Head of the privatisation Unit, Mr. Winston Brassington, yesterday said that the privatisation of Sanata Textile Complex to Queens Atlantic Investment Inc.(QAII) is a positive move geared to promote employment and investment, and to generate income for government.

He pointed out that the US$30M investment programme to be completed by 2010 will see permanent employment of more than 600 persons.

Mr. Brassington told reporters at a press briefing jointly hosted by Chief Executive Officer (CEO) of Go-Invest, Geoffrey Da Silva, in the National Communications Network (NCN) Studio, Homestretch Avenue, D’Urban Backlands, that already the scale and expansion of the investment is evident and moving at a rapid pace, with over $1.5B having been expended since last year. Prior to this, $400M was spent on the removal of asbestos from the buildings.

Upon completion, the complex will house :

* a modern textile mill for gauze, bandages and demin production;

* a state-of-the art printery;

* an antibiotics plant and R&D facility;

* a pharmaceutical export processing facility; and

* a hardware manufacturing division.

The Privatisation Unit head said QAII, which acquired New Guyana Pharmaceutical Corporation (NGPC) in 1999 following a competitive tender pursuant to the privatisation framework, has shown the capabilities and commitment to comply with the terms of its privatisation agreements.

He disclosed that the privatisation board and government have approved leasing arrangements for many operations including the following:

* the old glass facility leased to Mr. Howard Bulkan at $5.3M per annum since the mid 1990’s when GGWL was dissolved;

* the former GNEC facilities leased to GNIC at $70M per annum but not being paid.

* the former GRDB wharf leased to B.K. International at $10M per annum;

* the Eccles Industrial Estate-84 plots at $1 per square foot;

* the Coldingen Industrial Estate-38 plots at $1 per square foot and;

* the Ruimveldt Industrial Estate ( 19 plots) for which currently none of the occupants are paying rent.

* Mr. Brassington stressed that government is moving to the Courts to repossess those lands and pointed out that the rental circulated by the Government Valuation Office is substantially lower than what is being charged at Sanata.

Concessions granted
Mr. Da Silva emphasised that the concessions granted to the Sanata projects fall under the fiscal enactment amendment, customs, VAT, the excise tax, income tax in aid of industry, and the investment acts.

He said that the bio-technology initiative, the first investment of its kind in Guyana, has been granted a tax holiday of five years which might be extended to another five years based on performance.

The CEO disclosed that any investor planning to join the Sanata operation will have to invest in textile projects in addition to others. That project has also been given a five year tax holiday.

Da Silva disclosed that government is looking to assist the company in meeting its fuel costs and has waived customs duty and VAT on machinery and equipment, including a generator set, raw materials and all inputs for the manufacturing processes for all five projects at the company.

This applies to all building materials for construction, communication and security equipment, and vehicles proportionate to the investment and specifically for the projects.

“In addition to investment project of this size, US $ 30 M…the government does grant a waiver of withholding tax on the repayment of the loan,” he revealed.

Da Silva pointed that another concessions granted are the unlimited losses carried forward for all projects as set out in the Income Tax Act as well as the right to open a foreign currency account in a commercial bank and the unrestricted repatriation of capital, dividend and profits.

He said the incentives have been signed under a Memorandum of Understanding (MOU) with government and QAII, which has joint venture projects with investors from China and India.

Mr. Brassington told reporters that in mid 2007, a proposal to lease the complex was received from the QAII; and following detailed discussions, a paper was submitted by the Privatisation Unit to the board of that body on May 9 unanimously recommending its approval.

He recalled that cabinet approved the recommendations in May 2007 and the key terms include:

* the lease rate being set in US$0.24 or $50 per square, per annum and payable at the equivalent Guyana dollars at the date of payment;

* the lease rate being indexed to the rate of inflation in the US after 2009; and

* all rates and taxes being to the account of the lessee (rates in 2007 was approximately $6M).

Mr. Brassington also said that the benefits were considered by the Privatisation Board and cabinet in accepting the proposal. These include:

* utilisation of the land and buildings which had fallen into a state of dilapidation end vandalism;

* avoidance by National Industrial and Commercial Industrial Limited (NICIL) of the high level of maintenance, security, rates and taxes and insurance associated with the property;

* creation of new jobs;

* conversion of the property which was not making a net return into an entity with positive cash flow and;

* encouraging economic activity in the Ruimveldt Industrial Areas.

Specifically, the Privatisation Unit head underlined the complex’s use. Including:

* resumption of the textile operations once a detailed plan was completed; and the operations acquiring machinery to produce dyed and printed demin fabric. These operations will be executed through a company called Global Textile (Guyana) Inc;

* a printery via a company named Global Textile (Guyana) Inc. and;

* an antibiotics plant and research and development facility under Healthcare Life Sciences Inc.

He stressed that like any may lease arrangement, we have claw-back clauses that allow us to terminate the lease if the investment and construction is not implemented within stipulated time frames.

“We have ‘Option to buy’ clauses based on independent valuations of the complex prior to the privatisation…this can only be exercised after the business plan has been implemented. Our rent is denominated in US dollars and additionally indexed upwards over time to the US Consumer Price Index (CPI),” Mr. Brassington noted.

The Sanata company was closed and all workers were severed by 1998. During the 1990’s, Sanata lost money and in 2000 was dissolved and its assets and liabilities transferred to NICIL.

A government of China loan was transferred to the Guyana Government and at the time of dissolution, it had a liability of $55M to the Georgetown Mayor and City Council (M&CC) representing judgment on outstanding rates and taxes for many years.

In 1997, a large Chinese textile operations owned by the Chinese government, agreed with the government via the Privatisation Board to lease the majority of the Sanata complex. However, it took many years for this arrangement to become a reality. Generally the Sanata complex has been closed or abandoned for the most part of the last 15 years, only operating during the period of G&C (the Chinese operator) which had an operational life for only three years.

Mr. Brassington said despite G&C commitment to pay rent for the leased complex, the operation failed shortly after commissioning and was formally handed over to government in lieu in 2006.

He pointed out that the annual upkeep costs for the facility in 2006 were almost $20 M in security, $6M in rates and taxes, and over $5M in cleaning and miscellaneous repairs.

According to the Privatisation Unit boss, over the years, although parts of the complex now leased to QAII had been rented on short term licences, the fees collected were never sufficient to cover the upkeep.