Kingston Hotel: Crooked or Foolish Deal?

On Thursday the cream of the private sector would be gathering at the Kingston Marriott to celebrate what a leading private sector representative described as an impact investment, i.e. an investment in a company that not only provides a financial return to the investor but also social and environmental returns as well. One example of such a company would be one that produces solar lighting for those without access to electricity, while another would be one producing low cost mini-computers (tablets) for the needs of deprived kids.

In both economic as well as financial terms, the Marriott Hotel provides neither a financial return to the investor, in this case a Government company named Atlantic Hotel Inc., nor any social benefit to the community. Let us see what the Government has had to put into the investment:

1. Land with a market rental value of $1 US per square foot has been leased to the company at half a US cent per square foot, i.e. 1/200 of its worth.

2. The land is estimated to be worth around US$75 million but the company can buy it at any time within 99 years for US$1 million. This model practically tells the investor to rent for next to nothing for the next ninety eight years and then exercise the right to purchase in the 99th. year when the present day value of $1 million will be worth approximately US$491, using an 8% discount rate.

3. There is a concept of a negative rent and the nominal rent being paid is effectively a payment to hold an option for 99 years.

4. Investment in GT&T which has produced billions of dollars in dividends was sold for $30 million to partly finance the government investment in the Marriott. At least $20 million of this sum has been lent to AHI at zero rate of interest and not repayable until after fifteen years. In today’s value that US$20 million paid after fifteen years is worth US$6.3 million, using an 8% discount rate.

5. The Government has given a generous tax holiday to the company including ten years for taxes on income and twenty years on duty and taxes on imports.

6. The Chinese contractor, which was awarded the contract even before it registered to do business in Guyana, has paid no corporate taxes on its profits, nor as is widely suspected were its all-Chinese labour force subject to tax on their income or to NIS.

7. All the development costs including multiple but useless studies, sewage diversion, interest during construction, and administration costs have been borne by NICIL, another Government company whose chairman is Dr. Ashni Singh, the Finance Minister, and is therefore not recoverable.

8. In addition to the more than US$20 million given to the company interest free for fifteen years, the Government is putting in another US$4 million by way of equity on which no return is guaranteed.

Now, here is the kick: none of the concessions injected by the Government is given any value in how control of the company is exercised. Another Chinese investor – ACE Investments Inc. – who invests US$8 million dollars in equity is given control of the company while the government becomes a minority shareholder!

Because Brassington as the sole director of AHI has decided that details of the investment are a private, commercial matter, no one is sure that ACE is prevented from exercising its controlling interest by selling its shares at any time and capitalise on all the concessions the Government has put into the company! This is either a foolish deal or a crooked one.

No doubt the top brass of the Private Sector Commission will be at the opening to give praise to the Government and so I hope that its Chairman Ramesh Persaud who is an accountant and is in the business of finance would be willing to answer the following questions:

• Should a value not be placed on all the non-equity inputs in the company, including tax concessions, land rent concessions and costs borne by NICIL for the benefit of AHI not recorded in AHI’s books?

• Does it make financial sense that the price to be paid for a share by an investor coming in when the project is operational is the same as that paid by an original investor who has also made valuable cash and non-cash inputs?

• Is the PSC aware that that is the nature of the arrangement with ACE?

• Is the PSC aware that the Shareholders’ and Share Subscription Agreement were entered into in 2013 when the project and its financing were almost completed?

• Does the PSC agree with the decision to dispose of shares in GT&T earning hundreds of millions to be invested in ANY investment that produces no return for fifteen years?

• Would IPED of which the Chairman of the PSC is the CEO lend money or make advances to any person on the terms on which NICIL is lending AHI?

I have not heard anyone make the case that the Marriott was conceived as a social investment for the benefit of any deprived individual or class of individuals, whether economically disadvantaged, physically impaired or socially underprivileged. In fact, a five star brand does quite the opposite – it is expensive, exclusive and selective. So any suggestion of a socially impactful investment is clearly nonsense.

