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THE RIOT ACT SHOULD ALSO BE READ TO THE BAUXITE COMPANIES

Aug 01, 2015 Features / Columnists, Peeping Tom

The government has reportedly read the riot act to timber companies operating in Guyana. It has told them to shape up or ship out; either they begin to set up sawmills or run the risk of losing their concessions.
The government would have had adequate time to study the agreements entered into with these companies by the previous administration. They would have also been able to appreciate just what were the shortcomings. They have reached the stage where they can now insist that the promises made to establish timber processing facilities be established.
The government however needs to explain if indeed these companies are contractually bound to establish the value-added operations. Suppose it is just a mere promise made by the companies but it is not bound in the companies’ contracts with the Government of Guyana. What happens then?
How will the new government then proceed to withdraw concessions? The government will open itself to civil suit if it attempts to withdraw concessions that are not conditional on value-added activities.
There is also a wider implication. Investors will frown at the actions taken by the ruling APNU+AFC government and accuse it of pressuring foreign investors.
Even if there is a condition in the contract between the foreign loggers and the government to invest in value –added production, there may be reasons why this cannot be done. The company for example, as one company has done, can claim that it cannot attract the necessary investment to establish the factories.
They may or may not hold up in the court. If there hostility to loggers, then it may be a legitimate excuse to contend that in such circumstances, the raising of investment capital becomes problematic.
The government therefore should be careful in its pronouncements. It should press for the necessary investments to be made but at the same time, it has to ensure that it is standing on a strong legal limb because it is likely that any action it takes to roll back concessions are going to be challenged.
A negotiated settlement is always a better option rather than a long protracted legal battle which could see the country losing the entire investment. In the Bahamas, there are serious problems now over the bankruptcy of an investor involved in the construction of a major hotel, one of the largest to be built in the Caribbean. The country has been thrown into a major tailspin because of this problem and the government is therefore seeking a negotiated settlement to the problem.
It would be wise counsel for the government of Guyana, before it makes public pronouncements, to enter into a negotiated settlement with the foreign logging companies. The future operations of those companies should be tied to the creation of local employment.
But it is not just logging companies that should come under the radar. What about the bauxite companies. One of them promised a long time ago to build a smelter. That has not happened and therefore the government also needs to read a riot act to those companies operating in our natural resource sector.

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