DR. KENNY D. ANTHONY
LEADER OF THE OPPOSITION
INTRODUCTION
For some time now, there has been a raging debate about the so-called Hewanorra International Re-Development Project. The project has earned denials and counter denials from SLASPA, an address to the nation from the Prime Minister, three major front page articles in the Voice Newspaper, several Press Releases from the Saint Lucia Labour Party, numerous comments for and against on Talk Shows and a media blitz by SLASPA to convince a sceptical public about its handling of the project and its viability.
THE ISSUES BEFORE US
The Saint Lucia Labour Party fully understands that the issue of building a new airport terminal is a matter of national pride. We would like to think that we have an airport as good as that of Barbados or, for that matter, as good as, or even better than the new airport currently under construction in Saint Vincent.
Undoubtedly, there will be arguments for and against such a massive investment in these uncertain times and with the uncertain returns.
The Saint Lucia Labour Party even understands that in addition to the obvious self-interest of some members of Cabinet associated with the leading company in the so-called consortium, Asphalt and Mining, there is anxiety within this government for this project because after nearly four years in office and borrowing in excess of 700 million dollars, the Government has nothing positive to show and few, if any tangible benefits have accrued to the people of Saint Lucia.
There are occasions when we need to step back and take an objective look at the options before us. We need to peel away the raw politics and examine what is best for our country and its people, separate from any selfish or narrow-minded interests. I invite you to do so now by considering two questions.
First of all, given the multiple crises facing our country from unacceptably high levels of murder and other serious crimes, frustratingly high unemployment particularly among our young people, an extremely weak economy that is affecting all of us, critical problems in our health sector, and serious strains in our social services, is this project in the best interest of our people at this time?
Ask yourself a simple question: Are tourists more likely to visit Saint Lucia because of an extravagant airport or because they feel safe during their stay in the country?
Secondly, should a project of such magnitude, with the potential for such a long-term negative impact on our country’s financial position, be decided upon behind closed doors, without frank and full disclosure, without transparency, without public bidding, and without published rules of procurement?
THE AGREEMENT
The Saint Lucia Labour Party has in its possession a letter to one Mr. Antonio Assenza, described as the “President” of Asphalt and Mining (St. Lucia) Company Limited. This letter was sent to Mr. Assenza by BB&T Debt Capital Markets and SPP Capital Partners LLC, two companies based in New York. These companies are supposed to raise the financing required for the Airport Project. SPP Capital Partners LLC, are described as advisors to Mr. Assenza’s company.
In case you are in doubt, here is a copy of the letter.
The information on the letter clearly shows that Mr. Assenza has signed this agreement not only on his behalf but also on behalf of SLASPA, a most unusual occurrence.
AFTER THE DENIALS
When this issue first became public, the Saint Lucia Labour Party indicated that Asphalt and Mining was the company that had been earmarked to undertake the re-development of Hewanorra Airport. SLASPA repeatedly denied this. Events have now confirmed that we were speaking the truth.
WHY A&M?
The question that has been on the lips of most Saint Lucians from the time this story broke, is simple: What qualifies Asphalt and Mining for this project?
You will recall that this company first made an appearance in Saint Lucia after the 2006 General Elections. Since its arrival, it has been awarded two huge contracts by no less a person than the Prime Minister himself. These contracts were awarded by what is usually described as “Direct Purchase’, which involves the Prime Minister/Minister for Finance awarding a contract directly to a company or an individual without any advertising or any competitive bidding. One contract to rehabilitate the Babonneau Highway was valued at $12.24 million dollars, while the other to rehabilitate the Desruisseaux Road is valued at $10.55 million dollars.
In the view of the SLP, both contracts are illegal because they constitute loans to the Government and as such, they require parliamentary approval. This does not seem to bother Asphalt and Mining. But then again, why should it, since it certainly has not bothered the UWP Government, which, by law, was supposed to have obtained the approval of Parliament.
To this day, the Saint Lucia Labour Party has been unable to unearth any creditable information anywhere to suggest that Asphalt and Mining has any track record in road construction.
In addition, the Saint Lucia Labour Party is now confident that there is not a shred of evidence to suggest that Asphalt and Mining has any experience in financing and constructing airports, yet this UWP administration has trusted them to raise money for the largest public sector project ever to be undertaken in our country’s history. Why? What do Stephenson King and his Government know about Asphalt and Mining that nobody else seems to know?