There has been some disingenuous attempt to make the financial case for the project using some heavily doctored projections contracted by Winston Brassington. The economic case is even weaker. Does any rational person say “international brand X operates in Guyana and I must therefore visit that country”? Or does a rational person not say “I am thinking of visiting Guyana so let me see what my hotel options are”? No investor decides against coming to Guyana because HSBC or UBS (international banks) does not have a presence here so why do we think that an international hotel is any different?

A local, actual example also undermines the economic argument. The GMSA plans to host the PPP/C presidential candidate at a forum and decided that it would be held at the Pegasus. The President and some members of the GMSA were overruled and the venue was suddenly changed to the Marriott. Is there an economic benefit to the switch from a business which pays tax to the Government to one that does not? The GMSA example is the beginning: we can expect business to be diverted to the Marriott to make the financial case for the Marriott. The economic case is at best minimal.

I do not think any Guyanese does not welcome the Marriott brand but did it have to come at such an expensive cost to the taxpayer and as an investment by the government rather than by the private sector? Scarce resources are about choices. Does the PSC really think that the Marriott is a more impactful project than an investment in University of Guyana, or a better equipped and paid police force?

Finally, there are several legal issues which the project has raised, issues of constitutional violations, illegalities and misfeasance in public office. The project and those who have been part of the improprieties will be in the news for some time to come.

There is of course a part two to all of this in the form of the proposed Casino. We will leave that for a later date.

Atlantic Hotel Inc: Lies and deception from Brassington.

– total audit of project needed

The known…
Even as the construction of the Marriott Hotel nears completion and the opening soon but uncertain, the role of Winston Brassington, Chairman and CEO of Atlantic Hotel Inc., continues to raise serious questions about his honesty and integrity and those he retains to speak for him. Indeed as recent as Sunday January 18, I have had cause to expose the lack of integrity on his part and that of his spokesperson Mr. Kit Nascimento when they created a fictional column for me.

It is public knowledge that the hotel’s construction has been financed mainly from the proceeds of the sale of Government shares in the Guyana Telephone & Telegraph Company Ltd. and from other public resources diverted to or vested in the company through means that many consider completely illegal. It is also public knowledge that the National Assembly passed a motion on December 17, 2012 that, among other things, neither NICIL nor Atlantic Hotel Inc. incur further expenditure on the Hotel Project without the authorisation and approval of the National Assembly. Needless to say, the directors and officers of NICIL and AHI have ignored that motion.

It is known that the Hotel has been granted concessions rare to any entity in Guyana – even Queens Atlantic, Jagdeo’s people. Those concessions, in addition to land at below market price, are no more than crude government subsidies. It is also known that the contractor has been allowed, illegally, exemptions from the laws of Guyana which even the diplomatic community does not enjoy. Central to and facilitating every well-known violation associated with the company is Winston Brassington. See Soul for Sale series of articles on chrisram.net beginning February 17, 2013.
Continue reading Atlantic Hotel Inc: Lies and deception from Brassington.

Soul for sale: The Marriott saga conclusion

Introduction
Well, Mr Brassington has done it again. Like he did to me over the Berbice River Bridge Company, he wanted me to hold back a column while he committed NIS money to the Berbice Bridge. On this occasion he needed a weekend to respond to my questions on his Marriott. Well it turned out that ten days were not enough to provide answers to what I thought were straightforward questions. Maybe he was too busy.

I am sorry if I piqued readers’ interest or led them to believe that the public will receive first hand, honest-to-goodness truth to questions we are all dying to have answered. I apologise to you all for leaving you without any answers to a string of questions which I have put to Mr Brassington. It was his undertaking that made me not divulge the questions last week.

But if there does come a time when Guyanese officials are made accountable for their abuse of office, when they can no longer make promises which they have no intention of honouring and when they will have to deal with public money in a lawful and transparent manner, Winston Brassington will surely be listed among the pantheon. For him, the indictment will be long and damning: complicity and execution of NICIL’s illegalities; the Amaila Road contract to ‘Fip’ Motilall; the privatisation of the Sanata Complex and the illegal concessions to Queens Atlantic Investment Inc; his hinterland road-building exercises with GGMC billions; his shenanigans with fund-raising for the Berbice River Bridge Company Inc; and now the Atlantic Hotel Inc of which he remains the sole director, Chairman and CEO.

