourth Schedule sets out the respective functions of the national government and the county governments. Some of these functions are strictly separated, such as foreign affairs, international trade, immigration and citizenship, tertiary education, monetary policy, and the courts which are functions reserved for the national government. Functions reserved for the counties include county health services, county transport, and county planning and development while some overlap and may be exercised at both national and county levels. These include culture, sport and the control of pollution.

Revenue raised nationally is to be shared equitably among the national and county governments.

County governments may be given additional allocations from the national government’s share of the revenue, either conditionally or unconditionally. Criteria for equitable sharing are set out in Article 203 but the amount allocated to county governments must not be less than 15% of the national revenues of the preceding year.

Article 204 provides for an Equalisation Fund into which is paid one half of one per-cent of all revenue collected by the national government each year. The Equalisation Fund is to be used by the national government only for the purpose of providing basic services such as health, water, roads and electricity to marginalised areas. Parliament may only pass Bills that appropriate funds from the Equalisation Fund on the recommendations of the Commission on Revenue Allocation that must obtain approval by the Controller of Budget for all withdrawals from the Fund.

At the national level there is a Consolidated Fund and for all counties there is a Revenue Fund.

Into these funds are placed all revenues and from which payments must be approved by the respective legislative assembly. Only the national government may impose income taxes; value added taxes; excise taxes as well as customs and other duties on the import and export of goods.

A county may impose property rates; entertainment taxes; and any other taxes authorised or imposed by an Act of Parliament. Both the national and county governments may impose charges for services.

Finance and taxation
A waiver of any tax or licensing fee may only be granted if authorised by law. A public record of each waiver must be maintained along with the reason for the waiver. Each waiver must be reported to the Auditor-General. Article 210 specifically states that there can be no law excluding the President and judges as officers of the State as excluded from the payment of income tax. In Guyana, the official emoluments of the President, the Chancellor of the Judiciary, the Chief Justice and the Auditor General are exempt from income tax.

There are detailed provisions regulating the preparation and timing of national and county budgets and contingencies and audits. The report of the Auditor General has to be submitted to the Parliament or the County Assembly within six months of the end of every year and must be considered and debated within three months. The Constitution provides for a Salaries and Remuneration Commission to set and regularly review the remuneration and benefits of all officers of the State and advise the national and county governments on the remuneration and benefits of all other public officers.

Constitutional Commissions
A member of a Commission, or the holder of an independent office, other than an ex officio member, is appointed for a single term of six years and is not eligible for re-appointment, and unless ex officio or part-time, such any officer may not hold any other office or employment for profit, whether public or private.

Some of the Commissions provided for in the Constitution are:
● Commission on the Implementation of the Constitution set up to monitor, facilitate and oversee the development of legislation and administrative procedures required to implement the Constitution. That body is required to co-ordinate with the Attorney – General and the Kenya Law Reform Commission in preparing, for tabling in Parliament, the legislation required to implement this Constitution; and to report regularly to the Constitutional Implementation Oversight Committee on the progress and impediments in the implementation of this Constitution;

● A Human Rights and Equality Commission whose functions include investigation into the conduct in state affairs, or any act or omission in public administration in any sphere of government, that is alleged or suspected to be prejudicial or improper or to result in any impropriety or prejudice as well as to receive complaints about the abuse of power, unfair treatment, manifest injustice or unlawful, oppressive, unfair or unresponsive official conduct;

● A Land Commission to manage public land on behalf of the national and county Governments and to recommend a national land policy to the national government;

● An independent Ethics and Anti-corruption Commission to deal with the conduct and financial probity of officers of the State whose activities are in any case restricted by dictates of the Constitution; and,

● A Commission on Revenue Allocation to make recommendations concerning the basis for the equitable sharing of revenue raised by the national government between the national and county governments; and among the county governments.

The Constitution provides for members of the public to be represented on several of the commissions while the following commissions and independent offices have the power to summon persons including public officials in any of their investigations:

(a) the National Human Rights and Equality Commission;
(b) the Judicial Service Commission;
(c) the National Land Commission; and
(d) the Auditor-General

Unlike Guyana there is no Office of the Ombudsman or Public Procurement Commission. However, in respect of procurement the Article 227 of the Constitution of Kenya requires the enactment of an Act of Parliament that prescribes the framework within which policies relating to procurement and asset disposal shall be implemented.

