Infrastructure deficit 'can't be quantified'


Tribune Business Editor

The Ministry of Works has $100m less than desired in its 2019-2020 capital works budget to tackle a Bahamian infrastructure deficit its minister has described as "unquantifiable".

Desmond Bannister, minister of works, told Tribune Business that many of The Bahamas' key physical infrastructure assets "should have been replaced many, many years ago" - a situation that has now left him unable to place a dollar figure on the investment required to replace and modernise them.

With his ministry's $93.736m capital works budget "$100m less than what I hoped for", Mr Bannister said it will "have to be creative" in both the projects it undertakes and seeks to involve private investors in via public-private partnerships (PPPs).

Pledging to "come through for the Bahamian people and make it happen" despite the financing constraints, he added that the Ministry of Works would seek additional funding from the Ministry of Finance only if absolutely essential.

Describing the country's infrastructure needs as "tremendous", Mr Bannister said key assets had suffered from under-investment for years, resulting in their deterioration and additional economic and social costs that had to be borne by the Bahamian people and private sector.

"We already have, as you and I are painfully aware, an infrastructure deficit," he told Tribune Business. "I cannot quantify it in dollar terms. We have an aging infrastructure, much of which should have been replaced many, many years ago.

"There's been so many years without the kind of development we ought to have. There have been so many challenges, but we are working assiduously to make a dent in it. It's not something [the deficit] we look forward to; it's a challenge, but I like challenges."

Simon Townend, a Bahamas-based KPMG partner and managing director of its corporate finance arm in the Caribbean, as far back as 2013 estimated that The Bahamas needed $1bn in short-term infrastructure investments spread between its utilities, roads, airports, docks, schools, hospitals, and other public sector buildings and facilities.

Such assets are vital to the efficient, seamless functioning of the private sector, as well as the provision of essential services and the quality of life/living standards enjoyed by Bahamians throughout the archipelago.

Mr Bannister, meanwhile, reiterated that the Ministry of Works' 2019-2020 capital works budget is less than 50 percent of the sum deemed ideal. And, with $53.512m of the $93.736m earmarked for projects already underway, there is less than $40m available to tackle further physical infrastructure needs that are replicated across virtually every island in The Bahamas.

"I'm $27m less than what I had last year, so we have to be creative," the minister added. "I'm $100m less than what I hoped for, but we expect to make up by doing PPPs, and will try and interest companies in doing a lot of roadworks not in our budget.

Describing the ideal capital works allocation as "a little over $200m", he continued: "We don't live in an ideal world, so we don't get everything we want. These are the financial times we face, and need to have a financial strategy across the board. The Ministry of Finance has looked at the markets, and determined this is the way we must go.

"We have $53m of projects already in train, and when you consider we have only $40m for new projects, that's a huge challenge. If we perceive that there is a challenge we'll come for supplementary funding. At this stage I don't see a huge need for us to seek supplementary funding. We'll make it happen; we're going to come through for the Bahamian people."

Acknowledging that a PPP model is still being developed, Mr Bannister said Family Island roadworks not included in his ministry's 2018-2019 Budget will likely be one of the key areas where it will seek to attract private capital and road builders.

Revealing that there had been private sector interest in PPPs before the Government was forced to look at such a mechanism, the minister said toll roads - where drivers pay a fee to drive their vehicle on the road - were unlikely to be the mechanism through which private companies/investors gain a return on their investment.

"It's the only way we can go, having regard to what our funding is this year," Mr Bannister said. "It will probably be a lot of roadworks in the Family Islands; that will probably be the PPP focus. All these islands, Eleuthera, Exuma, will be priorities. There's a lot of roadwork projects in Red Bay, Andros, and south Eleuthera is really in need of roadworks. We'll try and get it done.

"A number of them [private road builders] asked us this year. They were already interested before... a number of them had indicated an interest in PPPs. I don't know if it's going to be toll roads; it may be some kind of payment with a lower interest rate. We're going to figure out an ideal model."

The Government has been warned against cutting its capital works budget too deeply, and for too long, as this is the easiest part of its Budget to slash to meet annual deficit targets. Some $235m in total capital spending has been budgeted for 2019-2020, up from $207m this fiscal year, with Mr Bannister warning that The Bahamas must face economic realities by not spending monies it does not have or cannot afford.

K P Turnquest, the deputy prime minister, said in unveiling the 2019-2020 Budget that The Bahamas has no choice but to look to PPP structures as a means to meet its infrastructure needs given the Government's cash-strapped position.

The Minnis administration, upon taking office, placed on hold several PPPs planned or agreed to by its predecessor, including a new headquarters for the Road Traffic Department, on the basis that the advantages were too heavily weighted towards the private investors rather than the public interest and because no PPP "model" had been agreed.

Meeting both public interest objectives and those of private investors has been the delicate balancing act that PPPs worldwide have sometimes failed to meet, with the Government having subsequently issued a PPP policy and guidelines for what it will seek to achieve through such tie-ups.

The Bahamas, though, is already home to several PPPs such as Lynden Pindling International Airport (LPIA) with the Nassau Airport Development Company (NAD); Arawak Port Development Company (Nassau Container Port); the New Providence Ecology Park (landfill); and, potentially, the outsourcing of Nassau Cruise Port's management.