A Bridge Too Far Editorial
Stabroek News
April 5, 2002

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In the 2000 budget debate Minister Anthony Xavier promised the National Assembly that work on the Berbice bridge would begin by November of that year.

A few weeks ago Ballast Nedam, the Dutch contractor chosen by the government through a tender process to build and operate the bridge, pulled out of protracted negotiations citing a restructuring of its international operations. The second ranked bidder, The Berbice River Bridge Consortium (BRBC), is now about to enter contract talks with the government and even though a lot of work has already been done by the Privatization Unit, there is still a long way to go.

No one can doubt that a bridge over the river would be a great convenience to commuters and could help boost economic activity in a chronically depressed region. Noble intentions these may be, but they are not of concern to an investor whose only consideration is to see a return on capital.

The economic fundamentals of the project are weak and financing it still remains, as in all Build Operate and Transfer projects, the major obstacle. Ballast Nedam in its proposal had failed to supply details on its financing arrangements, something prophetically pointed out by the other bidders at the time.

Meanwhile a traffic study funded by the IDB in November 2000 claimed that commuters were willing to pay double the existing fares of the ferry to use the bridge and that trips by those persons would increase by 20-25%. This does not appear realistic and respondents may have been giving the pollsters what they wanted to hear given the excitement over the project in the region.

Go to Rosignol any given day and see how many vehicles are crossing with the ferry. Apart from the morning rush maybe ten or twelve vehicles are crossing every hour. The majority of commuters are foot passengers who will continue to use the ferry even if the bridge is built. At present rates charged by the TH&D the study indicated that car owners were prepared to pay a one way toll of $1600. Trucks carrying produce to markets in Georgetown might pay as much as $10,000. Instead of the 20-25% increase, traffic could actually decline as businessmen see boats for moving goods as a cheaper option. But assuming that the study is accurate this would work out to revenues for the project of US$5m. Although some revenue would come from concessions around the bridge site it is anticipated that the revenue streams for the project's first seven years would probably not be enough to meet the operational costs and debt servicing. So the government in its talks with Ballast Nedam was willing to contribute a contingency commitment of US$2.5m per year in the event revenues fell short. Quite where this money was to have come from was not established.

Even with a new contractor now in negotiations, it's the same project and accessing cheap enough financing will be very difficult. The project's internal rate of return is reported to be 15% which means money has to be borrowed well below this. The BRBC claims it has access to funding at 8% -9% through the credit guaranteed scheme in South Africa which requires that 70% of the inputs are sourced from that country. If this materializes it would lower financing costs considerably. But like it or not investing in Guyana remains a risky proposition and money, wherever it comes from, first and foremost avoids risk. Exchange rate depreciations and the country's political unrest remain large considerations to banks and investors in and out of Guyana.

It took a guaranteed rate of return on equity of 23% to find a company willing to take over GEC . Even bonds issued by well established local businesses such as Laparkan attract rates of 12%. Without the project being financed completely by the South African scheme, financing will remain the major obstacle.

Berbice has seen and continues to see massive emigration at rates higher than other parts of the country. The bauxite industry is in the throes of restructuring and job cuts are inevitable. Building a bridge might provide some employment in the short term but it will not stem the exodus. Over the next decade the population of the region will likely shrink or at best remain static. Emigration is a phenomenon politicians are reluctant to acknowledge but which an investor cannot afford to ignore.

One has to ultimately ask whether the bridge is worth it. Even if the contractor is willing to spend the US$43m, the government will still have to service IDB loans related to construction of the access roads. Combined with the proposed subvention to the revenue streams it does not appear the most efficient allocation of the nation's resources.

Governments everywhere like big projects they can point to in election years, and the desire for the bridge is motivated in part by politics. But it will only be built when economic demands have been satisfied.