Giving effect to the Constitution
Apart from resolutions of Parliament or referenda, as appropriate, the Constitution provides for citizens to propose amendments to the Constitution by a popular initiative signed by at least one million registered voters. But it is Article 258 that I find very attractive, giving every person who claims that the Constitution has been contravened or is threatened with contravention, the right to institute court proceedings. In other words, the locus standi rule which requires a person bringing an action to show a direct interest in the matter, does not apply and any citizen can institute such a suit to enforce the Constitution whether or not it affects that citizen.

The Fifth Schedule sets out the time within which the various provisions of the Constitution are to be implemented. The Schedule requires that the necessary legislative measures must be enacted within one year to four years. In the case of any provision not specifically identified in the Schedule, the legislative time limit for these to be addressed is five years.

If Parliament fails to enact any legislation as required by the Constitution within the specified time, any person may petition the High Court for a declaratory order. The order is transmitted to Parliament and the Attorney-General directing them to take steps to ensure that the required legislation is enacted within the period specified in the order.

While the commission which reviewed the 1980 Constitution after the contentious 1997 elections may have had several of the ideas now enshrined in the Kenya Constitution, the opposition parliamentary parties that constituted the Commission and the members of civil society and the public which made submissions, obviously failed to anticipate the extent to which the PPP/C would have frustrated progressive changes to the 1980 Constitution or even to implement the recommendations coming out of that exercise.

Conclusion
President Barack Obama whose father hails from Kenya welcomed that country’s new constitution as an important step that sets “a positive example for all of Africa and the world.” It is an example from which we in Guyana can certainly benefit.

But as the ruling PPP/C and President Jagdeo have strengthened their hold on the country, its institutions and its purses, they have shown no interest in any constitutional reform. As a result, they have also failed to implement several important provisions in the existing constitution such as the appointment of an Ombudsman and the Public Procurement Commission, allocation of revenues to the regions, the proper use of the Consolidated Fund and the integrity of the financial system.

As a result, instead of enjoying a modem, progressive constitution, Guyana, in many key areas, is actually worse off. That we seem to have neither an appetite nor a willingness to address our constitutional backwardness may explain several of the fundamental defects that stifle the country’s development.

Posted on

Advice by the Clico liquidator for continued payment of premiums is legally questionable

In Business Page of October 3rd, 2010 I expressed the hope that those who were entrusted with powers and duties for the liquidation of Clico would ensure full compliance with the laws. For the several hundreds of persons who have so far received their cheques, the law and its processes are not important. But spare a thought for all the others who are in limbo, uncertain of their fate and funds and getting information from Mr. Lawrence Williams, the Court-appointed liquidator, that conflicts with commitments given by President Jagdeo. Let us remember that those in limbo include the NIS which is owed about six billion dollars by Clico and for which one way or the other we the taxpayers will have to bear the cost.

So far the liquidation has gone according to the script written by the President, a script that sets out a process and scheme of preference not consistent with the law. During the time, I have received many complaints and copies of correspondence and policies from persons who were told that because their policies did not have any cash surrender value they have nothing to get. There is merit in that. But what I find most uninformed, irrational and unlawful is what appears to be a circular-type letter sent by Mr. Williams to one policy holder earlier this month.

In the letter Mr. Williams identified eight types of policies sold by the company and encouraged the holders of those policies “to continue payment of premiums to avoid losing contracted benefits.” Whatever might be his intentions – and I know him well enough to know that these are well-meaning – what he is trying to do is legally questionable, unnecessary and unlikely to benefit policyholders.

The principal duty of the liquidator is to call in the assets and ascertain and pay off the liabilities of the entity. He can only carry on any business with the approval of the court.

Of the eight types of policies at least two are not susceptible to cash surrender value so his advice to pay premiums on those is ill-conceived. It would be silly for the holder of one of these policies to put further money into Clico. Find another insurance company and get another policy.

And for those policies that are so susceptible, there is no reason why any negotiations for the sale of a portfolio of policies to another insurance company – the rationale for his “encouragement” – cannot include policies that have already earned cash surrender value and those that have not. Why is he encouraging people to gamble on whether or not the belated efforts will succeed? Insurance is about covering risks, not taking a gamble.

