Month: December 2010

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Jagdeo’s mis-conceptions of the details of Guyana-Norway MOU source of international embarrassment

The road from Oslo, Norway to Cancun, Mexico has been proving to be a rather rocky one for Guyana’s President Jagdeo. In February 2009, Jagdeo and Norwegian Prime Minister Jens Stoltenberg signed a memorandum of understanding in the Norwegian capital Oslo under which Guyana would receive from Norway up to US$250 million ($51.7 billion) during a five year period ending in 2015 for this country to preserve its forests. In return Guyana has undertaken to accelerate its efforts to limit forest-based greenhouse gas emissions and protect its rainforest as an asset for the world. It was a euphoric moment for Jagdeo, one that placed him in a positive light on the world stage and caused some of his supporters to nominate him unsuccessfully for the Nobel Peace Prize.

As a measure of President Jagdeo’s excitement, in November 2009, he described the agreement as a watershed moment, “another first by Guyana” for which Norway should be commended. One year later at a climate change forum in Cancun, Mexico on Tuesday December 7 when, sitting beside the Norwegian Prime Minister, he tore off at his long-time benefactor the World Bank as well as the Norwegians for what he perceives as delays in the disbursement process of what he described as “our money.” According to Mr Jagdeo, a process that Stoltenberg saw as going well, had turned into a nightmare that could for good measure cost him his presidency. This latter comment clearly indicates that President Jagdeo had overstepped the boundaries and with this had lost the respect of Stoltenberg and the World Bank which was quick to point out the mechanics of the Norwegian deal.

Irresponsibility and immaturity
Mr Stoltenberg’s incredulous look at the iconic moment of his outburst was a defining point for Mr Jagdeo and Guyana, a measure of how one moment of irresponsibility and immaturity can undo a year of good solid and hard work. Suddenly the Champion of the Earth shrank into ordinariness and Guyana was exposed as a country unable to appreciate and demonstrate basic rules of diplomacy and discretion. But those who have observed President Jagdeo over the years would not have been as surprised as Mr Stoltenberg. That has been Mr Jagdeo’s brand of behaviour in Guyana where he could rail, abuse and defame with complete impunity.

By the time the President had returned to Guyana two weeks later his temper had subsided and more calmly he announced that he expected disbursements to take place some time next month. Bad as it, Mr Jagdeo’s conduct in Cancun might have been understandable, except that the display of crassness was not an isolated case of abuse but rather a pattern that has been directed at the British over security, the Americans over drugs, the World Bank over process and Guyanese over the mildest criticism, no matter how justified. This is more than a problem for Mr Jagdeo; it is one for the country, its citizens and its diplomats. Their task of damage control will add to the challenge they face with few and sometimes mixed signals from the Office of the President that is effectively the country’s Foreign Ministry.

Glaring misconception
So what is the problem or are there more than is being let on? President Jagdeo had said in January that Guyana had complied with all of the conditions under the Memorandum of Understanding (MOU) and that the “only outstanding thing” is the settlement of the trust fund mechanism through which the money will flow to Guyana. Even if that was all, a trust fund carries immense legal and other obligations as the World Bank Director for the Caribbean Yvonne Tsikata had to point out in trying to correct our President.

The fund, the Guyana REDD+ Investment Fund, which aims to be a multi-donor financial mechanism managed by a reputable international organization, is to be operational before any contributions can be disbursed from Norway. Describing Jagdeo’s position as “the most glaring misconception,” Ms Tsikata explained that as a trustee, the World Bank cannot disburse any funds to the implementing partners such as the UN and the Inter American Development Bank, before getting the green light from a Steering Committee comprised of Norway and Guyana. She added that up to now, the committee has not instructed us to transfer any funds and as trustee, the World Bank cannot act faster than the Steering Committee. That elementary fact appears to have escaped Guyana’s President.

And as Prime Minister Stoltenberg pointed out in Cancun, his country’s agreement with Guyana is one that is results-based. Knowledgeable persons I have spoken to confirm Mr Jagdeo’s misinterpretation of the agreement which he negotiated.

