Secrecy clauses and giving of concessions to foreign companies must be revisited

Sep 13, 2019 Letters

DEAR EDITOR,

Has our government, and (also) the preceding one, signed contracts to drive local companies out of business or render them uncompetitive vis-a-vis foreign companies? Contracts signed with oil and gas (O&G) companies seem to suggest such a fact (as illustrated by KN) where the cost of doing business by locals is substantially higher than foreigners. Based on the illustration provided, the cost of an identical product (imported) supplied by locals could be some 40 percent higher than when supplied by a foreigner. Foreigners are reported to be given special privileges and concessions to conduct business with the energy companies. The foreigners are exempted from taxes. This is a cause for serious concern. The government may not be cognizant of this fact and needs to be schooled in economics. It is not that our companies are on a level playing field. Foreign companies enjoy tremendous advantages over local companies in prices of products to be supplied to the energy companies and to government itself. Our government must revisit this issue regardless of which government signed the contract. Politicians must be held accountable for errors or blunders and if they don’t take corrective remedies, they should be held accountable as is the norm in their countries especially in diasporic countries where a million Guyanese are settled.
Over 25,000 workers lost their jobs in recent years. Also, many local businesses have shuttered over the last four years putting hundreds more out of work. In addition, the economy has slowed causing businesses to lose substantial income – loss of income of between 30% and 60% (of revenues obtained in 2015). Many companies are not even earning half of total revenues made in 2015. Now comes news that suggest (supported with illustrated evidence from KN) that our government has signed contracts with foreign oil companies and suppliers that will drive more of our local companies out of business and even put more of our workers out of a job. Our business will not be able to compete because of major subsidies offered to foreign companies. Foreign companies are exempted from import duties and all other taxes including VAT. Local companies should enjoy preferences over foreigners as the oil and gas (O&G) industry is developed. On the other hand, at a minimum, there should be a level playing field for all to give our companies a chance. In economics, it is unheard of for local companies to be punished and foreigners given privileges. For those of us who study economics, we know that no country operates that way. In other countries, local companies are privileged.
But in Guyana, foreign companies are given duty free and other concessions to bring in products and offer services whereas local companies have to pay duties on imports and or in providing services. Such taxes would make products and services offered by local Guyanese companies more costly than those offered by foreign companies. How can our local companies compete? And the difference is not marginal. Since import duties could be anywhere between 15% and 100% (if not more) plus VAT, it means local companies cannot compete (will be at a disadvantage) with the foreigners. Thus, virtually all oil and gas related products and services would be supplied by foreigners. Guyanese would not be major beneficiaries in this industry if rules remain in effect. And to think that such contracts were signed by our governments! Such contracts should be immediately rescinded. Right now, virtually all products and services are supplied by foreigners with virtually no benefits to locals. And these contracts have a secrecy clause preventing Guyanese from knowing the facts.
The secrecy clauses and giving concessions to foreign companies must be revisited. Guyanese companies should be given some kind of preferences. And local content should be mandatory for all energy companies (more on this topic to be followed). All countries have a local content policy that benefits and provides advantages to locals. So should Guyana! Media reports on local content policy do not seem to provide substantial benefits to our companies.

Yours truly,
Dr. Vishnu Bisram

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