But once again the Office of the Commissioner of Insurance that should be looking after the interest of the policy-holders and advising on technical issues has allowed itself to become a bystander.

The acting Commissioner Ms. Tracy Gibson now has taken up office at Clico, apparently appointed by Mr. Williams, along with Mr. Maurice Solomon, to carry out the liquidation on his behalf. Might I add that under section 375 of the Companies Act, Mr. Williams needed the permission of the court to make those appointments.

Unlawful action and poor supervision have played no small part in the substantial losses the country, its taxpayers and policyholders have suffered from the Clico fallout. Even if the Office of the Commissioner of Insurance makes the doubtful assumption that its obligations with respect to Clico ended with the appointment of a liquidator, the office holder should not abandon policy holders and become associated with actions that can bring the Office into question.

Posted on

A tribute to Winston Murray – in his own words

Introduction
Business Page joins in paying tribute to Winston Murray, economist, attorney-at-law and politician who offered this country a unique blend of experience, expertise, capacity for research, hard work and patience, all reinforced by unusual humility, integrity and respect for others. He was proud of his roots in the Essequibo island of Leguan, the place and community where he was born, but which our political system did not allow him meaningfully to represent; committed too to the PNCR which he served with distinction for several decades, but which rejected him when it most needed him; a firm believer in the virtues of a healthy, informed and honest debate, outside and inside a parliament in which he excelled over and above all others of his time, a parliament that is poorer for his passing; a patriot in the most noble sense of the word, putting country above self and personal considerations.

No word is sufficiently adequate or praise generous enough to describe Mr Murray the man, the servant of the public and this son of Guyana. The word ‘void’ at the national level cannot convey the space created by him during forty years of dedication, or the experience and expertise gained in vocations and professions ranging from the primary school teacher, the diplomat, public and political servant, economist and attorney-at-law. Inadequate too is the word ‘loss’ at the level of the party to which he committed his entire career, serving it steadfastly even as its appeal became tarnished by mis-steps and non-steps and its leadership pool haemorrhaged from dissatisfaction within the ranks.

Today’s tribute to Murray is one mainly in his own words, drawn from Hansard, the official record of the debates in the National Assembly. I go back only to 2007, the year in which Dr Ashni Singh, a technocratic Finance Minister presented his first national budget. I chose that year because Murray saw in Dr Singh the prospects and possibilities of a new culture and a combination of competence and integrity in the financial management of the country’s affairs.

Even when he soon came to question his initial opinion of and optimism about Dr Singh, his disappointment was expressed in the best tradition of parliamentary courtesies. So on February 9, 2007, on Dr Singh’s first budget presentation, this is what Murray had to say of him:

“I wish to congratulate the Honourable Minister of Finance, Dr Ashni Singh, on the occasion of his inaugural presentation of the National Budget. This Minister has shown a refreshing approach to openness, and in fact, prior to my coming here today, drew my attention to certain small discrepancies, which are really printer’s errors, and I thought that, even though small, the fact that he should call to mention them was not an insignificant occurrence, and I hope that that same spirit will be a hallmark of his tenure as Minister of Finance.”

On his reservations about sugar’s contribution to the economy and GuySuCo’s turnaround plan
“Sugar was supposed to be the flagship within the traditional sectors, but the present position shows that for the last years, the industry has been making significant losses and is projected to continue to do so until at least 2012, when it is projected to return to marginal profitability. This is the position notwithstanding the fact that Government has taken over significant debts from GuySuCo and notwithstanding the bragging of about $2 billion worth of cost reduction in 2009. This industry is being significantly subsidised by the Guyanese taxpayer. A massive investment to over US$160 million is expected to ramp up sugar production ultimately to 450,000 tonnes per annum. The issue is that at what cost of production and, therefore, how competitively?

“The state of the Skeldon factory and the availability of the 1.2 million tonnes of cane necessary to feed it are also causes for concern. We are assured in the turnaround plan that the canes will be available. The question is: How soon? Until then, the Skeldon factory will continue to operate below capacity, thereby negatively affecting the cost of production and possibly the technical functioning and efficiency of the factory.”