Technical and scientific issues
Persons familiar with the agreement point out that its technical and scientific issues and Guyana’s spending proposals under its hurriedly cobbled up LCDS are distinct issues which have been distorted and conflated by Mr Jagdeo. The Verification Report for Norway is not final – Rainforest Alliance has been contracted to undertake this verification of compliance with the enablers (progress indicators) in the Joint Concept Note attached to the Norway-Guyana MOU. I understand that the report is not yet finalised.

Also incomplete is a report by Poyry, a New Zealand management consulting firm that specialises in forest and related industries and which is conducting a study into the technical and scientific issues of monitoring, reporting and verification system (MRVS) for carbon emissions. So, there is no verified performance, and consequently, the Norwegians have no obligation to pay in advance of the agreement on verification.

Spending
A separate issue is the proposals for spending. President Jagdeo is confusing these two issues. He said that all spending proposals will be run past the MSSC, which is different from the Steering Committee under the GRIF. According to the LCDS website, the MSSC is not recorded to have met since August, and there is no evidence that MSSC has considered any of the proposals on spending – these are Mr Jagdeo’s proposals.

Then there still remains the anomaly that this is a REDD scheme. REDD is about reductions in carbon emissions. But Guyana is increasing emissions – from increasing gold mining and gold exploration, road-building and associated land-clearing, increasing log exports. So that paradox remains unresolved.

Cancun was a failure for Guyana which was represented by Andrew Bishop but who was effectively silenced by Mr Jagdeo. How fast we have lost ground in terms of our credentials as a climate change champion is demonstrated in the recent UNASUR communiqué, in which there were prominent mentions of Ecuador’s Yasuni initiative to keep oil in the ground but no mention of Jagdeo’s LCDS, even though the summit was held in and financed by Guyana.

Money, money, money
President Jagdeo’s performance also vindicated the view of many here that his only interest in climate change was in the money it could bring. Had the McKinsey study been done by any lesser known consultancy it might have been described as bogus, valuing the retention of our forests at US$580 million annually, when we settled for an average of less than 10% of that for each year over the next five years. And at a very practical level, if Mr Jagdeo really believed in the dangers of climate change, the rise in ocean levels and the overtopping of our sea defences, would he have allowed an entirely new community involving some of his close colleagues to be established right on the shores of the Atlantic knowing that it is the state that will have to come to the rescue of the property owners if the fears were to be realised?

And some of President Jagdeo’s LCDS proposals are equally spurious as the World Bank and Norway would discover with minimal research of the Amaila Falls hydro-project and his land titling for the swing voters in next year’s elections. We are told that just when the 2011 elections are around the corner, Mr Jagdeo wants to spend some $1.6 billion on land titling. Not only has the process of land titling for Amerindians been greatly simplified under the 2006 Amerindian Act which his government was finally forced to bring into law four years late. In fact for several years the national budget has easily provided the money for land titling exercises and there is no evidence of any major backlog of applications that are outstanding. Some fear that without campaign financing laws and no financial controls, the bulk of the $1.6 billion will simply be used for political purposes.

Conclusion
The LCDS Unit in the Office of the President has been busy spending money while some of its key players have been engaging in private consultancies. They should have been sent home a long time ago. Ram & McRae had cautioned about including in the 2010 Budget money from Norway but instead of cutting back on expenditure we now have the Finance Minister going to the National Assembly for $6 billion including $4 billion for Irfaan Ali’s ministry. One can only hope that on this occasion, he has fewer difficulties with the truth than he had with a similar sum around the same time last year.

And finally there is an element of governance in the agreement. That is another word that makes Mr Jagdeo see blue.

Have a happy and peaceful Christmas.

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The making of the Supreme Court a budget agency has placed the judiciary under threat

While the independence of the judiciary is often couched in lofty concepts about separation, one from the other, of the three arms of the state, the essence of it all is empowering, securing and protecting the judiciary and its individual members in their fearless and uncompromising defence of the fundamental rights of the citizens.