NO ADVERTISEMENT
Right-thinking Saint Lucians would have thought that a project of the enormous magnitude proposed by this government would have been advertised internationally so that we could have procured the best possible financing terms and the most experienced and reputable companies. Not so with this Government.
Instead, the Company’s so-called ‘advisors’ are to be paid a “Placement Fee’ of approximately US$2.25 million dollars or EC$6.075 million dollars for their troubles in finding the money for the project. Why is Asphalt and Mining needed in this equation? Why is it that the Ministry of Finance or even SLASPA itself could not have performed the role for which it is paying so much money to Mr. Assenza of Asphalt and Mining? After all, the Ministry of Finance and SLASPA itself, are accustomed to undertaking these tasks assigned to Mr Assenza on our behalf.
Further, the Prime Minister is yet to respond to the question as to why is Asphalt and Mining earning U.S.$2.25 million to raise U.S.$140 million when previous bidders were offering to raise the original amount of U.S.$160 million dollars tabled by SLASPA, at a fee of U.S.$0.8 million dollars. In other words, why is Asphalt and Mining allowed to earn U.S.$1.45 million or E.C.$3.93 million dollars extra for raising a smaller amount?
THE REAL COST
The Prime Minister says that the cost of the project is US$ 140.0 million. Frankly, we do not believe for one moment that this is the real cost. We believe it is much lower than this.
Be that as it may for the time being, the loan is said to attract an interest rate of 5.8 per cent spread over twenty five years. This means that the interest costs over 25 years at 5.8 per cent is a staggering US$ 130 million, or over EC$ 300 million. In effect, with the Government’s best case scenario, Saint Lucians will end up paying over $700 million for this project. However, keep in mind that these calculations are based on the project getting investment grade rating, which is not guaranteed and probably highly unlikely. Should the interest rate shift to a more likely 6.5 per cent then the interest cost of the loan would increase by 20.0 million US dollars or 54.0 million EC dollars. The cost of the project would then go up to EC$ 750 million, or three quarters of a billion dollars. This is a mind-boggling sum of money for a project of this nature.
A NEW BURDEN
The method of repaying this loan is very intriguing and worrying.
The Government proposes to charge every Saint Lucian as well as every visitor a tax of US$ 35 or EC$ 94.50 dollars on their tickets to finance the repayment of the loan. Already this tax is described as an “Airport Development Tax”. This money will be put into a special account described as a “Lockbox Account”. According to the Agreement, the deposited money will be “immune from, and not be subject to any claims or other expenses of or against SLASPA, GOSL or any other Corporate or Government entity related to SLASPA or GOSL”. In effect, this Government is saying goodbye to whatever money raised by our country from that revenue stream for a period of twenty five years.
The document negotiated by Asphalt and Mining on behalf of the Government and people of Saint Lucia implies that for the duration of the loan, the Government will have absolutely no say on the lowering or increasing of Departure Taxes in the biggest sector of our country’s economy. That is an amazing and almost unprecedented surrender of policy and authority by a Government.
The Agreement says that SLASPA must handover “amounts amalgamating to US$ 15 per passenger for the first year, US$ 25 for year two (2) and three (3), and increasing to US$ 35.0 per passenger for each year thereafter, provided however that such increase may be waived through lender consent”.
Inevitably, these proposals will lead to an increase in the overall cost of travel. What then of our competitiveness as a tourist destination in light of other global events such as the imposition of taxes by the U.K. and EU and charges by the airlines in our main markets?
We are busy increasing travel costs to and from Saint Lucia while attempting to persuade the British Government to lower theirs.
TOO MANY “UNKNOWNS”
For these increases to service the debt obligations, they must be based on passenger projections and here again the “unknowns” abound. What are these projections? Were they subjected to rigorous analysis and are they realistic and achievable or are they just figures to produce desired results? What additional marketing subsidies and other costs will we have to bear to generate the projections yet unknown? We just don’t know!
But, we do know that, all these elements, when added and costed, will be very disquieting for all of us. What would be our response if, as is likely, detailed analyses were to show that our unit cost to generate an additional passenger escalates to be higher than the unit revenue to be derived.
It now remains to be seen how we will finance the marketing of tourism since Departure Taxes were used for that purpose. How will SLASPA fare if, as a result of the Assenza Agreement, it is not able to receive a proportion of the Departure Taxes as it does now? Will it mean job losses or reduction in the quality of services offered by SLASPA?
THE DEBT ISSUE
Stephenson King has offered the hollow boast “that there is no Government Guarantee, nor will SLASPA have any of its properties mortgaged or debentures placed against its revenue stream.”
