Dear Editor,

Every country in the Caribbean takes pride in its hotels for the role they play in the local tourism industry, the backbone of its economy. Their industry has been built over many years of careful planning and execution. One thing the governments of these countries have in common is that they provide the infrastructure both physical and fiscal to spur private initiative of both local and foreign investors to invest in hotels and other components of the Hospital industry.

None of these Govern-ments use taxpayers’ money to build hotels for foreign companies and discriminate against local entrepreneurs. They encourage and support local hotels to refurbish, improve their standards, add rooms and build new hotels as the demand increases. There is no better policy strategy at a national level than providing a stable, certain and attractive fiscal environment that attract investments to particular industries.

Governments building hotels using taxpayers’ money for leasing to foreign Hotel Chains is not the best use of taxpayers’ money. Guyana with its narrow economic base and poor infrastructure of roads, unreliable electricity, poor drainage, rising crime, and uncontrollable migration should not even be thinking of building hotels for wealthy multinationals. Of more pressing need are clean water, reduced electricity rates, better health care, computers in schools for every secondary school child, a real highway to the airport, roads to the intermediate savannahs, and improved drainage in the city and the rest of our country. In addition, Government must, as a matter of priority restore long eroded independent democratic institutions to ensure transparency, accountability and fairness in the use of the national patrimony and resources. The repeated request by the private sector and other stakeholders for an independent integrity commission along the lines of the Trinidad model and the call for a Freedom of information Act have fallen on deaf ears while the President misuses our tax dollars for the benefit of his friends.

In my comments to the press last Friday I raised the issue of the increasing evidence that the Government of Guyana is squeezing out the private sector by unfair competition, and more directly that of the use of our taxpayers’ money to build a Hotel for the Marriott Group.

I take serious offence with Mr. Jagdeo’s outburst, among other comments, on the quality of water at the Pegasus Hotel and condensation in the rooms in reaction to my comments of serious governance issues in his misuse of our tax dollars. Let me remind the President that his Government has been a shareholder in the Hotel from its inception and that the primary responsibility for the supply of water to the nation rests with the Guyana Water Inc., a 100% state-owned entity. And is it not public knowledge that Pegasus is currently undergoing a US$8M upgrade that will bring this national forty-year-old icon to the very best of international standards of comfort and hospitality? Even as we do this no guest of the hotel has recently complained of room comfort or water quality. I invite President Jagdeo to stay at the Pegasus for a weekend with my compliments to see firsthand how guests enjoy themselves and why they keep coming back. It is highly unpatriotic for a President to criticise his country’s flagship hotel amid an audience that knows and fully appreciates the iconic role it has played on the Guyanese business landscape.

The Pegasus enjoys the highest level of occupancy of all hotels in Guyana, averaging 55-60% per annum compared with a national average of approximately 35%. If the demand for rooms increases we will mobilize the resources from local banks to add more rooms and expand facilities. It does not make economic sense to do so until then. When we do so the entire economy benefits, including the banks as well as the national coffers. Why since the President feels that the Marriott will bring more tourists doesn’t he ask his private partners and the Marriott to do likewise and borrow money instead?

A country whose people pay among the highest level of taxes in the world ought not to have their sacrifice squandered by its President for the benefit his friends and wealthy multinationals. If the Marriott’s shareholders so desire let them buy land on the open market and build their own Hotel. A Govern-ment’s overriding responsibility must be to its citizens and any public official who discriminates against any of them must be asked to resign.

Let me address a few issues that the President raised. Firstly, rates and taxes owed by Guyana Stockfeeds Inc. This company is always prompt in its discharge of rates and taxes obligations. The amount the President referred to relates to the land housing the Oil Mill transferred in late 2003 with accumulated rates which the Government did not settle on transfer of the land. The rest is the subject of  discussions with the Minister as the rates were arbitrarily increased 1000% after I took over the oil mill.

The Wharf the Company built cost $140m and benefits the livestock, rice and coconut industries tremendously by reducing the cost of transportation. It uses an access road 30ft by 100ft which my company has been using for the past 15 years. This narrow strip is not owned by NICIL as the President alleges. Why would the President have a problem with this?

