Baishanlin International Forest Development Inc. is again in the news. This time it is challenging the decision of the Guyana Revenue Authority (GRA) to seize two Lexus motor vehicles because of the company’s failure to pay the requisite taxes on the importation of these vehicles. The company, through its lawyers, contend that GRA’s action violates the trade agreement entered into in 2003 between the governments of China and Guyana.
Baishanlin was incorporated in September 2006 under the Guyana Companies Act 1991 with the main objective of setting up downstream wood processing operations in Linden and on the East Bank Demerara. It is a Guyanese company and its main shareholder is a Guyanese citizen by naturalisation. The company had signed an investment agreement with the Government on the basis of which it was granted generous fiscal concessions. This is in addition to two State Forest Exploratory Permits despite the fact that Baishanlin did not meet the criteria for the grant of such permits. During the period 2012 to 2015, the company benefitted from concessions in the sum of $1.8 billion. Its shareholders/directors also acquired controlling interest in five logging companies in violation of the Forests Act 2009, thereby gaining access to 627,072 hectares of State Forest.
After nine years, Baishanlin is yet to set up the wood processing facility despite several promises to do so. Instead, the company has been involved in the wholesale exportation of logs mainly through the companies it controls; mining operations and housing development at Providence; among others. The investment agreement specifies that the company is required to repay the fiscal concessions if it fails to honour the terms and conditions of the agreement without adequate justification. At the same time, the Agreement is to be terminated. Needless to mention, no bilateral agreement can take precedence over, or override the requirements of, the Revenue Authority Act 2000 and the Forests Act 2009.
A few weeks ago, we carried an article entitled “Lessons from Tanzania” in which we highlighted a number of actions taken by newly elected President Magufuli in attempting to cut waste and extravagance, and to reduce corruption government. These include:
(a) Severe restriction on overseas travel by government officials and instructions that they instead make regular visits to the rural areas to learn and help solve problems affecting residents. First class/business travel is also banned, except for the President, Vice-President and the Prime Minister. In addition, as far as possible Ambassadors and High Commissioners are now responsible for attending to those matters that previously required overseas travel by government officials;
(b) Cancellation of 9 December 2015 Independence celebrations (coincidentally observed as the International Anti-Corruption Day since the coming into being of the United Nations Convention against Corruption in 2003) and declaring it a national day of cleanliness and sanitation;
(c) Reallocation of funds for entertainment expenses to healthcare at a time when people were dying of cholera and in the light of the deplorable conditions of health care facilities;
(d) in the size of Cabinet from 30 to 19 and reorganising the operations of ministries and departments as a cost-saving measure;
(e) Ban on workshops/seminars at expensive hotels and using government boardrooms instead for such events; and
(f) Tightening of revenue assessments and collection by removing corrupt officials. This has resulted in a 67% increase in the monthly revenue.
The BBC recently reported, that over 10,000 “ghost workers” have been removed from the government’s payroll, based on a special audit carried out. This has resulted in a monthly cost saving of US$2 million. Similar discoveries were made in Nigeria and Kenya in respect of 24,000 and 12,000 workers respectively.
Given the current state of our economy, as explained by the Minister of Finance in a recent interview, as well as the precarious financial position of the Government, as evidenced by the overdraft on the Consolidated Fund of $76.718 billion as at the end of 2014, should we not consider implementing some of the actions of President Magufuli? Can we not inject some “Magufification” (a word that is gaining increasing currency in Africa) to provide the much needed impetus to our economy?
The Minister’s statement on the economy
According to the Minister of Finance, Guyana is experiencing a reduction in spending because of a decrease in illegal activities, including drug trafficking that had over the years created and institutionalised a parallel or underground economy. He indicated that it would take time for the economy to improve and adjust to the new situation, despite several measures in place. The Minister stated that Guyana is not on track to achieve a medium-term growth of 7% and that to achieve such growth we need to move away from the over-dependence on sugar, rice, bauxite and gold.
