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Introduction
Today as we celebrate Christmas, a day marked as much for its commercial opportunities as for its religious significance, Business Page concludes a look-back at some of the articles carried in these columns during 2011. Out of a pool of fifty, the selection was made based on what I consider to have been the ones which had continuing importance, as Guyana navigates the unchartered but exciting prospect of shared governance between the executive and the legislative branches of the state. Consequently, and with a slight departure from the first instalment begun last week, the number of articles has been reduced to allow for some greater depth of those addressed. Today, we look at Robert Persaud’s challenge and pusallinimity with respect to GuySuCo, the continuing failure by the opposition-chaired Public Accounts Committee to put teeth into the audit of the government’s accounts, the continuing abuse of the Contingencies Fund by Minister of Finance Dr Ashni Singh, the Amaila road and hydro-electricity project, NICIL, Clico and the Berbice Bridge Company Inc. With that introduction and Business Page’s wish to all Guyanese and readers for a peaceful but joyous Christmas, here is the selection.

Calling Robert Persaud’s bluff – Forensic Audit of GuySuCo
“In a letter in the Stabroek News of May 18, 2011 I … note[d too], that Agriculture Minister Mr Robert Persaud had challenged Kaieteur News and me “to conduct a forensic audit of GuySuCo and the Packaging Plant.” Responding to that challenge I wrote, “I hereby accept this challenge to undertake a professional audit, the cost of which will be borne by Kaieteur News.

“I hope this is not just bluff on Mr Persaud’s part and that he has both the authority and the courage to carry through with his challenge. I now await word from him.”

As the public is aware Mr. Persaud quietly resiled from that position, using the Audit Office as the excuse.

The ‘blasting’ Public Accounts Committee – May 22, 2011
“Unlike legislation which the National Assembly makes, requiring the specific qualification, experience and competence, appointees to boards, commissions and committees must possess, there is no specific requirement for eligibility to membership of the Public Accounts Committee. The PAC has no secretariat and must rely on the Auditor General Deodat Sharma and the Finance Secretary Nirmal Reekha as resource persons.

“One wag once said that an expenditure of $200 usual attracts more attention than a $200 million transaction, simply because that is how the ordinary mind works. That seems to hold very true for our PAC, and only a couple of days ago Ms Bibi Shaddick was blasting one region over vehicle log books while Ms Chandarpal was raising questions about some mystery “Economic Fund” and raising questions about advances of “amounts such as $400, $600 and $1,000,” while Chairperson Volda Lawrence was questioning an advance of $60,000. That is like auditing the petty cash and ignoring the bank accounts.”

Amaila: ‘Deals within a deal – Sunday, May 15, 2011
“President Jagdeo not too long ago had announced that the final cost for the hydro will be US$306 million, the transmission line US$145 million through a public tender and US$150 million is there for contingency and interest cost.” That leaves US$75 million of the US$675 million to be accounted for.” (SN Ed Note: We are now told that the cost is US$850 million. The government has so far not explained this escalation.)

Annual Reports of the NIS 2008 and 2009 – Sunday, May 8, 2011
“As the NIS enters its forty-second year … there is one egregious matter which I think deserves the widest exposure and that is risk to the Scheme of losing $5.8 billion invested by the NIS in the failed CLICO Life and General Insurance Co (SA) Limited. At December 31, 2009 the NIS had invested in CLICO’s so-called annuities the sum of $5.748 billion, in addition to $90 million of income earned but not yet received from CLICO. The reality is that because of this reckless and possibly unlawful investment by the board in a Jagdeo-favoured company, 20% or $1 of every $5 of the accumulated fund of workers’ contributions in NIS is now at grave risk, earning nothing in income.”

The biggest budget ever – and more! – Sunday, June 19, 2011
“The contingencies fund continues to be used and abused in the most unlawful manner with practically no regard being paid to basic principles of financial management. It is not without some irony that it is the serial violators of the precepts of proper financial management and controls who continue to be provided with increasing sums of money to be spent without regard for the interest of the country’s taxpayers. While the Report of the Auditor General often makes adverse comments on the use of the Fund, it never deals with some of the most troubling questions that the public would wish to see answered. Hopefully the Public Accounts Committee will at some time insist that these be addressed.”