The President claimed that I stole the Government’s shares in Guyana Stockfeeds Inc. He was referring to an issue of rights shares in 2002 in which the Government refused to take up the shares offered to it and which under the terms of the issue were purchased by other shareholders. This matter is the subject of litigation in the High Court. In addition to retaining some shares to harass the majority shareholders, it is now using its political bully pulpit to try to influence the court.

Mr. Jagdeo also alleges that I am afraid of competition. May I remind him that I have successfully dealt with competition all my life and have built highly competitive businesses even in the midst of deliberate and well known obstacles from his administration. He would recall refusing Guyana Stockfeeds concessions which he extended to another company owned by one of his friends.

My company has invested close to $4b in the last 12 years and is the market leader whose investments, careful planning and creative strategies spurred the rapid growth of the local livestock industry. The company boasts the most advanced value-added technology in the rice industry with its brand of parboiled rice, Angel, the Caribbean’s number one brand in supermarkets after just four years. In contrast the company which received lavish concessions went out of business for a long time and only by a Government guarantee (taxpayers’ resources) has it re-entered the market.

Competition is a way of life and every Government must ensure that competition in every sector is clean, fair, and non-discriminatory. I had to borrow money to purchase Pegasus and do refurbishment. Therefore the Marriott and Mr. Jagdeo’s undisclosed private partners must. Who really is afraid of competition by using taxpayers’ money?

No Head of State in the region abuses its private sector the way Mr. Jagdeo does. The very private sector which generates the economic activity that stimulates the economy, creates the funding for Government, and provides employment that builds and sustains families. In turn, these ensure social and economic stability and progress. In Jamaica, Trinidad and Barbados, the private sector plays an integral role in shaping the economic agenda of the country, is treated respectfully and as a partner, not a competitor.

Hopefully the Presidential hopefuls both within and outside the governing party will protest this aggression and abuse and make known their promise of accountability, transparency and prudent use of our taxes. This would finally signal a new order of politics in this dear land of ours.

Yours faithfully,

Robert Badal

Introduction

The proposed US$51 million Marriott Hotel in Georgetown is one of the primary anchors of the economic policy stance of the PPP government. The Marriott, the airport terminal demolition and reconstruction (US$160 million), the One Laptop per Family Project (US$15 million), and Amaila hydroelectric plant (US$860 million) are all projects brought forward from the Jagdeo administration.  The necessity, economic logic and optimal sequencing of all these projects can be questioned. In this column, I will examine the proposed investment in the Marriott Hotel, which is expected to be part financed by the government (US$13 million).

One of the first things to note is the equity investment by the Guyana government represents a subsidy to the hotel with the use of monies from the people of Guyana. Whether that person is a PPP supporter, PNC supporter, AFC supporter or an independent does not matter since he or she will be responsible for paying taxes to help finance the debt all these projects will take on.

In that case the government of the day ought to be extremely careful that it is implementing the best sequencing of projects. While it is true a Marriott 5-star hotel can be nice for the capital city, the economic benefits are less clear. When the government takes on foreign currency debt, it must make sure it is investing in the tradable sectors that will generate enough foreign exchange for the economy.

Crowding Out of Other Hotel Investments

I want to make it clear that the Development Watch column is not against the Marriott coming to Guyana. If the Marriott wants to invest in Guyana then it ought to be financed by private investors. It is not right for the government to subsidise a foreign hotel that will be directly placed into competition with several existing Guyanese hotels that are in the three to four star range. These existing hotel investors would have financed their projects with owner’s equity and bank financing. Some of the investors performed a patriotic duty by responding to President Jagdeo’s call for hotel investments just before Cricket World Cup.

Some estimates have it that the hotel occupancy rate in Georgetown is just around 50 per cent. The government and NICIL are yet to give us a convincing argument that this hotel will bring in mass tourists to yield the projected 11 per cent return. What is there in Georgetown that will cause thousands of tourists to come?

