INVESTOR CONFIDENCE IS LACKING

Mar 16, 2016 Features / Columnists, Peeping Tom

---

The signals coming from the government to the investors are worrying. These signals are going to scare away investors and discourage those who have already invested, from expanding their investments in Guyana.
There is a lack of investor confidence in the economy. There has not been announced any major investment deal signed by the new government, and we are fasting approaching a year in government.
The new government is running on PPP investments, including the just announced deal with India which was signed by Donald Ramotar when he was President.
Three developments by the APNU+AFC government have the potential of worsening the lack of investor confidence in the economy.  The government needs to be careful that in its attempt to embarrass the PPPC, it doesn’t cut its own nose in the process.
The first of these developments concerns suggestions that all the casino licences which were issued under the PPP are going to be reviewed. Once an agreement is legal, then there is no need for any review. What is the basis for the review? If the legality is not in question, then there can be no basis.
It has been suggested that there were no consultations with the residents of the area in which a casino was supposed to be built. But does the law demand such consultations? If the law demands consultations, then it could only mean that it was the government that erred, not the casino owners. The casino owners therefore cannot be penalized.
There was also the suggestion that the residents who live near to the site of the proposed casino on Church Street in Georgetown were going to be inconvenienced by the parking of vehicles of patrons. Well, how come no one says anything about the parking inconvenience which takes place every Friday when there are religious prayers at the nearby mosque which is now in a stage of expansion? Were any consultations held before the permission was given to expand the mosque?
The implications of any review of casino licences granted are going to affect investors’ confidence. It is saying to investors that any agreement signed by one government can be repudiated by a successor government. This is called political risk, and it is the greatest deterrent to investment in any country. Major investors are going to shy away from Guyana because of the exposure to political risk. The government has to stop behaving as if governance is child’s play.
It is the same thing with broadcast licences. Once these licences were given contrary to law, then they should be rescinded in accordance with the law. The government knows, however, that since these licences are either intangible property or affect tangible property, they simply cannot be rescinded without the risk of a constitutional challenge which can paralyze government’s attempt to grant any broadcast licence at all.
As such, the government has to be careful about the signal it is sending to investors by all the talk about reviewing licences. It is either the licences were lawfully issued or not. Even if they were unlawfully given, the owners cannot be penalized because it would be the State, rather than the person holding the licence, who would be culpable for the illegality. Therefore the licence holder will have to be compensated for any licence that is abrogated because of any review. This compensation will bankrupt the government faster than GuySuCo ever can.
Finally, there is the issue of the sale of government shares in GT&T by the PPP government. The PNC government when it privatized the telephone company had retained 20% of the shares which allowed the government to have two seats on the Board. It now seems that when the PPP sold these 20% shares, the new owners received only one seat instead of the anticipated two seats. As such, the new owners of the 20% shares are reportedly refusing to pay the balance owed on the purchase price of the shares because of their inability to have the other seat.
The government is justifiably concerned about the outstanding money that is due for the sale of the shares. But the government should also be concerned about the fact that the new shareholder is not being allowed two seats on the Board. The government is opening itself to a breach of contract challenge which can also bankrupt it faster than GuySuCo can.
These three cases send a negative signal to foreign investors. While there is not much else to privatize in Guyana, it does send the wrong signal to investors when a person who secures government shares in the telephone company does not secure at the time the expected number of seats on the Board.
The government has to be careful with how it is dealing with these matters. It is one thing to claim that the PPP may have made bad deals. It is another thing to not see the danger in not ensuring that the new shareholders get what may have been promised.

---

---