The Shaping Of The Investment Code?
"An investment code has been prepared and will be enacted into law
as soon as all the consultations are completed. The Act will clearly define
the various areas of interest and concern to potential investors, including
the incentives structure." These are the words used in Budget Speech
2001 by then Minister in the Office of the President with responsibility for
Finance Mr. Saisnarine Kowlessar. Mr. Kowlessar was subsequently confirmed
as Minister of Finance following the 2001 elections. And one month later,
Chief Executive Officer of the Guyana Office for Investment (GO-INVEST), the
Board of which is headed by President Bharrat Jagdeo repeated the intention
to "enact the Investment Code into law". Guyana had also committed
itself in its undertaking to the IMF and the International Development
Association in November 2000 "to tabling the Investment Law in
Parliament." (Page 21 of Decision Point Document of November 1, 2000).
This latter obligation alone should have made the enactment one from
which the country could not have excluded itself. We appear to have
forgotten too that this was a commitment made to the private sector of
Guyana. The six-page document circulated in the National Assembly in August
last year would therefore have been both surprising and disappointing to a
large number of Guyanese including several in the private sector.
To compound the confusion are the statements made by a number of
prominent political leaders seeking to justify the meltdown of the code to a
level at which its very status is now in doubt. Minister Kowlessar appears
to have reversed himself certainly in respect of concessions when he said
"that such concessions etc. should go in an investment guide -
otherwise you would have to change the code each time the concessions/
incentives changed" Minister Kowlessar appears to have been very badly
advised on this issue. Taxes including their rates can only be changed by
legislation, which includes both primary legislation enacted by Parliament
and supplementary legislation (regulations and orders) which the principal
legislation empowers Ministers to make subject to either negative or
affirmative confirmation by Parliament.
President Bharrat Jagdeo has downplayed the deletions and in fact claimed
that he had the agreement of the leaders of the Private Sector Commission in
the changes. No one from the PSC has contested this assertion although
former head of that body, Mr. George Jardim during whose tenure the draft
law was prepared, told the Catholic Standard that he had not seen the
version of the Investment Code which was circulated in Parliament. Mr. David
Yankana, the Secretary to the PSC is quoted in the Stabroek News as saying
that the private sector was unhappy that the Code was not legally enacted.
If it all sounds very confusing, that is because it is.
Today in Business Page we look at some of the sections which have been
deleted and their significance.
Section 2 dealing with Objectives has removed the two objectives of
streamlining the existing procedures for investment and establishing the
structure and authority of the Agency responsible for investment. The reason
for the deletion is hard to understand since one of the problems investors
face is a proper institutional framework and the absence of a one-stop shop
for potential investors, matters which have been publicly recognised by the
In Section 4 dealing with fields of activity open to investors, financial
services have now been excluded which seems to suggest that the Government
is satisfied that the economy is sufficiently served by the existing
financial services providers or that any application has to go through the
torturous case-by-case process. The same section had provided for certain
sectors to be reserved, but this too has been removed.
The draft of Section 11 had provided for the government's right to own
some or all of the shares in specified industries. This specification has
been removed while maintaining the government's right to own some or all of
the shares in an investment.
In Part 2 of the Draft Law dealing with the Rights, Guarantees and
Obligations of investors, Section 13, while continuing to guarantee the
prompt payment of adequate and effective compensation, has had removed any
obligation to pay interest from the date of acquisition or taking possession
of the investment enterprise or asset. The right to interest on money
forgone is an economic reality and should not have been removed.
Section 15: non-intervention by government is one of the really
indefensible areas of deletion since it is hard to understand why a
government would wish to intervene in the management of a business,
particularly given that the Draft had allowed for such intervention in the
pricing of services provided by utilities.
As with Section 15, Section 16 which sought to guarantee free export and
import has also been deleted in its entirety.
Sections 18 and 19 providing for equal treatment and the granting of Most
Favoured Nation treatment of all investors have been deleted in their
entirety. While the Government's position on these are understandable, it
will soon have to recognise that international commitments under trading
agreements such as Caricom and FTAA as well as bilateral investment treaties
and the rules of the WTO will make such equal status treatment mandatory.
Section 24 permitting existing and new investors to operate foreign
currency accounts in Guyana has been deleted, no doubt in part because of
its implications for the Guyana Dollar. Section 28 which sought to confirm
intellectual property rights under various existing legislation was deleted
also in its entirety.
Fiscal Incentives & Administration
The Draft Law had a number of sections dealing with the subject of
taxation including tax remissions and tax holidays. Anyone familiar with the
widespread abuse of tax remissions and tax holidays by successive
governments would have welcomed the proposed changes designed to bring order
and transparency into the process. Regrettably for the most spurious reasons
conceivable a number of these provisions were dropped leaving a situation
where the politician can decide on who benefits from any concessions and
reliefs without any obligation to advise Parliament or the nation.
Section 23 had provided for investors, their foreign personnel and family
members employed in Guyana to pay taxes to which Guyanese are routinely
subject. This Section has been deleted in its entirety for reasons not
apparent. Section 34 which had similar objectives to Section 23 but in
respect of the investor has been amended by deleting the taxes to which the
investor would be liable. Section 35 which sought to guarantee stability in
tax rates has been deleted.
Section 36 dealing with the conflict of laws and which sought to
interpret all laws in favour of the investor has been deleted in its
Part 3 dealing with investment priority categories and fiscal incentives
has been deleted in its entirety. The retention of this part would have
removed much of the uncertainty and the discretionary powers accorded to
politicians under the current system. Section 44 would have required the
government to "publish in the Gazette full information regarding all
fiscal incentives granted to specific investment enterprises and to specific
Part 4 dealt entirely with administrative structures and procedures about
which GO-INVEST's CEO made a song and dance in The Chronicle of Friday July
13, 2001. That Section has been completely erased once again leaving
uncertain and hanging the role of GO-INVEST in promoting investments in
The Draft Law was the work of a wide cross-section of the Guyanese
business and professional community as well as government officials. Legal
luminary Bryn Pollard provided the legal input while the writing was done by
international consultant Dr. Don Lecraw. This effort was unfortunately
diminished by the PSC's agreement to the relegation of the document from one
having legal force to one of at best a mere policy restatement.
Given the legal down-grading of this document as well as the substantial
deletions from the original draft without a more comprehensive explanation
from the Government, it is hard to see nay fundamental policy shift by the
Government or specific features that will gain the confidence of potential