Note to Readers
Over the past month I have been engaged with the editorial management on the Stabroek News over an apology they offered to Mr Ron Webster in connection with his controlling share acquisition in Caribbean Containers Inc, a company of which he has at all material times been Chief Executive Officer. It is my considered opinion that such share dealings are inconsistent with the principles of law and good governance which Business Page has set out to promote.
As a result of our failure to resolve that matter, I no longer consider it possible for me to continue as a contributor to that column.
I thank all the readers of the column for their consistent and critical support over the years and promise that I will continue to advocate good governance in Guyana. A special thank you too to Ms Anna Benjamin, the Sunday Editor and to Mr Anand Persaud, the Editor-in-Chief.
In this series I sought to expose the improprieties and the violations of the law and the constitution perpetrated on this country by the Government of Guyana and the directors of the Cheddi Jagan International Airport Corporation. Maybe it was coincidental but it was only after I drew the attention of Mr Ramesh Dookhoo, Chairman of the CJIA Board, to the requirement for the tabling in the National Assembly of the annual accounts and reports of the corporation that audited financial statements were laid. However, the relevant Minister is yet to table a single annual report for any of the nine years of CJIA’s existence. Part 1 of this series also noted that these audited accounts gave no indication that they were approved by the Board and the date on which that was done. These were signed by the CEO and another employee.
The column also challenged the procedure for the accounting and spending of moneys by the corporation. It quoted from the notes to the financial statements which revealed that “all revenue earned and collected from aeronautical services is transferred to the Ministry of Public Works. CJIA Corporation is financed by 37.5% of every departure.” In one year it referred to “departing passenger” while in another it referred to “departure ticket and a subvention.” That is so outside of the framework of the law that it boggles the mind that any auditor, however untrained, would allow such a policy and practice without a complete disclaimer on those accounts. Our Auditor General’s Office appears to have no such concerns and so Minister Benn and the Board of Directors of the Corporation continue in their merry and lawless ways.
Over the past two weeks the contract for the extension of the runway and the construction of a new terminal building was placed under the microscope. That contract signed by the Permanent Secretary of the Ministry of Works and Communications just seventeen days before the November 28, 2011 elections was a most amateurish attempt at contract drafting while the itemised Bill of Quantities shows some outrageous charges for things like toilets. As a result, as noted last week, the cost of the extension is higher than a new international airport being built in the much more difficult terrain in St Vincent and the Grenadines.
Too many Persauds, too little governance
In this final part I will address the financing contract but before I do so it may be useful to identify the directors of the corporation listed on its website. They are Messrs Ramesh Dookhoo, Chairman; Ramesh Ghir who is also the CEO; Balram Balraj; Micheal (sic) George; Berkley Wickham; Faizal Wahab and three Persauds – Drs Vindhya, Vladim and Seelall. There are no bio-data on any of these persons but Dr Persaud is believed to be a scion of a late key PPP member; Vladim may be the deputy Accountant General; Seelall the Crime Chief and Balram Balraj, the person who signed the airport expansion contract for the Ministry of Works and Communications. These are the persons who, along with the Cabinet of Guyana, collectively and individually join to perpetrate the improprieties on Guyana, helped in no small measure by those in the National Assembly who have had copies of the CJIA construction and financing contracts and who voters elected to protect the interest of the people.
And one final point before looking at the financing contract. Earlier this week, Minister Benn in responding to a call by senior political spokesperson for the APNU Mr Joseph Harmon for a review of the airport tax to mitigate the harshness of the airfares, said that “the tax was crucial to the upkeep of the Cheddi Jagan Inter-national Airport (CJIA)” and that “if the infrastructure isn’t supported and maintained, then there will be nothing to fly out and land on.” This suggests that both men are blissfully unaware that both the travel tax and the travel voucher tax go to the Consolidated Fund through the Guyana Revenue Authority (see table 6 of the National Estimates which shows budgeted inflows of $1.4 billion for 2013) and that other monies collected at the airport are diverted to Benn’s ministry, outside of the law and the framework for accounting for government moneys.
The financing contract
The contract was signed on November 2, 2012 by Dr Ashni Singh, Minister of Finance on behalf of the Government of Guyana as the borrower and Export-Import Bank of China as the lender. Interestingly the signing of this agreement took place two days after another agreement between Guyana and China, called The Framework Agreement on Provision of Concessional Loan. According to the preamble to the agreement, Guyana requested from the EXIM Bank a loan facility of up to approximately Renminbi Eight Hundred and Twenty-five MillionYuan only (¥825,000,000.00) to finance the contract between China Harbour Engineering Company Limited and the Ministry of Works for the airport project. The loan proceeds are to be applied for the sole purpose of payment of approximately 94.2% of the commercial contract amount of US$138 million or approximately US$130 million.