During the period 1991 to 1997, Guyana recorded an average GDP growth rate of 7.1% mainly due to the Economic Recovery Programme (ERP) initiated by the Hoyte Administration and continued by the PPP/C Administration. GDP growth, however, declined markedly to 0.6% during the period 1998 – 2004. This was well behind the Caribbean region, and one of the lowest among the countries that benefitted from the Highly Indebted Poor Countries Initiative. During the period 2005-2013, the average growth rate was 4.7%, peaking at 7.02% in 2007. However, in 2014 and 2015, it fell to 3.8% and 3.0% respectively. The projected rate of growth for 2016 is set at 4.0%
The Minister spoke of Guyana “adding value to its commodities, by taking production to the tertiary level, diversifying agriculture, and modernising productive methods”. He also warned of getting over-excited about oil exploration and suggested that we need to pay attention to new industries, especially in the service sector.
We cannot agree more with the sentiments expressed by the Minister. Drug trafficking, money laundering and corrupt behaviour have taken a stranglehold on the economy and have been propping it up over the years. One should also not ignore the extent of the role remittances play in the scheme of things. Money was flowing through the economy. In the circumstances, there was no incentive to encourage legitimate activities, and value added initiatives of which the Minister spoke were to a large extent ignored. In an attempt to dismantle this network of illegal activities, Guyanese citizens are feeling the adverse effect in terms of job creation and spending power with the resultant spike in criminal activities. According to a Caribbean Development Bank study, unemployment among youths is hovering at around 40% with the overall unemployment rate persistently high.
It is indeed a herculean task to integrate the underground or parallel economy with the official economy but the effort must be made in the long-term interest of the country. It is a price we have pay, and a bitter medicine to swallow, to correct the ills of the economy. Who is to blame? What is certain is that the collateral damage extends to the poor and vulnerable, the unemployed youths, disadvantaged women and children, pensioners without adequate sources of income, and the sick and elderly with little financial resources to take care of them.
Private Sector Commission statement
At its Annual General Meeting held last week, the Private Sector Committee (PSC) reported that the economy had not grown as fast as it did at its peak in 2007 and that the past two years had seen the rate of growth slow even further. The decline relates to imports and exports of commodities, loans granted to the private sector and overall gross domestic product. In addition, since 2015 was an election year, there was increased skepticism about the economy, and there was reduced economic activity because of the hesitance of investors to get involved. The PSC further stated that 2016 poses particular challenges, and cited telecommunications liberalization; revision of the tax regime; and the amendments to the Anti-Money Laundering and Countering the Financing of Terrorism Act as examples. In addition, much more needed to be done to enhance the environment for doing business and making the private sector the ultimate engine of economic growth.
The PSC’s key recommendations are for the Government to: (a) share its economic vision and plans and having more engagements with the business community; (b) make improvements in business conditions a top priority; and (c) improve the efficiency and effectiveness of the public service; and (d) rethinking the enforcement of some regulations and modernising them, where necessary.
Recognising the problems associated with the public service, the Government had established a Commission of Inquiry with a number of objectives, including: (a) to inquire into and make recommendations on the role, functions, recruitment, training remuneration and conditions of service and other matters pertaining to personnel employed in the public service; and (b) to determine what measures should be taken to improve the efficiency of the public service in the discharge of their duties to the public. The Commission of Inquiry has since presented its report to the President who considered it an important step in making the public service more efficient.
The Minister of Business, who was the keynote speaker at the meeting, acknowledged that the economy has been sluggish but gave the assurance that every effort is being made to provide the best possible conditions for the growth and development of the economy and by extension for the businesses that operate in it. He stated that Guyana has been languishing for too long at the bottom rungs of the Global Competitiveness Index and the World Bank’s Doing Business Index. The effort, however, has to be a joint one effort, and according to the Minister, the Government is committed to partnering with the private sector to bring about these improvements. Like his Cabinet colleague, the Minister spoke of the need to be involved in value added activities.
We end with the words of the President at the handing-over of the report of the Commission of Inquiry into the Public Service:
We have to go back to a standard where performance of individuals is related to promotion and pay. We have fallen into the trap of across-the-board benefits; people feel that simply by going to work they will benefit. They are like a rudderless ship floating on an ocean of goodwill. Many people who expect that there is going to be some bonanza, I hope they discover that the bonanza will come from their own efforts…if they want to be lazy, they will get a lazy person’s salary…if they work hard, they will be rewarded.
