Guyana does not observe the eight sub-rules of the rule of law

Mr Anil Mohabir Nandlall evades my request (‘Not the rule of law’ SN, March 22) for him to state his opinion as to whether Guyana observes Lord Bingham’s eight sub-rules of the rule of law and instead immodestly invites me to examine his legal career: (‘Not a response to letter on mischief caused by prescriptive title’ SN, March 25). I leave an examination of his career to those with the interest, time and inclination to do so, but welcome the opportunity to examine his assertion that “the presence of the rule of law in a society… can be measured by an examination of the workings of the democratic institutions in the society.”

While Mr Nandlall and I may differ on their order of importance, we can at least agree that the principal institutions include the constitution itself, the president, the state, the parliament, national elections, local government elections, the judiciary, the Ombudsman, the Director of Public Prosecutions, the police force, the Audit Office and the Public Procurement Commission. Let us examine them.

1. A fundamental tenet of the rule of law is that all are equal in the eyes of the law while our constitution endows one person with the privileges and immunity of a monarch under the divine right of kings doctrine. Mr Nandlall’s hero Cheddi Jagan, had vowed to change what he and his party referred to as the Burnham constitution, a constitution that hangs like an albatross around the nation’s neck, notwithstanding the timid changes under the St Lucia Accord. If at least ten articles of the constitution have not been operationalised, do we need further evidence that even this “undemocratic” constitution is not working?

2. Few would dispute that over more than a decade, this President has routinely violated the constitution, the Fiscal Management and Accountability Act 2003 and the Procurement Act 2003, broke (tax) and bends (procurement) laws to help his friends; creates jobs for his political cronies whose sell-by date has long expired; heads an office where procurement takes on a special meaning; and who surrounds himself with persons not deserving of respect. In short, the Office of the President is the very antithesis of the rule of law and the constitution.

3. The state’s “supreme organs of democratic power” are spelt out in Article 50 of the constitution as the president, the parliament of which he is a part and of which he plays an important role in the appointment of the majority, and the cabinet which is an advisory body to the president, making the three organs largely embedded in a single individual. Is this Mr Nandlall’s concept of democracy and the rule of law and does it explain why the constitution is so frequently violated by the President with impunity, whether in relation to assenting to bills and the naming of constitutional commissions and office holders? Perhaps I can ask the learned counsel to explain the constitutionality of the President’s refusal to assent to Bill No.18 of 2000 dated December 15, 2000 and unanimously passed by the National Assembly on January 4, 2001. Let me remind him that this was no ordinary bill but one that sought to elevate certain articles from principles to fundamental rights for citizens. In any democratic country where the rule of law prevailed the President would have long had to resign.

4. And what about the National Assembly whose productivity is modest by any standard, whose priority does not see a flooding of agricultural land as a matter of urgent public interest, which regularly passes laws that are a violation of the constitution, whose members represent no one but a political party, who vote for bills they have never read or cannot understand and who receive generous duty-free concessions and qualify for pensions at the age of forty? And that protects at all costs a Minister who misleads the House about a small matter of $4B of public money!

5. National elections which are characterised by playing to ethnic and racial sentiments and insecurities (Babu John annually), patronage, bribing of sections of the electorate by the incumbent, misuse of state funds and justifying it as the privilege of incumbency, and political parties operating outside of a legal framework. Those things distort the fairness of elections and are a real threat to democracy as political debts have to be paid, often with tax immunity, special contracts and other favours.

6. I doubt that Mr Nandlall would consider the absence of local government elections since 1994 as anything but a cynical and gross violation of Article 12 which states that “local government by freely elected representatives of the people is an integral part of the democratic organisation of the State.”

7. The courts which are the guardians of the constitution and the citizens’ rights are hobbled by a law that takes away their independence while the constitutional requirement for consultation between the President and the Leader of the Opposition on the appointment of the head of the judiciary is bypassed by an acting appointment.

