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Commentary: Argyle International Airport: St Vincent and the Grenadines first 'amusement park'
Published on August 21, 2014 Email To Friend    Print Version

By D. Markie Spring

For two elections now the Argyle international airport has been used as a prerequisite for votes!

Each year voters and taxpayers alike have been promised a completed and fully operated international airport. To us, this is a never ending promise, which seemed distant – like a ship being driven by weak tail winds from the horizon.

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The author of a number of published works, D. Markie Spring was born in St Vincent and the Grenadines and now resides in Providenciales in the Turks and Caicos Islands. He has an MBA from the University of Leicester, England, and a BA from Saint Mary's University, Canada
Development of infrastructure is most important; however, an infrastructure should not go unplanned or left idle. Moreover, constructing an international airport is not the same as constructing a private house. When investments are made in building a private home, solely, the household is affected. Conversely, investing in a national project like the Argyle International Airport, certainly affects the entire nation.

Therefore, an investment of this magnitude should not be undertaken without an adequate financial plan, which involves the allocation of assets and liabilities, time value of money, working capital, risk management and the rate of return.

In fact, at the commencement of this important project the government had minimal funds, and did not even consider the capital structure and the debt to equity ratio; neither did the government take into consideration the weighted average cost of capital (WACC) – not examining the average costs of these sources of finance: debt or equity.

Additionally, the government’s failure to consider the net present value (NPV) of its investment or disclose its marketing strategies, have prompted Vincentians to ask many pertinent questions relative to the viability of this investment and, today, taxpayers are still investigating the profitability of this project. This is a vital question to raise, since the government has used the harsh global financial times as an excuse for SVG’s daunting economic environment.

However, this is not all!

The capital budgeting phenomenon is not being determined either; therefore, it is unknown whether this new project is worth pursuing. Additionally, some taxpayers are still of the opinion that the government should pursue other long-term ventures, or whether it is more feasible to extend ET Joshua Airport or the airport on Canouan Island, open a help desk at Hewanorra International Airport in St Lucia than constructing an entirely new airport at Argyle. This is an important factor, since the lifetime of cash inflows and outflows of a perspective investment are analyzed in an effort to determine whether the generated returns achieve an adequate target benchmark.

Similarly, it is important to acquire other infrastructure, such as roads, fire and safety, security, health care and hotel accommodations before an international airport can function effectively. After a careful assessment of the condition of infrastructure in SVG, the government is open to many challenges including increasing crimes, liability, loss of reputation and isolation.

Not surprising, the completion date has been postponed on many occasions – suggesting, from inception, the Argyle project has no real management or leadership!

Despite all this, I support the Argyle project, considering its potential for economic development. For me, all is not lost, as proper planning for financing the remainder of the project is still possible and it profitability can be reached through well thought out extensive marketing strategies. The infrastructure is not a short-term investment, but one I believe, would bring long-term benefit to St Vincent and the Grenadines once managed property.

To date, and with empirical evidence, this project has failed financially and from a management perspective. I believe this is so because the decision to build the airport and, more so, the financing strategy were centralized; decisions concentrated at the top, and only made by a few individuals.

From a political viewpoint, however, I am of the opinion that all these setbacks have damaged the leader’s credibility and reputation of the governing party, especially the multiple postponements of the completion date – creating doubts in the minds of the people whether the government is competent and capable of getting the job done. In this capacity, I am predicting that the governing party could lose enormous votes in the next general election.

As we speak, the completion date has been pushed forward, yet another time to midyear – 2015. Hence, the prime minister would be unwise to call elections after midyear 2015 as it is unlikely that the airport would be completed then. His best strategy is to call elections before August 2015 with a view that people would believe that this new date for the airport completion is reachable.

Having said this, I am sure that the airport strategy for votes has been played out; hence, it is advisable that the PM develop a new strategy; however, I am assuming that this would be extremely difficult making reference to the PM’s poor performance.

Here, a better strategy might be to distract his constituency by using the Georgetown sea defence strategy – a seemingly empty promise that most people have already analyzed and deemed unattainable.

I reiterate, the Argyle International Airport investment is an important project and all Vincentians should welcome it, as this project has enormous long-term benefits for economic sustainability. However, much work is left to be done and should be pursued by different governing bodies.

2015 general elections -- vote wisely!
 
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Comments:

C. ben-David:

I agree with most of your assertions because they are based on empirical facts.

You rightly state that: “… it is unknown whether this new project is worth pursuing” and ground this with the arguments you and others have often made: poor planning; slip-shod funding; incompetent administration; lack of public consultation or independent oversight; missing feasibility study; no cost-benefit analysis; no real alternate attempt to better integrate Arnos Vale airport with nearby fully-developed but underused airports; what appears to be a deliberate attempt to delay project completion to gain political advantage; and inadequate ancillary infrastructure and services (security, tourist facilities, medical care for visitors, etc.)

With all these negatives, it is surprising that you still conclude that: “I support the Argyle project considering its potential for economic development” and “… the Argyle International Airport investment is an important project and all Vincentians should welcome it, as this project has enormous long-term benefits for economic sustainability.”

This is surprising since you present not a shred of evidence of the airport’s “potential” or promise of “enormous long-term benefits for economic sustainability” but only evidence of the project’s shortcomings.

Please tell us what this potential is based on hard evidence and a comparison to similar projects in similar environments, not empty assertions about a huge boast in tourism, the construction of multi-million dollar hotels at non-existent locales, the hypothetical air shipment of thousands of tons of agricultural produce and fish to non-existent markets, and so forth.

And please don’t tell us that “if we build it, they will come” because all right-thinking people, including the Prime Minster, know that building a tourism-oriented airport is a very risky business even where there is considerable tourist potential. Building one on mainland St. Vincent where this potential is nearly absent is only a recipe for failure.

Jamal Henry:

I believe the Argyle airport in St. Vincent is a classic example of putting the cart before the horse. Meaning there may not be evidence to prove the worth of the airport... YET. However once the airport is complete *cross fingers* foreign investment will then see the potential of St. Vincent to develop into the next best destination with access to a beautiful chain of pristine islands.

Though I agree with some points made about the financial decision making of the airport by Mr. Spring. I believe many points regarding his financial analysis are flawed. As an MBA graduate he should be able to distinguish between micro and macro economics. You should not apply micro analysis to validate the expenditures of a government. Remember that in macro economics, government expenditures increases GDP through use of local resources to improve infrastructure. Therefore the cost of building the airport would be somewhat offset by tax revenues from employment and purchases of materials for constructing.

I think everyone believes the there are long term benefits to building this airport, but those who oppose can't seem to look past the politics to get to the economics.

Jamal Henry


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