Expertise or conviction?
I had understood from someone in the engineering fraternity that there were concerns including a criminal conviction of one of the persons reportedly involved in the supervision of the construction of the hotel. So I asked for the name, expertise and experience of the firm or individuals looking after AHI’s interest in the construction of the building; if it was an individual, the person’s qualifications and experience in projects of this magnitude; whether the position was advertised and who was responsible for the selection; who the person reports to and whether that person was provided with all the documentation, specifications and drawings for the foundation, plumbing, electrical, concrete pours, curing period for different aspects of the concrete work, steel size and resistance capacity, etc; and I asked about the number of non-compliance reports submitted to date by AHI’s representative.

On the contractual deals with Marriott International I sought from Mr Brassington information on the precise role of Marriott International in the design and construction stages of the contract; the basis and the amounts payable and paid to Marriott for the two phases; whether withholding taxes were deducted from those payments and remitted to the Guyana Revenue Authority; and whether the contract for the management of the hotel has been signed and sealed. I also subsequently asked for copies of the contracts with the Marriott.

The mysterious private sector partner
The project has always been promoted as a public-private sector partnership with the Grenada- based Zublin identified as the/a partner. Of course, the term private-public sector partnership can mean whatever one wants it to mean. To clarify the point and satisfy concerns expressed by cynics that Zublin was never seriously involved and was merely a red herring, I asked Mr Brassington whether the discussions/negotiations with Zublin had been concluded and for him to confirm the percentage of the shareholding Zublin would take and the price for each share issued.

After all the hotel would be worth much more than the actual amounts paid to the contractor. If we divert for a moment and look at the financial statements of Atlantic Hotel Inc as at December 31, 2011 we see the flawed accounts signed by Mr Brassington and given a clean audit opinion by the Audit Office. Only the Guyana dollar equivalent of the payment to the contractor has been recorded in the accounts. It is a matter of public knowledge that NICIL has spent not inconsiderable sums in infrastructural works; it must also have paid Marriott several millions for services provided while it is reported that a huge sum has already been paid to the engineers looking after the country’s interest. None of these costs are reflected in the books of AHI and must have been paid by NICIL, which engages in so many disparate activities that it can be confident that the Audit Office would be unable or uninterested in identifying those costs which are properly chargeable to the hotel company.

And surely those concessions which Mr Brassington has negotiated from Go-Invest have a huge value which must be factored in any price. The selling price of the shares in the hotel should therefore exceed the actual cost giving rise to a huge profit. Of course, Director Brassington will argue, quite incorrectly, that the profit belongs to the company and can only be distributed by way of dividends.

To return to the identity of the buyer which Dr Luncheon has indicated has already been agreed, I asked Mr Brassington about the alternative arrangements that AHI/NICIL have put in place in case Zublin is no longer interested. Some people think that the name Atlantic is more than a coincidence since there is another beneficiary of state largesse with Atlantic in its name. Or is it a ‘brother’, peeved that he was forced out of the business the first time around?

SCG
The public will recall that Mr Brassington had said that the contractor SCG International (Trinidad and Tobago) Limited (SCG) had insisted on the exclusion of Guyanese from its labour force, apparently because we are not up to their standard. But my failure to see such a clause and my prior experience with Mr Brassington compelled me to ask him a direct question: where in the contract does it state that the labour force is Chinese only? To put it politely, he did not tell the truth.

Readers will recall that I reported in an earlier column that an official search I had carried out at the Companies Registry came up with the astounding fact that SCG was not legally permitted to carry on business in Guyana. So I asked Mr Brassington whether he or his legal secretary had checked to see whether SCG is incorporated or registered in Guyana before entering into a multi-billion dollar contract with them. It was almost laughable that following the column frantic but improper efforts were made to register the company with the Registrar.

At large is whether the company has registered with and is complying with the income tax and NIS laws of Guyana. The laws of Guyana treat such omissions as extremely serious and one can be sure that the GRA could step in with heavy boots when it finds out. That is surely how SCG should have been treated.

