Build not destroy
From reading the letters and stories in the daily papers in Guyana, it is obvious that Guyanese have entered the year 2014 with a new resolve to make things better for themselves. The contents of the stories suggest that Guyanese realize that, despite years of continuous growth, the economy is not working for them. The economic benefits of the successive growth years have gone to a few, even though it was the majority of Guyanese who made the sacrifice necessary to enable the economy to produce the results that it has produced in recent times. Many who are frustrated by the state of affairs are calling on their fellow Guyanese to join in being more assertive in their demands about the changes that they seek. Quite often people think of destructive militancy as a way of gaining attention and change, especially when they experience a sense of hopelessness. As these thoughts are processed, Guyanese should keep in mind the words of President Obama to the world in his first inaugural address in January of 2009, “… people will judge [us] on what [we] can build, not what [we] destroy.” Indeed, the fallout that results from overly defiant and aggressive action can do more harm than good at times as is seen today in some parts of the Arab world.
Investment vehicle
Guyanese therefore need to look for alternative action, a constructive militancy, that gives them control over their lives and control over their government. Constructive militancy is good citizenship that calls for a different kind of participation in the economy, one in which Guyanese could 
earn money by spending money while going about their daily lives. Not everyone is a risk-taker and the unfairness of the regulatory system and the rigours of entrepreneurship discourage many. But there is another way open to Guyanese, even the risk-averse Guyanese, to participate in the entrepreneurial opportunities of the country with some success. This option has been given to them unwittingly by the government with its misuse of the public-private partnership investment model. Guyanese need to examine this investment modality and take advantage of its usefulness as an investment vehicle. Based on recent disclosures of how some of the public-private partnership deals were structured, future decisions on how the model works should no longer be left solely to the government. The Guyanese public needs to take a more active role in how this modality operates for its own sake. It is the reason that this writer urges the establishment of a capital investment fund which would be financed through the sale of shares or the continued creation of special purpose entities to which Guyanese households, including those in the diaspora, should first be invited to invest.
Increase in revenues
When the government started using the public-private partnership modality for building infrastructure, very few Guyanese knew about the model and how it worked. The World Bank, through the International Finance Corporation, held seminars for public officials to explain the public finance benefits of using the modality for building infrastructure of a country and to demonstrate its operation. It might be the case that still few understand how it works even today, but that does not matter. What is more important is the effectiveness of the tool and its relevance to the economic prospects of private citizens and its potential use as a governance mechanism. The policy focus on public sector investment has resulted not only in massive amounts of money being spent, but also in massive amounts of money being earned by a sliver of the Guyanese population. Expenditure on capital works accounts for nearly 50 per cent of the spending by the government. In 2012 alone, this level of spending resulted in an annual increase in revenues of at least $680 million for the contractors who were fortunate to get these jobs.
Misuse of model
The concern, however, is not so much about the level of spending as it is about the misuse of the public-private partnership model of development that induces a call herein for business to be done differently under this model. A discussion of this behaviour would require more time and attention. But, there is an urgent need for action stemming from the reports appearing in the newspapers about the financial structure of some past and existing projects. Some reports reveal that past deals have resulted in the conclusion of very poor structuring of the investment. These lopsided deals show taxpayers bearing the greater risk and enjoying little benefits while a few private investors reap the greater benefits and bear little risk. Considering that the bridge over the Berbice River could have been funded by investments by Guyanese households, there is no logical explanation to giving away the benefits as reported. The structure of the deal surrounding the Marriott hotel and the Amaila Falls hydropower project serves as additional examples of this malpractice.
Irrationality
Recent revelations about the financing of the Berbice River Bridge indicate that the government used the money of Guyanese taxpayers to fund most of the cost of the bridge and then allowed private investors with a minority stake to own and operate it. Under this arrangement, the majority of the cash inflow is going to the private investors whose risk is negligible. A similar discovery was made of the construction of the Marriott hotel where the government intends to subordinate the majority of its investment by treating it as a loan, thereby allowing investors with a minority stake to control the cash inflows of the project. How and when the loan is to be repaid and at what interest remains unknown. The Amaila Falls project was not dissimilar to that of the Marriott project where the investor, Sithe Global, would have had a minority stake but majority control over the project with the government agreeing to bear all risks associated with the loans that made up the larger financial burden. One did not expect to find this kind of irrationality in attendance among the aforementioned projects under the public-private partnership model where for no justifiable reason the government would abandon the legitimate interests of Guyanese households just to say that it built another piece of infrastructure. This reflects poor governance as well.
