Fri | Sep 22, 2017

Land probe! - Lack of valuation forces OCG to intensify investigation of Chinese property deal

Published:Friday | May 5, 2017 | 5:00 AMJovan Johnson
Dirk Harrison, contractor general.
In this file photo, National Road Operating and Constructing Company Managing Director Ivan Anderson (right) listens keenly to former transport, works, and housing minister Dr Omar Davies during the opening of a segment of the North-South Highway.
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The country's main anti-corruption body says that it will now have to intensify a probe into the US$720 million North-South Highway contract between the Government and the China Harbour Engineering Company (CHEC).

Contractor General Dirk Harrison disclosed the office's intention yesterday, following revelations on Wednesday by the National Road Operating and Constructing Company (NROCC) that 1,200 acres of state lands being given to the investors under the deal was not valuated.

"Up to December of last year, we had sought some further update from NROCC on the matter. We had received a response, and it was along the same line, particularly them not being in possession of a valuation report," he said.

"In addition to hearing what had been said, we are continuing our follow-ups to ensure that we seek and obtain further clarification on the matter."

The Office of the Contractor General's (OCG) probe, which commenced at least a year ago, followed the battle with the previous People's National Party administration, which set up an "independent" oversight body to monitor major projects. The body was widely viewed as sidestepping the OCG.

 

CONCESSION AGREEMENT

 

In June 2012, then transport and works minister Dr Omar Davies signed a 50-year concession agreement with CHEC to develop the North-South Highway, which runs from Caymanas in St Catherine to Ocho Rios in St Ann. NROCC, set up in 2002 to implement the Highway 2000 project, represents the Government's interests.

Months before, in April, Davies announced the oversight body during a parliamentary sitting, where he argued that the administration would not allow the OCG to be a stumbling block in the pursuit of investment opportunities with private entities.

Instead of cash, Jamaica agreed to provide the lands for development as its contribution. The 850 acres that the investors have already identified and will get are in Mammee Bay, St Ann (200 acres), and Caymanas (650 acres).

... 'Land could cost about US$20 million'

Some lawmakers on Wednesday expressed concern when NROCC's Managing Director Ivan Anderson told them at a Public Administration and Appropriations Committee (PAAC) meeting that there was no valuation.

Leslie Campbell, a government member of parliament, suggested that Jamaica may have agreed to provide lands to Chinese developers that would otherwise have attracted a significant cost if they were being sold. "I somehow get the impression that this is a little untidy arrangement. Some arrangements ought to have been put in place to factor in these very expensive lands."

The committee's chairman, Dr Wykeham McNeill, questioned the selection criteria, noting that there has to be "some reckoning" with the value of the land Jamaica was giving up.

Anderson explained that while there was no valuation, the cost of the properties was linked to the cost of acquiring lands for the construction of the 66-kilometres highway, and further, that a valuation was not necessary because the lands were state-owned.

"We have an average cost based on what we're acquiring for the highway, and if we use the same number, we can apply it also to the 1,200 acres because at the time, we would not have known exactly where the lands would have been." He said that the lands to build the highway cost J$2.1 million per acre, and when the land to be transferred is calculated at that rate, the cost could be about US$20 million.

According to Anderson, Jamaica was "well ahead of the game" by providing the land because it is costing the Government "far less" than if it had to pump cash into the project.

The MPs questioned the lack of the valuation after the NROCC head revealed that China Harbour would not be making a profit for another 20 years. This is because yearly costs for operations (US$15 million) and debt servicing (US$30 million) far exceed the US$18 million made annually from revenue. The highway was fully opened last year.

"Yes, yes, and yes," the contractor general said when asked if NROCC would have more explaining to do. "I believe the answers that were given (at PAAC) are answers that add to our interest in the matter. It will lead to us furthering our questioning and issuance of requisitions because there are still some matters that we believe need clarification."

Telephone calls to Davies went unanswered.

jovan.johnson@gleanerjm.com