Borogu defends ministry action

The Finance Ministry’s first secre tary, George Borugu, was one of the signatories to the letters of guarantee. On July 6, he explained what his impression of the whole operation was.

From the Finance Ministry’s point of view, there was nothing wrong.

PIM: Mr Borugu, this operation involving signing letters of guarantee was not a scam, to your understanding?

GB: No, this programme was not a scam. It involved a trip to Europe by our Ministry of Finance and Peter Swanson.

They went to London and Zurich, where they met reputable banks which were to be the custodians for these documents. The governor of the Reserve Bank declined to go with them for reasons similar to the accusations of the ombudsman.

PIM: What sort of banks did they meet?

GB: Barclays, Loyds, Deutschebank in London and in Zurich Credit Suisse and Swiss Corporation Bank. Now, if it was a scam, it would not involve genuine rep utable banks like this.

PIM: What was the idea on the Finance Ministry’s side?

GB: The idea originally was that we put the proposal together and if the Council of Ministers says OK, we do it. If not, we withdraw it. So we put together a 80-90-page report for the Council of Ministers’ consideration. Then the council of ministers decided we should withdraw from the programme. This is what has been done and the Ministry (of Finance) finds it difficult to accommodate. We haven’t done anything wrong yet. We were still at the stage of preparing the report. If we had gone right to the end of the programme and ended up with nega tive results, the Ombudsman’s Office then could have accused us. But we’re still at the initial stage of the programme. How can you say this is a scam when you’re only at the first month?

PIM: You were expected to gain some SUS2SO million in a few weeks by issuing letters of guarantee worth SUSIOO mil lion. What was this money for?

GB: This was the total of the cost of

several development projects put together.

At present, we want to increase private participation in national development pro grammes at the planning and implementa tion level. This was to finance a project of generation of geothermal energy on the north of Efate (Vanuatu’s main island).

This project, as early as 1982, was identi fied in the national plan objectives and it is believed it could generate about 10 times the quantity of energy produced by the electricity company here.

Currently, the price of electricity is so high it’s become a prohibiting factor to development. One of the other projects was a cement factory in the same area.

PIM: But how did you understand this scheme was supposed to work?

GB: It’s a use of guarantees. According to our advice, this is a normal business between banks. It’s not something new.

The idea was that the trading would gen erate profit and the profit would be used by government through a company.

Money would then be used by this compa ny, New Resources Group Vanuatu Limited, which was formed here, to fund

government projects.

PIM: Is it like a loan?

GB: It’s not a loan. We did not sign a guarantee for a loan. It’s an instrument the trading banks in London are going to use to trade. So, it’s a guarantee for invest ment rather than a guarantee to loan money. The guarantees were going to be held by custodian banks and the profit would be used to finance development projects identified by the government.

PIM; Were you not surprised that it could be so easy to make so much money

in such a small time?

GB: No, I wasn’t surprised because I was aware of that trading going on.

PIM: So you had no doubt it was a

legal operation?

GB: I don’t say it’s a scam because I know this trading exists. The Ombudsman’s Office say it’s a scam because they’re not aware of it.

PIM: To your understanding, is this a similar thing to what happened in the Cook islands? What was the advice you received on this type of operation?

GB: I don’t know much about what happened in the Cooks. All I know is the Cook Islands have been mentioned. But all the advice we have received were in favour of the programme and they were not saying it’s a scam.

PIM: Did you seek advice from experts and specialists?

GB: Yes, we received advice from spe cialists internally and overseas, including a law firm in Australia. They all said we could do this. I know it exists. I had no doubt we would succeed in generating the profits.

PIM: Didn’t you think because of what had happened in the Cook Islands, you had to be extra careful?

GB: No, I never envisaged this possi bility. We were at a preparation stage. The advice from the PM’s office was that we should follow the steps.

PIM: And this Australian ‘financing consultant’, Peter Swanson - how did you first hear of him?

GB: We’ve known him over the last four years. He’s a financier. Before we asked him to be involved, we asked him to submit his CV and backgrounds of all peo ple who were going to be involved.

They’re all people who exist in Australia not fictious people - and genuine banks in London. Peter Swanson is a member of

several reputable banking organisations.

PIM: The ombudsman report alleges he’s been declared bankrupt more than once. This didn’t affect the good image you have of him?

GB: No, we heard he had entered about 10 different businesses and only two companies were bankrupt. But who in this world is not bankrupt?

PIM: He was also was given a Vanuatu diplomatic passport although he’s not a Vanuatu citizen.

GB: That was from the beginning (of this government) when the government asked him to deal with this. To show some commitment, that was issued to allow him to travel on behalf of the government overseas. It was after the government was formed. ■