Mark Simmonds, the new United Kingdom minister for overseas territories, visited the Virgin Islands last month. This was his first visit since assuming responsibility for the OTs in a UK cabinet reshuffle. Whether this is an honour or a cautionary note depends on whether or not he considers the VI as one of the “hot spots” in the group of OTs. Certainly there is evidence that might point in either direction.
At the present time, the VI government is under the restrictions imposed by the Protocols for Effective Financial Management that the territory was forced to sign in order to be allowed to extend its borrowing at all. And, given the recently stated intentions of Deputy Premier Dr. Kedrick Pickering and Communications and Works Minister Mark Vanterpool, it will be necessary to extend the borrowing by not a small amount.
Dr. Pickering has been quoted as saying that the airport expansion will proceed no matter what the public says. Such an arrogant attitude in the face of the general lack of public support and the absence of any economic justification is really stunning. The last time the National Democratic Party took this stand was over the possibility of five-star hotels immediately prior to the 2007 election. Remember? The end result was a dramatic change in leadership: The eight-to-five NDP government was ousted by the Virgin Islands Party, 11 to two. So, in response to the then chief minister’s attempts to sell the idea of five-star hotels as a great idea for tourism, the public gave the NDP an unequivocal heave-ho. But, despite the fact that the public’s views were fairly obvious, the chief minister was not about to listen. Sound familiar?
History is apparently repeating itself. Dr. Pickering has sufficient public response, virtually all of it either sceptical or negative, to see what the public’s attitude is. But he is not interested in listening.
Airport proposals
Five contractors have apparently submitted proposals for the expansion. These proposals were supposed to be evaluated by the end of October. To date there has been no word as to the selection of a contractor or the suggested cost of the project.
The following facts appear to be true:
• The selected option appears to be the extension of the existing runway. The quoted cost of this “less expensive” option was stated as $43 million. But the option did not include any widening of the existing runway; any refueling facilities; any expansion of the terminal to handle the (hoped for) increased traffic loads; any increase in staffing levels for Immigration and Customs; any improvement in safety facilities; or any improvement in road communications between Road Town and Beef Island.
• The scope of the basis for the five contractors’ bids is basically unknown. It is not even known whether they are all bidding on the same scope of work — or for that matter whether there really is a fixed scope.
• Dr. Pickering claims that there is great interest in providing funding for this project. But he gives no details of the basis for the funding or whether this is on a loan basis or on the basis of foreign ownership of the airport.
• Mr. Simmonds refused to commit the UK to any support for the expansion. His only comment was that discussions had taken place. Surprise, surprise! As is usual after one of these visits, there is nothing but praise for the progress that the current government has made. And why should we expect anything else? The UK, until a Turks and Caicos situation arises, is really hesitant to be critical of any local government. But the very fact that we are under the protocols tends to indicate that the mother country is not fully content with our past performance — even if we are now improving. And the refusal to let us out from under says that we may not have solved all our problems yet, at least in the UK’s opinion.
Airport cost-benefit
Part of the protocol system is the required production of a “robust” cost-benefit analysis on major projects, which the airport expansion most certainly is. And Mr. Simmonds reported that he had not seen one as yet. There can only be two reasons for his not having one in his hands:
• If one has been prepared and he has not seen it, it could be because it does not show benefits that in any way support the estimated costs; or
• the government would like to dodge the analysis and get the UK to agree to pass on the protocol requirements.
By the way, “robust,” to me, when referring to a public document, means one that will survive detailed public scrutiny, not one that contains “proprietary” information and cannot therefore be reviewed.
Environmentally, the deputy premier has stated that no expansion of the airport will be allowed to affect Trellis Bay negatively. But the environmental impact study indicates the need for extensive (and very expensive) mitigating measures. Some of the suggested measures have been used in Europe, and representatives of the government have visited airports that have used them. An example is in Portugal — the report indicates a superb result — where they visited a facility that cost somewhere in the neighborhood of $400 million.
The airport project has a long way to go before anyone is really going to believe that what has been said is even close to the total story.
Foreign investment
In recent Beacon commentaries, Dickson Igwe has extolled the virtues of foreign investment. And he is indeed correct. But you need to be certain that you do not sell the baby at the same time you sell the bathtub.
Canada recently was forced into this type of decision. Offered $5.5 billion by Petronas, the Malaysian national oil company, for a Canadian oil operation, Canada refused. The reason for the refusal was not that the Petronas offer was not tempting; not that national policy welcomes foreign investment; and not that Canada needs $600 billion over the next decade for financing of the national oil industry — but rather that the Chinese National Oil Company also had a bid in for $15 billion for a larger worldwide oil operation, which would be sold under that proposed agreement completely to the Chinese. The Canadian government was not really willing to totally give up control of a major section of the national economy. “A joint venture, yes, but we did not really want to sell the whole head office.”
In my opinion, the VI needs to consider how far down this road it really wants to go. Premier Dr. Orlando Smith, with reference to the possible funding of the expanded cruise ship dock, suggests a combined foreign/public ownership scheme with an 80-20 percent split. How this would work is uncertain, but what is certain is that no one who is going to contribute 80 percent ($60 million?) of the cost is going to settle for calling less than 80 percent of the shots when it comes to running the show. And investment by any sane investor requires a return on investment: They will expect to be paid out of any profits and to be first in line as well. So foreign investment is not all gravy. It is very much a two-edged sword.
A good risk?
Are we a good risk for investment?
Somehow we managed to get ourselves involved with two contractors apparently doing the same job on the same site, and without cancelling the first contract. I refer, of course, to Global Water Associates and Biwater, who are both supposed to be building a desalination facility at Paraquita Bay. Global Water reportedly may sue the government for $23 million for breach of contract.
Then, of course, there is our old friend the hospital. Carimex is apparently owed some $9 million for work that was completed before the firm was fired for reasons that are still under dispute.
Then there is the underpayment ($8 million?) for water delivered to the government by Ocean Conversion.
Going back to the airport, Dr. Pickering says the expansion will pay for itself. If this is correct, it will be the first time since Noah built the ark. Reviewing history, the old airport departure tax was (once) $5 per passenger. Then it went to $10 to pay for additional security measures that were necessary. Then it went to $20, supposedly to pay for the cost of the old expansion. Then they tried $40 to pay for the next expansion. That died in a hurry.
The result each time has been the same. As the Beef Island departure tax increased, and the ferry departure tax remained the same, the traffic shifted to the ferries, to the point where the fancy new airport terminal was distinctly underused, and almost to the point where you could fire a cannon down the terminal at busy times without hurting anyone.
And the ferry companies remarked on the increase in business every time with great glee!
The grim fact remains the same. So long as it costs less to fly to St. Thomas and take a ferry than it does to fly to Beef Island, the main traffic will come via St. Thomas. In fact, statistics show that 65 percent of overnight tourists currently arrive via St. Thomas and 35 percent via Beef Island. And that is basically with fair to poor ferry service.
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