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Our Infrastructure Needs 'Beyond Fiscal Capacity'

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government yesterday unveiled its promised public-private partnership (PPP) framework, conceding that this nation's "infrastructure needs are beyond our fiscal capacity".

The ministry of finance, in a statement, said the policy was designed to better define PPPs and bring order to a previously ad hoc approach to such arrangements, enhancing their governance and ensuring better value for money for Bahamian taxpayers.

KP Turnquest, deputy prime minister, said: "The Government is looking at every possible avenue to limit its borrowing, constrain its debt while meeting its financial obligations. The reality is: Meeting The Bahamas' infrastructure needs is beyond the fiscal capacity of the Government alone, given the geographic dispersion of the islands, coupled with low population densities of the Family Islands and higher than average infrastructure costs. These factors create particular challenges with regard to policy, management and maintenance of public infrastructure.

"To address these challenges, the Government recognises the private sector has financial and technical resources that can be mobilised to help provide high-quality, responsive, resilient and sustainable public assets and services in a way that achieves value for money for the Government and public users."

The ministry of finance said the policy's development, and issuance, will bring greater transparency and accountability to PPP deals, while creating a set of criteria and objectives against which proposals can be rated and benchmarked.

This, in turn will aid the selection of projects and private sector partners, and improve PPP management and procurement. "Partnerships of this nature undertaken by the Government must go through a rigorous accountability process because we are talking about using public money on major infrastructural projects that have profit incentives built in for private sector partners.

"This is not the private sector where you can make snap decisions and do what you want, when you want, because it is your own private money. These are public investment projects and there is no short-cutting the accountability process.

"It must have transparency, and it must be open and fair, and it must be fiscally responsible. That is why a policy is necessary, and that is why our policy establishes these as guiding principles along with value for money, environmental and social sustainability, partnership and inclusiveness."

Mr Turnquest added: "We have created a streamlined process that is fair and transparent with essentially only three stages: Project Identification and Screening; Business Case Analysis; PPP Procurement.

"The oversight and management structure has four reasonable tiers: Sector level/project specific management teams; overall PPP operational unit at the Ministry of Finance; oversight bodies responsible for all approvals in the PPP steering committee and Cabinet. This creates the needed checks and balances for responsibly managing public money, and protects the return on investment for the Bahamian people.

"It is important to note as well that although the policy sets guidelines for the ideal size of projects and the nature of same, the Government will retain its right to exercise flexibility on project types and project sizes that it will consider and make exceptions when warranted. The primary ambition is to engage the private sector in a way that makes optimal use of public resources toward public sector goals."

However, the PPP policy has already come under fire. Mick Holding, the Grand Bahama Chamber of Commerce's president, in a statement issued last week called for the document to be amended because it was "overly bureaucratic" and "cumbersome".

He also expressed concern that the policy called for all PPPs to have a $10m "minimum" investment value or "floor", while arguing that opening up projects to bids from international companies and investors was "detrimental" to the needs of small and medium-sized (SMEs) Bahamian enterprises.

Tribune Business previously reported that the Government hired the Caribbean Development Bank (CDB) to help develop a "properly structured" legal and risk management framework for PPPs, with meetings held with the private sector on the issue earlier this year.

This came after six PPP contracts entered into by the former government came under heavy fire from the Minnis administration, which inherited them upon being elected to office on May 10.

Carl Bethel QC, the Attorney General, told the Senate on June 22, 2017, that all were placed under review to determine if the Government was getting value for money and they were in the Bahamian people's best interests.

He identified the contracts as including proposals to "construct an administrative office building on 30 acres of prime agricultural Crown Land on Gladstone Road; reconstruct an administrative office for the administrator and police Station in Harbour Island, entered into with the same company that had agreed to build the Gladstone Road complex".

Mr Bethel said the Memorandums of Understanding (MoUs) for these two projects were combined, adding: "That MOU called for the 30 acres to be granted to the builder by a Crown Grant, so that it could then lease the same land back to the Government. The transfer of title was said to be so as to enable that builder to borrow necessary funds from a Bank to fund the construction."

The Attorney General did not identify the developer involved, but Tribune Business previously revealed Sebas Bastian's Brickell Management Group (BMG) as the private sector partner behind the Harbour Island project.

The other PPPs referred to by Mr Bethel included a new administration complex and police station in Eight Mile Rock; the new General Post Office at the Independence Drive Shopping Plaza; the proposed new Road Traffic Department building on Tonique Williams Highway and Knowles Drive; and contractual works for the Fox Hill Community Centre.

Scott Godet, principal of Scottdale Bedding and National Fence Company, and a major landlord to the Government, was the principal behind the Post Office PPP. Desmond Bannister, minister of works, subsequently revealed that now-Exuma MP, Chester Cooper, was leading the $24.5m Road Traffic PPP, while New Providence-based Top Notch Builders raised $25m to finance the Eight Mile Rock complex.

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