One of the requirements for registration with both these bodies is that the company be registered or incorporated in Guyana. Since it has not been registered, it is a fair assumption that the previous suggestion that the company is excluded, or has excluded itself from the tax and NIS laws of Guyana is more than justified.

Readers will recall that SCG, in bringing down their tender price from US$65 million to US$51 million, had indicated that it would exclude a number of works and the critical certification of which the government boasts. I have asked for the estimated cost of the several other elements of the project which SCG excluded, whether funding for those works and the balance of the contract price had been sourced.

Conclusion
Mr Brassington has chosen to ignore direct questions from a taxpayer and citizen of this country. He is shielded by equally opaque politicians who could not be bothered about answering questions from anyone. Democracy and accountability have been turned on their heads, or dumped into the Atlantic next to the hotel.

There is nothing more that civil society can do. All the questions have been asked while any answers have been provided by the media itself. It is the new democracy, the new dispensation. There is no room for questions.

To summarise, the government has embarked on the conception, construction and financing of a $10 billion hotel built with taxpayers money but from which taxpayers labour was explicitly excluded in a collusion between the Government of Guyana and the Chinese construction company. The hotel will be sold to God knows who at a price which has not been determined. The hotel comes with concessions extending in some cases to twenty years – itself historic.

Meanwhile we claim that we cannot afford to increase the subvention to the University of Guyana, equip our regional hospitals and health centres, pay better pensions or solve the problems at the NIS.

It is a new model of development.

Soul for sale: The Marriott saga Part 3

Introduction
Earlier this week I sent to Mr Winston Brassington, the head of Atlantic Hotel Inc, (AHI) the company financing the construction of the hotel complex a number of questions dealing mainly with the construction phase. I was hoping that I could address the issues in today’s Business Page. However, Mr Brassington in a telephone call initiated by me explained that events at the Guyana Power and Light Inc prevented him from addressing my questions but promised that I would have a response by tomorrow (Monday). Out of respect for that commitment, I will await his response.

Meanwhile Guyanese learnt from no less a person that a member of the Board of the controversial NICIL, AHI’s wholly-owned parent, that AHI has found all but US$8 million to complete the construction of the complex. At the end of 2011, NICIL had advanced to SCG International (Trinidad and Tobago) Ltd the sum of $2,036.7 billion, or the equivalent of US$10 million, as a 20% advance payment on the US$50.9 million contract. Since that date NICIL received some US$25 million from the sale of the government’s share in GT&T (with a balance of US$5 million) to come. This suggests that NICIL/AHI have secured financing for at least US$35 million to US$40 million, leaving a gap on the construction cost of some $11 million. Since the total cost of the project was budgeted at US$41 million against the US$50.9 million price contracted with SCG, one is left to speculate whether the US$8 million shortfall figure given by Dr Luncheon is to cover the entire contract cost or the difference between what NICIL/AHI have secured from the US$40 million privatisation proceeds.

The unclear Luncheon
business pageNot surprisingly and not for the first time, Dr Luncheon’s statement is less clear than the country deserves and adds nothing to another document which I have seen. The document, an Agreement between the Guyana and AHI, dated April 14, 2011 and signed by Winston Brassington on behalf of AHI and Mr Dhanraj Dhanpaul, CEO (ag) of Guyana Office for Investment (go-Invest) on behalf of the Guyana Government, states as follows:

That AHI was formed with the objective of building and operating a minimum of 150-room hotel (revised in 2010 to 197 rooms) and an entertainment complex (including a casino, nightclub and restaurant);

The Developer, through its owners (current and prospective), has represented to the government that the Undertaking is currently in the tender stage for construction, with a projected timeline for the anticipated commencement of construction being Q2, 2011 with a construction timeframe of 2 years, following the conclusion of a contract with a Contractor, to deliver the substantial portion of the undertaking;

The Developer will own the Hotel and Entertainment Complex which shall be operated by third parties; the Hotel will be operated by the Marriott; the casino, nightclub and restaurant will be operated by other third party operators to be identified. All income earned and expenditures made will be in the name of the Developer, with the Operators being paid an operator’s fee for services provided.