The Clico fallout: Contrasting the action in Trinidad and Tobago with the silence in Guyana

“So far we have heard nothing but a deafening silence from the new insurance regulator the Bank of Guyana whose Governor has, probably dangerously, been appointed the company’s liquidator. I say dangerously because it is not unusual for legal actions to be brought against a liquidator and the person most likely to do so would be the regulator. That is not going to happen even as the liquidation has in essence been contracted out! Indeed my understanding is that CLICO’s former CEO Ms Gita Singh-Knight is still playing a paid role in the liquidation. We are truly an incredible country.

“We should long ago have started an enquiry into CLICO for possible criminal conduct and the Bank of Guyana should, like their counterparts in Trinidad and Tobago, have begun civil action against them and their Trinidadian masters. This would have been an excellent opportunity to expand on our jurisprudence while penalizing those who break our laws and cause our people and country huge losses.”

NICIL – Sunday, July 24, 2011
“NICIL, whose directors are mainly ministers of the government, continues to receive public monies and to spend it however it pleases. It infamously played the role of handmaiden to President Jagdeo and his cabinet in the unlawful tax concessions to Queen’s Atlantic Investment Inc and has failed to provide properly audited financial statements for its expenditure of hundreds of millions of dollars of GGMC funds to build hinterland roads. It is at the heart of the proposed Marriot Hotel deal and indeed has been busy shopping around for any partner, which would give the project legitimacy. No one knows where the funds will come from.”

Elections year mid-year report – September 18, 2011
“I also draw attention and comparisons with the half-year report of the Bank of Guyana which while using the same data used by the Minister of Finance, is less inclined than the Minister to put a political spin on the numbers. Readers may find it of some interest that in this election year and with so much at stake, it is the first year since the Fiscal Management and Accountability Act was brought into force in 2004 that the mid-year report has been presented within the two-month deadline, hence the title of this column. Guyanese who have become quite cynical may not have been too surprised, given that the same treatment was accorded the Guyana Prize for Literature which was held this year after last being held around the time of the 2006 elections.”

The Jagdeo Initiative – what is that? Sunday, October 23, 2011
“As President Jagdeo prepares to demit office in another few weeks there is a single issue with which his name will always be associated in Caricom. And that is the common regional agricultural repositioning strategy that has been given the name Jagdeo Initiative. That it will remain only an initiative without any success is evident by Jagdeo’s failure to carry through his initiative even in his own country. Quite what is the Jagdeo Initiative and how did it arise?

“The silent and dormant agro-processing/packaging plants at Parika and Sophia testify to Guyana’s failure to address its mounting food bill and exploit its huge potential in agricultural products. There must be a sense of both relief and sadness among Guyanese that other Caribbean countries long ago realised that under Jagdeo the region’s agricultural initiative was going nowhere.”

Berbice Bridge Company Inc – Not really a profit – Sunday, October 16, 2011
“Had it not been for some admirable creative financing and accounting the Berbice Bridge Company would not only have recorded continuing and significant losses but it would have been unable to meet the generous interest and dividend obligations to its investors.

“Despite substantial subsidies, the bridge is uneconomic for the body of investors as a whole, and most especially the government in the form of exempted taxes running into further hundreds of millions of dollars and in waivers of Preference Shares Dividends. The high cost necessitates an unbearable burden on the users of the bridge in the form of tolls.

“Even at, or because of the high tolls, the company will continue to have significant shortfalls to cover annual expenditure and current and future debt obligations. In the medium to long term the company would only be able to repay loans by further borrowings and would be insolvent, i.e. unable to pay its debts at the time of its contractual handover.”

Ever since October 16, when in the Business Page column I reviewed the Bridge Company’s annual return and the 2010 financial statements, I have been studying how the second issue – the high tolls – can be addressed. I am more than ever convinced that the legal structure, nature of ownership and the financing model are the cause of the high tolls.

Conclusion
The Jagdeo-Ashni Singh combination was largely responsible for the mess inherent in the issues raised by these transactions. I am hopeful that despite the re-appointment of Dr Singh by the new President, that good sense, better judgment and best practice will prevail, both on the initiative of the President and the determination of the opposition-controlled National Assembly.

The National Assembly has a duty to right the wrongs of the Jagdeo era. I think it is also committed to doing so.

