In this article I continue to examine the PPPs in Tobago against the role of the responsible elites or officials for these important matters.
Before returning to those large-scale, misbegotten PPP schemes, it is important to give the background in terms of learning and the institutional framework.
The Finance Ministry’s PPP Unit was established in August 2011, to promote public private partnerships for infrastructure in Trinidad and Tobago. The National PPP Policy was approved by Cabinet on May 31, 2012, as an institutional framework for the development and implementation of projects through the PPP modality.
I understand that the current government is not supporting that Policy, so it is effectively in some kind of administrative limbo. That limbo and the lack of an operational policy is having a detrimental effect on the completion of Regulations for the new Public Procurement regime. Notwithstanding those positions, the PPP Unit is still officially stated to be under the direction of Ms Nadira Lyder, who was appointed to that Negotiating Team for the Tobago Sandals MoU.
But apart from those points, into which I will go deeper in a subsequent article, there are certain questions which arise in the period prior to September 2015. You see, in that period the MILSHIRV contract was signed in November 2011, with the AG suing to test its legality in 2013 before effectively withdrawing that challenge. So, what was the role of the PPP Unit in that entire MILSHIRV imbroglio? What advice did that unit give to the Minister?
Given the recent episodes, one could even ask what role did Ms Lyder’s team play in relation to that Tobago Sandals MoU? Was the PPP Unit asked to give advice in this matter? Or was that team also side-lined, as the high-powered Cabinet-appointed Negotiating Team appeared to be?
In April 2019, the IADB published its 31-page Report – The Governance of Public–Private Partnerships – A Comparative Analysis which examines PPP policies and implementation across 21 Latin American and Caribbean countries. The table at page 14 of that Report compares the arrangements in those countries by reference to a series of decisive stages – Planning; Promoting; Designing (Technical and Economic); Gatekeeping; Evaluating Fiscal Risk; Structuring Contracts and Monitoring Contracts. Even if it was functioning as intended, our PPP Unit does not have the Gatekeeping function, or indeed, any of the important subsequent ones.
In August 2019, the Central Bank of T&T published its 29-page Report on Public-Private Partnerships in Trinidad and Tobago as part of its Working Papers Series. That series is described as primarily written by Central Bank of Trinidad and Tobago research economists in order to solicit comments from interested readers and to stimulate discussion.
The Central Bank Report provides a useful overview which draws on academic and multilateral institutional sources but is silent on key PPPs. The PPPs which are examined get only skeletal treatment, with no notes of the Internal Rates of Return or comparisons between costs for construction via the traditional procurement method and the PPP approach. Those are not fatal shortcomings, as the research is stated to be preliminary.
One of the species of PPP is the hybrid, which combines the traditional PPP approach in which facilities are built by the private sector and paid for by the public via user fees/tolls, with those in which the State pays directly. Our State-owned hotels represent yet another strain of hybrid PPPs in which the capital investment is with Public Money and the private sector input is via its management expertise and international network. None of those hotels are mentioned and it is therefore unsurprising that the Tobago Sandals proposals were also omitted from what would have surely been an important analysis.
Even more perturbing, however, is the fact that MILSHIRV was ignored by the Central Bank researchers, despite the heated public debate and protracted litigation.
It would be interesting to know just how much of this huge MILSHIRV building is actually occupied by THA offices? We know from the documents released by THA that the monthly rent of $1.295M became payable once the building was completed. I also wonder when THA will again make that 225-page bundle of documents available for public viewing. That release was an important step in the direction of accountability, and I commended Mr Orville London for that at the time, but the document cannot now be located online, I wonder why?
Magdalena Grand (formerly Tobago Hilton)
That hotel cost $16.75M USD to build (about $115M TTD) in 2000 and cost a further $390M since its construction in 2000. Minister Gopee-Scoon stated that Magdalena Grand lost $276M in the 11 years between 2008 to 2018. These estimated costs do not include the $138M paid to private shareholders of the failed hotel. e TecK reported to the JSC that
“…with Magdalena…for every dollar revenue it earns, its operating cost in 2017 was $1.70. It was $1.68 in 2016…”.
So, we have a failed first hotel with Hilton (2000 to 2008), a failed second hotel with Magdalena Grand (2008 to present) and we are now closing negotiations with Apple Leisure to again refurbish, with a new Management Agreement to follow.
So just what are the terms of this new agreement? Having failed or refused to examine the two failures, we are once again entering a new arrangement. Is the public still to be kept in the dark?
Do we have the capacity to learn from our errors? All educated, reasonable people do. How will our Public Institutions handle the upcoming PPPs in Tobago? Will we be told of the terms of the new Management Agreement with Apple Leisure for Magdalena Grand or the new ones being contemplated by the THA? Will the public be told of these projects before decisions are taken, as recommended in the Uff Report?