On budget size and oppressive taxes
“I could not leave the 2010 framework without reference to and comments on the statement that Guyana’s largest budget ever, requires the introduction of no new taxes. Given what I have said earlier about tax yield and tax burden, the issue is not ‘no new taxes,’ but rather doing something to lift the oppressive burden of taxation on the citizenry. That is what we have to do. And with that connection we call for the return of the VAT windfall to the people through a reduction. And we call for a reintroduction of a graduated progressive rate of income tax.”

On accountability, Clico, the Lotto Funds and integrity
“With respect to the Economic Services Committee, I have to highlight the unresponsiveness of the Minster of Finance to invitations to him to come to that Committee to update us on matters relating to C.L.I.C.O. There was a resolution passed in this National Assembly for this Committee to follow up on such matters. We have written him at least twice and he has not had the courtesy to even grant us the favour of an acknowledgement.

“Equally grave, if not more so, is the failure of the Minister of Finance himself, a highly trained professional, to observe some principles of financial governance. He continues to allow the Lotto Funds to be placed into a separate bank account instead of being put into the Consolidated Fund. He continued to allow the sale of public assets to be put into a separate bank account instead of finding its way into the Consolidated Fund. And now under the LCDS he is talking about putting money through G.R.I.F. (Guyana REDD Investment Fund), but nowhere in the scheme of things is there contemplation for bringing this money into the Consolidated Fund which is where it belongs to be supervised by this Parliament on behalf of the people of Guyana.”

On strengthening Caricom
“I believe we need a more dynamic and functionally relevant framework for the furtherance of the goals of CARICOM. For example, I believe that the Secretariat should have a strong project development arm that seeks to use available data, and make and support project proposals to strengthen regional capacity. It could also be involved, if only as an observer, in relevant discussions between and among Member States in the formulation or execution of projects. The institution cries out for being streamlined and possibly being restructured. It is no accident, I wish to observe, Sir, that the Heads of important international agencies are generally not permitted to serve more than two terms, normally a period of ten years.”

On limitations of politicians and the usefulness and role of experts
“Politicians see the electoral cycle as the framework of their operations, and so their eyes are set [on the year when elections will come]; and the measures that they will take will not necessarily address the longer term economic problems that the country faces, but are likely to be guided by the imperatives of an election victory… I say therefore to the Hon Minister of Finance and to the Government more generally that they should heed their own advice and agree to the setting up of a group of experts, who can independently analyse where we are, where we are likely to go and propose measures for dealing with what is likely to be a most difficult situation.”

On the airstrips at Leguan and Wakenaam
“It did not escape my attention, for example that in 2008, the sum of’ $108 million was earmarked for airstrips at Leguan and Wakenaam along with rehabilitation of the airstrip at Baramita. Obviously, the projects for the airstrips at Leguan and Wakenaam did not materialise, as they are therefore repeated for 2009… I think it is a sick joke to propose such a project when the citizens of Leguan are more concerned about proper and adequate number of beds at the cottage hospital; when they are more concerned about the availability of drugs and other medicines at the facility; when they are more concerned about the reliability and timeliness of the ferry service and about better drainage and irrigation facilities.”

On further evidence for corruption
After recounting several cases of the illegal purchase of drugs, impropriety in the regions and drawing attention to Guyana’s low ranking on the Transparency International Corruption Perception Index, he offered to the Speaker of the Assembly, “Sir, but perchance they want more evidence, I advise them go to the project site where projects are being implemented; and go to the villages across Guyana and talk to the people, and you will get all the evidence you need, to know that corruption is endemic in this country.”

On VAT and revenue-neutrality
“Throughout the Debate on the VAT Bill in 2005, all the major Government Speakers and the Ministers in particular, emphasized the revenue neutrality of the tax. We were assured that the solemn intention of the Government was to collect the same amount of money as would be foregone by the taxes that would be scrapped. A regime of Excise Taxes was also going to be introduced on so-called sin and luxury goods with the intention of maintaining the pre-VAT prices on those goods. Thus, the tax of these goods VAT plus Excise Taxes would result in pre-VAT levels of revenue being collected and that overall the collection of VAT plus Excise Taxes would be revenue neutral.”

