Port Authority seeks bailout to stay afloat
Daraine Luton, Senior Staff Reporter
A DOWNTURN in the shipping industry brought on by the prolonged global recession has significantly affected the cash flow of the Port Authority of Jamaica (PAJ), forcing the state-owned agency to seek a government guarantee to allow it to refinance a maturing loan.
Finance Minister Dr Peter Phillips, in seeking approval from the House of Representatives yesterday for the guarantee in the amount of the Jamaica-dollar equivalent of US$20.15 million, said the facility, negotiated with the Bank of Nova Scotia, will replace existing loans for which government guarantees are already in place.
"The provision of this guarantee will not increase the level of government outstanding liabilities," Phillips said.
He told the House that the PAJ, which has containerised shipping as its main business, has been struggling to navigate the storms being caused by the global economic downturn.
"The slow pace of recovery in the advanced economies such as the United States, and the financial crisis which is continuing in the Eurozone, have negatively affected the expected rebound of containerised trans-shipment operations," Phillips said.
He added: "Consequently, the PAJ's cash inflows have been adversely affected as the entities financial projections continue to lag behind the pre-recession expectations."
But Karl Samuda, the opposition spokesman on industry, suggested that the PAJ has found itself in the current stage because of the elasticity it gives to its functions.
Describing the entity's operation as "an out-of-control octopus", Samuda said the PAJ has engaged in activities that have resulted in tremendous loss.
"Based on the information in the ministry paper, which is sketchy, I think we can conclude that this organisation is insolvent," Samuda said.
He added: "Its current liabilities exceeds its current assets ... . Were it not for the government bailout continuously, it could not survive on its own."