Introduction
This, my closing column for what was a truly eventful, indeed historic year is not about introversion or narcissism but one that was forced by reality. I had really intended to review the annual report of the Demerara Bank Limited which will be holding its annual general meeting tomorrow. I could not anticipate that a public company would refuse to make available a copy of its annual report to be reviewed in the media. In fact, the bank indicated that it would not provide a copy of its annual report until after the general meeting. So much for transparency and good governance in twenty-first century Guyana.

I could have written about the economics and morality of that new buzzword ‘boycott’ which has been around for millennia. In the late eighteenth century the Society for the Abolition of the Slave Trade organised a highly successful boycott of sugar produced by the enslaved in an attempt to end the slave trade in the British colonies. In India’s struggle for independence, Gandhi called on Indians to boycott British-made products. And in the struggle for freedom in southern Africa, much of the non-aligned world participated in the boycott of South Africa in the days of white supremacist apartheid. As a student in the UK in the early seventies I responded to a call by the National Union of Students by closing my account with Barclays Bank which was funding the Kabora Bassa Dam.

Reflections
Boycotts of course can be misapplied as when they are used by the state to discriminate against someone they wish to punish or when citizens use them to pursue a racist agenda. The American embargo of everything Cuban must surely be considered immoral and hardly successful. Yet it has gone on for fifty years. But I have digressed too far.

I thought it might be useful to reflect on some of the columns published in these pages in 2011. One thing I noted and will address in 2012 is the emphasis in 2011 on public sector finance and economics rather than business proper. That it was an election year might have been a subconscious factor. That Ram & McRae had begun an award for the best annual report might be another. Hopefully 2012 will not be another election year – unless it is local government elections – and our public companies need to have the message they send out, their pronouncements and predictions, analysed and discussed.

The selection of 2011 Business Page extracts this week and next is largely random. They are not necessarily my favourites, nor of the greatest importance, seriousness or depth. Even continuing relevance may not apply in each case, but here goes starting with January and ending in April.

2010 corporate performance and reports (January 16)
“2010 had turned out as a bumper year for some of Guyana’s leading businesses. With several public companies having a September 30 year end, the results are welcome for the shareholders of Banks DIH Limited and its banking subsidiary Citizens Bank Guyana Limited; the DDL associated banking business Demerara Bank Limited and Republic Bank Guyana Limited.

“The annual reports [of public companies] have one limitation running through them. None of them even mentions the movement in their company’s share prices as reported by the local Stock Exchange. This is clearly wrong since people buy shares not only for dividends but also for capital appreciation as reflected in the price for shares.”

Mr Nadir on state entities’ audit and contract employees (January 24)
“Stating that I used a broadside to describe the state of audits of public entities, he dared me to name any of those entities. Does he need any more than NICIL, the entity of which the Finance Minister is Chairman and through which state assets are diverted for unlawful purposes, and which disdainfully refuses to have an audit or to file an annual return? Just in case he needs more, here we go: Go-Invest, Guyana Energy Agency, Institute of Applied Science and Technology, Integrity Commission, GINA. Need some more? What about National Sports Commission, Guyana National Bureau of Standards, Environmental Protection Agency, etc.”

Justiciability of Article 13 of the Constitution (January 27)
“On the question of the justiciability of what is now Article 13 of the Guyana constitution as well as enshrined in the fundamental rights article (149c), the then Chancellor said: ‘[The question] is therefore in Guyana at large for debate and decision. Now that it has arisen, the court cannot retreat into a state of intellectual agoraphobia, refusing to venture forth and to express an opinion one way or another.’ Responding to the question the Chancellor said: ‘I see no reason to think that the articles in Chapter II of the Constitution have no juridical relevance and are merely idealistic references with cosmetic value only. So to think would be to seek to debase the Constitution.’”

Driving tax policy (January 30)
‘Tax policy has to be driven by a vision and relevant information. This column has called for more relevant information to be disclosed in public documents. Principal among these would be the annual report of the Guyana Revenue Authority which the Minister of Finance has failed to table in the National Assembly for some time now. Let us see how much the construction sector, the bauxite sector, the forestry sector, the agriculture sector including rice, sugar and other crops sectors contribute to the national coffers, and how much remissions, rebates and holidays they receive which may amount to billions each year. And yes, we should be able to see how much each region contributes and compare this with their receipts from the central government.”

