Govt. has contradicted its own rationale for investing in the Marriott

Jul 11, 2014 Features / Columnists, Peeping Tom

Hip Hip Hooray! Yet another major investment for Guyana’s economy! More jobs! Good news for tourism!
Government officials were caught beaming at the turning of the sod ceremony for the construction of a US$54M hotel next to the International Convention Centre at Liliendaal, East Coast Demerara. They were heralding yet another major investment, one that we are told will create some three hundred jobs, and which represents a show of confidence in the economy.
What those government officials did not realize was that in praising the decision of foreign investors to build this hotel in Guyana, the government was in the process shooting holes into its own rationale for investing in the Marriott Hotel.
The government’s rationale for investing in the Marriott was that this was necessary, because the private sector was unable to come up with the sort of capital needed to build the Marriott. In other words, without government’s investment, the project could not be realized.
It was also stated that the government’s investment was necessary to encourage foreign investors to invest in equity in the hotel. The example of major hotels built by the government of Trinidad and Tobago was thrown in to buttress the case for the government compensating for the shortage of private capital.
Well, here we have now one private company, not a syndicated group of investors, reportedly putting up US$54M for a major hotel in Guyana, one that will match in size and cost to the Marriott Hotel into which government’s funds have been ill-advisedly sunk.
So what does our venerable Minister of Finance have to say now that a foreign investor has found the capital to construct a hotel in Guyana at a cost that matches that of the Marriott?
The publisher of this newspaper was all along pointing out that the government did not need to risk billions of taxpayers’ dollars in a hotel, utilizing a highly controversial and questionable financial model. He had all along pointed out the flaws of the financial model developed by the government in relation to the Marriott Hotel.  However, the government justified the financial model on the grounds mentioned before: the lack of capacity of the private sector and the need for foreign investors to be encouraged through an injection of funds by the government.
We have heard nothing about the government investing any money, be it through loans or equity contributions, in this new hotel being constructed by an Indian firm. And therefore we can only conclude that the government is not a co-investor.
I am sure that the investors in that hotel are well aware of the political situation in the country, particularly the fact that the government does not hold a majority in the country’s legislature. This is a situation that adds to the political risk of an investment. Given Guyana’s tenuous political situation, any foreign investor ought to be cautious about making such a sizeable investment in the service sector.
We therefore have to wait and see whether the hotel will materialize, because it is one thing to turn the sod and another thing to begin construction work.  Let’s see just how fast the investors will proceed.
We have had these turning of the sod ceremonies before. The one for the Marriott Hotel occurred years before the final deal was signed. So we have to wait and see whether this hotel announcement is a political gimmick on the part of the government.
There will, of course, be an almost immediate spin-off benefit from the announcement of the decision to build the hotel. The area where the hotel is located has also been designated for a massive shopping mall which is almost complete, a series of movie houses and shopping complexes, a specialty hospital and a proposed medical school being constructed by another Indian company.
If all of these things plus this US$54M investment materialize, this area will have the highest sunken investment per square foot than any other part of Guyana, and for that matter, the Caribbean.
This prospect alone is almost immediately going to cause land prices in that area to soar through the roof.  Do you know of any person or entity that has available land in that area? And do you see how a mere sod-turning ceremony can lead to the price for that land to increase astronomically overnight?
We have to wait and see, don’t we?

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Govt. has contradicted its own rationale for investing in the Marriott

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