DEAL OR NO DEAL?

Mar 02, 2012 Features / Columnists, Peeping Tom

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A Memorandum of Understanding (MOU) is an agreement. And an agreement is a deal, so a MOU is a deal.
The government and the investor behind an MOU signed last September have tried to downplay the charge that there was a secret deal. But they are not reading from the same script.
While the investor is saying there is no deal, the government is making out that there is no secrecy in the arrangement. The investors say that there is no deal that what has been signed is a MOU and that any investment will be dependent on the outcome of a feasibility study.
This is no news. No one expects that any company would invest millions of US dollars without first determining the viability of the project in which they are getting involved. However, the fact that the company has moved towards having such a study undertaken, a study that will cost hundreds of millions of Guyana dollars, means that they hold out strong prospects for the viability of the project.
The MOU allows for them to undertake this study and if a decision is made then to negotiate the investment. The investor is not going to want to undertake the study only to find that the government backs out of any future engagement. As such the MOU offers to the investor some comfort that the feasibility study would not have been done in vain.
As in any understanding, there are expressed and implicit commitments. Since the investor is saying that there is no deal, then the MOU has to be innocuous. This one may well be so but Guyanese will recall that the Amalia Falls Hydroelectric Project started with a Memorandum of Understanding and that MOU supposedly secured rights for the future development of the project to its creator who then made a lot of money by selling those rights to the company that is now putting together the project to build the hydroelectric plant.
This is why even though the Trinidadian company, which is at the center of the MOU signed two months before last year’s elections, is not describing it as a deal, there are concerns within the public domain that commitments may have been made by the government that  may turn out to be controversial.
These anxieties stem from a number of factors beginning with the timing of the agreement. It seems extremely worrying that the government would sign a major MOU two months before an election. MOUs do not normally commit the outgoing government; they commit the State of Guyana regardless of which government is in place and therefore any new government is likely to be hogtied to that agreement.
This is one of the reasons why there is an unwritten understanding, a convention so to speak, that in the run-up to elections, the incumbent government does not enter into any major contract.
I am sure that when that Trinidadian company signed that MOU they must have been aware of this fact. So why would they have gone ahead. Were they not worried that the MOU could have been disowned and therefore render a nullity the need for any feasibility study.
It seems bizarre that the company would sign an MOU so close to an election and especially knowing that whichever way the election went, a new president would take over.
Unfortunately, the opposition cannot jettison this agreement because the government does not need a parliamentary majority to go ahead. Once there is no cost to the treasury, then no need for parliamentary approval. But the opposition has to be concerned as to why a deal could be signed two months before a General Election and why no announcement was made earlier.
Companies are usually very excited to advise both their shareholders and the public about new investors. Such announcements can cause their share value to rise. Governments too, especially one in election mode, are often very keen to advise the country that a major investment is being lined up. This is a vote-getter and one has to ask why it was not revealed.
It is the lack of knowledge by the Guyanese people of the MOU that led it to be described as secret, moreso, since the government has made public other MOUs that it signed. Many years ago, there was an MOU signed with a company to build a refinery on Crab Island but nothing has been heard of this since.
The other major concern at this stage is the effect of this announcement on investment in the ethanol sector. If the government was considering a number of firms, if it went to the trouble of seeking a consultancy to compile a list of companies with the potential for bio-energy development, what is the effect of this announcement on the many companies which may have been interested in investing in bio-fuels in Guyana?
Were these companies asked to submit proposals? If so how many did? Was the Trinidadian company part of the group that submitted proposals, and if so, does it mean that because the government has signed an MOU with that firm that the other companies are no longer under consideration?
These are the questions to which answers are needed.

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