CASTRIES – DECEMBER 7TH. 2016 – Statement by Hon. Dr. Ernest Hilaire, Saint Lucia Labour Party spokesman for Commerce and Investment
THE DSH AGREEMENT AND THE GOVERNMENT OF SAINT LUCIA
Let me commence by reiterating a point made by the Political Leader. A Saint Lucia Labour Party Administration was never against nor would be against any project that has great potential for Vieux Fort and indeed Saint Lucia. However, having seen large projects not materialise such as La Paradise, the Black Bay and Canelles Land Hotel Project and the Mall at Bois D’Orange and the impact on the landscape, we had to be very prudent in negotiating an agreement which was in the interest of Saint Lucia not only for now,but also for the future.
We keep hearing that, why was the Labour Administration secret about the investment. The reality and practicality of it is that, why would a Government announce a project that itself was not comfortable with, as yet. We had not completed negotiations and as such we could not bring it to the public. The question is now why would the UWP Administration be in such haste to sign the largest investment project in the history of Saint Lucia after 6 weeks in Government? What was the inducement to do so without regard for consultation nor dialogue? We all saw the pictures a few days after the swearing in of the Prime Minister, with the Investors.
Given the scope of the Project, there ought to have been public discussion and dialogue with residents of Vieux Fort and of the South. The problem has been exacerbated as the physical footprint of the Project has been increased but still no consultation.
One of the most frightening aspects the Agreement is the expanse of physical space the project will occupy. It virtually places all of the productive and investment lands in Vieux Fort in the hands of one developer, one single developer. This is worsen by the fact that the project implementation period is 20-25 years which means much of the lands in Vieux Fort South will be given away with no or little space for alternative developments by other developers.
Think of it, nearly all the prime and commercial lands in the hands of one developer for $1 per acre for 99 years.. We are talking about all of Sandy Beach, the area where the Playing Field is next to the airport, the area where recreational activities like Jazz and Kweyol Day take place in Vieux Fort, the Stadium to be taken up and no access to the beach. The UWP Government which stopped PROUD in 2006, where lands occupied by persons for extended periods can purchase the lands at a nominal value, now sees no issue in offering prime lands to a private foreign developer at $1 an acre.
The lands committed to DSH further stifle any physical expansion of the town of Vieux Fort as it will be constrained to the north by the airport, the east by DSH, to the south by the sea and westward also taken by DSH to be used for a marina, casino and hotel.
Personally, it hurts to learn that the land committed, includes where the National Stadium is presently sited. I served as Permanent Secretary in the Department of Youth and Sports and chaired the Working Team which oversaw the construction of the National Stadium. For years, successive UWP Governments promised but never delivered an international standard stadium. Our sports persons suffered and longed for a national stadium. The UWP always hated that the stadium was built in Vieux Fort!! Plain and simple. Just recently Senator Belrose said that the stadium ought to be in the North and not in Vieux Fort. During our negotiations, it was suggested that the Stadium was incompatible with the surrounding developments. Our response was that this was a gift to the People of Saint Lucia and since the Hospital would be returning to its original site, what should be done at the expense of DSH was to renovate the Stadium to ensure, that its look and design is in keeping with any development. We even suggested that we could facilitate the cost of refurbishment through a CIP enterprise investment. There was no agreement on these points and it was agreed that the Stadium would stay. Now the UWP Administration has gotten their way and the Stadium will be gone.
The haste of the UWP Administration to sign this Agreement is best reflected in the requirement that Government commits to stop using the landfill by the March 2017 and to decommission by December 2017. There has been no consultation nor any announcement on the plans for solid waste disposal especially the siting of a new landfill.
At a national policy level, there are other provisions which can be questioned.
- Clauses 9.3 and 9.4 suggest that exclusive rights are given to DSH for the operation of a casino, horse racing facility, and betting facility and further, it is in perpetuity. If so, how would these concessions, if granted, impact other investors who may wish to invest in Saint Lucia in the future?
- It is noted that the horse racing aspect will become a qualifying investment and the project given CIP status. Why this necessary if is the horse racing facility and casino are parts of a hotel development project, which currently qualifies as an investment under the CIP. Further does that mean that any investor interested in horse racing, marina and casino can apply under the CIP or is this proposed CIP Regulation exclusive for DSH, noting the above?
- Agreement provides that the DSH will lease the land for the horse racing facility at US$1 per acre for 99 years (Clause 2.10). This is grossly unreasonable. Also given that this is the first phase, it means that DSH is limiting its risk and exposure at the expense of Saint Lucia. Where is their substantial capital injection? Where is the Foreign Direct Investment?
- The Agreement provides (Clause 2.3) for payment of lands transferred at the completion of each parcel development. This means that DSH is paying for the land after it has been transferred to it, DSH has sold investments through citizenship, and used the monies to develop the land parcel. Only then DSH will pay for the land, IF and only IF, it decides to purchase, if not it leases at $1 per acre for 99 years, which would be the likely scenario.