The owners of the Developer have further represented to Government that the Undertaking will contribute to the development of the Guyanese economy, more particularly the hospitality sector and have therefore applied to Government for concessions.

Government negotiates concessions and dooms Pegasus
Of course, the owners of the developer are the same Government with which Mr Brassington made the agreement. And note that the only hint that the AHI will sell the property is in B above – “current and prospective owners.” And under the Agreement the new facility is being granted for ten years exemption from corporation, property and withholding tax (including the payment of interest and dividends to debt providers and equity holders. Additionally the developer has received an undertaking that it will be granted a licence to operate a casino.

Additionally, the developer is guaranteed relief from duty and excise tax on capital repairs or replacements including machinery, equipment and buildings costing more than US$10,000. And on top of that, the developer is entitled to a “one-off” retrofitting of the project within ten years if so required for a period of ten years (sic) from the commencement of commercial operations.

There is absolutely no way any investor can compete with AHI’s project unless it receives similar concessions. It is either that the hotel will make super-profits or competitors will simply be run out of business. These concessions spell the death-knell of the Guyana Pegasus and possibly the Princess Hotel as well. The only other entity in Guyana that came close to such generous concessions is the Ramroop-owned Queens Atlantic Inc, lending credence to the rumours that the investor will be the same group.

The Agreement as signed has no conditions regarding ownership and it means that AHI can sell the hotel one day after completion with all the massive concessions which amount to a windfall to whoever the buyer turns out to be.

The Guyana Government has now taken on the role of venture-capitalist and procurer of concessions, licences and permits for an unknown entity(ies) which is not willing to invest any money upfront. It is hard to think of any similar arrangement across the Caribbean!

The wrong feasibility
Now that it is becoming almost certain that AHI is risking taxpayers’ money for the benefit of some private investor/s, one must wonder why the Government went to such lengths to convince the public that the project was feasible. If the project was undertaken for resale, the only feasibility was whether or not there would be takers of any offer of sale of the hotel on completion. And with such sweeteners the only thing one has to fear is diabetes, not a shortage of buyers. But that is another part of what seems to have been an elaborate but not too hidden plan to fool the Guyanese public while building a project for selected friends of the Government.

We wait to hear what Dr Luncheon and Mr Brassington will tell us next.

The construction
Now this is another story. Recall that when AHI conceived the project its budget was US$41 million based on its drawings and specifications. It went to tender on that basis. So when SCG sent in a tender for US$65 million, AHI said to SCG please go and do an alternate design meeting Marriott’s standards. SCG came back with a design but this time costing US$51 million but excluding several costs and most importantly that relating to Leadership in Energy and Environmental Design (LEED) certification. What SCG was effectively telling AHI is that if you wish to have LEED certification then you must pay for it. And Mr Brassington said yes. Now that we are cutting corners on statutory deductions, changing design specifications and eco-features we allow the contractor to dictate to us about quality certification.

Having been duped by SCG, the Chinese contractor, on the importation of labour – although Guyana had the final say in work permits – the next danger for us is who is looking after the interest of AHI in ensuring that we do not have a similar experience in the quality of the material used or in supervising the execution of the work by the contractor. Earlier this week I was being regaled with the post-modern technology and material being employed on the cut-price contract. Well maybe that explains why none of the local consulting engineering firms was retained by AHI to look after its interest.

Supervision
One experienced engineer expressed to me considerable doubts about the ability of AHI to put together a competent team to deal with the international contractor, SCG. According to the engineer, AHI has stepped well out of its league, even though the internet made it easy to research the experiences of other countries using Chinese contractors with Chinese labour.

He suggested that persons who negotiate building works contracts should have an understanding of building components, building codes and current construction practices. Of course, the contractor on a project of this size should have a Quality Manager whose primary responsibility is to meet Quality Assurance/Quality specifications. But contractors are mainly interested in maximising profits which comes from reducing costs, and so AHI must satisfy itself and specify the steps embedded in the process to ensure that quality assurance and quality control matches the agreed plans and specifications.

