It remains exceedingly disturbing that in an era of what should be open, responsive and transparent government, underpinned by such staples as access to information legislation and the recently promised whistleblower legislation, that the government can have avoided for so long coming clean on who the major equity investor in the proposed Marriott Hotel is.

The National Industrial and Commercial Investments Limited (NICIL) on Thursday convened a press conference in an attempt to allay longstanding concerns about this project and the secrecy that attends it.  Sadly, at the end of the presentation the Guyanese public continued to be treated as of secondary or even lower importance, despite the fact that up to this point taxpayers’ money has funded completely the shell of the Marriott.

In no other jurisdiction, even in these troubled parts of the Caribbean, would any government be allowed to get away with this type of behaviour, much less a government holding company and overlord for privatisations in the country. Yet this is exactly the malady that has been inflicted on the hapless Guyanese. NICIL – and by extension the government – has just restated for Guyanese taxpayers that it has assigned $2B of taxpayers’ money without the benefit of a publicly available feasibility study for the construction of a supposed five-star hotel which, nearly a year after work started, is still formally without an equity investor who for an investment of US$8M in a US$51M project will own two-thirds of the hotel.

Based on what the head of NICIL, Mr Brassington reported on Thursday, the government has already executed a deal with an investor  for the US$8M and an “intense” due diligence was undertaken by Republic Bank Limited in Trinidad and Marriott International. What gives the government the right to disclose the identity of the investor to these other parties for the purposes of due diligence but deny the real stakeholder in this project – the Guyanese taxpayer – the right to know? By NICIL’s own account the sequencing of financing is the government first, followed by the private investor and then debt financing from Republic Bank Limited and others. If this is the case then the private investor should have already been made public as the debt financing is now being tied up.

What reputable investor will shy away from being identified from the outset in what is a run-of-the-mill investment? There can hardly be any sensitive information that would put the prospective investor at a disadvantage, neither could there be a possibility that some competitor would gain a leg up. Short of being some internationally-blacklisted investor, it could only be that there is fear in NICIL that the investor would be negatively received here, possibly jeopardizing a final deal. Whatever the reason, the new investor, whoever it is, will be closely examined by groups here and made to account for the questionable and secret financial architecture for the project. Whenever it is tabled, the investment agreement will no doubt be subject to careful scrutiny by Parliament.

What is galling about this project is the intent to have the hotel built no matter what market conditions dictate. Surely if feasibility studies showed that a five star would be commercially viable then there would have been a wall-to-wall campaign to publicize this and no shortage of willing investors. Guyanese would eagerly welcome a premium hotel property, particularly if there was no or little risk to the public purse. It is clear from the amount of advertising that the government has had to do for an equity investor and the length of time it is taking for a deal to be concluded that this project, even with its built-in casino, has hardly set the hotel market alight. In this weak position NICIL and Guyana will have very little to bargain with and any investor coming to the rescue will be able to dictate terms.

The gratuitous mention at the press conference by Mr Brassington of hotel properties in Jamaica and Trinidad which the governments there participated in ‒ but without the furtiveness of the government here ‒ bears little comparison to the Marriott situation. Jamaica is a mega tourist market and while not on the same scale, Trinidad’s rapid industrialization and booming economy creates a ready market for high-end hotel rooms. That is clearly not the case in Guyana where many mid-range properties have anaemic occupancy rates and there is little evident appetite for five-star rooms. In the main, tourists are returning Guyanese who stay with their families. Further, the enabling environment and infrastructure for attracting a large number of tourists is simply not there.

For all these reasons, the Marriott project from the very inception has come across as purely the domain of the whims and fancies of former President Jagdeo, a band of his confidantes and former government officials. Whereas in the past these same officials had played up the Princess Hotel as the epitome of the high-end market it is clear that they have now conveniently settled on the Marriott for undisclosed reasons in a poorly performing tourist sector.
There is nothing wrong with Mr Brassington being the investment supremo, but considering the defective deals that have been struck, Amaila Falls being a classic example, this should give rise to serious pause on projects like the Marriott considering that all of the upfront money has come from taxpayers. Were a private investor to take the majority shares for US$8M as envisaged then that investor should at least be required to pay market rates of interest to the government for the use of the start-up capital and repay immediately the difference between the state equity and the front-loaded money.

In a weak tourism market, the US$4M  investment equity of the Guyanese taxpayers in this hotel will likely see poor returns with the prospect – as in the case of the Berbice Bridge – of the government forgoing dividends and doing its utmost to improve returns to the yet unknown investor. Indeed, it would seem that the proposed 99-year lease for the land on which the hotel is sited, for a paltry US$148,000 is one such example. There are also ongoing concerns about the order in which creditors will be repaid and the final toll on the economy were this project to fail. The government has failed to provide the requisite assurances.

With US$8M securing two-thirds of the property surely the local private sector could have been encouraged to participate in this deal at a reasonable rate of return for a truly indigenous undertaking in which the seed capital from the state would have made more sense. Surely US$8M isn’t beyond the ability of the local private sector.

The Marriott project took off in a wholly unacceptable manner wherein no Guyanese labourer was employed by the contractor. It continues along a path of opaqueness which cannot be the standard of business in this country. The government remains stubborn to the lessons of the Amaila Falls debacle.
While Mr Brassington is the investment czar, President Ramotar remains the person who will have to bear final responsibility for this project. He needs to take account of the valid concerns raised by critics and seek to have them properly addressed.  The Marriott project as is remains a muddle and needs a healthy dose of transparency.

Around the Web