Has the government maintained the art scene? Has the museum been updated? Is Georgetown the garden city of the Caribbean or the garbage city? Are the building codes maintained so UNESCO may declare Georgetown a world heritage site as is Paramaribo? Is there legacy industry tourism like taking foreigners to old sugar factories?

Are they going to come to the Marriott in Kingston, Georgetown to gamble? Is that the tourism vision of the government? In which hotels overseas Guyanese visitors stay and do they care for 5-star hotels? Or do they prefer to stay with families?

Without these forms of city attractions, it is very likely that existing hotels will face competition from the government-subsidised hotel. This is a classic example of government investment jeopardising or crowding out genuine private investments. Even the government accepts this when it accused the AFC of protecting the interest of Pegasus and Mr Badal.

The PPP politicians made this point in Parliament. Hence, they know they are using the monies of the people – regardless of political leanings – to suppress existing hotels because they view their owners as being unfriendly to the government. This is classic oligarchic behaviour. If several hotels should fail because they cannot compete with the city Marriott then the development role the government envisaged would not be fulfilled. Jobs will be lost and resources wasted in other areas as some are created by the Marriott. Isn’t the task of the government to make sure that the rising tide lifts all boats?

Even more perplexing is that several ‘representatives’ of the private sector have not taken into consideration this downside risk. This could send the wrong signals to future investors, both foreign and local.

On the one hand, future investors will see the government as being willing to use taxpayers’ monies to establish businesses to compete with their self-financed projects. On the other hand, future investors will likely view the existing private sector ‘representatives’ as mainly protecting the oligarchic extractions of those connected to the PPP government.

Catalytic Role of Government

Caribbean governments have financed hotels in the past. When these governments were building hotels they were thinking in terms of the catalytic effects their investments would have on nascent tourism industries.

Also when the Barbadian government invested in hotels they were doing so in an area that is geographically compact. Tourists could move easily from one beach location to hotel. In Guyana tourists entering via the international airport at Timehri must incur time and money to get to the real jungle attractions the country has to offer.

Therefore, I would argue that the Ramotar administration should also be thinking of igniting similar catalytic effects. What would be some examples? What this column proposes may be risky, but that is the nature of the task when government intervenes to set the stage for future developments while not jeopardising the success of existing sectors.

The government needs to think in terms of the opportunity cost – the next best economic activity on which the said money can be used – of tearing down a perfectly okay airport terminal and building a new one for US$160 million. It needs to think about the opportunity cost of investing US$13 million in the Georgetown Marriott and US$160 million in a new terminal at CBJ Timehri. What is the next best investment that could be made with these funds? That is, investments that will grow and nurture a new or nascent production sector, while not impacting negatively on existing businesses; investments moreover that will stimulate the demand for locally grown produce and crafts by engendering new and sustaining the old.

I would suggest that creating a system whereby beach tourists visiting the Caribbean can easily, quickly and directly fly into the Essequibo Coast to get a taste of something different. Here the task should be to combine blue water beach tourism with green jungle tourism in one package. Flying tourists into that area will help to stimulate several Indigenous village economies. If the government is going to be daring then do so to ignite the catalytic effects; but do not bring unnecessary competition to your existing local investors. Why not establish a medium scale airport that can accommodate Boeing 737s and Airbus A320s into Essequibo? This airport can be connected to popular Caribbean tourist destinations while doing the same at home with CBJ Timehri, Ogle and eventually Skeldon. This will certainly require hotels to be built in the area. However, eco-tourists will not fancy modern architecture buildings like the proposed Kingston Marriott. Hotel investors will have to think about blending eco-tourism themes into resorts as they do in Costa Rica.

Once they get hooked on the Indigenous villages, rivers, lakes, wild life and jungles of the Essequibo they might travel to Georgetown once the politicians get their acts together and restore the city to its glory as the garden city. Then the PPP elites can fulfill that long held fantasy to build their five star city hotel. At that point no one would be able to criticise the government for bad timing and poor sequencing.

Please send comments to: tkhemraj@outlook.com