To ensure that independence, constitutions – including Guyana’s – provide elaborate mechanisms and safeguards to protect the judiciary and its members. These include security of tenure; salaries that are fixed and not subject to a vote by the National Assembly; Parliament can only add to the powers and jurisdiction of the Supreme Court but cannot curtail them; the power to punish any person for their contempt; separation of the Judiciary from the other branches of the state; and immunity from criminal and civil actions in respect of judicial decisions.

Despite this formidable armory, Rudolph James, a Professor in constitutional law, in The Constitution of Guyana published in the 2006 Special Issue 35-36 of Transition, a publication of the Institute of Development Studies of the University of Guyana, writing of the conduct of the judiciary during an earlier era noted that while the leadership of the country set about to miniaturise the judiciary, the “Guyana judges largely contributed to their subservient status.”

Professor James was optimistic that with the commitment to democracy expressed by the new ruling party in 1992 “one expected a transformation of the judiciary …” But a decade later James lamented the many acts of indiscretion of the leadership of the ruling party including the late Mrs. Jagan, current President Jagdeo, Dr. Roger Luncheon and even the government’s high ranking judicial officers, acts that would in a truly democratic state be treated as contempt of the court. Instead, Mrs. Jagan won a nod of approval from a senior counsel when in his and the presence of the then Chancellor she disdainfully threw over her shoulders a judicial notice.

The onslaught has continued, sometimes with the approval of some of the very judges whose sacred duty it is to ensure the independence of the judiciary and their own. They have not raised their voices as Jagdeo undermined the judiciary with financial and fiscal incentives, embarrassed its membership by challenging their competence and judgment, emasculated them with laws that are clearly in violation of the Constitution and dared them to caution him when he pronounces on matters that amount to contempt of their proceedings.

The Time Limit for Judicial Decisions Act is only the most recent case of the legislature seeking to control the conduct of individual members of the judiciary. But Jagdeo whose capacity to use and misuse public money will go down in presidential folklore knows that the judiciary’s independence can be compromised both at the personal and institutional levels. For the latter the tool chosen is the Fiscal Management and Accountability Act 2003, the most insidious piece of legislation the PPP/C has passed to control some key constitutional bodies including GECOM, the Audit Office and the judiciary. By making the Supreme Court a budget agency, the judiciary’s independence has been made subordinate to the legislative and the executive arms, bringing it under the control of the Minister of Finance. Moreover the judiciary is treated on the same basis as the regions and ministries whose financial misdeeds are legendary.

The Act seems clearly repugnant to several articles of the Constitution. Article 122 A (1) provides that the “courts and all persons presiding over the[m] shall exercise their function independently of the control and direction of any other person or authority; and shall be free and independent from political, executive and any other form of direction and control”, while Article 122 A (2) makes all courts “administratively autonomous and shall be funded by a direct charge upon the Consolidated Fund.”

When an entity like the judiciary, the Audit Office or Rights Commissions, or a payment like the public debt is funded by a charge on the Consolidated Fund it is included in the Estimates as a block sum and does not require a debate or subject to a vote by the National Assembly: Article 218. And Article 217 sets the mechanism for the payment of the sum so charged by requiring that the “moneys charged …shall be paid out of that fund by the Government of Guyana to the person or authority to whom payment is due.”

To add clarity and reinforce the court’s independence even in financial and administrative matters Article 222 A states that the expenditure shall be by way of an annual subvention. But by making the judiciary a budget agency, it now has to answer to the Finance Secretary about its affairs and is required to provide information and explanations to the National Assembly. Worse, under the Act the Finance Secretary can designate who the head of the judiciary should be for purposes of the Act!

Not that the Constitution expects a lower standard of accountability or financial management in the judiciary than it expects of budget agencies. Indeed Article 122 A (2) imposes on the courts the obligation to “operate in accordance with the principles of sound financial and administrative management”, similar standards set for budget agencies.

The questions being asked is if the judiciary, the guardian of the constitution and the protector of the citizens, can be so easily emasculated, what hope is there for the citizens? If it cannot defend itself, how will it defend them?