On contract employees
“The Government has included a category in the Estimates known as ‘contract employees’ and we have again on numerous occasions requested that the information on ‘contract employees’ should be fully set out at the back of the Estimates. Do you know for the traditional Public Servants there are appendices O through S, which state the category in which each Public Servant falls, and in another Table gives you the salary scale applicable for those positions? And that is all we are asking for in the interest of transparency that these Contract Officers who many people see as replacing; that is why you do not want to put the authorized staff in the Estimates.

They are replacing the traditional Public Servants more and more but there is no transparency of their method of appointment or of levels of salary they are paid. We call upon you to explain to this National Assembly during this Debate, why it is not possible for you to include this as an appendix to the Estimates the framework in which contract employees are employed in the various agencies and the levels of their remuneration.”

On making belief and missing the truth
“In January 2010, the Hon. Minister of Finance brought a request for supplementary provision for, among other agencies, the Ministry of Housing and Water in the sum of $5.6 billion of which $4 billion was for housing development. I cannot avoid commenting on this because, to me, it represents a brazen act of illegality which should not go without being mentioned and pursued.

“We were making believe here that we were appropriating $5.6 billion to the Ministry of Housing and Water. It is clear that the Hon. Minister of Housing and Water, with prodding from and acquiescence of the Minister of Finance, missed the mark of truth in this Hon. House when in response to my question as to how much of the $4 billion had already been released he said ….”

And later when the question surfaced in the Committee of Supply and with the Housing Minister still reluctant to come clean, Mr Murray lamented, “I note that the Hon. Minister is not budging and is not answering any of these questions, could I ask whether he has become deaf all of a sudden because I want to know. This National Assembly needs to know. Is there a deliberate act on the part of the Minister to withhold information from the general public about his compliance with the Constitution, compliance with the law and about his observation of a proper budgetary process? Is that his intention?”

Sense of humour
On Irfaan Ali, Minister of Housing and Water: “Please I want it to be noted that I am not saying that Minister Ali is rubbish, I am saying that what he said is rubbish.”

“And I want to suggest that in naming this Budget under the title Staying the Course I would not like to stay on this course. That is the first point. I did not recommend it.”

“This year will be another year of trying to find a reasonable job, or of trying to get a visa to leave for ‘Region 11’ or of joining the ranks of the unemployed. This must be a sad state of affairs after seventeen years of P.P.P. /C. rule, but then, I suppose, it could be blamed on the twenty-eight years of the P.N.C.”

And after a scathing critique of the 2009 Estimates and Budget Speech, challenging the other side with the irresistibility of truth, the force of logic, the mastery of detail and the display of oratorical skills, he ended with the following words: “I therefore apologise for any inconvenience that may have been caused in the course of this presentation.”

A true gentleman is a rare being.

Posted on

Dr Singh’s appointment as acting Prime Minister was unconstitutional

Article 101 of the Constitution was this month tested when Dr. Ashni Singh, an unelected Member of the National Assembly, was sworn in to act as Prime Minister. The Article states that “The President shall appoint an elected member of the National Assembly to be Prime Minister of Guyana…”

The press was convinced that Singh could not be appointed but the Office of the President (OP) ruled that “the appointment was well considered and is within the ambit of the constitution of Guyana.” No explanation was offered and one must therefore make assumptions about the logic of the ruling. Is it that OP considers that since Dr. Singh’s appointment was an acting one, the Constitutional limitation does not apply? If that logic is applicable, which I doubt, then it should also apply to corresponding constitutional powers in which case an acting President could not have appointed Singh. The Office of the President cannot have it both ways.

And let us take a very practical example. Let us apply this logic to the Audit Office and specifically the position of the Auditor General. Section 8 of the Audit Act 2004 provides that “The salary, superannuation, benefits and other conditions of service of the Auditor General shall be the same as those of the Chief Justice.”

Since the holder Mr. Deodat Sharma is not qualified to hold the substantive position as Auditor General and is therefore only acting in the position, would either Dr. Luncheon or Mr. Sharma tell us if he is entitled to and avails himself of the benefits of section 8 of the Audit Act including a tax-free salary?

My view is that the acting President does have the power to make the appointment but only of someone qualified under the Constitution, which clearly rules out Dr. Singh. And that only a properly qualified person – which would rule out Sharma – could act as Auditor General and enjoy the benefits of the law.

