Not a good deal
Editorial
As much as Guyana desperately needs pioneering, high tech investment like Beal's satellite launch site the terms now on offer are unacceptable. Under the conditions of the proposed deal revealed by the People's National Congress at a press conference on Thursday Beal would pay the sum of US$3 per acre for the 25,010-acre primary site, US$1 per acre in easement for the buffer area of 76,000 acres and a graduated launch fee of a maximum of US$100,000 per launch if launches exceed 19 per annum (clearly very optimistic) but only US$25,000 per launch if the total is no more than six per annum. Besides these fees there are no other clearly spelt out financial benefits and to top it off Beal is being granted a 99-year tax holiday which essentially means that the company will never pay income taxes, however successful it may be. In the estimation of Prime Minister Sam Hinds, the average recurrent proceeds to the nation will be around US$775,000 (approximately $143M) for the life of the project and this figure includes a flat US$100,000 to be paid annually to cover the state's administrative expenses relative to the deal. This average figure may not be attained for many years into Beal's operations as it assumes a fair number of launches. The first exceptionable feature of the deal is the price of the land to be sold. The US$3 per acre price for the 25,010-acre primary site, even though it is remote and underdeveloped, is shockingly low and it is hard to believe that negotiators for the state could countenance this kind of giveaway. Given the sparse financial benefits from the operational side and the tax holiday the price of the land sold should not have been virtually concessionary, a peppercorn. Retention of the area as is with its future conservation prospects would be far more palatable. In setting the acreage price, negotiators have failed to recognise that the country is ceding ownership of this land in perpetuity. The Go-Invest head's explanation that the rental fee per acre for similar land is US$0.10 ignores the fact that those companies pay substantial royalties and income taxes; in any event those fees are low. The US$1 per acre easement fee for the buffer area of 76,000 acres is also hard to accept. No matter that Beal did not have its way with exclusive rights to the area, that fee bears no relation to the likely financial benefit to Beal from control of it. The buffer zone is unlikely to become a haven for other productive uses, particularly since Beal is operating in its vicinity. So essentially the state is giving up over 100,000 acres for a payment of US$75,000 the price of the 25,000 acres, plus US$1 per annum for 76,000 acres. The 99-year tax holiday is unprecedented and inexplicable in the context of the limited financial returns from the launch fees and acreage sale. The proposed deal is equally barren relative to innovations like financing scholarship programmes to ensure that Guyanese are trained to take over as many of the positions as possible and also to lift the state of high tech education. Beal's flat offer of US$400,000 to settle all relocation costs for residents in the Waini area also seems low. The deal would only be slightly more attractive if there were tangible prospects of immediate satellite industries, such as an assembly plant, springing up around the investment which in turn would themselves yield greater financial returns and enhanced employment. There are no such commitments. The countervailing argument that downstream benefits would eventually be lucrative has so far not been effectively made by the state's negotiators and spokesmen. Guyana cannot continue to accept financially unattractive investments (Aroaima was the first) in the hope that they may lead to a pot of gold at the end of the rainbow. The line has to be drawn somewhere. The government is understandably anxious to close a deal given the state of the economy and the lack of recent investment. But these terms are an imposition and should be rejected. We had advocated in a previous editorial that government seek to retain experts in the satellite launch field to negotiate on its behalf for the best possible deal with the Texas company. This clearly was not done, but it is not too late. There is still time before the deal is finalised for the government to do its duty and extract the best possible arrangements from Beal given the conditions that apply elsewhere, or to say thanks but no thanks.
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