The China-funded airport expansion project could end up costing over US$250M as opposed to the contract sum of US$138 million according to Chartered Accountant Christopher Ram, who says that a long list of obligations on Guyana frees the contractor of any responsibility for poor work and delays.
“If this contract was grossed up for all the costs and tax remissions to be borne by Guyana it will probably exceed US$250 million,” said Ram in an article in yesterday’s Sunday Stabroek “Business Page,” in which he sought to critically analyse the contract entered into between the Works Ministry and China Harbour Engineer-ing Company Ltd (CHEC) of China.
Ram called for a re-negotiation of the contract by “sensible and suitably competent persons.”
The contract for the expansion of the Cheddi Jagan International Airport (CJIA), Timehri was signed on November 21st 2011 at a price of US$138 million, but Ram argued in his article that this price “excludes all taxes, duties, royalties, and fees of all kinds imposed by the Guyana government and other statutory authorities. More-over, the entire exchange risk under the contract is borne by the Government of Guyana”.
Some of Guyana’s obligations, which according to Ram are not included in the contract, include its obligation to “permit CHEC to import 60% of Chinese Labour for non-technical work and 100% for work requiring professional and technical personnel and to issue work permits for such persons free of charge.”
The government has to construct a car park and internal roads, design and construct a new cargo area and fuel farm.
CHEC is also guaranteed by the government ten hours work per day, seven days per week for the 32 months duration of the contract.
The Government of Guy-ana will also be responsible for providing sand and other fill material to the contractor for free.
However, if the distance from the material source to the project site is more than 12 km, the transportation fee will be increased according to actual distance. It is the government who will be responsible for the quantity, quality, and timely supply of the above mentioned sand and other fill material for which failure to do such will entitle CHEC to claim expense and time expansion.
Guyana is also required to “assist the CHEC – at no cost to the company and free of all duties and taxes – in obtaining all the necessary permits, licenses or approvals from relevant authorities, including vessels, cars and vehicles, GPS frequency, mobile phone, internet, materials, equipment, tools, medicines, etc.,” Ram said.
Additionally, the government is required to make to CHEC an advance payment of 15% of the total contract price (US$20.7 million) while the company in return is expected to grant a “Performance Security” of 10% of the contract price (US$13.8 million) to guarantee its performance. This amount is to be footed by the EXIM Bank of China.
Guyana is also strapped with the cost of paying the full contract price of US$138 million so that CHEC bears no taxes, royalties, duties and fees imposed by the central, or any local government and statutory bodies. Ram said it was surprising that Balraj Balram as a former acting Auditor General of Guyana could consider himself vested with the powers to waive taxes of any magnitude.
In addition to his critique, Ram also reiterated his qualms with the circumstances which led to the contract’s signing in the first place. He recalled Works Minister Robeson Benn’s explanation that the government “had” to enter into an agreement since they had a very “narrow window” in September of 2011 when the Chinese Vice-Premier came to the Caribbean with several billion dollars to fund projects.
It was the government’s decision to capitalise on this “narrow window” which gave birth to the contractual requirements outlined by Ram. He noted that the contract was signed by the Ministry’s Permanent Secretary Balram on November 11, 2011, 17 days before the general elections.
“What is amazing is that the government has more obligations under the contract than CHEC and accordingly failure by the government to carry out its obligations in a timely manner not only extends the contract period but in many cases extends the contract period,” Ram stated, adding that CHEC is exempted in many instances of any responsibility for delays or substandard work they may be responsible for.
Notwithstanding his critique of the particulars of the contract though, Ram made it clear that he supported the extension of the CJIA “but strongly believes that the cost which was presented to the Guyanese people (US$138 million) is far from a true reflection of the project’s cost.
Since the opposition cut allocations to this project during the consideration of this year’s budget, the airport expansion has been in limbo.
Minister of Works, Benn told Stabroek News on Saturday that the government would hold meetings to persuade the opposition to restore the funds to the project. Benn said that CHEC is already on the ground and mobilizing on the basis of the US$20M voted in the 2012 budget.