Posted on

VAT no burden: A different perspective (Conclusion)

Introduction
Business Page of October 31 had referred to statements both by President Jagdeo and Finance Minister Dr Ashni Singh that the Value-Added Tax and the Excise Tax introduced in 2007 would have been revenue neutral. In 2007 alone, the excess of over the prior year – the basis for revenue-neutrality – was $12.6 billion, or 49%, of which VAT by itself had exceeded the taxes it was supposed to replace by a staggering 76%. Over a four year period the combined excess would therefore be approximately $50 billion. The question then is whether or not a reduction of taxes would have hurt or helped the economy and more importantly, whether the government has been honest with the VAT rate of 16%. And here a distinction needs to be made between the economy and important segments of the economy. Two women’s interests organisations, Red Thread and Grassroots Women across Race are under no illusion and from their own experiences are convinced that VAT for many, many (women) is a burden that is beyond bearing.

The government and its economists remind the country that the women miss the bigger picture of the “macro-economic fundamentals” and that the women ignore the benefits which taxation brings to the country as a whole such as the availability of accessible and free education, health care, better roads and other infrastructure. Those who make these arguments for the government often ignore the questionable quality of the public services and might never have gone to the Admissions Unit of any of our public hospitals to see the hours of waiting before receiving attention, nor are they likely to have been aware of the state of the Den Amstel or Cane Grove Primary Schools. They ignore too that however good the roads which the poor and the rich alike enjoy, the Guyana economy – whether in the hinterland or on the coastland – is a cash economy. The stallholder or the minibus conductor will only accept money and if you do not have money to pay, neither the availability of the goods nor the quality of the roads makes any difference.

The rent which the single mother is asked to pay for the most modest accommodation in the most working class of areas is often more than the gross pay of the nurse or the teacher in the public school system. Yet the more fortunate among us would carp about the nurses for their inattention to patients or the teachers for supplementing their income with “lessons.”

Jagdeo has closed the VAT rate debate
The problem in the discussion about the economy and taxation is that those two sides are speaking from very different perspectives and interests. The Minister of Finance is engaged in an abstract argument of which he may have no personal experience and speaks from the top. The Red Thread and Grassroots Women Across Race on the other hand speak of their daily experiences from the bottom. It is not hard to see the real issues from the theoretical arguments.

The problem for the poor is that the strength and logic of their argument count for nothing and since they have neither the time nor the inclination to wage a sustained and effective campaign, change in their favour is almost impossible. Jagdeo has already said that VAT is no burden which means that for all intents and purposes the matter is closed. Of course no one expects the government to admit that as an expenditure tax, VAT is borne only by consumers. Since women bear the predominant role in equipping the children for school and putting food on the table, they feel the pain of the VAT more than the menfolk.

Favouring the better off
Nor will the government wish to admit that the tax system is skewed in favour of the better off; that all tax changes since 1992 have effectively shifted the burden to the poor and in favour of the better off. Guyana has effectively abolished Estate Duty which used to capture in death the taxes which were avoided in life. A capital gains tax which already favours the shareholding class over the working class has been abolished on the gains made from trading in shares in public companies. Just ask yourselves which is the dominant shareholding class and you will see the bias in the tax system. And as the column has consistently pointed out the perquisites, expense allowances and benefits received by the managerial and entrepreneurial class including chauffeur-driven expensive vehicles, 24 hour security and meals at the most expensive restaurants are generally tax free, while the travel allowance paid to the ordinary to get to work on the minibus is taxed at the rate of 33⅓%. For the poor a meal out is a cheap Chinese while the managerial class enjoys business paid nights out at the expense of the taxpayers.

Even in tax administration, the die is loaded against the poor. They are at best employees who are sitting ducks under the PAYE system and neither need nor can afford an accountant to represent them at the GRA. Contrast that with the self-employed who decide how much tax they will pay and often pay the equally dishonest accountant to aid and abet them in manufacturing accounts to suit.

Solution
The solution in my view lies both in the income as well as the expenditure side of the accounts. In fact I think it is necessary first to decide what is the expenditure that the government needs to incur and then consider how best to finance that expenditure. Let us use as an example the Ministry of Health for which there are two ministers. With little understanding of what their roles are and not enough work for them to do, the two ministers dabble in the day-to-day affairs of the ministry and the hospitals in a manner that creates confusion rather than solutions.

