If your goods aren't selling ... The Beal Deal Woman's-eye View Stabroek News May 21, 2000 This week I wanted to have a column on the Beal deal because the agreement that has been reached by the government seems to me astonishingly bad, even shameful. The column draws heavily on part of a presentation made by Sheila Holder to a Forum on the Beal deal at the City Hall on Wednesday May 17. It also draws on remarks made by Prime Minister Hinds and Mr Deochand Narine of Go-Invest during an interview on Thursday, May 18 with Christopher Ram, to be repeated on Sunday 21 at 12:30 pm Andaiye In discussing the Beal deal, government negotiators have been weighing what Prime Minister Hinds calls its "financial and calculatable effects" versus its "non-financial and non-calculatable effects". At one level, both in their first press conference and in the later interview, both the Prime Minister and Mr Narine seemed to be saying that what we would gain financially from the deal was adequate. There were comparisons between Guyana's deal and a rocket launching site project in Brazil, and much was said about what Beal originally offered versus what the negotiators eventually won (the Prime Minister did not like the term "fought for"). Among the economic benefits identified by Mr Narine were tourism and spin-off industries from the rocket launching. The negotiators drew our attention to the Beal promise of 500 jobs during construction of the site and the Beal promise of 200 jobs after. The word "promise" is used deliberately. Here are some of the reasons Holder and other citizens see the deal as financially inadequate: 1. It provides for a 99-year tax holiday (one that Dr Makepeace Richmond has said qualifies us for the Guiness Book of Records). 2. The valuation of the land is based not on opportunity cost but on what land is now being sold for (or leased for). 3. It fails to give due consideration to the fact that the land is prime equatorial land. 4. It provides for a paltry US$400,000 to dislocate 54 Amerindian families in the targeted Waini area, with the families having the option to relocate to land which government will provide. To return to the 99-year tax holiday. One of the negotiators of the agreement with Beal was Mr Heyligar, recently appointed to head the new Revenue Authority and in that capacity, responsible for the enforcement of the revenue laws of the country. Yet he has been part of a negotiation which has made our tax laws practically irrelevant. Another reason why the 99-year tax holiday must be condemned is that because the technology involved in the launching site can change so rapidly, it is a giveaway to concede a tax holiday virtually in perpetuity. Put simply, the tax holiday is a tax exemption. Prime Minster Hinds also said during Thursday night's interview that the deal was justifiable on its "non-financial and non-calculatable effects". Among those he mentioned were that it creates a new positive image for Guyana; it opens the door for us to take part in the new century; and it should lead to other investors looking more favourably on investing in Guyana. Mr Narine said that it would give Guyana increased visibility. (I can think of some other times we had increased visibility, but never mind). Then the Prime Minister gave the game away. I do not mean by this that the PM thinks he is playing a game; it was quite obvious that he felt he was making a straightforward and reasonable point. He said that it was perfectly normal marketing practice that if your goods aren't selling, you lower your price to make the sale more attractive. People keep on saying that Guyana needs foreign investment. But foreign investment isn't coming. Therefore if your goods aren't selling... This clarified something he had said in the opening presentation he made before the interview: Beal had approached the government; it had then stopped showing interest because, as was discovered later, postelections it feared political unrest; it had then approached the government again. When it approached the government, Guyana was not its first choice for a rocket-launching site. Guyana was fighting for second place on its list of options. We must look at the negotiations, Mr Narine said, in the context of Guyana's not being the number one choice and trying to become the number one choice. If your goods aren't selling ... Sheila Holder pointed out in her forum presentation that the destructive, internecine political environment in the country places the Guyana government in an unfavourable negotiating position, and that this was as applicable to the just-concluded negotiations with the Beal Aerospace Company as it was to the negotiations with the investors in the electricity sector. Investors coming to Guyana, she pointed out, do their homework. They come here armed with the knowledge that the government is desperate to clinch a major investment deal - it is desperate to clinch such a deal in order to refute arguments from opposition political forces that a major failure of the PPP/C government has been its inability to attract at least one major investment during its term and a half in office. I think this is part of what's wrong, an important part of what's wrong. But I also think that we think that we have nothing to negotiate with. Thus we went to bargain (but were we bargaining?) and we went naked. I borrow the following list of clothes we went without from Sheila Holder again: * We negotiated a business proposal with Beal in the absence of a business plan. * We negotiated without knowing the net assets of the Beal Company, relying instead on data posted on the Internet regarding the financial credibility of the investors. (Contrary to what some think, data on the Internet can be very unreliable). * We failed to do the basic check of undertaking a 'due-diligence' study on the Beal Aerospace Company. * We failed to appreciate the need for a cultural heritage assessment study to be done, given the fact that the Warrau cultural site is recognised as one of the world's most endangered sites. * We breached the requirement under the Environmental Protection Agency Act for an Environmental Impact Assessment to be done before (not after) the signing of the agreement. * We failed to include assurances that the satellite project and land should be used only for peaceful purposes in the agreement. If we were naked, Beal certainly wasn't. For we allowed the US-based Reichler firm to advise Beal although it serves as lobbyist/legal draftsman for the government, earning some US$1.5M annually. And Mr Reichler has said that the Beal deal we got was the best Guyana could expect. Two questions: 1. What if a deal is bad, should we not walk away from it? 2. When Mr Reichler says it's the best deal we could get, is he speaking as Guyana's permanent lobbyist in the U.S., or as the Beal negotiator in this deal? But why should Mr Reichler care what we win and what we lose? The point is, we should care. The deal has been deformed by technical deficiencies and by conflict of interest. But above all, it has been deformed by our willingness to accept that all advantages lie on the investors' side, none on ours, that if your goods aren't selling, a reasonable option is to give the goods away and sell yourself.