8. An Ombudsman, the people’s judge, has not been appointed for six years so that the poor have no avenue and opportunity for redress. That needs no comment, either about democracy or the rule of law.

9. And no discussion on the rule of law can exclude the police that in this major drug transshipment country cede their duty and responsibilities in drug case investigations; whose operational efficiency and independence are often compromised by a telephone call from the politicians; which selectively investigate a blog site critical of the government but refuse to act on another friendly to the government; which needed a drug lord to fight a crime wave; and which is involved in a struggle with its Minister as to who should and should not get a gun licence.

10. The Audit Office, the guardian of the public purse is handicapped by the acting appointment of an unqualified head and compromised by a conflict of interest involving its deputy. No wonder then that it cannot yet publish its 2005 flood report or the 2007 Cricket World Cup report; that it conveniently ignores the improprieties of the big-spending ministries and big ticket items in favour of the checking of vehicle log books and ineffective special investigations on poor people at the Palms and in receipt of pensions.

11. And even as we spend more and more billions on contracts of dubious benefit, quality and authority, the government has refused to establish the constitutionally mandated Public Procurement Commission so that Fip Motilall’s multi-billion dollar contract can pass through NICIL with its huge slush fund, and another multi-billion dollar contract is awarded to a Chinese company, Huawei, now involved in the Laptop scandal.

The litany of violations by these instruments of democracy and the rule of law is long and depressing enough to cause some to refer to Guyana as a failed state. I do not share that view, but rather consider it a dysfunctional state administered undemocratically, that facilitates, permits and protects illegalities and improprieties by a certain class. I am interested to hear Mr Nandlall’s explanation for these phenomena under a government that has been in place for eighteen years, and the reasons why he thinks the party of Cheddi Jagan is unwilling to introduce access to information legislation to give effect to Article 146 of the constitution.

On the Line: 2010 Annual Report of the Guyana Bank for Trade and Industry Limited

Introduction
Last year when the Guyana Bank for Trade and Industry published its annual report for 2009 Business Page interrupted its series on the state-owned Guyana Sugar Corporation. GBTI’s 2010 annual report similarly interrupts a series of articles on the 2011 budget for the principal ministries of the government.

Another similarity this year is the remarkable growth of the Bank particularly in terms of after-tax income which in 2010 increased by a substantial 21.6%, easily surpassing the 5.3% growth in after tax income in 2009 over 2008.

The satisfaction with the results was writ large on the face of Chairman Mr Robin Stoby and in his enthusiastic and lofty prediction of the bank’s future as “luminous in the vein as our head office” and the realisation of the Bank becoming “the leading bank, not only in Guyana but also further afield.”

While there may be some over-enthusiasm in the Chairman’s predictions, they are understandable with net income before taxes increasing by 17.8% in 2010, 25.8% in 2009, 14.8% in 2008 and 23.9% in 2007, making for a cumulative increase since 2006 of 110.6%. Because of the tax effect, after-tax profits have increased cumulatively over the same period by 138.1%.

Highlights

Performance
Earnings per share for the year were $30.1 in 2010, a significant increase from $24.8 in 2009. With the last trade in the company’s shares happening on January 31 at $163, the P/E ratio would be 5.4 compared to 5.6 just under a year before. No offers to sell the Bank’s shares were reported by the local stock market last Monday while the best bid price was $180, theoretically giving a P/E ratio of 5.98.

Given that per-tax income actually grew at a slower rate (17.8%) than in 2009 (25.8%), the enhanced after-tax performance has to be attributed to the lower effective rate of corporation tax which in 2010 was 24.5% compared with 26.2% in 2009.

This of course compares with the nominal rate of corporation tax of 45% up to last year. No doubt the shareholders would have been happy with the announcement that the nominal rate of corporation tax on banks, commercial and telecommunication companies other than telephone companies is being reduced from 45% to 40% effective January 1, 2011.