Price v quality
AHI would have needed to ensure, even before construction started, that it had in place a team to manage the construction supervision, including the ‘Engineer’ who will sign off on the final product and approve design changes. While only a limited amount of information has reached the public, the several volumes of contract documents – probably written in one of China’s languages − would comprise of specs and drawings. Within the specs are written quality responsibilities for the contractor, eg a spec for cast in place concrete would require the contactor to submit product data for the cement, concrete admixtures, mixing requirements of concrete plant if readymix concrete is used, a concrete mix design, certification that the plant is certified, type of aggregate used, tests used, certification of the readymix trucks, etc. Similarly there are specifications for formwork, reinforcement, survey, safety, code compliance, electrical, mechanical, windows, masonry, and so on.

It is true that we negotiated on price. The question now is whether AHI knows whether it has compromised on quality.

Next week: Conclusion

Soul for sale: The Marriott saga Part 2

Introduction
In the first part of this article I wrote that I did not see a copy of the final contract between Atlantic Hotel Inc (AHI) and SCG International (Trinidad and Tobago) Limited (SCG/the contractor) for the construction of the Kingston hotel property financed by the Government of Guyana, owned by AHI and proposed to be managed by and operated under the name of Marriott, the international hotel chain. In fact there is no single contract but rather ten separate documents, including one described as the Contract Agreement, that together constitute the contract. At all times Mr Winston Brassingston operated as the shareholder representative, chairman, sole director and Chief Executive Officer of AHI. In addition, these and other documents which I have seen indicate that Mr Brassington was the point man for negotiations with the contractor as well as government agencies. It is almost unthinkable that a single individual who in law has no obligation but to the company would be allowed such vast and unrestricted powers over expenditure exceeding ten billion dollars.

What is not unthinkable and indeed was foreseeable is the ‘shamateurishness’ of the negotiated documents and the potential implications for the Guyanese taxpayers who bear the full cost of the investment and any potential losses. To understand why it is not unthinkable and was indeed foreseeable, we have only to look at the example of the Skeldon Sugar Factory. With its large and powerful board and with inputs from Booker Tate, GuySuCo could not prevent a lopsided contract with a Chinese contractor in a matter in which the balance of expertise resided in Guyana. Sadly, the taxpayers continue to suffer the consequences of that mistake. And yet, even before that mistake is rectified − if it ever can be − we are, as Santayana warned, repeating it.

Marriott’s role
Let me also clarify why I am hesitant to call the property the Georgetown Marriott Hotel and Entertainment Complex despite this nomenclature in the Contract Agreement initialled by Brassington for AHI and Michael Zhang of SCG. Marriott is not putting a cent into the project. While the several documents provide for the property to be built to specifications established by Marriott International, the group’s principal role is to manage the property from which it will gain indirectly from the expanded global coverage and directly, from the hotel’s operations. No details have been released of the terms and conditions and the payment arrangements to Marriott for the services it currently provides in the construction phase, and what it will receive under its management contract. In the documents’ package there is a bare reference to Technical Services Agreement of April 23, 2010 between AHI and Marriott International. Interestingly, the financial statements which are audited by the benign and bemused Audit Office show no payment to Marriott in either 2010 or 2011, suggesting that Marriott worked gratis in those two years − a highly unlikely possibility.

What is certain is that Marriott bears no risk and is guaranteed its income, even if the hotel makes a loss. I hesitate to think that the contract with Marriott does not include a termination clause under which Marriott can withdraw their name from the operation. The fact that Brassington may very well sell Guyana’s majority holding in AHI suggests that termination can never be ruled out, in which case the label will inevitably change.

Tax exemptions − déjà vu all over again
Last week I noted that in order to meet a request for a price reduction, the contractor SCG quoted a price which excluded, among other things, PAYE, i.e. the system by which income taxes are deducted and remitted to the Guyana Revenue Authority. For PAYE to constitute exclusion of cost and therefore a saving, it means that Mr Brassington would have had to agree to an exemption of employment income of the labour force from income taxes. Surely even Mr Brassington, whose little knowledge of taxation impressed then President Jagdeo, must know that the law does not allow for any such exemption. In fact, PAYE is collected by and held in trust until paid over to the Guyana Revenue Authority. I would not have thought Mr Brassington would agree to such a preposterous provision but for the fact that the Memorandum of Understanding which Mr Brassington signed with SCG includes PAYE as a cost reduction device.

