THE ONLY WAY FORWARD

Jul 26, 2013 Features / Columnists, Peeping Tom

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Creative accounting has now reared its head in the efforts to demonstrate that the Amaila Falls Hydroelectric Project is overpriced. This new form of accounting for project cost involves adding interest payments and rates of return and ending up with a figure that is said to represent the overall cost to the Guyanese people.
It is very much as if someone takes a loan of $10M to build a house, but then decides that the real cost of the house is not the $10M alone to build it, but all the interest payments and everything else that have to be paid, not just from start to completion of the house, but also over the life of the loan.
If this method of determining project cost is standardized throughout our economy, the taxman is going to be smiling, because his capital gains intake and property taxes are going to skyrocket overnight
The hydroelectric project is going to be built by private investors with equity contribution from government. The monies that are going to be borrowed from the Inter-American Development Bank (IDB) will no doubt be backed by a government guarantee, but will be essentially and contractually treated as a loan to the company undertaking the project.
Forget, therefore, all that nonsense about the actual cost of the project running into billions of US dollars. This is creative accounting.  If we begin to use that method then the cost of a car to the owner is going to be almost twice the showcase price.
If the opposition parties are concerned about the cost of the hydroelectric project, they should do what was done many years ago, in relation to the Omai Project. They should ask the government to have an independent opinion as to the cost of the project. Experts, that the opposition parties have confidence in, can be recruited and asked to make an independent assessment of the project. This can then inform whether the opposition parties will support or not support this project.
One political party, the Alliance for Change, has already signaled that it is awaiting the opinion of the IDB. But the IDB cannot be considered an independent actor, because it will end up financing this project and thus become a stakeholder. The IDB also has an interest in lending to this project, because that is the business that it is in. If the IDB does not find projects to lend funds towards, then its operations in Guyana will grind to a halt.
The government is justified in claiming that the opposition parties are inflexible. They have been. But the opposition can also justifiably counter that the government has not been willing to offer reasonable compromises.
APNU wants a new framework for the governance of the country, but it is not compromising. The government on the other hand wants its projects to continue, but is stuck in the old, Jagdeo–style of no quarter to be given to the opposition. With this scenario, there is only one direction that the country will move.
Compromise is needed on both sides. In the instance of the Amaila Falls Hydroelectric Project, the government has been willing to provide documentation to the opposition about the project. They also even arranged for a confidential briefing.  This was over a year ago.
The opposition did not afterwards express any reservations about the project. They still are not. They are however now playing politics, as perhaps is their right, with this project. Except that for the average consumer, when the opposition plays politics, the cost can be counted by the amount of food on the table.
For the vast majority of Guyana, except perhaps, those who are enjoying special electricity tariffs, monthly electricity bills are an onerous financial burden. People want relief from that burden. And they will view the political gamesmanship over this project as hurting large numbers of them. In short, they will see the jettisoning of this project as not allowing them to reduce electricity rates. And they have a point.
The opposition may thus be forced to seek refuge in manufactured criticisms which are now being given credibility by boosting the credentials of those making them. But how well-founded are these criticisms? And how authoritative are the sources of these criticisms? What experience do those making assessments of the project have in evaluating projects of this scale?
Compromise is needed from all sides. Firstly, disclosures should henceforth be full and consistent. Right now, when it comes to the final cost of electricity to the consumer, there are two sets of responses from the government. One person is hinting at a 20% reduction; another is saying 40%. Which is correct? That needs to be clarified, as well as whether we are dealing with subsidized costs or not.
The second thing that needs settling is the overall cost and viability of the project. In this regard, the government should offer to have an independent assessment done and this assessment should be undertaken by persons jointly selected by the government and the combined opposition.
This is what compromise is about. Not about walking out of the National Assembly and about bashing one another. It is about making hard choices and having the patience and willingness to sit down and do so, even if it takes weeks to arrive at a consensus. This seems at this stage the only way forward.

 

 

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