The sale of the hotel

Jan 03, 2023 Features / Columnists, Peeping Tom

Kaieteur News – The Government of Guyana has invited Expressions of Interest for the Marriott Hotel. That is a very suspicious move. If the government is serious about divesting itself of the now money-making Marriott why not simply put it up for sale to the highest bidder?

The Marriott Hotel was built with substantial government funding. Taxpayers bore a considerable cost for preparing for construction by having to carry the costs of diverting the city’s sewage lines. According to an audit report, done under the APNU+AFC government, the cost of the hotel kept escalating. A special purpose company, owned by NICIL, a state holding company, was established and the hotel was completed with a syndicated loan from Republic Bank. The loan agreement gave preferred rights to the syndicated investors, which meant that should the hotel go bust these unknown investors would have the first lien on the proceeds of any sale. This aspect raised suspicions because it could have opened the doors to the possibility of the hotel being grabbed by the syndicated investors at a severely-discounted price had it continued to lose money.

The hotel did lose money in its early years. It suffered from poor occupancy rates until its fortunes appeared to be reversed with the discovery of oil. One Minister of the government boasted last year that the hotel was fully booked into this year. Therefore, it is more than likely that the hotel is now making money. Why then does the government want to sell a venture that is turning a profit?

At the turning-of-the-sod ceremony for the hotel, then President Bharrat Jagdeo had explained that if the country was to provide world-class accommodation, it needed a five-star hotel. Presumably, the floating of the hotel was intended to allow Guyana to offer such accommodation. This still did not, however, explain, why the government needed to inject funds into the venture given the fact that the original plan was for it to be privately owned. The Private Sector Commission (PSC), in a typical reflexive reaction, threw its weight behind the project but ironically called for more information to be made available. One local hotel owner however did not share the PSC’s optimism. He said the investment represented a “misuse of taxpayers’ money and an indecent assault on the local private sector.”

But while the government was getting involved in an investment that would put the hotel in competition with the private sector, its chief spokesperson, was saying that the government’s experience had led it to the belief that government should not crowd out the private sector. The floating of the hotel was therefore a direct contradiction of this philosophy under which the PPPC government had privatized a number of companies with state interest including Guyana Stockfeeds Limited, Guyana National Engineering Corporation, Guyana Airways Corporation, Guyana Pharmaceutical Corporation Limited, Sanata Textiles Limited, National Bank of Industry & Commerce, Guyana National Cooperative Bank, Guyana Bank for Trade and Industry, Guyana Agricultural and Industrial Development Bank, Guyana Cooperative Mortgage Finance Bank, Guyana Cooperative Insurance Society and Seals and Packaging Industry Limited.

In its Privatization Policy Framework Paper, the PPPC government warned against privatization simply to raise finances and said that consideration should also be given the future operational efficiency of state enterprises to be divested. The PPPC government listed the following as the reasons for privatization: improvement of economic efficiency, the reduction of financial and administrative burdens, expanding the role of the private sector, promoting modernization, efficient management and growth, enhancing competitiveness and provision of greater employment and reduction of costs to users and consumers.

The PPPC had been highly critical of the PNC’s privatization programme. But its own divestment of state owned enterprises were fraught with controversy and the PPPC privatized far more with state interest than the PNC. If it is now the economic philosophy of the government to not hold on to entities which compete with the private sector, the government must explain why it continues to hold on to the Guyana Oil Company, National Lithographic Company and the Guyana Sugar Corporation, the latter of which the PPPC has been unable to put on the road to viability. If the PPPC now wishes a state exit from economic enterprises, beginning with the Marriott Hotel, it should provide its reasons for doing so. It should ensure there is transparency in the present arrangements. It is far from transparent when potential investors are given a narrow window of a few weeks to provide expressions of interest since such tight deadlines favours the favoured.

(The views expressed in this article are those of the author and do not necessarily reflect the opinions and beliefs of this newspaper and its affiliates.)