Disclaimer: The views and opinions expressed by the author(s) do not represent the official position of Barbados TODAY.
by John Beale
Yes, the District of Scotland urgently needs development. It is also very encouraging to note that the government is finally taking action, as stated by the acting Prime Minister, Santia Bradshaw, and the statements by the Minister for Labor and Social Partnership Relations, Colin Jordan, and the Minister Ryan Straughn at the Department of Finance.
All ministers expressed their satisfaction with the attractive terms the government was able to borrow from the Export-Import Bank of China for the Scotland District Roads Rehabilitation Project.
Whilst we appreciate the importance of developing the District of Scotland, we are confident that a thorough analysis (including investment opportunities) has been carried out to justify spending these funds at this time. In addition, has there been any study regarding the cost of road maintenance and the life expectancy of new roads, taking into account heavy rainfall and ground movement, including soil creep and landslide? floor ?
Such a large investment with an unknown life expectancy will need other activities to promote faster returns to compensate for the shorter life expectancy of the investment. One such example would have been Tom Adam’s “vision” of an east coast route running continuously to Conset Bay and College Savannah, which would have attracted more tourists.
The concessional loan for an amount of 256.6 million dollars with an interest of 2% per annum and a duration of
20 years and a five-year grace period sound attractive.
However, it should be noted that there is also a commitment fee of 0.25% per annum on the undisbursed balance. Additionally, there is a management fee of 0.25 percent of $641,530.00 paid by the first disbursement. However, these fees are quite reasonable.
What is concerning is the advertised five-year grace period for debt repayment, which is really not technically true. According to the resolution approved by the House of Assembly, the five-year grace period is “from the effective date of the agreement”. It is NOT from the time the entire loan is withdrawn. Similarly, the disbursement period is “48 months (four years) from the effective date
of the agreement. »
It would be appropriate to know what the total cost of the project is and how long it will take to complete it within a realistic time frame. Experience has shown that too many government projects are not delivered on time and often funds cannot be drawn because preconditions have not been met.
A project like the District of Scotland takes time to execute and for the development to mature and generate economic results. There is therefore a significant gap between the signing of a loan agreement and the start-up and completion of this project.
This project cannot be expected to generate funds to repay interest and debt installments for several years after its completion. Therefore, the five-year grace period should NOT begin when the agreement is signed. I also assume that interest payments during the grace period will be covered by another government source.
It should be noted that the law in force is China, which I imagine was due to Chinese insistence and is understandable, but it would have been better if it could have been in a neutral country like the United States .
Other aspects that require further explanation are:
It appears that the main contractor is a Chinese company, China National Complete Plant Import—Company (COMPLANT), specializing in construction and engineering. Again, I guess that was a condition of the Chinese.
I hope we have had a great experience with this company as they are the main contractor for the Sam Lord project. Will the equipment needed for the project also be imported from China and what percentage of the workers will be Bajan?
John Beale is a former World Bank Group investment officer and international banker.