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Giving generously but carefully

Introduction
It is the time of the year when requests for donations to business houses – including from my own experience, professional firms – increase from a trickle to a deluge. There is something about Christmas that makes most of us guilty if we turn down a request for a donation, not only from the more prominent charities but service organisations, churches and other groups. Unfortunately, there is no study or other information on the success of these efforts, the main purposes of which are to feed groups of disadvantaged children in poor communities, throw a party for senior citizens and make monetary donations to needy persons. To think that by one’s refusal some needy person will be deprived of a meal or the cheer which the opportunity to participate in an annual party brings is probably not only difficult, but conscience troubling.

Studies abroad have thrown up some interesting and some counter-intuitive findings that are themselves worthy of further analysis. For example, studies show that as a proportion of income, poorer households actually give more to charity: the poorest 10 per cent of households give 3 per cent of their income to charity, compared with the richest 10 per cent which give only 1 per cent of their income. Of course in dollar value, the 1% will far exceed the 3%. They also show that the level of donations rises with the proportion of females in the household, but the presence of children makes no significant difference. This would indicate that women are more generous and empathetic than their male counterparts, even though women on the whole earn or own far less than men.

Surprisingly, those not in work are likely to give significantly more than those in employment — by 20 per cent (conditional on their total spending). There is no significant difference between the employed and the self-employed. Compared with the wage-earner, the effect of being self-employed is to reduce the probability of giving by 11 percentage points, while being out of work reduces it by 7 percentage points. Both these effects are significant.

Political donations
Unfortunately in Guyana where even government information is hard to come by and where our institutions of higher learning are themselves short of resources, it is hardly surprising that there are no studies undertaken of this important measure of a caring and giving society. And perhaps arguably the most substantial form of donation in dollar terms but of questionable social value is that made by businesses to political parties. In that case both the donor and the recipient have an interest in secrecy and the labyrinthine path from donor to recipient would make a good case study for money laundering.

And we are only too aware that for businesses, political donations are an investment in protection money or for future favours, hence the reason for donations of varying sums to the political parties, often based on an assessment of their prospects of winning. And for many businesses with their non-political donations, their picture in the newspapers making the donation to some sport or charitable organisation is good business with column inches of picture and accompanying report being much less than the cost of a paid advertisement.

Charitable donations
Now let us return to genuine, charitable giving. Questions that arise are how much to give, the vehicle for giving and what other considerations should apply. For individuals the cost of giving is much more expensive than it is for businesses. Individuals get no tax relief for any donations whether to national organisations, charities or under deeds of covenant, with the latter opportunity having been taken away when other allowances such as mortgage interest, insurance premiums and family allowances were taken away. Not that it was always easy to make donations even under deeds of covenant, and one recalls the case of Peter D’Aguiar v the Commissioner of Inland Revenue where the Commissioner disallowed a payment of $4,200 per year covenanted by Mr D’Aguiar to the Citizens’ Advice and Aid Service (CAAS). That was before Guyana had abolished appeals to the Privy Council to which Mr D’Aguiar unsuccessfully appealed. The Privy Council held that the CAAS was not a charitable organisation and disallowed the deduction. And we think Mr Sattaur is tough!

There are three separate statutory provisions governing donations, two in the Income Tax Act and one in the Corporation Tax Act, but they all only apply to companies. Under section 35 of the Income Tax Act donations of money or property to the government for public purposes or to or to any prescribed institution or organisation of a national or international character in Guyana or elsewhere are deductible. There are only about eight such organisations which have been prescribed, the most recent being the Cheddi Jagan Research Centre. And under section 75 which is generally regarded as the Deed of Covenant section, the deed must be for a period exceeding two years and to “any ecclesiastical, charitable or educational institution, organisation or endowment of a public character within Guyana, or elsewhere as may be approved by the Minister for the purposes of section 7(e) of the Corporation Tax.” All section 7 (e) of the Corporation Tax Act does is exempt from the tax any such income.

