The mining sector
Editorial
The mining sector accounted for l7 per cent of GDP in l998, in the last decade the value of its exports has been higher than any other sector and it employs between l5,000 to 20,000 people. After reviewing the state of this important sector, including the plight in the state owned bauxite industry ("the scale of operation of both Linmine and Bermine is well below the minimum for a viable operation in a mining activity involving the stripping of overburden, with overburden to ore ratio in excess of 4:l" and "the cost of production (at Linmine) is above the price received for its product. As a result it annually incurs net losses which are met by the Treasury"), and the unattractive tax regime, the National Development Strategy (NDS) prescribes as follows: " There will no longer be any special agreements in respect of the mining sector. The fiscal regime will be so structured that it could be applied to a variety of projects and in a number of circumstances without wasting time and resources in devising a unique set of arrangements for each project. There will be a standard regime for each mineral or set of minerals. The royalty rate will be 2 per cent. An additional half per cent will be added to exploitations on Amerindian lands to be paid into the Amerindian Development Fund. The corporate income tax rate will be fixed at 30 per cent for all mining projects. Export duties on minerals will be reduced to zero. The consumption tax on fuel will be l0 per cent CIF. A coupon system for miners will be put in place. The withholding tax on repatriated dividends will be fixed at 6.25 per cent, which is the rate applied in the case of Omai, rather than the l5 per cent rate that is normally applicable. A special commission will be convened to determine new, land rental rates in mining and to develop a sliding scale which correlates rental rates with the length of time the claim is held without beneficial occupation". Noting that efforts to privatise bauxite have failed and recognising the importance of the industry to its communities the NDS states: " Recent studies have indicated that there exist more than sufficient reserves of bauxite in our country, of the highest quality, to permit both national bauxite companies, Linmine and Bermine, to produce a range of types of product, for which there are ready markets. Moreover, the available evidence strongly suggests that both companies can be financially viable provided that they expand their operations and provided that they receive adequate injections of capital. The bauxite-alumina-aluminium industry is falling more and more under the control of a small group of multi-national corporations. In other words, the industry is essentially managed and controlled by private enterprise in the form of the multi-national giants. It might therefore be to our advantage to try to involve one or other of these multinationals in the funding and ownership of the two national companies. It cannot be too strongly emphasised that if the formulators of this National Development Strategy did not consider the industry to be potentially profitable it would have been allowed to wither away and die, and other non-bauxite strategies would have been put forward for the region's development. This, however, does not appear to be necessary, at this stage, because of the arguments adduced in the preceding paragraphs. Accordingly, both Bermine and Linmine will be supported for a maximum period of four years, beginning on January l, 200l. This support will be in the form of loans from commercial banks that are guaranteed or otherwise underwritten by the Government of Guyana, or in any other form that can be negotiated either with bi-lateral or international donors. The Government will seek the approval of the Bretton Woods institutions to enter into any such arrangements, if, by so doing, their conditionalities will be breached. While this essential expansion and rehabilitation process is proceeding, further efforts will be made to privatise the two companies. However, the necessarily long and tedious privatisation process will not be followed. Instead, prospective investors, selected from the major multi-nationals will be directly approached with proposals for them to enter into joint ventures with the government and the management and workers of the enterprises. The proposals will embrace two options: they will be given the choice either to capitalise Linmine or Bermine separately, or to take them over and run them as a single entity. If acceptable offers are obtained for the separate purchase of the enterprises, then the ownership models will be different. Because Bermine lends itself to a joint venture agreement in which the foreign financier, the government and the management/workers will be owners, with the controlling interests being held by the foreign participant, this will be the arrangement. However, in respect of Linmine, the participation of the management/workers in equity holdings will not be pushed. In all these options, there will be five-year income tax holidays; the importation of machinery, equipment and spares will be duty-free; as will be the importation of Bunker C fuel oil and diesel fuel". The search for petroleum continues. It was found in l979 in the Takutu Basin by Home Oil Canada but because of the remoteness of the area and the lack of infrastructure it was not produced. Ten exploratory wells have been drilled offshore since l997. The NDS says: "Guyana will continue to utilise the Production Sharing Contracts (PSCs) in its arrangements with oil exploring and production companies. The PSC is almost a standard in the petroleum industry today. The important distinction between the PSC and concessions is that under PSCs the state retains ownership and control of the resources. In Egypt the government retains 85 per cent of the profits, while the Libyan government keeps 8l per cent. However, the ratio between the Government of Guyana and CGX,Energy which is to begin oil explorations off the Corentyne coast by mid 2000, will be on a 50:50 basis, if commercial quantities are discovered. Although committed to the PSC, extensive studies of the share that has been negotiated by other governments in these types of activity will be undertaken in order to ensure that while we remain competitive, we do not make unnecessary concessions".  Follow the goings-on in Guyana
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