Real Marriott plan exposed

…Govt to give hotel to unnamed private investors – Roger Luncheon

The story of Government’s decision to plunge billions of dollars in the Marriott Hotel, has taken a new spin with disclosures yesterday that it is the intention to hand the hotel to private investors some time after it is completed. The disclosure would take the public by surprise now as government has gone full steam ahead, amidst criticisms, risking billions into a project in the absence of other investors. There have been harsh questions why Government in the first place is investing taxpayers’ dollars in what is considered a traditionally private sector initiative. At first, Government said it was a public/private partnership (PPP) initiative. In 2011, without finalizing who its partners in the project are, Government advanced Shanghai Construction Group (SCG), the Chinese contractor, US$10M ($2B). Recently, more than one year later, Government said that it is still finalizing details with the investors. This is despite the fact that construction is in full swing at Kingston, Georgetown. Yesterday, Head of the Presidential Secretariat, Dr. Roger Luncheon, may have contradicted Government’s stance on investing in commercial or private sector activities. During his weekly media briefings, the Government spokesman was asked whether government was considering investing again in a national airline following news that Delta Airlines, one of two main operations running the critical Georgetown to New York route, is planning to leave by May. According to Dr. Luncheon, the Cabinet of Ministers has not placed any “significant attention” to another Guyana Airways or a similar “Government-owned, Government-controlled” international airline. He went further. He said that Government has had “experiences” in economic activities that would compete with players in the same sector. This stance, he stressed, would be reflected in privatizations of state companies which show a clear withdrawal from private sector activities by Government.

Sold!

Asked to justify the Marriott against this stance, Dr. Luncheon then disclosed that Government has no intention to hold on to the Marriott once it is completed, up and running. “Marriott is clear,” he said. There have never been any indications or declarations that Government intended to maintain or own the Marriott Hotel, the official made clear. “As a matter of fact… to the contrary. The financing of the Marriott and closure of the deal anticipates private sector… a non-government hand in the mature situation.” He explained that Government would initially be involved with the management before the final transfer of the hotel into “non-governmental hands.” The government is still to name the private investors. Before yesterday, there was never any talk of the government giving the hotel to any investor. But the media, in general, and Kaieteur News in particular, was telling the nation that the Marriott was a scheme designed to defraud taxpayers.

Construction underway at Marriott Hotel.

Kaieteur News also said that former President Bharrat Jagdeo was using the government to front the hotel for the benefit his friends who would be hiding in the background. The National Assembly, controlled by the Opposition, has not given its blessings for the project as the taxpayers’ dollars being used, are controlled by the National Industrial and Commercial Investments Limited, a controversial government-owned company. In late 2011, former President Bharrat Jagdeo officially turned the sod for the construction of the hotel with the promise, that the project will create hundreds of jobs in the construction phase, and beyond when it becomes operational. The 197-room hotel and entertainment complex is expected by February 2014. Despite pressure by opposition parliamentary parties and a Parliamentary motion to halt Government funding for the project, the government is stubbornly pushing ahead with the project. Private investors are expected to contribute US$27 million of the US$51M needed. Guyana loses… The government has some special arrangement that guarantees the private investors that they would get their money if the project folds. So, if in a scenario where the project fails and the value of the property depreciates to a value below what the investors have plugged, then the investors will get back their money, and there would be nothing to return to NICIL. Taxpayers’ dollars would, essentially, go down the drain. The government will participate in the project by way of equity, in the sum of US$4 million. This will be committed through NICIL, one of the investment arms of the government which holds its assets. The reality is that the investors would get the hotel. The equity contribution determines the government’s strength in Atlantic Hotels Incorporated – the company created to see the project through. As it stands, the government is currently the sole shareholder in the company. However, apart from the equity contribution, financing for the project would also come from “subordinate loan stocks” of US$15 million invested by NICIL. Adding the US$2 million, NICIL will end up spending in development costs for the project, including design and other preliminary studies altogether, US$21 million. So, in total, the amount of money the government is pushing into the project is just about what it should cost in Guyana to complete the project, industry experts say. The additional US$40 million remains a mystery to industry experts. Recently, news that SCG had imported Chinese labourers without using locals, triggered several protests across the city. Government, in its defense, said that it is the contractor’s right to hire its own labour force. Government had promised 200 jobs would be created when the hotel is completed…but never made it clear when. Anger mounts from the Parliamentary opposition who felt that the monies for the project should have come under the scrutiny of the Members of Parliament. Government, refusing to release the feasibility study which justified the building of the hotel, had instead accused the opposition of not wanting investments and of defending Pegasus Hotel, located nearby of the current Marriott Hotel site, because of partisan interests. Local hoteliers have over the years been reporting that there are too many hotel rooms. A number of hotels built for Cricket World Cup in 2007 have since been sold or turned over to new management, including Buddy’s Hotel (now Princess Hotel and Casino) in Providence, East Bank Demerara.