The problem and uncertainty is that section 75 does not specifically require the approval to be publicised by way of an Order or notification while 7 (e) of the Corporation Tax Act requires the approval of the President, again without a requirement for publication. This certainly needs tidying up.

Charity laws
Even if we ignore these technicalities, we have the practical question as to who deserves our donations. Some form of charity laws were promised since 1991 when the Companies Act was passed, but we still have no such laws in Guyana. The word ‘charity’ is often used and confused with ‘not-for-profit,’ these being employed incorrectly and interchangeably. There are some charitable institutions that are in fact created by statute, such as the Guyana Red Cross and the Chest Society, which derive their existence and status from statute. Then there may be some churches that are given statutory recognition and authority to hold property, while the Boy Scouts Association Act seeks to “further and protect the activities and interests of the Boy Scouts Association of Guyana.”

Apart from this form which is done by parliament, a charity may incorporate itself under the Companies Act or the Friendly Societies Act, which place them under some form of regulatory control and hopefully give rise to some level of corporate governance. But does this really happen? All of these organisations, year after year, raise money from the public and no doubt many of them do excellent work, but that can hardly justify the complete absence of some form of public reporting and accountability. Some of them operate as self-perpetuating oligarchs that feel no compunction or obligation to report to the public or to those from whom they raise money. Compare this with a company that would find itself in trouble and in breach of the Securities Industry Act if it was to try to raise money from the public without observing the strictures of the law.

This state of affairs may be due to ignorance on the part of some, and in the case of others because of their conviction of the genuineness and the nobility of their cause that any question or challenge about accountability and governance would seem out of place and Dickensianly mean. But not only should this be mandatory and in the public interest but it is in the organisation’s interest as well. I am certain that donors would feel confident and may even be tempted to give more to an organisation that shows a healthy respect for accountability and for the donors.

Making the decision
So whom should you give your money to? Based on the recommendations of the American Institute of Philanthropy and the amount of money you propose donating you should consider the following:

1. Know who you are giving your donations to. Never give to a charity you know nothing about. Request written literature and a copy of the charity’s latest annual report. If a charity is unable or unwilling to provide you with the information you request, you may want to think twice about giving to it. Honest charities typically encourage your interest and respond to your questions.

2. Ask how much of your donation goes for general administration and fundraising expenses and how much is left for the programme services you want to support. Is your donation going to pay salaries and other administrative expenses or is the bulk of it to be applied to the programme that you wish to support. Most highly efficient charities are able to spend 75% or more on programmes. Keep in mind that newer groups and those that are working on less popular issues may find it necessary to spend a greater percentage on fundraising and administrative costs than well-established, popular groups.

3. Some charities and not-for-profit organisations engage in high pressure fund-raising strategies. You help the organisation when you ask them questions. Ask whether they have a bank account, whether officers are paid or volunteers, do they have annual meetings that are open to the press, and do they have audited financial statements. If the answer to any of these is ‘no’ you might seriously wish to consider whether you would support that charity.

4. Do not accept what they tell you about tax-deductibility. Remember that deductibility is based on meeting the strict criteria of section 35 of the Income Tax Act. Check with your accountant or your attorney if your donation is more than small change.

5. Bear in mind there is only so much you may be able to give. So choose wisely and with the best information at your disposal. But once you are satisfied that the charity is worthwhile, give generously if you can. There are many good charities that need your help to operate valuable programmes and provide needed services. When you give wisely, you will be giving more effectively.

Next week we look at the LCDS and the Norway money

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Confusion at the Deeds Registry

Introduction
During the past week Mr Leon Rockliffe, attorney-at-law, has written two letters on developments affecting the Deeds Registry, arguably the most important depository of business information in Guyana, the regulator for businesses and companies, and the authority for a number of critical functions regarding real property. In that sense its vital importance to property rights, the registration of businesses, the incorporation and registration of companies, and the repository of corporate documents cannot be overstated.

