IF BOSAI WALKS, LINDEN DIES!

Dec 08, 2013 Features / Columnists, Peeping Tom

Forget about BOSAI and the contract it has with the government. Without that contract there would have been no investment.
Before BOSAI took over, the bauxite industry was facing grim times. Many other international companies had come to Guyana and inserted themselves in the failing bauxite sector. They had to be given concessions. If they were not given concessions, it would not be profitable to mine for bauxite. In other words, without these concessions, the jobs created by the companies working in the bauxite industry would be lost.
If the foreign companies have to pay the royalties there will be no investment and hundreds in bauxite mining communities will be out of jobs. There is no way around that. All the foreign companies that have worked in Guyana have enjoyed favourable concessions.
The concessions that were granted to BOSAI are no more favourable than those that were granted to OMAI, no less favourable than that granted to Green Construction, no less favourable than that granted to Aroaima.
These concessions have to be granted if the bauxite industry is to survive. As such, all the talk about BOSAI benefitting from the waiver of royalty and the non-payment of the bauxite levy is hot air.
In relation to the bauxite levy, this was a tax on the statute books that was hardly ever collected. Burnham had instituted this tax not to raise revenue but to make Reynolds unprofitable.
After Reynolds became stubborn and would not sell for $1 their assets in the bauxite industry, Burnham knew that he was in for a fight and so in order to pressure them, he did what he was always good at: made their businesses unprofitable by instituting a levy.
In the end Reynolds was forced to cede their assets which were paid for hook, line and sinker after the Americans read the riot act to Burnham.
The bauxite industry under State control was not subject to this levy. Nor were all the other foreign companies that were brought in after the economy was liberalized. The levy is an anachronism, a relic that will never be collected, ever. It initially served its purpose in forcing Reynolds to sell its assets and that was the end of the uses of the legislation.
The contract between the government of Guyana and BOSAI is therefore not being robbed of any entitlement. Any government – and I repeat any government – that wanted to attract investment into the failing bauxite sector – and bauxite has been heavily subsidized for decades now – would have had to grant the concessions that it granted to BOSAI.
If there was any fault in terms of agreement, it preceded BOSAI’s involvement in Guyana. In fact, it was another company, IAMGOLD which had acquired rights to Guyana’s bauxite which sold its interest to BOSAI. That should never have happened, but it did, because Guyana did not object to the sale of IAMGOLD shares to BOSAI for what has been said to be very attractive terms.
Instead of focusing on the agreement between the government of Guyana and BOSAI, the focus should instead be on the various deals that took place and involving Cambior, IAMGOLD and BOSAI more than six years ago. The spotlight has to be on the sale of shares and the rights that were granted to these entities and not to royalties and levies which in any event would have had to be waived, regardless of who took over the industry.
But BOSAI should not be let totally off the hook. It did promise in 2008 to invest one billion United States Dollars in an alumina oxide plant, so long as a study determined the feasibility of such a venture. For five years now, this proposed alumina plant has gone off the radar and therefore what is taking place right now is raw extraction of bauxite ore.
BOSAI needs to be asked about its plans for this plant, especially in light of the recent reminder by an official of the Caribbean Development Bank that Guyana needs to move away from primary production.
Similarly, the debate about the bauxite sector needs to drift away from useless discourses about royalties and levies, things which would never have been collected, and focus instead on how foreign multinationals operating in the bauxite industry are going to be encouraged to transition away from mere raw resource extraction.
If BOSAI walks – and it has sufficient interest outside of Guyana to walk – Linden will become a ghost town.

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IF BOSAI WALKS, LINDEN DIES!

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