Last Saturday, it seemed my story’s headline: “Chastanet Torpedoes Opposition’s Negotiated Plan for Hewanorra International Airport!”, ruffled more than a few feathers. Particularly controversial was the use of the word “torpedoes”; so much so a media colleague brought it up in conversation: “How did Chastanet torpedo Pierre?” Obviously he had not read past the headline.
He added that a good journalist (such as he?) would have gotten the opinions of the experts to settle the matter and would have taken into consideration the “precedents” already set by such economies as Barbados and Jamaica. The suggestion had earlier been expressed several times by House opposition leader Philip J Pierre; on several occasions.
In this writer’s opinion, to assume that precedent plays much of a role in analysing the HIA redevelopment debate is misguided, to say the least. Both pathways, PM Chastanet’s loan and Pierre’s proposed PPP model, come with huge fiscal risks. Additionally, there isn’t enough quantifiable data, with Jamaica and Barbados as examples, to assume Saint Lucia following their lead would have been the best option in the long run.
Consider the situation in Jamaica and its Norman Manley International Airport (NMIA). At the October 10, 2018 concession agreement signing, as detailed on the Jamaica Information Service website, Jamaica PM Andrew Holness “said that in the case of the NMIA, management of its operations is being divested to Mexican entity Grupo Aeroportuario del Pacifico S.A.B. De C.V. (GAP), people who are airport specialists.” Moreover: “Under the NMIA concession agreement, GAP will be responsible for improving the airport’s land and air operational efficiency, and financing and completing a modernisation programme at an estimated cost of over U$110 million.”
The company is of course not giving away its money for free. “Additionally, the Government will receive a guaranteed percentage of the airport’s gross revenues. The entity has the option to extend the contract by another five years.” That additional five-year extension option would bring the concessionary period to thirty years if taken, just like what was proposed in Saint Lucia.
Of course the “guaranteed percentage of the airport’s gross revenues”, as stated above, is a euphemistic way of saying that the government and by extension the people, will be missing out on possible billions of dollars over the next three decades, just as Allen Chastanet argued at the last sitting of parliament. In Barbados, the PPP airport redevelopment ball has also gotten rolling. As the Caribbean360 website reports: “The Government has signed a deal with the investment and advisory arm of the World Bank Group that will see the country’s only airport being completely renovated and refurbished.” That report was made on Thursday May 23, 2019.
With the PPP airport redevelopment arrangements in both Jamaica and Barbados being so new, they can hardly be used as the model for Saint Lucia. There is in fact no precedent of success in either case over a ten, fifteen or even twenty-year period. How can we properly gauge the success of this model in economies like ours when it’s hardly gotten off the ground in Pierre’s cited examples? The concessionary periods both span twenty to thirty years. Think about that.
This relegates Pierre’s reasoning to a “we should do it because they did it”. Not only is the proof of the pudding always in the eating, in this instance Pierre’s proffered puddings have not even reached the oven! At the risk of overdoing it, I might also remind my Pierre endorsing colleague that there’s folly in counting chickens before a hatching. It will be some time before anyone knows for certain that Barbados and Jamaica made the right choices!
Speaking of which, Chastanet’s choice isn’t exactly blazing some wild and unexplored trail. Referring to HIA’s redevelopment, Caribbean Journal reported it “will be supervised by the Overseas Engineering and Construction Company, which has undertaken more than 100 projects in the region, including St Vincent and the Grenadines’ new Argyle International Airport.” So, there goes that argument!
And lest I be accused once more of not citing the “experts,”—whoever they may be—this is what one respected source has said about PPP arrangements: “Public-private partnerships (PPPs) offer new opportunities to develop public infrastructure, but also bring in substantial fiscal risks.” (Taken from: Corbacho A., Schwartz G. (2008), PPPs and Fiscal Risks: Should Governments Worry?)
But that’s not all. It further explains that: “By involving management and innovation from the private sector, PPPs offer the promise of greater efficiency, better quality, and lower-cost services than traditional public procurement. However, PPPs also involve new and significant fiscal risks and can be used to bypass spending controls and move public investment off budget and debt off the government balance sheet. In fact, whether or not PPPs have achieved their efficiency objectives in practice remains an open question, although there is mounting evidence of fiscal risks associated with PPPs.”
My attempts to interview the opposition leader for the purposes of this article clashed with several other earlier arrangements. But Mr. Pierre has promised to meet with me as soon as possible!