In my discussion on the recent maternal and child deaths with two leading doctors I was shocked to learn that while many hospitals have modern buildings and state of the art equipment the experts and technicians to operate them are not available; that we seem to pay more attention to AIDS than to women’s health issues; that basic information on ante-natal care and nutrition is not disseminated. And pointedly, that in what appears to be a matter of policy, we underpay the caregivers.

Drugs and money for friends
This is the same ministry which along with the Georgetown Public Hospital Corporation has been paying hundreds of millions of dollars annually by way of advance payments to a friend of the government to buy generic drugs from India. These same drugs can be purchased direct or by way of tender through other suppliers at reduced cost. In 2009 the payments by the Ministry of Health and the GHPC amounted to $2.135 billion! That the government persists in this reckless arrogance suggests that instead of attempting to reduce cost, the government is more concerned about enriching its friends.

Excluding the expenditure on health by the regions, the GPHC and the Ministry of Health spent $7.3 billion in 2009 in the recurrent budget. This means that the dubious drug purchases alone accounted for 30% of the expenditure of those two agencies. If we add capital expenditure, the total expenditure in 2009 by these two agencies was approximately $10 billion. In 2010 the budgeted current expenditure of the GHPC is $3.5 billion while the expenditure for the Ministry of Health is $4.5 billion.

Reduced expenditure does not mean reduced value and it is my view is that with better policy formulation, efficient execution, reduced waste and corruption and enhanced cost management, the annual expenditure allocation on the Ministry of Health can be reduced by at least a couple of several hundred millions of dollars, if not billions.

Ministry of Local Government
Now, take the Ministry of Local Government that has overseen the destruction of democracy at the local government level. This ministry that operates like the Wild West has a Minister and two former ministers paid exorbitant salaries and benefits for doing mainly party work. If this ministry was scrapped, we could very well save much of the $250 million in the recurrent budget and $1.250 billion in capital budget.

Then we can look at the Ministry of Public Works and Communication which in 2009 had a capital budget (including supplementaries) of $10.2 billion but did not even keep a contract register to record details of financial transactions of projects undertaken by the ministry. On roads and bridges alone some $5.9 billion was spent in 2009, no doubt much of it completely wasted.

The Office of the President and NICIL which are the havens of non-accountability, non-transparency and favouritism control funds that are so secret and mismanaged they are beyond the reach of any auditor or accountant. In fact nothing less than a forensic auditor by a trained fraud investigator could unravel what has taken place around these entities.

The bigger picture
What is a safe bet is that included in the total recurrent and capital expenditure in 2009 of $128 billion, must conservatively, be at least 15% ($19.2 billion) of avoidable, unnecessary expenditure that could be cut without any loss of efficiency. If say 60% of those savings ($11.52 billion) are applied to improved salaries to government employees and payments to our senior citizens, the remaining 40% ($7.68 billion) can be applied to a reduction of the VAT which is budgeted in 2010 to bring in $25 billion. That means that instead of VAT having to bring in $25 billion in 2010 it need only to bring in $17.4 billion. The VAT rate can therefore be comfortably set at 12%, bringing a boost to the economy and relief to the poorer sections of our society.

The evidence from economic research around the world indicates that tax rates have a direct influence on saving, entrepreneurship, lower rates of economic growth, reduced rates of personal income growth, lower rates of capital formation and lower than expected aggregate labour supply. In the case of Guyana, high tax rates may also cause outward migration and the brain drain.

Just as I am sure that both the President and the Finance Minister know that 12% is what the VAT rate should have been in the first place, they also know the economic arguments for lower rates. But then from the government’s point of view that would reduce the pool of funds for whimsical spending.

Of course a more detailed examination of the current revenue and expenditure structure will necessarily reveal other possibilities. Meaningful tax reform will suggest variations of the existing tax structure, the way revenue is raised between the central and regional governments, and possibly new means of collecting taxes from those who do not currently pay. Organisational changes could see the restructuring and reduction of the number of ministries and departments, number of ministers and advisers, resulting in the reduction and re-prioritisation of expenditure.

While it would be nice for the Economic Services Committee of the National Assembly to take on such an exercise, I am not optimistic that this or the reduction of the VAT rate will happen any time soon.