GUYANA: Failed Infrastructure development projects financed by Exim Bank of China – By Anand Goolsarran

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In today’s article, we discuss some of the above projects that also ran into serious difficulties during their execution. We refer to the Skeldon Sugar Modernisation Project, the One Laptop Per Family and the Fibre Optic Cable Project.

In last week’s article, we discussed the Cheddi Jagan International Airport Expansion Project which, after ten years since the design and construction contract was signed, is yet to be completed. The main reason for this state of affairs is the absence of feasibility studies prior to the contract award, to determine the precise nature and scope of the works to be undertaken, coupled with a lack of effective supervision as the works progressed. The Project is financed by a loan from the Exim Bank of China, with counterpart funding from the Government of Guyana. Table I shows the list of projects in Guyana that are financed by loans from the Exim Bank of China since 2005:     

The Skeldon Sugar Modernisation Project

The reported US$200 million Skeldon Sugar Modernisation Project (SSMP) project  commenced in September 2005. Completed in March 2009, it has so far been non-operational because of major defects in construction, including alleged use of inferior materials. This was despite efforts by a South African firm in 2012 to rectify the defects. The SSMP was financed by a loan of ¥270 million, equivalent to US$41.283 million from the Exim Bank of China, as well as two loans from the Caribbean Development Bank amounting to US$28.356 million, giving a total foreign financing of US$69.639 million. This is in addition to counterpart financing from the Government of Guyana over the five-year period of construction.

The Government’s decision to proceed with the Project came at a time when it was known that the preferential prices that ACP countries were receiving for their sugar exports to the European Union were being removed. This was as a result of the World Trade Organisation (WTO) ruling in a case brought by Australia, Brazil and Thailand in 2003. It therefore meant that Guyana had to sell its sugar to the world market at a time when its cost of production far exceeded the world market prices. The WTO ruling forced other Caribbean sugar-producing countries – Belize, Jamaica, Barbados, St. Kitts, Trinidad & Tobago – to scale back significantly or abandon producing sugar for export. Guyana did the opposite and proceeded with the SSMP in the hope of modernizing the sugar industrial and reducing the cost of production.

The assets of the SSMP along with other assets of the closed sugar estates have since been transferred from the Guyana Sugar Corporation to the NICIL in keeping with a Vesting Order signed by the then Minister of Finance. However, an examination of the Auditor General’s reports indicated no evidence that NICIL’s accounts were audited beyond 2003. The related report was issued some eight years later in 2011.  A Google search for NICIL’s website was unsuccessful, suggesting that it is no longer in existence or that it might have been down.

The One Laptop Per Family and the Fibre Optic Cable projects

Two other major projects that failed to deliver are the One Laptop Per Family (OLPF) and Fibre Optic Cable Project. Both of these were financed by the Exim Bank of China – the former from a grant of ¥50.267 million, equivalent to US$7.686 million; the latter, from a loan of ¥215 million, equivalent to US$32.874 million. Numerous irregularities relating to the acquisition, storage and distribution of the computers were uncovered by the auditors; while the Fibre Optic Cable Project had to be abandoned because numerous problems were encountered in the laying of the cables from Brazil through Guyana’s interior towards the coast.

These failed projects financed by the Exim Bank of China reminds us of the statement by Chinese President Xi Jinping after announcing a new round of grants, loans and credit of some US$60 billion for African nations. When asked about allegations that too many poorly thought-through projects were receiving funding from China, he stated that the resources provided should not be spent on vanity projects but in areas that are most needed and that the investments must give ‘both Chinese and African people tangible benefits that can be seen, that can be felt’. (Page 232 of the book by Peter Frankopan titled “The New Silk Roads”).

The problem also appears to be a lack of effective accountability mechanisms to ensure that the funds are spent with due regard to economy, efficiency and effectiveness in the achievement of the stated objectives, outputs and outcomes.

For example, in relation to World Bank and IDB loans, one of the conditionalities is for separate financial reporting and independent auditing of the projects within specified deadlines. This is in addition to the submission of periodic reports to these institutions of the status of the projects, financially and otherwise, as well as periodic inspection visits by bank staff. One recalls one such visit resulted in the termination of the World Bank-funded Essequibo Road Project because of credible allegations of corrupt behaviour as well as mismanagement, as detailed in a special report prepared by the then Auditor General.

– To be continued..

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