Guyana: Bolting the Stable: Rusal and Troy Resources – By Adam Harris

The attention is on two failing companies operating in Guyana. One of them is in the bauxite industry, the other in the gold sector. Rusal has been in the Berbice operations of the bauxite industry after the company operating at Bermine pulled up its roots.

Generally, when a foreign company comes to work in a local industry that is outside the scope of the locals, the authorities would grant concessions. To the casual observer these concessions seem exorbitant.

There are concessions for fuel, for machinery, and even for tax payment. In turn the company would offer to provide employment, pay royalty on production, and keep the industry going.         

It would seem that Rusal failed to live up to its end of the bargain. But there is also the suggestion that Rusal even used the concession for fuel to its distinct advantage. Records show that Rusal was using as much as 19,000 gallons per day.

Watchers are now accusing Rusal of selling fuel even cheaper than the government importer. And this is easy to explain. The importer who would sell fuel to the operators in that part of the world with duty attached to the cost, is allowing Rusal, who pays no duty on fuel, to market the fuel to the other operators at a drastically reduced rate.

So Rusal is actually earning from its concession, and this is not amusing to Guyanese who have calculated the cost of the concession to the country. They say that the money given away by way of the concession could have developed something in the country.

The discussion about incentives has been had on many occasions. The government would argue that had the investor not come, then the resource would remain undeveloped. And developing countries cannot leave resources in the ground.

Guyana Telephone and Telegraph Company came to Guyana over two decades ago having acquired the then ailing telephone entity for a song. It turned out that the foreign company, Atlantic Tele-Network (ATN) bought Guyana Telecommunications Corporation for US$16.5 million.

The money owed to the company was more than US$4 million. The result is that ATN made back a large portion of its investment by simply collecting the debt. There was an enquiry which failed to overturn anything.

To its credit, GTT improved the telephone system, introduced internet, and continued to develop the system. It also paid handsome dividends to the government.

The other telephone company to come after U-Mobile was Digicel. Again there were concessions, and while there was talk that the government has failed to examine the books of this company and therefore failed to ensure that it collected its taxes, the bottom line is that the government did collect some revenue.

I had some discussions with GO-Invest and the system of concessions was explained. The authorities said that the plan is never to grant excessive concessions. In fact, they said that some of the concessions could be withdrawn if the company fails to uphold its end of the bargain.

I am not aware that any concession was ever withdrawn. Instead, there was one company that asked for even more concessions without expanding its operations.

BaiShanLin came with big plans to develop the timber industry. One of those plans was to set up a mobile sawmilling entity in the hinterland. That sawmill was never established.

Instead, BaiShanLin continued to export logs for which it paid no royalty, something that did not match up to what Guyana and the timber company had agreed.

One of the concessions that I saw involved the importation of paint, enough to paint the entire country. Fortunately, this concession was not granted. The then President Donald Ramotar later told me that people can ask, but it is up to the government to grant the request.

There is the gold company, Troy Resources, which claims that it is losing money. The authorities halted its operations after a man died in what has been described as a mining accident. Immediately the company sent home workers.

Last week it announced that it may not even continue operations. The question arises about the equipment that came into the country with duty free concessions. The government has a right to demand its duty if Troy Resources decides to dispose of those assets.

The Guyana Revenue Authority is looking at the developments involving Rusal and Troy Resources. Recently, when it was reported that Rusal was shipping its equipment away from Aroaima, the GRA decided to look at the operations.

There has been no word on the situation, because the laws prescribe that the GRA should not disclose the business of its clients. But I would expect that the GRA has information on what Rusal plans to do.

Indeed, it is the duty of the revenue collection agency to ensure that it gets what is due to Guyana. It says that it is already prepared to audit the books of the oil companies operating offshore Guyana.

There is suspicion about the charges the oil companies are declaring. It did send some staff members for training. Those staff members have returned.
At the end of the day, Guyana must ensure that it gets everything it deserves.

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Comments

  • kamtanblog  On November 18, 2019 at 5:31 am

    Unfortunately the mighty businesses/multi nationals/corporate will exploit any tax
    Loopholes/concessions to defraud the
    locals of local/national taxes.
    Make profits by tax avoidance/evasion.

    No am not a “commie” … just making
    Guyanese aware/beware of the crooked/corrupt capitalists greed.
    Its not wealth creation trickle down
    thesis …more wealth accumulation for the
    richer classes.

    Now go figure

    Kamtan a very interesting expose

  • Trevor  On November 18, 2019 at 7:11 am

    The GRA should audit the taxes that are being evaded by the “business investors” who are bringing dirty money from Asia and proceeds of organised crime to build fancy 7 storey mall that isn’t occupied to sensible capacity (in other words, used as a front to wash illegally obtained funds).

    With the coming of oil production, and future GDP growth, those buildings would double or even triple the assessed property rate today.

  • brandli62  On November 18, 2019 at 10:25 am

    Doing business with Russian and Chinese companies is high risk. They are typically corrupt, do not keep their promises, and are typically run by shady characters. In Switzerland, we had our own share of this in the past. Exceptions may exist, however, but they are difficult to spot. My advise ist to stay away if possible. Alternatively, they pay their dues before starting to operate.

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