– Indian, Chinese investors on board
Several tax holidays and concessions have been extended to Queens Atlantic Investment Inc (QAII) covering the five different ventures it will undertake at the Sanata Textile complex.
Speaking at a press conference called at the NCN Studios yesterday by the Privatisation Unit, Head of the Guyana Office for Investment (Go-Invest) Geoffrey Da Silva said the tax holidays and concessions fall under the Fiscal Enactments Amendment Act, Customs, Value Added Tax (VAT) and Excise Tax, the Income Tax In Aid of Industry and the Investment Act.
Meanwhile, Da Silva said too that investors from India and China were on board with the projects, in partnership with QAII.
He said the biotechnology project – a first in Guyana – would benefit from a five-year tax holiday. And based on the performance of this venture, government may award another five-year tax holiday at the expiry of the first. The same holds for the textile venture.
Customs duty, Excise Tax and VAT have been waived for all of the projects, Da Silva said. Government is also granting a waiver of withholding tax on the repayment of loans taken to finance the projects. Da Silva said Go-Invest was also examining how government could help with fuel costs since this was what brought down G&C Sanata.
He said the concessions granted included provision for unlimited losses carried forward and the repatriation of capital overseas. The investors are also allowed to open foreign currency bank accounts.
Head of the Privatisation Unit Winston Brassington said yesterday that the government got the best possible deal that could have been achieved – one that was not envisaged at the time the tender was put out.
He noted that QAII was engaged to pursue its US$30 million investment after no bids came in for the Sanata Textile Mills complex and other investors wanted only part of the facility and not the whole thing. The QAII investment includes a modern multifunctional printing press, new textile milling equipment and a research and development facility for the manufacture of pharmaceuticals.
Brassington said the fact that no tenders came in for the Sanata complex had indicated a lack of interest, leading to the decision to negotiate with QAII. Insisting that the deal was no giveaway, Brassington called the deal the best of both words – maximum returns for government and giant investment and job creation. The lease rental is $50 million per annum – far higher than what government leases properties for at its other industrial estates.
“We have worked with the investors in sourcing other investors,” Brassington said, reiterating what Da Silva had said about partnerships.
Brassington also said that job creation was key in the decision to go with QAII. He said the previously identified employment number of 1,200 could increase significantly once the other investors got on board.
“If anyone was interested…, we would have worked with that investor to obtain a position that sought investment, employment and a net return on assets, this was sought here and obtained,” Brassington said.
He said the privatisation of the complex to QAII was fully endorsed by the Priva-tisation Board. Additionally, QAII undertook to handle rates and taxes and pay rent based on square footage of the land. It was recognised that most of the buildings had to be rebuilt or demolished given the condition and the presence of asbestos.
“In practice [like with Linmine] once you have advertised and no bids are received, the final deal is a negotiated deal. In this deal, we have benefited from securing a much larger investment and greater employment than that associated with textile alone. We have sought and maintained the textile operations but we now have additional operations – this helps to ensure viability and sustainability,” Brassington said.
“What we have in our arrangements with QAII are far better than what we would have achieved with our advertisement and there is no-one who has said that they were capable and willing to offer a better arrangement last year or any other year.”
He explained that the privatisation of the entity started with an advertisement in the last quarter of 2006 for the former G&C Sanata operations but no bids were received on the extended closing date of February 28, 2007. “The tender was re-advertised over 20 times. It had an original closing date of January 2007 but was extended to the end of February to encourage interest from both local and overseas investors. As usual the bid box was opened on February 28, 2007 in the presence of a representative of the Auditor General at which time the non-receipt of bids was recorded,” he said.
He said that in accordance with the Privatisation Policy Framework Paper of July 1993, where an entity has been advertised and no bids received, direct negotiations can be held. “Indeed, this was the case with the privatisation of Linmine to Omai in 2003 following the non-receipt of bids to the privatisation offers,” he said.
Brassington said that in mid 2007, a proposal to lease the complex was received from QAII and following detailed discussions and negotiations, which he called tough, a paper submitted by the Privatisation Unit to the Privatisation Board on May 9, 2007 unanimously recommended approval of the proposal. Cabinet approved the recommendations of the Board in May of 2007, Brassington said.
On the deplorable condition of the equipment on the complex, Brassington said security was an issue and much of the items have been pilfered. He said there have been instances where security guards in the Sanata complex had to fight tooth and nail with thieves who would not let go of cut cables and other items taken from the complex. He said there have also been reports of gunfire between security guards and thieves.
“Like any lease arrangement, we have standard claw-back clauses that allow us to terminate the lease if the investment and construction [are] not implemented within the stipulated time frames. We have option to buy clauses based on independent valuations of the complex prior to the privatisation – this can only be exercised after the business plan has been implemented. This deal is good for Guyana – employment, investment and income for government,” said Brassington.
