Business Page   The cricket stadium: from financial adventure to potential disaster

Sunday, August 15th, 2005

 

Introduction:

You would think that a project that can cost as much as US$40 million or eight billion Guyana dollars, that puts the country under the international microscope and that threatens the country's fragile borrowing ability would receive the country's best managers. But despite Guyana's financial straits and the fact that the head of state earned his job because among his peers he stood out for his talent as an economic wizard, that is far from the case with the cricket stadium.

Spearheading the project is what is called the Local Organising Committee (LOC) which is headed by Ms Gail Teixeira who heads two ministries; the CEO of the executing arm is a retiree; and the committee is made up of volunteers, where the rate of absence is equal to that of attendance, and which operates without the benefit of adequate financial information and reporting. Ministers and some other political appointees do not attend and participate in the meetings and the quality of reporting would be an embarrassment to any minor social village organisation. Cabinet does not, however, see this as a recipe for disaster and permits the doling out of funds in a manner that hardly meets the test of accountability let alone the requirements of the Fiscal Management and Account-ability Act. We must not forget that the government hijacked a private sector initiative, and sacked everyone with the exception of a select few whose enthusiasm has now clearly waned under political management.

Yet the cricket stadium is like no other project which Guyana has ever undertaken. Failure could lead to harsh monetary penalties, cause severe embarrassment and in any case cost money which we do not have. On the other hand, like many prestige projects, the government ignored a more inexpensive alternative (the development of the world-famous Bourda) in the process imposing an unnecessarily costly debt burden on the country against the better judgement and advice of many Guyanese and indeed its bankers, the International Monetary Fund. This is one case where 'cricket is serious business' is not just a cliche.

More money:

It is entirely co-incidental that one week today last year Business Page described the cricket stadium as a financial adventure at a time when the only cost figure the government had given was US$25 million to be financed by the Government of India by way of a grant of US$6M and a US$19M soft loan. It now transpires that the US$25 million was the projected cost for the physical construction only, and did not include site clearing, salaries and other administrative costs, designing and laying the pitch and outfield, travelling, hotel expenses, security, etc, which are likely to be in the US$10M (G$2B) to US$15M (G$3B) range - all to be met out of the national budget. Now we know that that figure is grossly understated and the term 'adventure' would seem extremely conservative.

Recall that the government defied the IMF which is concerned that at the now low price tag of US$25 million the expenditure would amount to 3.5 per cent of Gross Domestic Product (GDP), threaten standard sustainability indicators - including the net present value (NPV) of external debt to fiscal revenue ratio - to rise sharply and breach the HIPC threshold. Had the IMF known about cricket and that it involved more than the construction of a stadium, they might very well have taken a much tougher stance.

Yet a government that willingly accedes to the IMF condition of public sector wage restriction flexed its muscles on a cricket stadium of dubious economic value which threatens critical fiscal guidelines. The IMF had to settle for the preparation of a feasibility study not as to the project's viability but for compensating measures to be taken, if need be. Quite what these compensatory measures are is open to speculation, but it seems reasonable to assume that those are limited to financial measures and did not include proper management.

The government takes the stadium so seriously that it considers it an important element of its Poverty Reduction Strategy which is itself mystifying. In a clever use of the word 'contribute,' Chapter 7 of the Poverty Reduction Strategy Progress Report notes that the cricket stadium will contribute G$4.7 billion, but that contribution refers to the expenditure not income. It is troubling that whatever little information becomes available does little to reassure the public.

Comedy of event:

The construction of the stadium is only one, albeit extremely important, of 24 deliverables and we now lag in many of these, prompting the ICC Cricket World Cup West Indies 2007 (ICC) to record its concerns in writing to the CEO of the Guyana Committee.

The root of the problem it seems is best exemplified by Guyana's participation at a recent meeting in Grenada to discuss what is called Event Management which includes such matters as Event Operations, Special Events, Volunteer Programme, Visitor Experience, Protocol and VIP Management, IT and Telecommunications, LOC Operations, Accreditation, etc.

Incredibly at a July meeting Guyana's representative, standing in for the CEO who was unable to attend due to personal reasons, appeared so poorly briefed that he addressed the wrong topic and his presentation was not only completely irrelevant but an embarrassment to the country. Instead of speaking on Event Management, he spoke on Venue Management prompting the ICC representative to write the CEO expressing concerns and in as diplomatic language as possible suggesting that our representative did not deal with Event Management because Guyana had done nothing during the preceding six months!

As a condition for hosting a leg of the World Cup 2007, the government incorporated a company with the ubiquitous Ms Teixeira, and Messrs Chetram Singh and George Robinson as directors. Unfortunately the role of that company seems to be confused with that of the Local Organising Committee and it is impossible to get any information whether the company has complied with the minimum statutory requirements and how it is performing. It would be instructive to learn whether the Auditor General has taken any steps to ensure that public funds are being managed in accordance with the law, that proper books of account are being kept and periodic financial statements prepared and that a proper audit is carried out.

Avoiding embarrassment:

The coercive force of political management has never worked even when the workers were paid, and certainly fails with volunteerism. The main defect of this government is its failure to appreciate the principles of management, the limits to political power and the difference between policy formulation and execution.

The President and his ministers find micro-managing irresistible, not recognizing its effect on motivation and performance, and it would be surprising if this is not the major problem with the stadium. On the other hand there is an extremely mistaken view that a project of this magnitude can be sustained and executed through volunteerism. Who will take the rap for failure where the taxpayers will be the ultimate victims?

Recently in commenting on the public discussion on the introduction of Value Added Tax I suggested that a first task should be to assess where we are in relation to where we have to go and to decide on the action necessary to succeed. This exercise ought not to be undertaken by the members of the committee, despite the presence of such well-known personalities as Messrs Norman Mclean, Vic Insanally and Terry Holder, whose reputations are now on the line. Clearly both pride and fear of the findings of any such exercise would preclude such a review, but it would be worse if the ICC is forced to step in. After all the reputation of the West Indies Board is also on the line.

The press in Guyana often seems unable to report beyond daily crimes and weekly press conferences and press statements. In the absence of a full-scale press conference by the LOC they should demand a full report on the status of the preparations. Where is the Public Accounts Committee which has parliamentary responsibility for ensuring that public funds are well spent? Does it have to wait for the Auditor General to prepare his annual report before it can act, and what about the PNCR which is represented on the LOC? To save the country embarrassment and financial penalties, they all need to act and act now.

Conclusion:

This column said last year that it was clear that the decision on the stadium was made without the benefit of objective analysis and clear-headed decision-making.

This is no ordinary project and it is now turning out that we do not even have the personnel to execute it properly. It appears that more expatriates have had to be brought in than had been planned, with obvious cost implications, while parts of the plan have had to be dropped to come within the US$25M from India.

Barring serious weather and other uncontrollable circumstances, the stadium will be completed by October 2006, but the other twenty- three deliverables including legislation are still not being adequately addressed. This is where the real challenge lies.