Questioning a gift horse?

Feb 26, 2009 Editorial

It may appear to some that Berbicians are looking at a gift horse in the mouth. After putting up with an erratic ferry service that sometimes floated down river, kept drivers in serpentine queues for hours in blazing heat, and inflicted other sundry indignities when they ventured to connect with the rest of their country, the bridge that was constructed to ease their transportation woes appears to have earned their ire. More specifically, the mandated price that they have been to pay if they desire to use the bridge has raised their hackles.

One would suspect that even though from the beginning of the project, when the feasibility study was released, it was announced that the tolls would be comparable to the fares for the ferry service, the import did not sink in. Maybe most prospective users kept the Demerara Bridge tolls locked in their memory banks.
That the tolls for the latter bridge have been kept artificially low from the day of its opening back in 1978 was forgotten. And that it could be kept way because it was a service provided by the government of Guyana to its citizens – even if it had to be subsidised.

The Berbice Bridge is a bridge of totally different origin. As the government has been at pains to point out, it had conceived of bridging the Berbice River as far back as 1992, but funding was always the constraint. Locked into the IMF/World Bank Structural Adjustment Programme, it was forced to have those institutions sign off on any venture that made substantial demands on the national treasury.

From the end of the nineties, the government began to consider other forms of financing for public projects that had become popular in the developed world, which had trumpeted the virtues of smaller governments and a larger, market-driven business model.

Public projects such as highways, bridges and even prisons were farmed out to the private sector under either a Build, Own, Operate and Transfer (BOOT) or Build, Operate and Transfer (BOT) scenario.
In both options the financing for the project was secured by the participating private firm, which would build, operate and finally transfer the facility to the government after a specified period. In the BOOT option, the facility was actually owned by the private firm for the duration and assumed all the attendant risks that went with that alternative.

As with any business venture, the participating firms would only enter such arrangements if it made economic sense – that is if the money to be invested stood a good chance of delivering a return that compared favourable with other available investment opportunities.

After much ado (and feverish negotiations) the IMF/World Bank mandarins agreed to this new financing option for a bridge across the Berbice River – but only after a study commissioned by them signalled that a floating structure at the present location might make sense.

Several foreign firms were contacted including Ballast Needham as far back as 2000 but agreement could not be reached on the details of the financial structure of the deal. The key hurdle, not surprisingly, was the projected return on the money to be invested.

The government finally worked to put together a local consortium and use the available liquidity in our system in a BOT arrangement. It was able to bring together Colonial Life Insurance Company (CLICO), the NIS, the Hand in Hand Fire Insurance Company, Secure International Finance, Demerara Engineers and Contractors Limited (a subsidiary of DDL), and New GPC as six common shareholders in the private company, Berbice Bridge Company Inc. (BBCI).

There are some other investors in the project. However, it had to agree on a toll structure that reportedly would give an internal rate of return on the investment of 12.5 percent for twenty-one years, after covering all operating and maintenance costs during that period.

Early last year, the Chairman of BBCI had noted that after working with the ferry fare structure and a “willingness to pay” survey, they had come up with a five to 10 percent higher toll structure than the ferry’s charges. With the present chomping at the bits, one wonders who were surveyed.