The Guyana Stock Exchange (February 16)
“We have not heard much from or about it recently. Passing its offices at High and Robb Streets it is hard to believe that this is the institution that was set up with much hype, expectation and hope that it will make access to capital easier and cheaper, widen shareholder ownership and raise the bar of corporate governance. The Guyana Stock Exchange, or to use its more formal name, the Guyana Association of Securities Companies and Intermediaries Inc, was incorporated on June 4, 2001 after several studies with the principal aim of encouraging companies to “go public,” a term generally used to mean companies offering their shares to the public. To encourage such companies the government offered them favourable tax treatment including waiver of duties payable on the transfer of shares in quoted companies and exemption from Capital Gains Tax on gains made on the disposal of shares in public companies.

“As the stock exchange enters its eighth year of operation, policy holders may wish to look at the steps taken by Jamaica, where its exchange too had slowed almost to a crawl. Jamaica’s answer was the creation of a Junior Stock Exchange that within a couple of years has seen eight companies entering the market with another ten lined up for listing in 2011.”

Dr Ashni Singh’s tongue (March 20)
“The World Bank office came in for a scathing attack from Dr Singh who accused the bank’s staff here of having ‘one of the largest appetites for publicity and self-promotion’ and seeking to increase their ‘creature comforts’ by relocating to ‘a grand former colonial residence opposite one of the city’s most fashionable cafés.’ [Ed’s note: I understand that the café now uses this abuse in its not so subtle self-promotion.] Coming in for his tongue-lashing was the Economic Intelligence Unit which had dared to question the final outturn for 2009 after the economy had performed poorly in the first three quarters. It was a case of how dare they question him.”

GBTI’s prediction and incredible run (March 27)
“Chairman Mr Robin Stoby in the 2010 annual report of the Guyana Bank for Trade and Industry exulted that the bank’s future was as ‘luminous in the vein as our head office’ and the predicted the Bank becoming ‘the leading bank, not only in Guyana but also further afield.’

“While there may be some over-enthusiasm in the Chairman’s predictions, they are understandable with net income before taxes increasing by 17.8% in 2010, 25.8% in 2009, 14.8% in 2008 and 23.9% in 2007, making for a cumulative increase since 2006 of 110.6%. Because of the tax effect, after-tax profits have increased cumulatively over the same period by 138.1%.”

Annual General Meetings generate interest (April 24)
“As the season for general meetings moves into high gear, members, or as some companies call them, shareholders, have been showing some interest in these meetings, although not always for what might be considered the right reasons. One complainant in a letter appearing in the press this week went so far as to make the charge of meanness against the directors and management of one of those companies. For good measure the writer reported that there was a ‘deep groundswell of resentment against the directors and management.’ One individual who takes a healthy interest in such meetings and is one of the younger breed of investors wrote me on a number of issues all of which he suggested indicate that the directors and management are generally insensitive to the convenience of their members, including the calling of meetings when most persons would be at work, the meetings of more than one company being held on the same day, and no facilities for the aged and infirm. The shareholder was so incensed that he suggested that despite the expense of putting out glossy annual reports, company management really do not want shareholders to attend, speculating that there must be ‘something to hide.’”

Vaitarna and 1.82 million acres of forest (April 28)
“When Agriculture Minister Mr Robert Persaud held his press conference on April 12, 2011 to defend the permit/agreement over 1.82 million acres granted to the Indian company Vaitarna Holdings Private Inc, there had been very few letters and questions about the manner in which the two parcels of the land had been allocated to the company owned by Mr Siddhartha, the coffee magnate of India. Mr Persaud’s accusation of a ‘misinformation’ and ‘sleazeball’ campaign seemed therefore both inappropriate and disproportionate particularly since Mr James Singh, Commissioner of Forests had spoken two days earlier on the matter.

“With regard to the actual sums collected, both the US$254,000 and the $600 million should have been paid into the GFC from which, subject to the Act, surpluses could be paid into the Consolidated Fund. Both Mr Singh and the Minister confirmed that the lesser amount was paid to the GFC but were ambivalent with respect to the $600 million. From a review of the Commission’s records it appears that the $600 million was paid straight into the CLICO fund, in a liquidation process that defies many laws but which the public is silent about for reasons of convenience.”