And on the question of exemption from corporate taxes, one would have thought that Mr Brassington might have learnt from the QAII embarrassment that any exemption has to fall within the tax laws. If he knew that and went ahead and agreed to exemption from all forms of taxes for a construction company, he is guilty of a grievous violation of the laws of Guyana by agreeing to concessions which neither he nor the government has the power to give. If he did not know one has to ask if Finance Minister Dr Ashni Singh, who played a triple role in the QAII fiasco, is also similarly deficient.

Incidentally one of the criteria for tax holidays is the creation of employment. No more needs to be said on this.

The contractor is showing more cleverness than our one-man heavyweight team. SCG has chosen to incorporate in Trinidad and Tobago and thereby benefits from the Caricom Double Taxation Treaty under which the profit it earns in Guyana but which is not taxed here is exempt from taxes in Trinidad. But those same profits are taxable in China, so in effect we are, absurdly, forgoing revenue in favour of the cash-laden treasury of China. To think that the PPP’s father of the nation used to rail against such tax concessions to American, British and Canadian companies! It would be a great day when the GRA decides to step in and let any company know that it will not recognise any tax exemption that is granted outside of the law.

Duped
But on the issue of foreign labour, the contractor was more than clever. Understandably SCG became the target of protests and expressions of concern from several interest groups in Guyana, including the government-leaning FITUG. The Chinese contractor asked in its exchange with Mr Brassington that a clause be inserted in the initial draft contract available to bidders to provide that “the Contractor may [emphasis added] import any personnel who are necessary for the execution of the works.” Taking advantage of what may appear to be a standard and apparently innocuous provision in the contract, the contractor then imports all its labour needs from China. To add stupidity to insult, when the public in Guyana protests, Ms Teixeira with typical irrationality, shouts racism. Well Ms Teixeira, ask yourself who is being racist? The company had a choice of workers from Trinidad and Tobago, its country of incorporation and Guyana, two obvious sources. Instead it chose to import all its labour from China. But unfortunately, those who exposed us to the contractor’s deviousness and ethnic employment preference are too ashamed to admit that they have been duped and their masters now blame the country’s workers as unfit for employment on a construction site.

But Ms Teixeira was not alone in absurdity. Dr Gopaul, the labour man in the PPP/C said the construction of the hotel is a high-tech business, suggesting that it is beyond the competence of Guyanese. I find it hard to believe that having read the contract documents, any Minister would think that Guyanese are unable to contribute to the contractor’s obligation to ensure indigenous species of plants and grass and all aspects of landscaping. Twenty years on, there is no higher tech building in Georgetown than the US Embassy in Kingston, a building that was constructed with at least a 95% local work force. But for their own risible admission of reporters to their facilities, I would mention too the newly constructed spy centre in the compound of Castellani House which as far as the public is aware was built by Guyanese. Dr Gopaul’s defence of all-Chinese labour simply does not stand up.

Insulted once, twice and then thrice
As if to show that the 100% Chinese workforce had its PNC parallel, yesterday’s Stabroek News quotes GINA as stating that “the OMAI Gold Mines project had over 300 Canadians on site in the initial construction phase and no fuss was made.” The reason for the no fuss is that at no time did Cambior have any number close to 300 at the Omai site. My information on both the US Embassy as well as on OMAI was derived not from third party sources or speculation but from actual working knowledge. That those in control of GINA would resort to such fabrication is a measure of how weak they know their argument is. And even if GINA believed that to be the case, it seems to suggest that GINA believes that more than 20 years later we have fewer skills in Guyana!

