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Letter: Government lacks capacity to negotiate effectively with China on development projects
Published on September 2, 2017Email To Friend    Print Version

Dear Sir:

The memorandum of understanding between the government of Jamaica (GoJ) and China Construction South American Division (CCASA), dated March 9, 2017, sets out the general framework for the development of Centre of Government at National Heroes Park but is structured in such a way that will not ensure value for money but rather appears to expose the government and the people to significant project development risks with could result in huge amount of debt that is not accounted for in our national account.

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These development loans are indeed “phantom debt”, which is signed by the government of Jamaica on behalf of the Jamaican people but not subject to the Auditor General’s review or monitoring by the Office of Contractor General for compliance with our laws and general accounting principles in terms progress payment and disbursement of funds.

The very fact that these projects are being awarded to the Chinese without being subjected to competitive bidding in itself poses a number of risks and are inconsistent with our procurement laws.

According to section (6) of the MOU as published in the Gleaner dated August 30, 2017, “China Construction South American Division (CCASA) will submit the Design Drawings and the Budget to undertake the implementation of the Project”. It never mentioned any involvement of Jamaicans in the design and budget development.

But to allow the Chinese to determine the budget and then lend you the money to undertake the implementation suggests a level callousness with the public finances as it relates stewardship and accountability.

The government is, therefore, making a strategic mistake with significant financial cost implication in the long run if Section (6) of the MOU is not amended to allow for better cost management of the project from programming to final completion.

Recent statements by the general manager of the Urban Development Corporation (UDC) seem to contradict the general intent of the MOU, if not a deliberate deception. In news reports, UDC asserts that “the new Parliament building will be definitely designed and built by Jamaicans”, a position, it argues, that was always held, but which was lost in the 'noise' of public controversy over whether there would be foreign help.

“The UDC, in its responsibility as project manager, continues to execute the mandate and the terms of the memorandum of understanding (MOU) to ensure that the Parliament and the museum are built by Jamaicans," said Dr Damian Graham, the agency's general manager”.

If indeed the GoJ is the owner and project manager, then the Chinese, who are the constructor, should not be in charge of the design drawings or determine the budget. The contract drawings and specification, as well as the budget and schedule, are core elements of a construction contract.

This is the height of mediocrity in a major development project involving a sophisticated developer. It implies from the general outline of the MOU that the Chinese will be basically drafting a contract for the government to sign, when it should be the owner of the project presenting the contract to be signed by the constructor.

To ensure value for money there should be a design development stage where a third party design consulting team (architectural and engineering) works with UDC and the Chinese to carry out design development process from construction programming to schematics to concept, to preliminary and final design development within the framework of an established budget.

The Chinese should not be allowed to do the design and establish the budget at the same time. This is a big no no in project cost management. The budget and cost must be managed from the programming state to final design document, which would constitute the core of the construction contract with the specification and schedule.

The government should hire third party planners, architects and engineering consultants to work as a team with the Chinese and UDC, with a budget established by the GoJ on advice of the third party team and not solely by the CCASA. We are dealing with a very clever development partner who has effectively sold the government of Jamaica in accepting a very long term view of the economic benefits of their investments, while they reap the current or present value of the benefits in current dollars.

It is essentially in my judgement a debt trap we have found ourselves in again, especially under the terms and conditions as dictated by this MOU. We can't continue like this. China investment is easy money but we lack the capacity to extract the full benefits from this development model.

The billions of US dollars in "phantom debt" that is supposedly off-books will cripple any chance of economic growth for years to come under current and proposed infrastructure contracts with the Chinese. In fact, according to International Financial Reporting Standards (IFRS), we are "Enrondizing" our national accounts as these are hidden liabilities that must be accounted for and are indeed a taxation on the backs of the Jamaican people.

Silbert Barrett
 
Reads : 5250






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