(JAMAICA OBSERVER) PRIME Minister Andrew Holness says governments over the years have ended up holding onto assets that drain the public purse because of the sentiments attached to the State retaining ownership.
He was speaking at the signing of a 25-year concession agreement with Grupo Aeroportuario del Pacifico (GAP) for the privatisation of the Norman Manley International Airport (NMIA), at Jamaica House yesterday.
Under the agreement, the State will retain ownership of the airport, but the prime minister pointed out that the Government is not the expert in the management of airports.
“At the end of the day, what I believe the public wants more than anything else is a well-managed facility that delivers a service efficiently and at an affordable price-point, so we have to keep engaging the public because there is a short-sighted view of ownership which actually close out the full utilisation of the value of the asset,” he stated.
Holness argued that allowing entities with the competent skills to take over an asset like the NMIA unlocks a new world of opportunity for the airport, adding that the Public Private Partnership process allows the resources of the country to be paired with the skills and competencies that can best unlock the value of the assets.
He said as a result of this divestment, Jamaicans will become beneficiaries of an expanded runway, an infrastructure investment that the Government could not undertake on its own without sacrificing important social and economic expenditure.
“Now we can take in more flights,” said the prime minister.
In the meantime, he said practically every agency that the Government runs creates a fiscal risk. “An agency could run into problems; it could run up debt and, ultimately, who would be responsible for that? You, the people of Jamaica, which we have seen happen with several public enterprises, because Government sometimes are not the best people to provide some of the services that these enterprises are providing, but governments are sometimes afraid to enter upon a conversation about who best should run the enterprise and provide the service,” he stated, adding that governments end up paying for that with national debt.
The NMIA has been marketed to investors as an entity that should provide strong improvement in financial performance under a private operator with potential for earnings before interest, tax, depreciation, and amortisation margins above 50 per cent.
Under the deal, GAP has an option to extend the agreement by an additional five years. During the concession period, GAP will fully operate the NMIA and is responsible for improving the efficiency of landside and airside operations, financing and completing the modernisation and expansion, and maintaining and upgrading the facilities of the airport.
“This investment modality is, without doubt, a critical element of the Government’s economic growth strategy. It is evident that PPPs are excellent vehicles for unlocking the value of assets, reducing debt, and mobilising local and foreign investment in our economy,” Holness stated.
He pointed out that GAP is no stranger to the airport business as the NMIA will be the 14th international airport managed by the Mexican company.