Guyana’s Chinese-funded and contracted airport expansion project, an expensive embarrassment

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A computer-generated image of what the modernised airport should have looked like.

By Indranie Deolal

Plagued by prolonged delays, missed deadlines, shoddy work, and pricey revisions, Guyana’s Chinese-funded and contracted international airport expansion project is proving another expensive embarrassment, long dogged by controversy from its shady start.

This week, barely into his second month as new head of state of a heavily indebted nation, a livid president Irfaan Ali is asking tough questions of Guyana’s biggest bilateral lender, insisting that his government will only accept the project as outlined in the original 2011 contract.

Even as the poor, already burdened Guyanese taxpayers must be pleased, if surprised that someone in high office is insisting on fair value for precious money in the wasteful public sector, Dr Ali’s wish may prove unrealistic and unattainable without further stratospheric spending and a thorough, non-partisan investigation into this shame and scandal, through at least three presidencies. The project was extensively adjusted and altered by the preceding coalition administration of A Partnership for National Unity / Alliance for Change (APNU/AFC) following the 2015 defeat of the PPP/C, in power for 23 years.

Major players from the two major political parties are fast trading accusations and locked in dispute as usual, over who ordered what and when. The president was on a tour of the facility and had received an update from the project manager Carissa Gooding.

Holding everyone responsible

According to a stinging statement from the office of the president, he asserted in the presence of officials including the Chinese envoy, Cui Jianchun, “I am holding everyone responsible; the contractor, the consultant, the project management team … this is not acceptable for the Guyanese people. In this current position it is very clear from all that I have seen and heard, and from all the questions asked, it is very clear that something is horribly wrong. The right decision at this moment is that we cannot accept this.”

Yet, the signing of the G$31.2 billion /US$150 million agreement with a troubling Chinese firm, for the expansion of the renamed-Cheddi Jagan International Airport (CJIA) was so secret, the shocked local media only learnt of it through a small news item in the Jamaican  Observer newspaper back in November 2011, ten days before Guyana’s general elections.

Furious that China Harbour Engineering Company (CHEC) had gone ahead and publicly trumpeted its then fourth major infrastructural project in the Caribbean, the Guyana government reportedly moved to swiftly gag the officials at the company’s regional headquarters in Jamaica, preventing the independent release of any further information to the press.

Belt and Road

Earlier that year, a six-member delegation from the Chinese Communist Party, headed by a vice-minister on a four-country regional tour had visited Guyana at the invitation of the ruling People’s Progressive Party/Civic (PPP/C) administration then headed by president Bharrat Jagdeo, who was into his second term in office. Jagdeo is now serving as a vice president.

Looking to boost its widespread presence in the region before the launch of China’s ambitious multi-trillion dollar global development strategy and cross-trading plan, the Belt and Road  Initiative (BRI), Beijing dangled fresh concessional financing from its cash-flush China Export-Import Bank (EXIM).

But the special offer package of low-interest renminbis (RMB) equivalent to a whopping US$138 million came with the usual caveat, that the programme be undertaken by the State-owned powerhouse China Communications Construction Company (CCCC).

No tenders

There were no public tenders or open bidding, and the contractor received a generous range of tax and duty-free concessions, with the government providing from free sand to amenities like a car park, internal roads, and handling equipment area. The remainder US$12 million of project funding came from Guyana’s coffers.

The CCCC is among the world’s largest enterprises with hundreds of projects in more than 100 countries. CHEC is an engineering contractor and subsidiary of CCCC. The renminbi or “people’s currency” is the official note of the People’s Republic of China, and among the globe’s reserve monies. Previously pegged to the US dollar, it now floats within a small margin compared to a basket of currencies selected by the Chinese government.

Major construction on the CJIA scheme started since 2012 and was originally slated to last 32 months to be completed during the successor PPP/C regime of president Donald Ramotar. Some seven years on Guyana is still waiting for the much-anticipated airport improvements to materialise.

Need answers

The statement said that project officials failed to answer key inquiries as posed by president Ali, including about the outline of the original contract, the details of the revised scope of works and costs attached, and why some aspects of the airport expansion were omitted with monies diverted elsewhere.

“We need answers as we have decisions to make,” Ali maintained, shooting down the representative of CHEC who informed him that after the contract was signed; there were other works which needed to be done following an assessment. He retorted, “No, no this is a fixed-price contract, and that is not how it works. A fixed-price contract means that you examine all the works which have to be done before you sign on to the contract. So please, let’s get that clear.”

The president’s office said that the original contract featured the completion of 17,000 square feet of work, but currently only 6,000 square feet exists, adding that key aspects of the project were either omitted or poorly completed. As part of the original contract, the CHEC was expected to tear down the existing terminal building, and construct a new one which could accommodate eight air bridges. But the terminal building was only refurbished and four air bridges, some faulty, installed. CHEC was also permitted to bring in 60 percent of Chinese labour for non-technical work and hire only Chinese for technical aspects, reports said.

Daily penalties not applied

On being told that Guyana was forced to pay US$6.7 million for ‘cost delays,’ while the Chinese contractor was not disciplined for breaches as expected, Ali thundered, “Who decided this? We are paying them for cost delays, but the contractor has not been asked to pay us for their delays?”

In January 2019, the then minister of public infrastructure, David Patterson, had announced CHEC was being penalised US$7,000 per day until the project was completed, when the firm failed to meet another revised December 31, 2018 deadline. But now there are reports the charges were never applied. Minister of public works Juan Edghill, told parliament during the recent budget debate that an additional US$6.5 million is needed to wrap up the project.

At the end of June 2019, Guyana’s total stock of public debt measured nearly US$1,658 million, and its external debt stock accounted for US$1,274 million or 77 percent, according to the finance ministry. The three largest creditors at that time were ranked as the Inter-American Development Bank (IDB) – 41.1 percent; China’s Exim Bank – 17.8 percent; and the Caribbean Development Bank (CDB) – 11.9 percent.

Rate risk

The US dollar remained the dominant currency within Guyana’s external debt portfolio, comprising 73.4 percent at end-June 2019, with the renminbi yuan, the next largest share. “The currency composition of Guyana’s external debt portfolio renders it susceptible to exchange rate risk. A depreciation of the Guyana dollar against certain foreign currencies, in particular the US dollar, would significantly increase debt service payments in Guyana dollar terms. Notably, from mid-2018 to mid-2019, the Guyana to US dollar exchange rate moved from $208.44 to $210.45. This means that Guyana has had to pay an additional $2 million for every million US dollars spent on debt service,” the ministry observed.

As president Ali declared on Tuesday, the mismanaged airport expansion project with its countless problems from costly toilets to a malfunctioning sewage system, “tells a damning story” and “there are more questions than answers …”

*ID ponders, as little Guyana battles the crouching Asian tiger, at what cost has friendship and assistance come, and whether we are locked in the dreaded debt trap or crony diplomacy.

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