'We wanted Guyana to be number one option for Beal'
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'We wanted Guyana to be number one option for Beal'
- Narain
Holder says deal shows govt desperation for investmentBy Gitanjali Singh
Stabroek News
May 20, 2000
The government's desperation to attract at least one substantial investment before its second term in office expires was evident in the proposed deal with Beal Aerospace Technologies, consumer advocate, Sheila Holder, says.
Addressing a PNC-organised public forum on the proposed Beal deal at the City Hall on Wednesday night, Holder said that it was the "internecine political environment" in Guyana which had put the government in this unfavourable negotiating position.
"Investors coming to Guyana are no fools, they do their homework," Holder said. "They come here armed with the knowledge that the government is desperate to clinch a major investment deal to deter strong arguments from opposition political forces that a major failure of the PPP/Civic government was their inability to attract at least one major investment during their two terms in office. Take that argument to its logical conclusion and you are also highlighting a major weakness of the government in failing to provide much-needed jobs and job opportunities for job-starved, cash-strapped Guyanese fleeing the country at an alarming rate."
The government has acknowledged that it has relied on the Internet as the source of information on rocket launching to aid its negotiations. According to Prime Minister Sam Hinds on a television programme, it did not also see the need for Beal to submit a business plan for approval before a deal was signed and did not find it necessary to do a due diligence on the firm, because it was mentioned in reputable magazines. It also intends to sign a deal with Beal even if there was sustained opposition to it, hoping that once the agreement was laid in parliament, Guyanese would find the terms comfortable.
"We are comfortable with the agreement [as it is]. [And] I expect that the people of Guyana will be pleased and satisfied [once the terms are made public]," Prime Minister Sam Hinds told Plain Talk host, Christopher Ram, in a pre-recorded programme which was aired on Thursday night. Ram questioned whether the government would reconsider signing a deal if there was sustained opposition to the proposed agreement, but Hinds said negotiations were concluded and the deal will be signed "soon".
Hinds and Deochand Narain, director of Go-Invest who started negotiations with Beal, defended the proposed agreement in a lively interview with Ram aired on Channel 6 on Thursday night.
Narain said that the concessions made to Beal in the agreement had to be looked at in the context that the government was trying to make Guyana the number one choice for Beal, which at the time still had one foot in Sombrero Island (Anguilla) and Brazil was also on the cards as a possible source for this investment.
"During the process, we wanted to make Guyana the number one option [for Beal]," Narain said.
No rocket engineer And Hinds said that the government did not need to have a rocket engineer on the negotiating team to get the best possible deal. He said that Brazil had invested US$200 million in its satellite launch facility and was proposing to charge US$1 million to US$2 million per launch to recover on the investment. However, Hinds said that investment was not expected to be fully recovered and some of the cost will have to be borne by the Brazilian treasury, which put the Guyana government in an advantageous position.
Under the proposed agreement, the government will get between US$25,000 (for less than six successful launches per year) to US$100,000 (for more than 19 successful launches per year).
Narain also said that the only aspect of the deal which needed a specialist was the financial aspect because rockets were not being manufactured in Guyana and the Environmental Protection Agency would be able to call upon a list of experts for the environmental impact assessment for the project. In the case of safety, the criteria of the Federal Aviation Administration of the US will apply.
As regards the financial aspect of the negotiations, which had been much criticised, Narain said that Beal Aerospace was the first private spaceport to be built in the world and he downloaded much information off the internet to have an idea of the ballpark figure for rocket launches. "So we did not go into the negotiations ignorant."
Ram posited that in a strategic alliance, a launch fee not exceeding one percent of a contract price between Beal and its customer was negligible, but Hinds argued that the investment was not justified on the calculable financial effects but the feeling of excitement and challenge and the new wave of investments that will come to Guyana.
Swamp land valued $5 per acre As to how the government arrived at US$3 per acre for the 25,010 acres of land to be sold to Beal, Narain said this came out of bargaining and the Lands and Surveys Department's net present value price per acre of swamp land was $5.
Ram wanted to know whether Beal was asked to submit a business plan to show the period during which the investment will begin to pay for itself and give an indication of the period of tax holiday which might be needed, but Hinds said that the government did not think it was necessary and did not ask for one. "Even if we did ask for one, I do not think they would have given," the Prime Minister said.
As to a due diligence to determine the net assets of Beal, Hinds said the government did not think it needed that and had seen the company listed in many authoritative places which made it credible.
Narain also said the government had established that the company had the financial capability to do what it set out to do and had received extensive US State Department documentation on Beal. When Ram pressed on whether the government could rely on such information Narain queried whether Forbes was not considered a reputable magazine. However, Hinds intervened to assert that the company's financial capability was never an issue with the government.
Performance bond As to the posting of a performance bond, the two government officials said, this was expected to come under environmental protection as well as for safety indemnification.
Ram also questioned the government team as to the justification for a 99-year tax holiday and Hinds said it was not viewed as a tax holiday (not recorded explicitly in the agreement as such) but was in effect this. Narain, who shared Hinds' sentiments, said the 99-year tax break had to be looked at in view of a launch fee which was in fact a tax.
And Hinds disclosed that if the relocation costs for families in the area ended up being more than the US$400,000 being allocated by Beal, the government will foot the rest.
Asked whether the government felt that its negotiating position was weak and that it had to make substantial concessions, Hinds said that the government had to work to make Guyana more attractive to Beal. He said the government had to offer more to get investors into Guyana. And while Guyana law will govern the agreement, when asked what the government would be doing to ensure its terms were enforced, Hinds said that this was a good question which the government would have to address. Narain said that the issue was being looked at. Meanwhile, Holder urged the 150-odd persons gathered at City Hall to organise a petition protesting the terms of the deal and for the deal to be renegotiated. She also stated that the Select Committee on Constitutional Reform needed to urgently introduce a political structure designed to build public confidence and facilitate economic development.