This is not correct. This is another area where this so-called Agreement reeks with deception.
In the Prime Minister’s desperation to avoid a Parliamentary Resolution, he is willingly absorbing the hidden charges on this loan, but by so doing, he is increasing the cost of the loan to the people of Saint Lucia. For a country like Saint Lucia, it is difficult to see how an instrument issued by SLASPA without a sovereign guarantee would get better ratings than one backed directly by the Government.
The Government, no matter what it invents or how it spins things, cannot escape debt liability for this project. Saying that a government statutory organization has borrowed but the liabilities do not somehow affect the Government books is plainly ridiculous. The fact that government revenue, Departure Taxes, have to be raised to pay for it, makes nonsense of that claim.
The International Monetary Fund, popularly known as the IMF, has always included obligations arising from “off book” agreements as debt, even though they are not guaranteed or classified as loans. So, I do not know who the Government is trying to fool by the fancy moves not to classify this “arrangement” by Mr. Assenza of Asphalt and Mining as debt.
This loan, once it is classified as debt, as it surely will by the IMF, will increase Saint Lucia’s debt by an estimated 14 percent. Therefore, with one stroke of the pen, our country’s debt ratio will climb from 80 percent to a staggering 94 percent.
This loan will seriously limit our ability to borrow for future development projects.
UNUSUAL SECRECY
This loan is too huge and has too many negative implications for our country’s future development agenda for this Government to resort to subterfuge or to play games.
Perhaps the most baffling aspect of this entire disturbing affair is the selection and involvement of Asphalt and Mining as the lead company for this project. To this day, neither the Prime Minister nor SLASPA can explain why this company was selected for the financing of this project.
One would have thought that given the scale of the project, the Government would have advertised widely, allowed for competitive bidding of the designs of the proposed terminals, issued clear guidelines for procurement, invited companies to bid for the construction works and made public the rationale for the re-development of the airport at this time. Instead, what we have is a refusal to disclose material facts. Why the secrecy? Who selected the so-called” renowned” architects who designed the facility?
By the Government’s own admissions, SLASPA has not awarded any construction contracts, yet, an American Company, Herzog International, was able, with the active assistance of Guy Joseph’s Ministry, to land construction equipment in Saint Lucia. Why is this company here when no contracts have been awarded? Why is Herzog here when the equipment of Saint Lucian contractors lie idle? Again, neither the Prime Minister nor his Minister, Guy Joseph, can offer an explanation. Prime Minister King and his Minister, Guy Joseph, must come clean.
WHERE DO WE STAND?
Where then do we stand?
The Saint Lucia Labour Party has never opposed a sensible, well structured rehabilitation of the Hewanorra International Airport. Indeed, during our tenure in Government, SLASPA had commissioned a study to examine the feasibility of re-developing the airport.
We accept that additional space is required, that a new taxiway must be constructed, and that a new terminal for either arrivals or departures may be necessary. We accept too that it is also necessary to modernise our Control Tower.
However, we of the Saint Lucia Labour Party are now clear in our minds that the scale of this project is unjustified. The Saint Lucia Labour Party cannot support the financial arrangements or the extravagant cost of the facility given the planned investment.
The Saint Lucia Labour Party rejects, without reservation, the engagement of Asphalt and Mining to raise money to finance the airport for the Government of Saint Lucia. We do not accept that there has been enough transparency in Government’s choice of this company. Too much mystery is surrounding it.
The Saint Lucia Labour Party rejects the failure of SLASPA to be open and transparent in the processes leading to the selection of architects and the financier, Asphalt and Mining.
We believe that the financial arrangements are risky, pregnant with hidden costs and simply dangerous.
We believe that given the depth of the economic crisis facing our people and the continuing economic crises the world over, the huge increase in unemployment, the uncontrollable crime sweeping our country, and the severe strain on our social services, that any additional resources, small as they may be, should be allocated to deal with these pressing problems.
It is not too late for the Government to reverse this decision and act in the best interests of the country. We want to encourage them to do the right thing. We urge the Government to request either the Caribbean Development Bank or the World Bank to conduct an evaluation of the proposals to finance this project.
However, we wish to reassure the people of Saint Lucia that in the same way that we exercised our responsibility to protect the public interest in the Tuxedo Villas Affair, so too will we invoke our responsibility to protect the public interest in this matter. We will not hesitate to exercise that responsibility if it becomes necessary.