Commercial banks also enjoy several shelters including on investment income arising in countries with which Guyana has double taxation treaties and certain categories of loans made by the bank.

The interest earned on the average of net loan balances declined from 13.1% to 12.2% while the average interest paid on deposits was 2.1%, compared with 2.2% in 2009. The bank also consistently enjoys a high level of non-interest bearing demand deposits which averaged more than $12 billion during the year. Exchange Trading Gains fell from $733 million or 19.1% of total income in 2009 to $639M or 14.6% of total income in 2010, which took such gains below the 2008 level.

Loans and deposits
Deposits grew by $7.5B from $45.8B to $53.7B, an increase of 17%. Major sectors with increases were State Entities ($3.1B) and Personal ($4.6B), Deposits by the Commercial sector showed no increase while those by non-residents actually declined by 11% to $2.4B. The bank’s deposits increased slightly ahead of growth in deposits of all commercial banks, thus allowing it to increase its market share by 0.29 percentage points to 21.66%. Its market share of loans however could not be reliably determined as the total loans and advances figure published by the Bank of Guyana at December 31, 2010 excludes Real Estate Mortgage Loans.

The strong net increase in loans and advances came mainly in the Services ($2.8B) and Household ($2.6B) sectors. Since Household is wider than housing, it is not possible to ascertain from the financials the extent of mortgage lending from this categorisation.

Once a very strong player in the agriculture sector, the Bank’s loan portfolio suggests that this sector in no longer being emphasised and its growth in 2010 was a mere $73 million.

The Bank’s financial condition remains very strong and shareholders’ funds have increased from $5.7 billion to $6.5 billion.

In addition to providing several tax shelters, government support also comes in the form of treasury bills issued by the government that is prepared to spend billions to mop up liquidity. The bank’s stock of such bills is now $19.2 billion, while its loan portfolio has risen from $13.1 billion to $19.4 billion, an increase of 48%. Empirical evidence is that a substantial share of this is in the form of mortgages but strangely, the financial statements do not show this figure.

Related party transactions
Loans and advances to group companies totalled $660 million compared to $507 million at the end of 2009. Interest income was however recorded at $33 million on these facilities, an average interest rate of 5.69%. With a much higher average earned from the loans and advances portfolio (12.2%), it is difficult to see how the “rates of interest and charges have been similar to transactions involving third parties in the normal course of business” as stated by the Bank. On the other side, deposits by group companies were relatively stable at $1.1billion and interest paid averaged 2.46%, compared to the average on the total portfolio of 2.1%.

Insurance policies placed with a group company more than doubled from $2.1 billion to $5.0 billion.

Another related party is the law firm of Hughes, Fields & Stoby of which the Bank’s chairman is a partner. As with so many financial houses in Guyana, the Bank seems to place much of its customers’ borrowing business with a single firm rather than give the customers the expressed option of independent legal counsel.

Share price
Only 1000 GBTI shares have traded since November 15, 2010 – a single trade on January 31, 2011. 251,500 traded between January 1, 2010 and November 15, 2010, more than half (140,000) of which traded on April 26, 2010 which is the week after the AGM. Share prices on January 11, 2010, April 26, 2010 and January 31, 2011 were $135, $160 and $163 respectively. The highest price for the year was $180 on April 12, 2010.

At $9.0 per share, total dividends in 2010 will represent 29.9% of the year’s distributable profits, compared with 30.3% in 2009.

Conclusion
The Bank is clearly on a growth mode and is so far the only bank approved under the small business amendment to the Income Tax Act; is the centre of the Women of Worth Scheme; and has started construction in Lethem, which will likely make it the first bank to open in that area. The Bank has also taken up an additional 10% shareholding in associate Guyana Americas Merchant Bank Inc. These are significant developments.

On the negative side, the Bank could be more forthcoming with information on its overseas investments and the various loan schemes it operates.

