Jamaica's New Government: Tenuous Days Ahead?

Well, Jamaicans are bracing for the 2008/09 budget, set to be announced in Parliament in March of this year.

The Prime Minister, Mr. Bruce Golding, gave us a preview of what to expect this year, on Wednesday, January 23, at a post-Cabinet Press Briefing:

He said that:

1) The output (GDP) of the country needs to be expanded. In layman terms:the economy needs to grow, we need to produce more goods and services.

However, in light on the global economic outlook for 2008 and pending US recession, the government has revised its its projected GDP (gross domestic product) growth from 4 1/2 % down to 3%.

2) He also promised that he'll be concentrating on:

a) Job creation and attracting investments that auger this.

b) Human Resource Development with emphasis on our education system.

c) Ensuring our Energy security

d) Ensuring our Food security.

All this in light of news that NROCC..the government entity that is managing the implementation and expansion of Highway 2000 (the highway project that seeks to connect Kingston with Montego Bay and Ocho Rios, while passing through St. Catherine, Manchester, St. Elizabeth, Westmoreland, Hanover and St. Ann) suffered losses of JMD $1.6 billion in 2006/07 and is projected to have losses of JMD $2.4 billion by March 2007/2008.

To make up for this shortfall in the budget, the PM has announced that Jamaican taxpayers may have to pay...

He has already asked Portmore residents to brace for a 100% increase in toll-fees...

This is the same Jamaica Labour Party (JLP), who, when in Opposition, promised Jamaicans that there would be a reduction in toll fees if they were selected as the next government...that they would renegotiate the contract with Bouygues, the French company that won the contract to construct Highway 2000.

[NROCC is the National Road Operating and Constructing Company Limited. From the sources, below, it seems that the Development Bank of Jamaica (DBJ) in 2001, guaranteed loans of US $115 million, to NROCC, to start Highway 2000...

The Government of Jamaica(GOJ)  had no money of its own and so had to borrow money (from Jamaican taxpayers' pension funds, PetroCaribe money, and in the form of  Euro bonds) to enact Phase 1A of Highway 2000. The total cost of the project, at the time was estimated to be US $390 million.

Bouygues, a French company,  won the bid (for US $141 million), to do the road construction work for Phase 1A of the project. They set up a local registered firm, here in Jamaica, Trans Jamaica Highway Ltd., to perform this work.

They then contributed US $20 million to do said road construction...this represented their equity investment in the project...a sort of goodwill offering. So NROCC still owed them $121 million($141-20 million.)

So Bouygues, contrary to popular belief (and what was touted by the then GOJ), was not a private investor to the project, but a contractor. They were to be paid to do the construction work on the project and for lending their know-how to the project.

They were to be paid via:

1) The loan from NROCC, that was guaranteed by the DBJ

2) Toll fees charged to Jamaicans, over the next 35 years.

What it seems is that, from the evidence presented below, Bouygues (Trans Jamaica Highway Ltd.) is being paid twice.

Why on earth, would the then GOJ take out a loan to pay Bouygues and then agree to pay them over a period of 35 years, via toll fees?

This just doesn't make sense and I urge the present GOJ and the Contractor General to closely re-examine the contract  and related documents that were signed between the then GOJ and Bouygues...something smells fishy in the State of Denmark and it ain't the fish!]

According to article, "Gov't moves to restructure NROCC's debt", Jamaica Observer, January 25,2008, "The PM told the House of Representatives on Tuesday, January 22,2008, that NROCC will be in no position to meet its loan servicing obligations beyond 2008/2009, after which it will experience negative cash flow accumulating to $9.7 billion by 2012/2013.

No wonder!...they are paying for a loan to Bouygues...can't meet their servicing obligations for these loans and no doubt have been penalized for not meeting these obligations. Additionally, the projected revenues that they should have earned from toll-fees, are not being met, due to under-use of the toll-roads by Jamaicans.

Hmmmh!!! and double hmmmmh!

I wonder what other measures will be implemented by the GOJ, to make up for this and other budgetary shortfalls?

Should we be expecting an increase in General Consumption Tax (GCT) and other taxes, in March 2008?

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But it seems that the JLP is finally understanding the sad economic situation that Jamaica is in...we're broke.

Well, on the books we are..Jamaica is a very rich country whose wealth, unfortunately been squandered, plundered and pirated over the past 46 years. (It's been 46 years since we've become independent.)

However, I do admire the valiant attempts at profitability by the government-run Boards at the Jamaica Urban Transit Company (JUTC) and Air Jamaica (Jamaica's national airline) ... two companies that heavily contribute to our debt burden.

As a result of these two government-owned companies' having new Boards, whose members seem to be knowledgeable, experienced and proactive:

1) JUTC's monthly losses have been decreased from JMD $160 million/month to JMD $104 million/month [in just under four (4) months.]

Whilst:

2) Air Jamaica's Chairman, Mrs.Shirley Williams, has projected a decrease in its losses by US $80 million, by December 2008. (Air Jamaica is said to amass losses of up to US $100 million, yearly.)

The sad reality is that jobs will be lost...but both companies are trying to make the process as painless as possible for those to be affected.

So yes, with more and more being uncovered re the real financial quagmire that the country is in, the way forward may seem rocky for this new government.

However, by by the looks of things, they will continue to help keep Jamaica afloat, even though we, as Jamaicans, may undergo severe economic hardship in facilitating this.

Gillian

Sources Include:

1) Interview with Mr. Kingsley Thomas, then President of the Development Bank of Jamaica, on Radio Programme, "This Morning", Nationwide Radio, January 29, 2008.

2) Article, "No plans now to cut public sector - Golding", by Damian Mitchell, News Coordinator - Radio, Jamaica Gleaner, January 25, 2008

3) Article, "Gov't moves to restructure NROCC's debt" Jamaica Observer, January 25,2008

4) Highway 2000 website, http://www.h2kjamaica.com/2005/about/index.htm, January 28, 2008

5) Article, "Jamaica's development - cause for much concern", by Clifton Yap, Jamaica Observer, December 17,2006.

6) Article, "Dark side of Highway 2000 and its tolls", by Ken Chaplin, Jamaica Observer, August 22,2006