The loan is repayable in twenty years including a five-year grace period in which interest but not principal is payable.
The contract is strictly a Chinese currency contract and just in case there is any doubt the contract stipulates that The Lender shall not bear any foreign exchange risk in connection with the contract. Under the contract, the government undertakes that the amounts due and payable by the Borrower are unaffected by any change in the exchange rate between Renminbi and any other currencies or the exchange rates among currencies other than Renminbi.
But the Chinese do not stop there. They make sure that the contract provides that all drawdowns and repayments are to be recorded in their currency and that in case drawdowns in any other convertible hard currencies are requested, the amount in that currency must be purchased with Renminbi in accordance with the selling rate of the US dollar (or other convertible hard currencies accepted by the Lender) to Renminbi.
Just to show what this means, the foreign currency website indicates that since November 2, 2012, the exchange rate has climbed 1.8% and, depending on the drawdown to date and actual exchange rates used, Guyana would have lost up to US$2.4 million.
Exchange rate: Chinese Yuan Renminbi\United States Dollar
The Chinese not only protect themselves against any currency risks. They also promote Chinese business by providing that the entire proceeds of the loan are to be applied by the Borrower for the sole purpose of payment of approximately ninety-four point two per cent (94.2%) of the commercial contract amount. And note too how the Chinese do their precise calculations. It is not that Guyana can say okay, we will buy the toilets or supply any other items like we supply the sand free of charge. No, the money has to go – or rather stay – in China. The contract does not even say Chinese-made. It has to be paid to CHEC.
I have just come back from the (Salvador) Dali museum at One Dali Boulevard, St Petersburg, Florida. The building which was designed by Yann Weymouth, an architect who worked with the legendary I M Pei, on the Louvre renovation, contains some of the most modern construction features, including a DNA strand stairway, modern lifts, special lighting effects, theatre, every piece of glass unique, hurricane and earthquake resistance steel and concrete structures, etc. Using some of the world’s highest labour rates, the building cost US$30 million. The Chinese are charging us around US$45 million with all kinds of concessions thrown in.
The facility comes under a concessionary facility and the interest is an attractive 2% per annum. But there is an immediate, upfront 0.75% management fee which works out at approximately US$975,000. And then there is a commitment fee of 0.5% of the undrawn balance. This will add up to more than a pretty penny; in fact approximately US$550,000 will have to be paid as a commitment fee in year one assuming the US$20.5 million in advance payment to the contractor was the only drawdown. Adding the advance payment to these upfront loan fees, the government will be paying out more than four point four billion Guyana dollars before it delivers the first truckload of sand to the Chinese.
Here is where the Chinese are more than poker-faced sincere friends. They entice us with their money and say look, we want to help you. And you, with eyes closed, say okay, we will take the help. And then they say oh, but you have to pay us millions for this conversation in the form of a management fee.
The two contracts
It is my view that the contract signed by the Permanent Secretary of the Ministry of Works with CHEC has to be renegotiated. And that is not because of its amateurish preparation which might even suggest that CHEC wrote the contract and gave it to the ministry to sign.
As it is, we are not even sure of what we are paying for since there are so many matters that were not concluded or included in the contract. We have not even named our engineer or set out the detailed specs for many of the items we are contracting for.
A comparison of the CHEC and the EXIM Bank contracts suggests that there was more legal input in the financing contract signed by the Minister of Finance than the construction contract signed by the ministry.
Simple matters like Warranties and Representations have been omitted by the Ministry of Works and as an earlier column pointed out, Mr Balraj who signed the contract with CHEC purported to grant tax concessions which he has no authority to do.
Not that that should come as a surprise from a man who signed a contract that says the foreign contractor must have a minimum Chinese labour force relative to the Guyana labour force of 6:4. In other words, the Chinese can bring in 10 out of 10!
The government has in its service several attorneys in the Chambers of the Attorney General.
If they are responsible for the Ministry of Works contract, they have some serious questions to answer.
If they were not consulted, then Messrs Benn and Balraj have some very serious questions to answer. But then who knows, maybe they were instructed by the Jagdeo Cabinet to sign the contract.
Here is a contract signed outside the procurement framework and the laws.
A flawed, unauthorised contract which imposes serious obligations and costs on taxpayers should not be allowed to stand. There is no economic case of any extravagance. Except for the delivered product, there is little that the Guyana economy will get in the construction phase and therefore no transfer of skills to anyone.
By all means, let us extend the runway, modify the terminal building and have better ground handling services to cater for passengers. But to throw US$138 million in actual cash to the Chinese plus interest; spend additional millions more for work the contract requires Guyana to do; grant unquantifiable amounts in concessions because the government thought there is such a thing as free chow mein, or because those in Mr Benn’s ministry and in the Cabinet are hopelessly incompetent, is completely unacceptable. Cutting one’s losses is sometimes the best option.