Not the Rule of Law

Mr Anil Nandlall was one of the principal speakers when the National Assembly debated the end of provisions in the age-old law Title to Land (Prescription and Limitation) Act which allowed a person who has, without permission, occupied state land for more than thirty years to approach the court to grant title to that land. He followed that up with a letter in the press (‘Land amendment bill was promulgated to address a serious problem’ SN, March 16 ) which ends with the words “Guyana is a democracy where the rule of law reigns supreme,” and which conveniently invokes the name of Cheddi Jagan.

Mr Nandlall’s letter represents a view of democracy being only and all about five-yearly elections in which state resources can be used by the incumbent to be re-elected and where once in office, he is free to ignore constitutional requirements on local government elections, the appointment of an Ombudsman and the setting up of important commissions such as the public procurement commission; improperly accounting for and unlawfully using public funds; and enriching the re-elected party at the state’s expense as is increasingly happening in the twilight of the Jagdeo presidency. While wrong, that seems to be the democracy practised by Mr Nandlall’s party.

On the issue of the rule of law, I assume that Mr Nandlal is familiar with the Sixth Sir David Williams Lecture on the Rule of Law given by Lord Bingham of Cornhill. I would like to hear Mr Nandlall’s views on whether the state in Guyana observes the eight sub-rules of the rule of law spelt out and discussed by Bingham. For the benefit of readers I reproduce in the first person the third and sixth of these sub-rules and note that the sixth was actually highlighted (printed in bold) in the text of the lecture released to the public.

a) “My third sub-rule is that the laws of the land should apply equally to all, save to the extent that objective differences justify differentiation.

b) “My sixth sub-rule expresses what many would, with reason, regard as the core of the rule of law principle. It is that ministers and public officers at all levels must exercise the powers conferred on them reasonably, in good faith, for the purpose for which the powers were conferred and without exceeding the limits of such powers.”

Against this background, let us now compare the law relating to land as it applies to one set of people – many poor – and to another – the rich and the powerful. With the amendment – or rather repeal of the law referred to above – a long-held right of a person who has occupied public land without permission for 30 continuous years to apply for title under the Title to Land (Prescription and Limitation) Act is being taken away. To buttress his argument in favour of the repeal, Mr Nandlall quotes Article 32 of the constitution which imposes a duty on every citizen to protect the property of the state.

Now compare this with what has taken place in Pradoville 2 where state property with legal and environmental importance has been expropriated by President Jagdeo for himself, other members of the ruling elite and those whose support they need. Let us remember too that Mr Jagdeo and the political ruling class received the same kind of benefit of state land in Pradoville 1 under Cheddi Jagan and which came with several covenants which President Jagdeo failed to observe. By what stretch of the imagination can this be considered consistent with the ‘rule of law’? Or does ‘rule of law’ have one meaning for the political elite and another for the poor?

I wonder whether Mr Nandlall, the professional attorney-at-law, would refuse to act for a client seeking representation under the doctrine of legitimate expectation who has openly and for decades occupied, often with the knowledge of the leadership of the party he serves, public property, investing millions of dollars on that property.

I wonder, too, whether Mr Nandlall the politician will now tell his party that they have to support the eviction of their supporters on the East Coast Demerara whom they courted prior to the 1997 and 2001 elections with promises of ‘certificates of comfort’ and the assurance that their situation would be ‘regularized.’ And as a politician, whether he has exercised his duty to defend state property when the state’s freehold land is given to a member of the party in exchange for that person’s failure to develop leasehold land in Berbice.

Finally, I wonder whether Mr Nandlall believes that similar to the citizen in Article 32, the state has a duty to protect private property and whether he cares that persons can lose their title to someone who has unlawfully squatted on their property for twelve years – or in some cases simply stating that they have done so, as Mr Nandlall might know.

Let me make my own position clear. I am no supporter of title by prescription – whether of private or public property. But I believe that anyone who preaches or defends one standard for the poor and the powerless and another for the rich and the powerful is engaging in hypocrisy and double standards.

