Last week’s article outlined the research I have been conducting, with the support of my colleagues from Disclosure Today, into the ‘Underlying Commercial Arrangements‘ of the State-owned hotels in this country. Those are the decisive details which drive projects of this nature and from which the substantial public benefits ought to flow.
Details of the unhelpful responses from the various agencies with whom we engaged via the Freedom of Information Act only went to show that the actual conduct of these large-scale public private partnerships were virtually opposite to the repeated statements about openness and having nothing to hide. The Ministry of Finance was the only public authority to give a prompt and clear response.
SIDEBAR: Public Money
As I stated in ‘Everything but the Truth‘, published in this space on 10 June 2014, in relation to Public Money –
“The leading learning from which we have drawn serious lessons is Lord Sharman’s 2001 Report to the British Parliament ‘Holding to Account‘, which was a thorough examination of the definition, role and need for control of ‘Public Money‘. We expanded on Sharman’s definition of ‘Public Money‘ so as to capture the full range of possibilities, but we have accepted his key finding as to the requirement that ‘Public Money‘ is to be managed to a higher standard of Accountability and Transparency than Private Money – see 2.23 on pg 15. The contemporary, best-practice position in respect of the management of and accountability of Public Money being that the private sector rules are the bare minimum.”
This proposed large-scale investment would require significant sums of Public Money to be committed to the project. That commitment would be via direct investment or lease rentals; tax/duty concessions and expensive externalities such as improvements in the water/sewerage and electricity services or the expansion of the Crown Point Airport facilities.
The main point here is that Public Money is raised via involuntary payments called taxation which means that there must be certain rules for its proper use. The key rule is that those funds must be managed and accounted for to a higher standard than private funds. Therefore we need to consider the role of the Public Private Partnership (PPP) against that background.
Just try to imagine the Massy Group CEO taking a proposal for a large-scale hotel to his Board for approval without any details of how the three previous hotel investments had performed. If you think that is improbable, just try to imagine the Board approving that fourth large-scale investment without insisting on the details of the previous investments.
SIDEBAR: Learning the Lessons
One of the remarkable aspects of how these State-owned hotels are managed is the degree to which silos have been created. It seems clear that the Management Agreements and performance figures are closely-guarded, as shown by our requests under the Freedom of Information Act.
So, consider that the existing hotels are under these agencies –
- ETeck is the State Enterprise with responsibility for both Trinidad Hilton & Conference Centre and Magdalena Grand, its line Ministry is Trade & Industry.
- UDeCOTT is the State Enterprise with responsibility for Hyatt Regency, its line Ministry is Housing & Urban Development.
One could also add that the THA has itself purchased several hotels over the last three years, but those details are beyond the scope of this article.
- The first point is that I am reliably informed and do believe, that the Management Agreements and performance figures are concealed by confidentiality clauses with such strict provisions that it is very challenging to share the information within the State sector, far less with the public.
- The second point here is that we seem to have no inclination to learn from our mistakes, so it is all too likely that the Tobago Sandals project could come under the management of yet another state agency. If that happened it would result in a further dispersal of our limited management experience in negotiating with these international hotel groups.
According to the Minister of Finance, the Tobago Sandals project is being facilitated by this government (p 41). Is this large-scale investment by the State being advanced in accordance with private sector standards? Or is this yet another PPP in which the private sector takes a big capital cost off the public balance sheet and is repaid with risk-free returns?
It is now time to ask certain questions, to avoid that kind of common and undesirable outcome –
- Has there been a Feasibility Test or Cost Benefit Analysis of the proposed hotel?
- Have the externalities been estimated in terms of costs and timing?
- The Tourism Development Act offers a series of tax and duty concessions to developers and operators of hotels. Have additional concessions been agreed for Tobago Sandals in respect of Taxes, Duties and Employment of foreigners?
- Given that the proposed site is an Environmentally fragile one, has there been an Environmental Impact Assessment carried out for this project?
- What has been the performance of the existing State-owned hotels?
- Given the varying management arrangements used for those hotels, what are the lessons learned in terms of crafting a new agreement?
- What are the actual terms being proposed for the Tobago Sandals project?
- Most importantly, will these details be disclosed to the public before decisions are made?
This is a situation with two glaring ‘Red Flags‘ in terms of the perception of improper conduct.
- Firstly, there is the decision to pursue the project with Sandals on the ‘Sole Select’ basis. Of course one can recognise that this approach is not in breach of our laws, but it can also be said to produce uncompetitive results.
- Secondly, the State appears to be entering these negotiations without even the basic information as to the performance of its own hotel investments. That kind of lop-sided negotiation arrangement is very common in situations which have been found to be corrupt.
We need to continue insisting on the details of this huge project, before decisions are made.
© 2017, Afra Raymond. All Rights Reserved.