Private sector will commit when airport is nearing completion – Accountant

The local private sector will put things in place to take advantage of the Argyle international airport only when they think that it is nearing completion.

Partner of the accounting firm KPMG Brian Glasgow says that traditionally, the private sector in St Vincent and the Grenadines {{more}}has been a cautious private sector and would not commit to something unless 100 per cent confident.

The experienced accountant voiced his opinion on February 12, while giving a summary of the 2015 Budget at the Paradise Beach Hotel in Villa.

The event, which took the form of a luncheon and attracted a large number of business people from throughout the country, was organized by the St Vincent and the Grenadines Chamber of Industry and Commerce (SVGCIC) and paid for by the FirstCaribbean International Bank.

“I think any investor can tell you that. The private sector in SVG traditionally would not commit themselves to making an investment unless they are 100 per cent confident that there would be a definite start date (to the airport). As we get closer to a definite start date and the private sector sees more progress, as the paving continues, the river crossing and so on and the private sector is satisfied that within a reasonably short space of time the airport would be completed and operational, I am confident that we would see more interested response from the private sector regarding investment in the superstructure which is necessary to support an international airport,” said Glasgow.

The cost of construction of the airport is estimated at $729 million dollars. The project began in 2008 and was expected to be finished in 2011. The new finish date is this year, 2015.

But Glasgow says that in his opinion, no one is sure when the project will be finished and the longer it takes to move from an investment project to a productive project, the more strain is being placed on the economy.

“…It is beyond us (finishing date), but it’s in everybody’s interest to hope and expect that the project is completed reasonably within schedule. Even the smallest construction project gets delayed and those of us who have built houses, for example, have had to deal with contractors and promises from contractors and I don’t think there is anyone in this room who really expected that the airport would have been completed at the end of 2014,” said Glasgow.

He added that he is hoping that the project is finished soon, as in his opinion, it is critical to the future of St Vincent and the Grenadines.

The session also heard from another KPMG accountant Reuben John, who noted that some EC$74.7 million of this year’s capital budget will go to the airport.

“….You will appreciate that this project, once completed, will bring significant benefit to the state. The International Monetary Fund said late last year that the economy could grow by up to three per cent in 2016, once the airport becomes operational in 2015. The airport will create opportunities for investment in tourism, transportation and other support infrastructure,” said John, who added that even when completed, the airport will not immediately return a profit.

During the budget discussion, Glasgow also touched on a number of other issues,, including banking, BAICO/CLICO, debt to Gross Domestic Product (GDP) ratio, tourism and agriculture.

Answering a question about banking, Glasgow stressed that a bank is a business and not a social enterprise.

“They do not exist for the purpose of driving an economy, unless driving the economy is necessary to their own existence and that is typical of banks and other businesses,” said Glasgow.

He noted that when a banker makes a decision on whom to lend money to and which sector to lend to, they lend to sectors that they are assured have a stronger chance of repayment and recovery.

He said that recently, tourism investment has not been a good way of investments for banks, supporting the point by noting that the Bank of Nova Scotia, RBC Trinidad and the Bank of St Lucia have all spoken about losses in the tourism sector.

He said that Scotia published reports dealing with the closure of branches in a number of Latin American countries with specific concerns, including the volatility of the tourism industry.

He said that RBC Trinidad made a loss of approximately $24 million, as reported during their last financial year, while the Bank of St Lucia cited the tourism industry as an area in which they made what turned out to be bad investments.

Glasgow addded that consumer loans are most attractive in terms of profitability to banks, “and so the banks are a business and any self-respecting banker will not willingly go into lending where tradition or history has shown a relatively high chance of failure.”

He also opined that hotels in this country are owned through family structures and banks prefer to deal with persons who have the money to take up the investment and not necessarily family structures.

He thinks that the new thrust of tourism investment in the Eastern Caribbean would be driven by persons with money, like Jamaican hotelier Butch Stewart and others.