Dear Editor,
In your report of Aug 16, 2013 former President Jagdeo chastised public spirited analysts and APNU for killing the Amaila hydro project. He noted that the project would have added no external debt to the Guyana government and implied this is reason enough for Guyana to build the US$858 million hydroelectric plant. It may be true that Sithe assumes the debt and if anything should go wrong on the supply side Sithe has to assume the liability. To some extent this is a good idea and the former President’s men ought to be commended for trying to engineer this private-public partnership.
However, I believe the former President’s men (FPM) still did not provide the nation with the best financing option. On August 14, Stabroek News reported that the President of Sithe expressed surprise that the World Bank was not involved in financing Amaila. This did not come from the opposition or the independent analysts but from Sithe. Essentially the financing plan pieced together by the FPM is to have Sithe borrow from China at 8.5% interest. Sithe assumes the debt. However, Sithe pays a higher interest rate and assumes the exchange rate risk associated with paying back a strong currency – the Yuan. As the Yuan appreciated against the US$ persistently since 2005 the cost of the project cost increased. If for example Sithe borrowed from the World Bank this exchange rate risk could have been avoided. Is this the premium the government is willing to pay so that they do not have to deal with the transparency rigours of the World Bank?
In your August 15 report, Minister Ashni Singh focused on raw politics instead of providing a clear justification of why the retail price will decline. The Minister has a PhD in Accounting and Finance; therefore, a clear outline of the projected revenues of GPL (which would have the final unit price the consumer will pay), GPL’s cost per year and the discount rate used ought to be a piece of cake to explain.
Editor, I do not accept Minister Singh’s assertion that a project such as Amaila will take a decade or more to organize. Many of the arguments given by the government in support of this project makes sense; for example, the savings of foreign exchange and the need for energy security. We can all agree on these points.
Guyana since November 28, 2011 has some semblance of democracy for the first time since 1997. The scholarly literature makes the point that oligarchic societies often grow fast in the short run. However, because elites have erected enough barriers that make it hard for others to succeed, the system will eventually crash and slow down dramatically. Democratic societies, on the other hand, will grow more slowly in the short term as many parties have to work together. Although short-term growth is lower, the long-run growth performance is superior to oligarchic ones.
The PPP cannot implement these massive projects without engaging the opposition honestly, particularly in a divided society such as Guyana. These projects cannot be implemented without consideration of the wider political economy of the country.
One piece of wisdom did come from Professor Suresh Narine, who called for a national energy policy. The professor is calling for the portfolio energy approach but notes hydroelectricity has to be the core of the supply system. I agree. The government should revisit the Amaila project within the context of such a plan. The government also should learn how to work in a democracy.
Yours faithfully,
Tarron Khemraj
