“Local contractors and consultants who compete with foreign companies should be provided with the same or equivalent benefits as enjoyed by those foreign companies and should be protected from unfair competition through matters such as soft loans.”
—The Uff Report‘s 43rd recommendation, on the benefits awarded to foreign contractors.
This article will delve into the large-scale program for 5,000 new apartments to be built for HDC by China Gezhouba Group International Engineering Co Ltd (CGGC). I am writing this on the night before our 57th anniversary of Independence and my reflections are bittersweet, dwelling on those old discussions about how, for many countries in the Global South, Independence was only symbolised as a spectacle. We used to call it Flag and Anthem Independence, all form with little substance.
As the fight for transparency in our Public Business is waged against those officials who are hostile to the truth, my mind runs on the widespread recent discussion on the proper performance of the National Anthem; the re-emergence of the colonial offense of Sedition; the bizarre, backward, dress-codes to enter public facilities (no sleeveless, no shorts, no cap or hat, no this and none of that) and so much else in the same vein. At the same time as the endless discussions on these issues, we have a cultivated, enforced silence on the huge deals and arrangements within which our Public Assets are bargained.
I wrote on this HDC/CGGC deal on 29th May 2019 in this space and laid-out a case to justify the non-tendering of that contract, given the fact that private capital was at risk and the limited amounts of Public Money to be invested. Apart from my objections to the non-affordability of the proposed new homes, the arrangement was broadly supported. I closed that article with criticism of the JCC, which I accused of having become moribund.
I have to now recognise the leadership provided by the new JCC President, Eng Fazir Khan, under whose watch a Freedom of Information request was made to HDC for the details of that huge contract. I also have to, once again, thank the exemplary leaders at HDC who provided the requested details within the 30-day time-limit. Those details were the subject of an article in last weeks’ edition of Express Business – ‘HDC’s sweetheart deal with Chinese contractor’.
This article will put that description of the main terms into some broader context, moving from the Thing to the Meaning of the Thing.
Main terms of HDC/CGGC arrangement
‘5,000 Apartment Unit Affordable (sic) Housing Project’
|Overall number of new homes||5,000 apartments||Given that HDC has built an average of 850 units annually in the 16 years of the current 2002 Housing Policy, that is about 6 years’ worth of construction.|
|First phase||439 new apartments – 204 for South Quay in POS and 235 for Lady Hailes Avenue in San Fernando.||Proposed to be done in two years.|
|Cost of first phase||$71,739,411 USD
|Average cost per unit is $1.1M TTD, which does not include the land. That equates to $1,300 per sq. ft., which is about 30% more than the $900 per sq. ft. rate achievable by local contractors.|
|Projected cost of overall program||$5.5 Billion TTD||HDC is to use its best efforts to secure 60% of the contract sum in USD.|
|Taxes||Tax exemption from VAT and Corporate Tax (sic).||Even if that exemption is not granted, HDC will still refund all those taxes paid. My information is that this is likely rooted in a Taxation Treaty between T&T and the PRC.|
|Local Content||At 2.7 (pg. 10) CGGC “…pledges to use as many workers and materials as possible for the Project…”||Local content in terms of materials is listed at pg. 109 as comprising basic materials such as cement, sand, gravel, timber paint, glass etc.|
|Local Labour||At 2.2 (d) on pg. 19, HDC “…shall, using its best efforts, provide assistance in obtaining…visas, resident permits, working permits for 400 of the Contractor’s Personnel, 200 extra shall be granted if necessary…”||At 2.1 ‘Project Characteristics’ on pg 54 “…labour allocation shall be dominated by skilful workers come from China and other countries, supplemented by local workers. The ratio of foreign workers to local workers shall be around 1:2…”|
|Housing sites for workers||Two 2 Hectare (about 5 acres) sites to be provided.||Those to be with security, including 24-hour police presence.|
|Sales of new homes||HDC is to fully guarantee all the sums due to CGGC.||That removes any risk, which had been assumed as the key element in this project. This is evidently not a PPP and HDC is responsible for finding qualified buyers for these new homes, with no such risk or delay attaching to CGGC.|
So, my initial assumption about this CGGC contract was entirely incorrect, since none of the usual PPP risks leave HDC. The essential safeguard of competitive tendering appears to have been abandoned for no good reason, with high construction cost as the stated and predictable outcome. No risk-transfer is evident, given the payment guarantee.
Given the provisions for up to 600 work permits, it is hard to see the scope for local employment.
Finally, the Framework Agreement, which sets a target of 5,000 units will extend several years into the future. So this is a non-competitive arrangement to spend an estimated $5.5 Billion TTD of Public Money, beyond the reach of the Office of Procurement Regulation. At an average construction cost of $1.1M TTD for each of those new homes, the qualifying income is two times the national average, so it is impossible to describe those as being ‘affordable’. Hence my sic.
Despite the pretence at party political rivalry, I am not expecting any real objections or queries from the Opposition