The Deeds Registry derives its ‘modern’ origin to 1919 and the act “to regulate the Office of the Registrar of Deeds, and to amend the law relating to the execution and registration of Transports and Mortgages and other Deeds.” Space does not permit the reproduction of the several duties and functions of the Registry, all of which remain, but now fall under a Deeds Registry Authority, a new corporate entity but without supervisory oversight.

In 1999 the government passed an act piloted by the current Attorney General Mr Charles Ramson, setting up a Deeds Registry Authority the functions of which are set out in section 4 of the act as –

(a) the functions assigned to the Registrar and to the Registry under –

i the Deeds Registry Act;
ii the Companies Act 1991;
iii the Business Names (Registration Act);
iv the Powers of Attorney Act;
v the Bills of Sale Act;
vi the Trademarks Act;
vii the Patents and Designs Act;
viii the Civil Law of Guyana Act;
ix the Land Registry Act; and
x any other written law or other legal document.

Retroactivity
As is clear, these are not insignificant matters and suggest that Mr Ramson, Attorney General and Minister of Legal Affairs should have treated the act with more seriousness. The (Deeds Registry) Act had been lying idle for the better part of ten years since like the Amerindian Act, it required an Order to bring it into force. Recently, the same Attorney General signed Order 31 of 2010 published in the Official Gazette of Saturday, November 13, 2010, purporting to bring the act into force from October 1, 2010, approximately six weeks earlier. That publication was the cause of the two letters by Mr Rockliffe who correctly pointed out that there were a number of steps to be taken before the act could be brought into force.

This was a grave oversight by Mr Ramson who would be expected to be familiar with the contents of the 1999 act. The Order is clearly out of place and instead of adding clarity, we have confusion reminiscent of the bringing into effect the 1991 Companies Act on May 25, 1995 without informing the Registrar of Companies. In the case of the Deeds Registry Act the staff in the Registry have not only been kept in the dark but have been unable to exercise their employment rights under the act.

Recall and review
Mr Rockliffe raises some further issues. Despite the creation of an authority there are no directors and it would seem that the Registrar who becomes the Chief Executive Officer would report direct to the Minister! There is an advisory board consisting of the Chief Justice which creates a patent potential conflict of interest, the Solicitor General, a position that has been effectively abolished more that 12 years ago and the State Solicitor, a post which ceased to exist for close to seven years.

With all these problems, it would be hard to find any person who would not ask that the Order be recalled and the act amended to make it more sensible and practical.

The Deeds Registry needs major inputs to enable it to function properly and effectively. Some lawyers relate horror stories of improprieties, inadequate staff and consequently poor service. It is true that there have been some improvements recently and some of the staff make exceptional efforts in still challenging circumstances. But something is wrong when New Guyana Limited, the publicly owned but PPP controlled publishers of the Mirror, a recipient of government advertisements can operate for close to twenty years without submitting an annual return.

Different strokes
NICIL, the government controlled company to which moneys due to be paid into the Consolidated Fund are diverted and spent illegally and without regard for accountability has similarly been allowed to exist without filing returns. Compare this with say, the Linden Legal Aid Centre incorporated in 2007 and struck off the register of companies earlier this year for non-filing. It was subsequently restored after filing the statutorily required documents.

Linden Legal Aid was not alone, but is among close to 200 companies that were struck off the register of companies in 2010. The reluctance or failure of the Deeds Registry to act against NICIL and the New Guyana Company Limited at least requires an explanation for the uneven treatment which gives the appearance of discrimination, something forbidden in our constitution.

Conclusion
What is the point of having property rights guaranteed under the constitution if the records are so inadequately kept as to risk the loss of ownership and to encourage improprieties? This column has also pointed out the need to review and amend the Companies Act 1991 which has remained untouched for nearly twenty years. It is hard to believe that our learned Attorney General would not be aware of some of the inadequacies of the nine specific acts administered by the Deeds Registry, their need for updating, and the making of new and revised regulations. Such deficiencies go to the rule of law, property rights and a modern business infrastructure. If he is aware and chooses to do nothing, then we have a bigger problem than a poorly issued Order 31.