The World Bank’s ease of doing business indicators rank 180 countries according to the ease with which businesses can operate. The indicators are built on empirical studies that demonstrate that economic growth and development are stronger in those countries with better regulations and faster government processes.
Several commentators and newspaper editorials have indicated that the way to unleash any growth potential is to improve the ease of doing business. T&T has performed badly in the rankings falling to 105 in 2019. In the area of construction, T&T is ranked at 125.
Last week the JCC and the Association of Architects expressed outrage at the Housing Ministry’s “defining moment,” the contract to construct 5,000 apartment units at specific sites across Trinidad signed by the Housing Development Corporation (HDC) with the Chinese construction and engineering company China Gezhouba Group International Engineering Co Ltd).
Subsequently, the Prime Minister announced the cancellation of the contract saying that “the contract was reviewed extensively by the Cabinet and…HDC has been instructed to go back out to tender because there were some parts of that contract that did not meet Cabinet’s acceptance and approval, both structurally and legally.” Really? There are a few key points worth considering.
First, a contract of that magnitude would have required Cabinet’s prior approval. Evidence of that blessing was the presence of the five ministers, Trade Minister Paula Gopee-Scoon, Attorney General Faris Al-Rawi, Housing Minister Edmund Dillon, former minister Marlene McDonald and Foreign Affairs Minister Dennis Moses. Was there some change in policy at Cabinet? Since the project was not tendered, was this a government-to-government arrangement and hence the reason for the attendance of the Chinese Ambassador and the Foreign Affairs Minister?
Second, the Chinese are shrewd businessmen and capable builders. In construction, time is money; delays in getting approvals lead to losses. Therefore, CGGC accepted the construction risk but ensured that HDC would accept the responsibility for planning permits and all other approvals (all permits including tax exemption certificates, planning permission, and any other permits and approvals required for the project for obtaining all visas, resident permits, and work permits).
If government projects cannot get approvals, why would CGCC accept this responsibility? Examples are the Greenvale project, which did not have all the requisite approvals, and the hundreds (thousands?) of undistributed HDC houses for want of approvals.
Third, HDC was responsible for ensuring 24-hour security at the building sites for the contractor’s personnel. Security is a cost of doing business. In T&T there is a protection racket run by gangsters which increases the cost of doing business. The Chinese have simply said that is the State’s responsibility and not a construction cost.
Fourth, HDC agreed on a payment guarantee covering 100 per cent of the contract price and HDC that any delays in payment would be subject to financing charges for delayed payment compounded monthly at 11 per cent.
The contract terms may look unusual but simply reflect the difficulties that all contractors face and what CGGC would not accept. Despite its credit rating, contractors know that the government pays late and includes the cost of payment delays, including covert payment into the contract. There is no reason for a foreign contractor to accept delays in approvals or payment unless adequately compensated. CGGC made those risks express contract terms and made HDC responsible for these terms. Local contractors may be seduced by the prospect of additional business, but foreign contractors, like CGGC, are simply here for the project.
Ten years and $60 million ago, Dr Rowley was both protagonist and political prosecutor at the UFF Commission. The UFF commission made several recommendations including: “No 79 A Standard Form of Contract for use on any housing development project should be drawn up by HDC and agreed with the Government and the JCC, covering all aspects of housing development. HDC must ensure that joint-venture projects are implemented strictly in accordance with Cabinet guidelines. No 91 The HDC Board must be held accountable for any deviation from the rules, regulations, procedures and must be held responsible for ensuring that projects are implemented within the agreed time, cost and quality standards.”
The HDC-CGGC contract terms reflect the Cabinet’s loss of direction and “memory,” and CGGC’s understanding of the difficulties of doing business in T&T. If T&T is to shake itself out of these economic doldrums it must make the country a better and safer place to do business.
Blaming the Chinese will not help us.