Thu | Sep 21, 2017

Editorial | Another side of the North-South Highway

Published:Wednesday | May 10, 2017 | 5:00 AM

The Government ought, from the start, to have been transparent, including of its imputed value, about the 1,200 acres of land it intended to transfer to China Harbour Engineering Company (CHEC) to sweeten their more-than-US$700-million investment in the 67-kilometre North-South Highway.

But it was. And as is so often the case when governments are not open and frank, and do not take the time to explain the basis of their decisions or the implications thereof, they invite suspicion and, often, the perception of corruption.

That is what has now reached the Jamaican Government with regard to the highway deal, following last week's revelation by Ivan Anderson, the head of the National Road Operating and Constructing Company (NROCC), that there was no formal market valuation of the lands, including prime bits on the island's north shore, prior to the agreement for the transfer to CHEC. The public's complaint now is that the imputed US$20-million price for all the land was far too low.

We make no pronouncement on that argument. Debate on the matter, however, should be informed and rational, driven not solely by emotion and cynicism, but taking into account some basic principles of economics. In this regard, it is useful to repeat an observation that this newspaper has made about the facility of the North-South Highway.

Jamaica has two primary economic regions. The south coast has the bulk of the island's population and its commercial and industrial hub. The north shore is the primary home of the country's major industry - tourism, as well as an important region for mining.

Yet, for most of Jamaica's history, until the opening of the North-South Highway less than two years ago, these two critical economic regions were linked by a low, narrow, centuries-old bridge that spans an unpredictable river, and a road that runs alongside a dangerous gorge and precipitous mountain inclines. The 80-kilometre trip along this route took more than two hours.

Put another way, the absence, over three and a half centuries, of a modern road link between these two regions was a drag on development and economic activity. It wasn't that Jamaican governments didn't appreciate the value of such infrastructure, that roads are often drivers of development, or that they couldn't muster the engineering skills to build a modern, multi-lane highway over hills. They couldn't afford it.

CHEC, however, had the engineering capacity and, more critically, the money to fund the project. But not for free.

 

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Hence the idea of a toll road, developed on a build, own, operate and transfer concept.

But it was also known that the highway wouldn't command the volume of traffic to allow CHEC to recoup its investments and make a profit, even over the 50 years of the concession agreement. The 1,200 acres of land, therefore, is an incentive to leverage for the kinds of developments that should drive traffic on to the highway.

The value to be ascribed to those lands can be debated. But it ought to be clear that they wouldn't have the same value prior to the highway being built, as now that there is increased access to them and greater potential for economic development.

Further, the party with the cash to fund projects will likely have greater negotiating leverage. Yet, it is not only CHEC that will benefit from any lands it now holds. Expanded access via the highway is likely to trigger investment in newly opened regions, similar to what happened in the case of the Spanish-owned hotels after the reconstruction of the North Coast Highway in the 1990s.

The bottom line here is that while we hold the Government to account, it is important not to reject the real economic value of this highway and preen in underdevelopment.