Introduction
2010 has turned out as a bumper year for some of Guyana’s leading businesses. With several public companies having a September 30 year end, the results are welcome for the shareholders of Banks DIH Limited and its banking subsidiary Citizens Bank Guyana Limited, the DDL associated banking business Demerara Bank Limited and Republic Bank Guyana Limited.

Republic Bank, a subsidiary of the Trinidad and Tobago giant of the same name, and always the first of Guyana’s public companies to hold its annual general meeting, reported to its members profit after tax of $1.982 billion for the year ended September 30, 2010. This 8.8 % increase over 2009 turned out to be modest when compared with the results of some of the other businesses.

Citizens Bank had a whopping increase of 37% in net profit while the Demerara Bank Limited reported a more modest increase in net profit over 2009 of 4.2%. Banks DIH Limited, the beverage giant showed increases in before-and-after-tax profits of 21% over the corresponding period one year, inclusive of dividends from its banking subsidiary.

Contributing to these impressive results of the commercial banks is an 11.6% increase in credit to the private sector. Categorising the credits by economic activities, the September 30 report of the Bank of Guyana shows a 77.9 per cent increase to the mining sector, 36.5 per cent to agriculture, 22.1 per cent to manufacturing and 16.9 per cent to real estate (mortgage loans). Credit to the distribution and personal sectors reflected growth of 11.7 per cent and 4.1 per cent while the rice milling sector recorded a marginal growth of 0.3 per cent. Conversely, the other services sector reflected a decline of 8.9 per cent.

Taxes and corporate Guyana
It is interesting to see the effective tax rates paid by these businesses as the government continues to ignore tax reforms in which the private sector under its current leadership show little interest. For this purpose I include the other major domestic commercial bank – Guyana Bank for Trade and Industry whose year end is December 31 and for which the 2010 financial results will not be available for some time.

Tax Table

Source: Annual Reports of companies

Why the PSC is not taking any real interest in tax reform – an integral element in any developing economy – is really hard to understand, unless its priority is to avoid the public castigation one of its leaders received from Mr Jagdeo for daring to ask for a reduction in the corporate rates of taxes. As the table shows the effective tax rates have climbed quite significantly in some cases, with one bank almost up to the nominal rate of 45%. The Chairman of the PSC has said that tax reform has now been placed on the agenda of the National Competitiveness Council (NCC), of which he is the Vice-Chairman. This is an entity on which huge sums have been expended but it takes some effort to see if there have been any returns on those investments.

In fact even as the Chairman was disclosing to Stabroek Business the new responsibility on the NCC for tax reform, he was reported as giving no indication of the state of play regarding the tax reform discourses, alluding instead to what he said was a partnership between the government and the private sector to engage a consultant “to review the tax study that had been commissioned by government and to recommend appropriate changes to the country’s tax structure with the objective of formatting a new tax structure that would be friendlier to the business community and the average employee without compromising government’s tax collection.” This is quite a mouthful that really means very little.

Share prices and the Stock Exchange
The annual reports have one other limitation running through them. None of them even mentions the movement in their company’s share prices as reported by the local Stock Exchange. Whether this is because they do not take the Stock Exchange seriously or do not consider share prices relevant to their members is a matter for speculation. This is clearly wrong since people buy shares not only for dividends but also for capital appreciation as reflected in the price for shares.

What is also interesting is how the ‘market’ seems to ignore the companies’ reported results. As the following table shows the increases in earnings are not reflected in the share prices, an indicator of an inefficient market which can be due to a range of factors including as an extreme but unlikely cause, market manipulation.

Share price analysis

Source: Annual Reports of companies

The disappointment with our still fledgling Stock Exchange must be tempered by the fact that the regional exchanges are also facing difficult times with some companies choosing to de-list rather than face scrutiny and bear the cost of listing. There is no indication that the situation in Guyana will improve any time soon and the public’s lack of interest in the shares of Trinidad Cement Limited (TCL), the only regional company to list on our exchange will almost certainly discourage other regional companies for fear of repeating TCL’s experience. That would be unfortunate.