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Investment Bill delayed - again
Introduction
The
Investment Bill which has been in gestation for close to four years has to
wait a while longer before it becomes law.
Having been referred to a Select Committee of the National Assembly for
further consideration, the Bill must now wait until after that body’s eight
weeks’ recess before it can be voted on.
Compared with the more controversial Fiscal Enactment Amendment (No.2) Bill
2003, this should have been a shoo in since it has effectively been cleared
by the Private Sector Commission (PSC) and would almost certainly have been
supported by the main opposition party, the Peoples National Congress
Reform.
The Investment Bill was the initiative of the PSC and began in October 1999
when the President had the first and only Annual Presidential Summit with
the Private Sector. In April and May 2000 International Investment
Specialist Donald LeCraw, in a consulting assignment funded by the United
States Agency for International Development (USAID) which later brought on
board Senior Counsel Bryn Pollard, met groups from both the private as well
as the public sector out of which a draft Guyana Investment Act was prepared
and circulated for discussion. A number of questions, suggestions and
recommendations came out of the further consultation process following which
Mr LeCraw prepared a commentary on the feedback.
The government responded by pouring cold water on the idea and instead
circulated in the National Assembly an undated, unparented Investment Code
whose status is to this day rather uncertain. That appeared to be the end of
the PSC’s efforts until about two years later when surprisingly and suddenly
the private sector was told that the government was prepared to talk about
the Bill although at least one Minister cautioned against optimism. The PSC
appointed a committee chaired by its Treasurer Paul Cheong to review the
original draft against the tabled Investment Code, the result of which was a
second draft with which it felt the government would be more comfortable.
Compromise
The
President and the PSC then convened a meeting in May 2003 at the Hotel Tower
where a number of outstanding issues were resolved with an agreement to meet
again shortly to address the outstanding issues. The Bill that was tabled in
the National Assembly represented a compromise to which the committee had
agreed, although not without the expression of reservations by some members.
We now look at some of the provisions with which there is still some
discomfort and which it hopes parliamentarians will carefully review before
it is voted on.
Domestic investor
The Bill
includes in its definition of ‘domestic investor’ citizens of other member
states of Caricom ostensibly because of our regional obligations. Without
being insular, why should we confer a right on Caricom nationals when there
is no reciprocal arrangement for Guyanese? Why not put such a condition in
the Bill? And have we considered that more than a few countries of Caricom
sell their citizenship to Asians, among others, who under the provisions as
drafted would qualify as nationals? While as a country we must not put too
many hurdles in the path of investors, we should not place too many
ambiguities in the law whereby judgement has to be applied. Our tax laws
include residence rules which may be useful in the application of other laws
such as this one.
Investors can invest in just about anything, including a co-operative which
enjoys tax-exempt status, but they cannot operate “investment enterprises
prejudicial to the national culture.”
Will the private sector please explain what this means? Foreign investors
may also establish under the Business Name Registration Act which seems
particularly dangerous because of the loose nature of such a (non)entity.
And do they really mean that only companies incorporated under the Companies
Act are an acceptable business form and not a branch of an external company?
And while the bill recognises co-operatives as an investment enterprise
there is no such recognition of joint ventures, perhaps the ideal model for
our country.
Dollarisation
One
particularly interesting clause - 22 - provides that foreign personnel
employed in investment enterprises are subject to all the tax laws, but
section 23 is also interesting for a different reason. If the Bill is passed
then investors will be able to open foreign currency accounts which is
likely to see a flight from Guyana dollars and dollarisation of the
investment sector of the economy.
The Bill also sees the restoration of the provision that there be published
in the Gazette "information regarding all fiscal incentives granted pursuant
to this [the Investment] Act.” While this appears a significant concession
by the government which has resisted any attempts to curb the liberal
granting of fiscal incentives to those whom it favours, the ambiguity about
the incentives that need to be gazetted should be removed. After all, it is
not under this Act that tax holidays and various forms of waivers are
granted, and it is not difficult for the unsuspecting person to believe that
this will curb the excesses, notwithstanding the provision of section 38
that the incentives granted to an investor under this or any other enactment
be audited by the Auditor General.
In fact, not only will the cynic wonder why section 37 limits the
publication of incentives only “under this Act” and not any other enactment,
but there is a subtle but significant change between what the private sector
wanted and what is now provided.
Influence and control
The private
sector should also explain why it has agreed that the Minister can designate
the four private sector organisations from which the private sector members
of the Investment Promotion Council will be drawn. A legislative framework
which gives the President and Ministers autocratic powers is obviously the
model preferred by this Government.
Under the Bill, Go-Invest is assigned responsibility for administering the
fiscal incentives investment system, though it is difficult to reconcile
this with the powers of the Minister of Finance under the various tax acts.
The government has also rejected the attempts to put into the legislation a
provision which will force prompt decisions on requests for incentives, but
again the PSC appears to have taken the position that we are fortunate just
to have any Bill.
They seem to forget that this is one of the commitments given by the
government to the international community in exchange for debt relief, and
that it is in the country’s interest to have truly effective provisions for
encouraging investments.
Yet, one hopes that Go-Invest will demonstrate more openness and
transparency in its operations, be freed from political controls and become
truly autonomous.
On the other hand the private sector and indeed the country should welcome
the reinstatement of the requirement for interest on monies due on any
compulsory acquisition of property and the reinstatement of the provision
against governmental interference in investments which were major bones of
contention. But does the Bill’s provision regarding compensation and
interest apply to all privately owned property or only invested assets?
Conclusion
The Bill is
a vast improvement on the Investment Code which remains an embarrassment to
all concerned. Despite agreement from the private sector, there is
significant room for improvement, too many ambiguities and opportunities for
abuse. The Select Committee must be able to do a better job to ensure a well
drafted piece of legislation which the Bill in its current form is not.
An Investment Act is no guarantee that investments will come rushing in if
other factors do not exist. What it does, however, is bring some certainty
and order to the investment approval process which has so far been largely
politically driven and for this and other reasons has not been very
successful.
The Stock Exchange and a more transparent incentive approval process
superimposed on a more civilised political culture may be just what the
country needs to move forward. Over to you, MPs.
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