IMF’s comments
The typical public-private partnership involves long-term contractual relationships between public and private entities to share the risk for the design, construction, and operation of mainly infrastructure projects. It does not usually represent a totally arms-length relationship between government and the private entity doing the work. Usually, the private investor puts up the money or a substantial part of it thereby making the project possible without the need for the government to impose higher or additional taxes on citizens. It also reduces the need for government to operate budget deficits. Under those circumstances, the private investor who has put up all the money or the lion’s share gets to control the project and its cash flows. That is not how it has been working in Guyana and it is not surprising that the IMF in its most recent comments on the use of public-private partnerships by the government called on it to adopt international best practices.
Perfectly legitimate
Despite its misuse by the government, the public-private partnership model is a perfectly legitimate and valuable way of managing and spending public funds. By substituting private equity for taxes, the public-private partnership model has the potential to change fundamentally the public finance process and to make room for investors with small amounts of money. It makes no sense therefore for Guyanese to oppose it as a policy measure. Moreover, the government continues to obtain encouragement from the IMF and World Bank to use this investment modality for capital works. It should be clear also to all Guyanese by now that the government is not going to back away from using the public-private partnership model of capital. In the face of this reality, Guyanese should be insisting that the model be used in their best interest because it has implications and value for their overall welfare. This means that Guyanese households should be insisting on the right to participate in the public-private partnership opportunities that arise. That is the kind of constructive militancy that is required to guarantee Guyanese that they would benefit from changes in the economy.
Opportunity cost
Under the allocative function of the government, taxation is used to take money from the private sector, that is private citizens and private businesses, and make it available to the government. One of the key reasons for using the public-private partnership model is to avoid the need to ask citizens to pay higher taxes. While the government uses the unwillingness to tax citizens more as justification for using the public-private partnership model, it does not as a general rule give citizens the chance to invest the untaxed money in capital projects.
Instead, it goes off and looks for others to make the investment while creating the impression that these investments are beyond the reach of Guyanese households. Except where the investment might be beyond the financial capacity of the country as a whole, Guyanese should be given the chance to make the decision of whether or not they want to participate in a capital project funded under the public-private partnership.
The unavailability of this option to investors with small amounts of money ought to be a real concern for Guyanese because when the government takes money in the form of taxes, their opportunity cost of being taxed is their inability to invest the money however they wish.
Greater say
Now that the public-private partnership is an accepted way of spending tax dollars, Guyanese should have a greater say in how that happens since as private citizens they are part of the private sector. Why would allowing private citizens in on the investment make sense? The simple answer is equity and fairness. It gives each Guyanese who wants to a chance to own a share of the infrastructure and benefit both from its use and the profits that it generates. The Berbice River Bridge serves as a good example. The cost of constructing that bridge was put at $9.9 billion. Imagine how different things would have been for many Guyanese, including underpaid public servants, if the government had asked the working population to invest in that bridge and had given them a reasonable time to pay the money knowing that all of it would not be needed at one time. With a working population of 250,000, each employee would have been required to invest $40,000 in the construction of the bridge. If they were allowed to pay it over a one-year period, it would have cost each person $3,300 per month. Just think of how much easier it would have been if this investment option was open to all Guyanese in the diaspora and at home, and they had a longer period in which to make the investment.
Fun doing the maths
It should be fun doing the maths on the Specialty hospital and the Marriott hotel. As for the Specialty hospital, the cost per employee is $14,000 or $1,200 per month if allowed to pay over a one-year period. The Marriott, though a bit more expensive, is still manageable. Using the same denominator of 250,000 employees, the US$58 million Marriott would cost each investor $47,560 or $3,933 per month. As the few examples above show, many of these income-generating projects are not expensive and serve as additional means by which Guyanese could earn income. Instead the government tries to make it look complicated. Of immediate interest therefore should be the new bridge to be built over the Demerara River. Households should insist that they be given a chance to explore investing in any special purpose entity set up to facilitate the construction of the bridge.
Current and future projects
It is quite understandable that Guyanese would not be able to invest in all the capital projects, but those persons who want to participate in the investment should be free to do so and those who do not want to participate should have the same right. What should not happen is that the government should be allowed to dismiss out of hand investment by households in these projects by automatically turning to select private groups for help. In that case, the Amaila Falls project should be brought back for a second look, and since the financing of the Marriott is incomplete, that project too should be revisited. In addition, all of our politicians should be asked why Guyanese should not use this model for current and future infrastructure projects. That too is constructive militancy, and it would help to clarify who is blocking development and who really wants it.
Stock Index
The Lucas Stock Index (LSI) declined 0.85 per cent in trading during the first week of January 2014. The stocks of five companies were traded with a total of 197,800 shares changing hands. There were no Climbers and two Tumblers. Banks DIH (DIH) fell 2 per cent on the sale of 176,000 shares while Demerara Tobacco Company (DTC) fell 3.63 per cent on the sale of 600 shares. The stocks of the remaining three companies Demerara Distillers Limited (DDL), Guyana Bank for Trade and Industry (BTI) and Republic Bank Limited (RBL) remained unchanged on the sale of 3,500; 17,600 and 100 shares respectively.
