The proposed agreement with a Chinese government-owned construction company to build cruise berthing facilities in George Town harbour could have been salvaged, according to the project’s manager. Alastair Paterson, who was appointed by government in July 2012, said he was dismayed at the amount of work that had been done and money spent only for the cruise berthing project to be back at square one.
Mr. Paterson believes construction could be already under way had a deal with the China Harbour Engineering Company, or any of the other interested developers, gone ahead. Now he warns it could be 12 months before the cruise berthing project breaks ground.
A request for proposals from financial consultancy firms to produce a new business case for the facility is expected to go out Friday – the first step in the process of following the UK’s framework for fiscal responsibility on the port deal. Mr. Paterson said the consultants would be essentially repeating work that had already been done.
“Time should be of the essence as the Cayman Islands cannot afford to miss out on future cruise ship development,” Mr. Paterson said.
“There is major competition in the region. Roatan, Jamaica and who knows possibly even Cuba could dilute arrivals here and hurt this economy.
‘If it has to be done it has to be done but I have to say I am personally disappointed after all the efforts that have gone into this project so far and there is now nothing to show for it.”
The former project manager dismissed speculation, based on a leaked “framework agreement” with the Chinese, that government was giving too much away to the developer. He said that document was simply a starting point for negotiations and was substantially revised after he came on board.
Mr. Paterson said one of his first actions as project manager was to redraft the “framework agreement” – the document leaked to the media last month – which he said had never been anything more than a discussion document.
Zhongdong Tang, a spokesman for the China Harbour group, said the company still considered itself to be involved in the project and could not comment on the details.
He said: “China Harbour didn’t receive any official letter from the government of Cayman Islands up to now regarding the terminated discussions, so we both are now still in the process of proper negotiations for the agreement of build-finance-operate a cruise terminal in George Town.”
The statement appears to contradict earlier expressions of disappointment from the firm after former Premier McKeeva Bush publicly announced the negotiations had been abandoned because of the UK’s insistence that specific procurement regulations were followed.
The original framework document, published on the Internet last month, allowed China Harbour to collect all passenger taxes and tendering fees and contained a lease agreement that would have given the Chinese control of the port, including a planned hotel and shopping development, for 50 years with an option for a further 30.
Mr. Paterson insisted that this was not the deal on the table when it was scuttled in November. He said it had been substantially renegotiated to maintain government revenue and protect Caymanian jobs and businesses.
The revised draft ‘concession agreement’, provided to the Compass, would have given the Cayman Islands government a 20 per cent share of the passenger taxes (currently charged at $7.50 to $9.50 per passenger) over the $1.5 million mark, though this was still under discussion, Mr. Paterson said.
Only the tendering fees for the four ships docked would have gone to the developer. The private sector company, currently operating the tender service for ships at anchor, would have retained their fees for the service still necessary when more than four ships visited.
The other aspect of the deal offering a lease extending to 80 years to the Chinese for portside development was scrapped, Mr. Paterson said. He said an agreement was struck to form a limited liability company as a partnership between the government, local traders and the Chinese for any future development depending on the need. Negotiations with China Harbour also included current Port Authority debt being assumed by the developer as well as a reorganisation of cargo handling to improve operations. Current revenue by the Port Authority of $3 per cruise passenger was to be retained by them and was not part of the financial arrangements with the developer, Mr. Paterson said.
He said the deal being discussed included substantial improvements at the Spotts landing. The improvements included the construction of onshore facilities, parking and traffic circulation as well as an upgraded landing dock.
“That contract was nearing a process of competitive tendering with local contractors when the project was terminated,” he said. “The anticipated contract was estimated at approximately $6 million and would have been carried out entirely by local businesses and not the Chinese.”
There was some payback for whichever developer built the port, he conceded.
“No one is going to build us a port out of charity,” Mr. Paterson said. “A developer will want to be repaid and receive a return for their investment. This is a major marine development. The government can’t invest, it can’t put up any equity or guarantees and it can’t provide any expertise. Any partner appointed to be the developer will be assuming most if not all of the risk associated with their investment.
“Whichever developer is chosen –whether it is Dart, GLF, the Chinese or the cruise ships – they will all be in the same position. They will all have to invest a substantial amount, with little or no security. Even the cruise ships will want to get their money back in one way or another.
“The current preference seems to be for the cruise lines to develop the facility. While this partnership has a number of advantages, there could be a negative effect on the local traders. Go to any port developed by the cruise ships in the Caribbean and the amount of spending with local businesses can be debated. Substantial on shore spending money is earned by the cruise business. There is nothing wrong with that as they are in business to make money but it does not necessarily help the local economy.”
There may be few companies worldwide capable of such an undertaking, Mr. Paterson said.
“Only a select few firms globally have the ability to carry out this type of work, particularly as they will have to provide not only the design and construction but also the funding, estimated at around $200 million. Few will be prepared to risk that investment or have the ability to provide that level of funding as well as the expertise in design and build.”