Editorial: Harmony Cove and the Bahamian lesson
If the Jamaican Government is sensible, it would have been keeping a wary eye on developments inThe Bahamas and thinking about how it might have to retailor economic - development projects, and, especially, Harmony Cove, the mega resort planned for the parish of Trelawny.
Harmony Cove has been on the agenda for more than a decade - one of Kingsley Thomas' big conceptualisations when he was managing director of the Development Bank of Jamaica and chairman of the National Housing Trust and spearheaded the acquisition of 2,300 acres of beachfront land.
The plan was to build five major hotels of several thousand rooms, 450 residences, a 300-slip marina, golf courses, restaurants and shops and a landing strip for private jets. The whole development, to be completed in phases, was estimated to cost US$7.5 billion.
The problem with big, emblematic projects like these is that it is not easy to muster the financing, a problem exacerbated by the global financial meltdown of 2008, followed by the recession in major economies. It can't have helped that the only substantial private partner that, by then, had come aboard, the private investment firm, the Tavistock Group, took a substantial hit in economic turmoil.
In recent years, Chinese capital has appeared to be the more likely source to get Harmony Cove, or at least its first phase, costing US$900 million and involving a 1,000-room hotel and casino, off the ground.
At first, China's Export Import Bank seemed willing to lend the money but insisted on a government guarantee of the debt, which Jamaica couldn't give. China Ex-Im was also concerned, the Harmony Cove developers conceded, about their exposure to another major Caribbean resort, the Baha Mar development in The Bahamas, to which they had loaned US$2.4 billion. This is a fact to remember.
More recently, it has been suggested that the China Development Bank will provide financing for the deal and that another state firm, Sinohydro Construction Corporation, could invest in it.
This brings to the fore the Jamaican Government's recalibration. At the end of June, Sarkis Izmirlian, the Switzerland-born developer of Baha Mar, took the company into Chapter 11 bankruptcy in the US, saying it could not pay its debts, blaming the local subsidiary of its contractor, China State Construction Engineering Company, for that failure because of missed completion deadlines. It also accused the company of shoddy work. China State Construction said it is owed US$140 million by Izmirlian's group.
The Bahamian court has, so far, refused to recognise the Chapter 11 order from the US and the country's government is now attempting to get a winding-up order. The matter is now a major quarrel between Mr Izmirlian and Prime Minister Perry Christie's administration. The political Opposition is attempting to gain advantage.
Chinese institutions have been opening their pocketbooks to projects in the Caribbean. Jamaica has been a significant, and grateful, beneficiary, however, developments like that with Mr Izmirlian are likely to make officials in Beijing far more circumspect and hard-nosed before they agree to deals as Harmony Cove discovered with Ex-Im Bank.
It seems to us that those behind Harmony Cove should, unless they are doubly sure about their capital, be at the drawing board, scaling back the project to bits that are financeable. It makes little sense merely dreaming dreams.