The head of NICIL, Mr. Winston Brassington announced that the Marriott Hotel will open its doors next month. He highlighted the various challenges that the project faced over the years, including what he claimed were unrelenting attacks from the political opposition and certain sections of the media; the pending Court action to stop the project; and investor concerns about the failure to pass the amendments to the anti-money laundering legislation. Mr. Brassington further disclosed that:
- No taxpayers’ funds were used to finance the construction costs of the hotel;
- A feasibility study of the project undertaken in October 2012 showed an internal rate of return (IRR) of 11 per cent;
- The project was undertaken in “a full and transparent manner”; and
- NICIL transactions are subject to full public disclosures, are audited by the Audit Office and the related reports are presented for Parliamentary review.
Historical background
NICIL was incorporated in July 1990 to monitor the Government’s privatization programme and to ensure that the proceeds as well as dividends received from public corporations are promptly paid over to the Consolidated Fund. The anticipated revenue from these activities up to 2001 were reflected in the national annual budget under “Sale of assets” and “Dividends and transfers” respectively. NICIL did not retain any moneys collected on behalf of the State and met its operating expenses from a subvention provided by Parliament, a clear evidence of Parliamentary sanction of NICIL’s mode of operation.
In December 2001, through what many, including this column, regard as a flawed Management Co-operation Agreement, the operations of NICIL were converted from a small administrative and monitoring outfit to one which saw the wholesale transfer of a significant portion of State resources to NICIL. All government shares in public corporations and other entities as well as dividends received from them became NICIL’s assets. In addition, a large number of State properties, especially those identified for sale, were first transferred to NICIL through a misapplication of the Public Corporations Act. There was no exchange of value, and therefore NICIL received these assets free of cost.
When the properties were sold, NICIL retained the proceeds and treated them as its revenue in breach of the International Financial Reporting Standards and other generally accepted accounting practice. As a result, NICIL made windfall gains so much so that its net assets increased from a negligible amount in 2001 to $12.295 billion in 2012! There was also no publicly available evidence as to the reason for the wholesale disposal of state assets. Nor was there evidence of adherence to established norms relating to competitive bidding before the assets were disposed of, to ensure transparency as well assurance that the State received good value for money from these transactions. In any event, the Public Corporations Act does not permit the disposal of State assets in the normal course of business. Only capital assets that are surplus to a corporation’s needs may be disposed of, or transferred to another corporation in need of them.
Use of taxpayers’ money
All State resources, including revenues, assets and liabilities, belong to the citizens of this country in the same way that the resources of a company are those of its shareholders. The Consolidated Fund is the taxpayers’ fund, regulated by certain constitutional and legislative procedures with the full involvement of the duly elected representatives of the people. It is therefore bizarre to think that only revenues derived from taxation are taxpayers’ funds. Every citizen is a taxpayer, especially when one considers the widespread applicability of value added tax.
From 2002 to date, NICIL’s financial resources have reached enormous proportions so much so that that NICIL was able to finance the cost of construction of the Marriott Hotel, estimated at US$52 million. NICIL has become a parallel treasury and a government within a government, controlled by a few high-ranking government officials. When the Administration is unable, or does not wish, to access funds from the Consolidated Fund through the constitutionally-established Parliamentary process, it uses the resources of NICIL. However, the extent to which this has happened is not publicly known.
All of this is a serious violation of Articles 216 and 217 of the Constitution, the foundation pillar for the control over public revenues and expenditure. It has never been clear on whose authority this diversion of a significant portion of the State operations and resources took place; whether advice was first sought on the legality of this changed arrangement; and whether the advice is consistent with the new mode of operations of NICIL. However, in his 2002 report, Mr. Brassington boldly asserted that the agreement paved the way for, among others, “the fulfillment of financial statutory obligations which NICIL had previously failed to do”!
Feasibility study and internal rate of return
Although the decision was taken in 2009 to construct a Marriott-type hotel, it was not until October 2012 that a feasibility study of the project was undertaken. One would have thought that such a study would have been a prerequisite for determining whether or not the project should proceed. Notwithstanding this, the related report, excluding sections dealing with commercially sensitive or confidential information, was released to the public in September 2013. This was some eleven months later, after immense pressure was placed on the Administration amid concerns that: (a) the project might not be economically feasible; (b) the initiative would have been more appropriate for the private sector to undertake to free up the Government to attend to other important priorities; (c) the estimated cost of construction might be too high; (d) the project’s execution was shrouded in secrecy; and (e) the National Assembly should have been involved in the decision-making process of a project of this magnitude, considering that public resources were being used as a source of financing.
The study showed that the project will earn an internal rate of return (IRR) of 11 per cent. However, no mention was made of the cost of capital which is necessary to determine the appropriateness of the IRR. If the cost of capital is higher than the IRR, the project is not economically feasible. Mr. Brassington also did not disclose the assumptions made in the feasibility report but the Kaieteur News article of 16 March 2015 suggested the following: Guyana’s successful exploration for crude oil; the construction of a deep water harbour and the road to Brazil; airport expansion; and the completion of the Amaila Falls Hydropower project.
Issue of transparency
Transparency in government occurs when issues of national importance are brought before the highest forum of the land, and elected representatives are able to discuss and debate them in the spirit of goodwill and with the public interest at heart. On the basis of careful analyses of the facts and pertinent arguments decisions are made. The reality of the situation is, however, quite different, especially since the 28 November 2011 elections which saw the combined Opposition having the majority in the Legislature. The Administration has refused to acknowledge its minority status and has consistently denied the legitimate right of legislators to be involved in the decision-making process as regards major infrastructure works. The construction of the Marriott Hotel is but one example.
Placing advertisements for the various works undertaken was only the first step in a series of actions to secure full transparency and to ensure that the best value for money is achieved. Mr. Brassington had consistently denied access to information about the project, citing confidentiality, and the misplaced belief that NICIL is a privately-owned company. NICIL is a private limited liability company, meaning that its shares are not transferrable as in the case of publicly-owned companies such as Banks DIH Ltd. NICIL is also a government company in the context of Section 346 of the Companies Act.
Section 24 of the Procurement Act provides for public corporations and other entities in which controlling interest vests in the State to have their own procurement rules, subject to the approval of the National Procurement and Tender Administration Board (NPTAB). However, where there is a conflict, the Procurement Act takes precedence. In addition, if funds are received from the Treasury for a specific procurement, the concerned entity is obliged to follow the Procurement Act. It is not publicly known whether NICIL has its own procurement rules and whether they have been sanctioned by the NPTAB. What we do know is that NICIL did not adhere to the Act in relation to the award of contracts for the Marriott Hotel project. The main contract was signed just 12 days before the last elections!
Public disclosures, audit and Parliamentary review
As at June 2012, NICIL was ten years in arrears in financial reporting and audit. Concerned about this state of affairs, the National Assembly passed a motion calling on the Minister of Finance to ensure that NICIL brings its accounts up to date. Since then, within a period of a little over 12 months, NICIL has produced audited accounts for eleven years! The following are the details:
The audits for nine years, i.e. 2002 to 2010, were all finalized within an unprecedented period of little over two months, notwithstanding the complex nature of NICIL’s operations. Not only that, but a “clean bill of health” was given, despite all the constitutional and legislative violations. Reports for four years, i.e. 2002 to 2005, were also issued on the same day. In the circumstances, one could legitimately express concern about the credibility of these reports, especially considering that the Minister is NICIL’s chairman while his wife not only holds the number two position in the Audit Office but also oversees the audits of public enterprises, and by extension NICIL!