I have learnt that since Ms Teixeira’s comments, a decision has been taken to cease any further protests at the construction site since they “come across as anti-Chinese.” I understand that further protests will take place at the Office of the President, but not at the office of Winston Brassington who signed the contract with the contractor. It is a strange decision given the facts set out in the several documents I referred to last week, documents to which I am sure certain members of the political opposition have had access. The labour movement must feel thrice insulted – first by the Chinese contractor who shunned them; second by the government and its vacuous spokespersons who said in as many words that local labour is unfit to work on a construction site; and finally by opposition politicians who put Chinese feelings before the interests of the Guyanese workers. The Chinese have every reason to be contemptuous of Guyanese.

Ten billion dollars money, ten cents professionalism
Let us return to the contract documents. The first thing that comes across is the amateurishness of the documents signed by AHI whose officers are its director Winston Brassington and Attorney-at-Law Marcia Nadir-Sharma. Bear in mind that the contract is for over ten billion dollars, excluding a whole range of costs as set out in Part One last week. With such sums involved, you would think that some professionalism would go into the documents. In fact, professionalism is as excluded as Guyanese labour. Surely the contract documents should have been referred to one of the law firms with expertise in high-value construction contracts for finalisation. In fact the documents have all the hallmarks of people with no experience, expertise or concern for ensuring that taxpayers’ money is protected.

In fact there appears some amount of cut-and-paste going on in the preparation of the documents. Here is a classic example: Paragraph 4 of the MOU states that “US$21 million will be provided by AHI shareholders in the form of equity and subordinated debt, such that Zublin will invest the majority of the equity. Pending the execution of the Design-Build Contract, AHI is controlled by the Government of Guyana. Once the Design-Build Contract is executed and financial close is achieved, it is expected that Zublin will be the majority shareholder with the Government of Guyana having a minority stake and proportional representation on the Board of Directors.”

In May 2010 Zublin Grenada Ltd had announced that it was invited by the government to undertake this development and had given the Zublin team three weeks to consider the offer. There has been no indication from Zublin that it had accepted the offer but the June 14, 2011 MOU suggests that while Zublin is still involved it is not prepared to take any risk at the construction stage, all the financing for which has so far been provided by the Government of Guyana through AHI. As the public is aware, the US$25 million received from the disposal of the government’s share in GT&T was earmarked for the hotel and this is in addition to the US$10 million advanced by NICIL to SCG towards their $51 million contract price.

Viability not determined
Someone should surely be asking Mr Brassington and/or the Finance Minister for details of the Marriot and Zublin contractual arrangements, including the basis for valuing any shares to be issued to Zublin. I shudder to think that it will be at the price which Ms Nadir-Sharma has placed in the Articles as the price per share. She needs to be told that the share price in a company’s Articles of Incorporation should be the minimum issue price, to allow market flexibility to the directors. Is Ms Nadir-Sharma aware that nominal price per share was abolished in 1995 when the 1991 Companies Act came into force?

A review of the documents reveals other concerns: the June 2011 MOU admits that the revised contract price of US$51 million for a reduction in the scope of work is “not fully acceptable to AHI”; that AHI is confronted with a shortfall based on the Marriott projections; that there needs to be further capital costs reduction, increased revenue from the operation of the casino and more optimal financing terms. In other words, the construction began even before the viability of the project had been determined! This may explain why NICIL is providing interest-free loans to AHI.

What it does not explain is how and why Mr Brassington could give to Dr Ashni Singh, Minister of Finance, six months later, an undertaking that AHI “will procure or provide all the investment [and other] financing required [by AHI] estimated at US$58 million.” Mr Brassington and Dr Singh both appeared to be pretending that they were entering into an arm’s length agreement and that they did not know that it was Dr Singh’s NICIL that was improperly providing AHI with whatever money it accesses.

Vying for the most elementary but not costly error made by the Brassington-Nadir-Sharma combination is their failure to ensure that SCG has a legal presence in Guyana. It is one of the first assertions in the preamble in any properly drawn-up agreement. Two separate checks at the Deeds Registry this past week suggest that SCG is not incorporated or registered as an external company in Guyana as it is required to be under the Companies Act. There is no evidence that Mr Brassington agreed to waive the mandatory statutory duty.

To be continued