Finance Ministry’s budget relies on Norwegian funds

Introduction
Today’s column resumes the review of the 2011 budgetary allocations to the principal ministries of government. Two of the ministries covered so far were the Ministry of Education on February 27 and the Ministry of Education on March 6. Today we turn our attention to the Ministry of Finance which in 2011 was allocated $18.3 B on the recurrent budget and $17.4 B on the capital budget, making a total of $35.7 B.

A summary of the expenditure as contained in the 2011 Estimates is as follows.
As a percentage of the national budget, the Ministry of Finance accounts for 18.4% of the recurrent budget and 28.0% of the capital budget. This makes it the single largest spending ministry in the government, and it is perhaps surprising that its capital budget is bigger than that of the Ministry of Public Works and Communication.

What is also significant is the increase over 2010 – a massive 64.3% increase with the bulk of it on the capital side. This is largely due to the proposed spending on LCDS projects including equity spending on the Amaila Falls Hydro-electricity project.

The Ministry
Like the Ministry of Health, this ministry has two ministers, with the junior minister Ms Jennifer Webster playing a more low-key, back-room role while the senior minister Dr Ashni Singh, brought in after the 2006 general elections as a technocrat is increasingly copying the style and language of his mentor, President Bharrat Jagdeo. That style has not endeared him to the diplomatic and multilateral financial community, and many observers think that that may be responsible for the closing of the development agencies DFID and USAID as well as the relocation of the office of the head of the World Bank mission in Guyana.

The World Bank office came in for a scathing attack by Dr Singh who accused the bank’s staff here of having “one of the largest appetites for publicity and self-promotion” and seeking to increase their “creature comforts” by relocating to “a grand former colonial residence opposite one of the city’s most fashionable cafés.” Coming in for his tongue-lashing was the Economic Intelligence Unit which had dared to question the final outturn for 2009 after the economy had performed poorly in the first three quarters. It was a case of how dare they question him.

His shutting out of critical views by draconian legislation on the New Building Society, his refusal to approve proposals by micro-projects for EU funding and his refusal to canvass views prior to his annual budgets all demonstrate an intolerance for opposing views that is inconsistent with a true technocrat.

Staffing
This is another of those ministries where the percentage which the number of contract employees bears to the total number of employees exceeds 40%. It is in fact 43.4% but it accounts for 72% of the total wages and salaries of that ministry. If one excludes the junior staff who according to Labour Minister Manzoor Nadir, were recently shifted to the category of contract employees, the share of the wages budget that is paid to contract employees is huge, very huge.

In the current budget of the Ministry’s Administration, three line items account for 94.06 % of the total as follows:
$B
Revision of wages and salaries 3.5
Electricity charges 2.5
Subsidies and contributions to local organisations 6.3
12.3

In the Government Accounting Administration two line items – statutory pensions and gratuities ($2.2B) and Pension Increase ($2.1B) – account for 82.4% of this programme’s activity.

Subsidies and contributions
The entities in receipt of the largest contributions were the Guyana Revenue Authority ($3.1B) and LINMINE for community power ($2.2B). It is of some interest that notwithstanding a decision of the court, the GRA is treated for the purposes of its expenditure as a separate entity while its entire income goes into the Consolidated Fund.

Other significant subsidies and contributions were made to organizations, some of which are of doubtful legal status, while that of their audits is even less clear. The principal ones are:

$M
Customs Anti-Narcotics Unit 99.2
Ethnic Relations Commission 89.1
Kwakwani Utilities Inc. 253.5
State Planning Secretariat 130.1
Statistical Bureau 172.0
Total 743.9

Capital programme
Under the capital programme are such hazy projects as:

$M
Road Support Project 150
Basic Needs Trust Fund 650
LCDS Projects 14,350
Student Loan 450
Poverty 717
GuySuCo 440
Total 16,607

The projects earmarked for funding under the LCDS programme are “Amaila Falls equity” which can surely mean anything and everything, Amerindian Development Fund and Land Titling, and Fibre Optic Cable.

