Open letter to Ellio Solomon
Thank you for attending our meetings to keep us informed on the government’s progress in the ongoing negotiations with the China Harbour Engineering Company regarding the development of port facilities in George Town, Spotts Jetty and the Turtle Farm facility.
In our last meeting, the Cayman Contractors Association offered to supply the rates that would assist in guiding your negotiations and to ensure a level playing field for the CHEC group when hiring the local labour force. These rates are attached for your review. As you have stated, and we agree, this project must put our locals to work and utilise the services of our local contractors and subcontractors wherever possible.
The CCA would like to share some of our concerns about the selection of CHEC to construct the port facilities, keeping in mind that the mandate of the CCA is to protect the interests of our member contractors. Many of our concerns are documented and similar in scope with our neighbouring countries, particularly Jamaica, where, unlike Cayman, there is a large skilled and inexpensive labour force available.
Based on documented independent government reports and media accounts, there is a repeating pattern with the CHEC group in their business dealings with regional governments.
CHEC uses its vast resources to offer attractive financing (well below ordinary commercial rates) to regional governments with no liability. CHEC then promises to hire local labour and companies to perform parts of the works. The typical method that has been documented in government and media reports indicate that once an agreement is signed, CHEC will later state that all the local bids are too high, local labour is too expensive, local materials are too costly. Invariably, workers from China are brought in and are housed and fed in owner-supplied housing and cafeteria facilities (work camps). Materials are imported from China directly, thereby reducing further any economic advantages to local businesses.
If this same practice is allowed to occur, CCA warns that this will cause irreparable damage to the local work force and suppliers and will cause project cost escalation, of which there is no control. We see this as an unacceptable arrangement for our industry and the people of the Cayman Islands.
Entering into an agreement with a company who are providing the funding and managing the spending of those funds is also concerning. This leaves virtually no control to the Cayman Islands Government on how much is actually spent. It also will affect the terms in the agreement, making them ambiguous as to the true cost to our Islands. This will possibly place the Cayman Islands Government in a position where we cannot afford to terminate the contract.
Another of our concerns is to do with the spinoff activity that having such a large company on our shores will create. With CHEC it’s particularly worrisome as they have already stated in media reports that they are coming to Cayman not just to do port projects but “billions of dollars of future projects”, indicating they plan to stay! CCA members cannot compete with CHEC if they decide they want to bid on local jobs. CHEC is owned and financed by the Peoples Republic of China, with access to preferred lending arrangements than is available to us, they are so large and strong financially that we are effectively introducing a Killer Whale into a pond of minnows.
We also are unsure as to why we are considering building a port facility as large as that being proposed by CHEC. An eight-acre facility costing an estimated $300 million designed on two levels to facilitate four Oasis class ships, which do not even exist at this time, just does not make sense to the CCA. This brings up two additional major concerns with the development expanding to this size.
Firstly, no environmental impact study can guarantee that the impact on the George Town reefs and Seven Mile Beach sand will not be significant, or even devastating. Therefore, the potential of disrupting/damaging the surrounding reefs and Seven Mile Beach are of utmost concern to all industries in Cayman. We all witnessed the erosion of portions of the Seven Mile Beach some years ago and remember the deep concern about tourism. Whatever development is finally agreed, we urge you to consider this. Any piers extended should be built on piles that allow the flow of water, and the amount of filling out into the sea in George Town should be kept to a minimum, or we are playing Russian roulette with our world famous reefs and the Seven Mile Beach.
The second major concern focuses on the proposed construction of additional retail facilities in excess of 100,000 square feet to be owned and operated by CHEC for the term of the contract. The recent downturn in the economy has seen approximately 50 businesses close in downtown George Town over the past three years. Our existing retailers certainly do not need additional competition from new retail establishments located directly on the port and owned by a foreign entity. Certainly, this could be the “death-knell” for our downtown merchants and George Town in general.
When Cayman businesses fail, Cayman contractors suffer. It is our recommendation that the new port facility should be restricted to two piers to facilitate the current class ships and one Oasis class ship, with minimal or no additional retail. This will be a smaller and more cost-effective facility and will result in repayment of the loan in considerably less time than the 49 – 51 years proposed. In addition, any negative effect on the adjacent environment, including Eden Rock, Cheeseburger Reef and Seven Mile
Beach will be significantly reduced.
For over 20 years the CCA has been trying to get a Builders Law enacted so as to stop foreign contractors (the Fleur Daniels’, the Tom Jones’, the China Harbours’) from walking into Cayman and taking on our large projects, then setting up shop to compete with us for the smaller ones as well. We have a large, capable community of excellent builders locally, who make a commitment each and every day to the Cayman Islands financially. We are the employers that drive one of the largest sectors of the country’s economy. It is vitally important that the already approved Builders Law become enacted and implemented.
Should the Cayman Islands Government decide to proceed and considers the advantages of bringing CHEC to Cayman outweighs the disadvantages, the CCA is hereby recommending that the terms listed in the points below form a part of any framework, concession or definitive agreement and/or contract within which the CIG enters with China Harbour Engineering Company for the construction of the George Town Port, Spotts Jetty and the Turtle Farm facility:
CHEC will construct the three facilities after which they will de-mobilise and leave the Cayman Islands. They will not set up as a permanent contractor or partner with a local firm to create a permanent presence to compete with local contractors on any further projects in the Cayman Islands;
CHEC will bring only managerial, supervisory and specialist personnel to Cayman and will hire all other workers from the local work force;
CHEC will not set up its own housing facilities (work camps) in the Cayman Islands and will rent from the local pool of available housing;
CHEC adopt the rates supplied by the CCA and will pay all workers in accordance with these rates;
CHEC will subcontract all MEP and non-marine works to local contractors exclusively;
CHEC will utilise all local equipment, trucks and materials prior to importation of same from abroad;
The terms of the contract time be reduced as much as possible.
The CCA believes the above measures are more than reasonable, especially in light of the fact that we consider the considerable return on investment, according to the length of time the contract is estimated to be in place.
Thank you for your attention, the CCA understands that while Cayman desperately needs to stimulate our economy, we must not become so desperate that the projects selected are not in the best interest of our beloved Islands.
Kris W. Bergstrom