- The Supplemental Agreement (Clause 2.8) provides the Government will offset the cost of land acquisition where it falls above US$90,000 per acre. This transfers the risk of private land sales and speculation to the Government as against to the private developer.
- Has DSH being given approval to commence marketing and selling citizenship through investment BEFORE it has DCA and CIP approval?
- The Agreement provides that CIP applications for Desert Star will be accelerated and granted with five (5) weeks, yes 5 Weeks. No particular investor should be ‘pre-approved’ or receive preferential treatment as this undermines the CIP. All applications regardless of the source must follow the prescribed due diligence process to maintain the integrity of the CIP. This time period does not allow for complete due diligence and legal enforcement review, thus jeopardising our CIP programme and indeed the country and people of Saint Lucia loosing VISAs or being blacklisted
- The Agreements state that the Gross Development Value (GDV) of the project as a US$3bn project (Clause 4.1). We need to understand what is defined as GDV as the definitions in the Agreement do not provide any information. Is this gross development cost (GDC) plus DSH’s profit? It is significant as the figure determines the citizenship allocation for the developer. Assuming the development cost is only US$1b but profit is US$2bn, it means that Saint Lucia has to provide citizenships for development cost plus US$2bn to meet profit. Further, the Agreement says that the Developer will provide 10% of GDC for each parcel development but if profit is included then the developer is merely using profit of previous parcel developments to finance the 10% of each subsequent and has not provided any equity.
- Noting the above, what is the number of applications for citizenship that the Government agreed to allot to DSH? If the value of the development is as stated and taking the investment level of CIP at $300,000 minimum, then it means 10,000 applications. At an average family size of 4, this amounts to 40,000 new citizenships for one developer alone!
- The Agreement provides a buy-back option to DSH (Clause 10). It is a bit unclear but very very frightening. Let me explain. The Agreement says that the land for the racing facility is to be leased (Clause 2.10). It also says that if within 24 months of signing the Agreement (that is July 2018) there are not more than 200 investors then DSH can decide to invoke the buy-out clause. This means that if a racing facility is built and the DSH invokes the buy-back option, the Government will have to reimburse the cost of that facility and do so within 90 days.
- DSH in its absolute discretion decides whether our local contractors and/or workers have the skills that are needed for the Project. This means that any number of workers or contractors can be brought in to do work which may very well be done by locals. More so, they will not pay any work permit fees. (Clause 5.1,5.2, 5.3)
- No employee or affiliate of DSH will pay any income tax or VAT whilst working in Saint Lucia (Clause 5.4).
- The Agreement provides for the Escrow Account to be established outside of Saint Lucia (Clause 7.1). This limits the benefits which can be accrued by having increased liquidity in our banking system. Moreover, if there is a dispute, the money will not be within the reach of the Government of Saint Lucia and to get back the same, if it can be gotten back, would be a costly long drawn out exercise.
- The uses of the monies in Escrow are highly questionable (Clause 7.2).It appears that nearly every aspect of the DSH project will be financed through the sale of Saint Lucian passports.
- Given the scope of incentives and benefits given to DSH why should DSH be given $15,000 of Government fees, the people’s money, from the sale of citizenships. (Clause 8.2) DSH has now gotten every incentive that they had request ed plus a share of government fees.
- The Agreement provides for Security of Investment (Clause 18.1) which is so broad that it virtually requires that any act or omission in formulating public policy must be done in the context of the effect on the DSH project. What DSH wants, is what the Government has to do.
- The Supplemental Agreement (Clause 3) provides incentives which are beyond what has ever been given locally.
- The Agreement does not address the conditions under which the obligations of the Government of Saint Lucia can be rescinded or revoked. DSH has a buy-back option, what do we have if DSH is not performing satisfactorily? How are we going to ensure that the patrimony of our country and the heritage of future generations is protected?
Four responses to the Prime Minister’s interview last night.
- No confidentiality clause – that is simply not true. Clause 19 is a confidentiality clause
- It is a Framework Agreement with details to be put in later. The simple truth is that labels are not conclusive, you can call it whatever you want at the end of the day if the contents speaks of a binding agreement it is a binding agreement. Moreso, the Agreement already requires action from Government by December 31st so when what the details and finalise gotten to be.
- The PM claimed that the Beausejour lands and the lands in Vieux Fort are presently not creating any jobs. Then can I ask the Prime Minister how many jobs are created at Pigeon Point, then maybe he should give away Pigeon Point and how about the Pitons, maybe he should give them away to a developer at $1 per acre.
- The PM speaks of we building a marina, a hotel etc. with CIP money. Again, we need to ask will the Government have shares in the Development? Because CIP investment money is not Government monies as he claims but that of the developer.