Conclusion
But for the interventionist style of the President, this would easily be the most important ministry in the government. In addition to his several functions and duties under the Fiscal Management and Accountability Act 2003 which he sometimes conveniently ignores, Dr Singh is also the subject minister responsible for the Bank of Guyana, the Guyana Revenue Authority, the Bureau of Statistics, the National Insurance Scheme (NIS) and the Office of the Commissioner of Insurance. Under the Bureau of Statistics Act, 1991 unless he appoints a chairman of the bureau he is automatically the chairman, making him the scorekeeper of his own performance. And as subject minister, he seemed blissfully uninformed about the failure of the Office of the Commissioner of Insurance which allowed Clico Guyana to conduct its affairs in the most reckless manner and caused the NIS to have a yet-to-be filled hole of $6 billion.

Even though the major bungling and the public pronouncements on the tax concessions to the Ramroop group by Mr Jagdeo took the spotlight off Dr Singh, he was in fact at the centre of the fiasco, having had to look at it from three different perspectives. To his further discredit, Dr Singh also chairs the board of NICIL, the state-owned company that simply refuses to conduct its affairs in accordance with the law.

The Minister regularly publishes the mid-year report with misleading dates. He was cited by an opposition MP in the $4B transaction with GuySuCo in which his colleague in the Ministry of Housing was found to have a prima facie case made against him for misleading the National Assembly. There can be no doubt that Dr Singh would have known and went along with the transaction. But if there is a single issue for which this Minister will always be remembered is that while he served as Senior Minister of Finance, his spouse was effectively the Auditor General. That is an extremely convenient arrangement, but one over which few would be prepared to risk their reputations, and which will overshadow Dr Singh’s tenure as Minister during which he reported growth in each year.

Next week I will review the annual report of the Guyana Bank for Trade and Industry Limited which has published a notice of its AGM.

The President hides under the apron of the constitution’s immunity clause

The commemoration ceremony for the late President, Dr Cheddi Jagan, at the cremation site at Babu John in Berbice has a strange and profound effect on President Jagdeo. It is as if some weird spirit causes his newly minted doctorate in literature to desert him in favour of palpable fabrication; his natural immaturity to descend into inexplicable recklessness and the stature of his presidency into miasmic freefall.

A couple of years ago the spirit caused him to tell his dumbfounded Babu John audience that if the PNCR was returned to power, the same people who were stealing guns would be given them. This year it is about blood and its target is that party’s presidential candidate, retired Brigadier David Granger against whom the accusations were so beyond the pale that even Jagdeo’s preference as presidential successor Mr Donald Ramotar sought to rephrase the accusation describing it euphemistically as “a bit harsh.”

Once again, the President abuses the country’s constitution to make defamatory statements about others while hiding under the apron of immunity article in the constitution. He knows – or rather thinks – that he has such absolute and unqualified immunity under the constitution that he cannot be prosecuted for anything. I doubt whether the framers of the constitution would have intended the constitution to be interpreted in such literal and absurd sense. Yet, his confidence – or recklessness – seems to lead him to believe that he can, with impunity, accuse others of being incompetent, habitués of rum shops, man kisser, etc.

When Mr Freddie Kissoon, whom Mr Jagdeo regularly abuses and defames, uses a term which the head of state regards as offensive to describe his presidency, Mr Jagdeo runs to the court for financial compensation for loss of reputation. In the process he also sought and obtained a silencing order (injunction) against Mr Kissoon, an order that has been challenged but not heard by the court. One hopes that when the court calls, Mr Jagdeo will be courageous enough to take the stand and answer questions about his presidency and his conduct over the past several years.

Meanwhile, I believe that in Mr Granger, Mr Jagdeo has more than met his match. Now that Mr Granger has stood up to him, we wait to see what he will do.