Four Seasons project hangs over short-term economic policy like a dark cloud
By Hal Austin
LONDON, United Kingdom, Thursday October 20, 20011 - The financial future of the Four Seasons premium hotel project, situated on the site of the old Paradise Beach Hotel, is hanging over the short-term economic policy development of Barbados like a dark cloud.
In reality, it has an influence far beyond its relevance to the economic development of the nation or even as a potential contributor to jobs, tourism and general prosperity.
In simple terms, to many of us, this is an over-ambitious business development that should be left to investors and the markets to decide its success or failure.
That this government has chosen to get involved shows a lack of original ideas and direction on the part of the late prime minister David Thompson and his advisers, and simple confusion on the part of the present political leaders’ and policymakers’ in their vain attempt to come to terms with the current economic crisis.
The fact that Four Seasons may be a private company does not matter since the fact that it has approached the state, and other regional and international bodies for funding means that, even if legally its corporate structure remains private, morally it has lost the innocence of that private protection.
"Is Barbados as a five-star holiday destination a myth?"--Hal AustinIt is therefore now imperative that Four Seasons and its executive and senior management teams be treated in the same way as a listed firm: publish a full set of its audited accounts, from the day it was first registered; publish all its business plans, including the small tweaks and changes, from the first, last and all those in between; list all its professional advisers and their full and detailed remuneration; name the full executive team and the history of their remuneration; list the founding shareholders, their percentage of equity and any changes over the years. Who are the main shareholders now?
There are other questions that the executive and its advisers will have to answer publicly: why, for example, in their fund raising have they not gone for a full loan/investment to fund the completion of the project? Why, if reports are true, have costs escalated to such proportions, inflation aside, especially in an economic climate in which they can re-negotiate down their costs ?
Return on Investments
The claim that investors in Four Seasons can reap a return of up to 25 per cent, as has been suggested, in the present global (regional and local) investment environments is either a miscalculation, over-optimism or, to my mind, misguided over-enthusiasm.
Had this been the case, offering such returns on the London venture capital markets would have investors queuing for every flight to Barbados, pen and cheque books in hand.
The obvious question is why should a small, unindustrialised, economically badly managed economy be giving investment growth projections which could compete with the fastest growing BRIC nations and leading corporates? The old saying if something looks too good to be true, avoid it, comes to mind.
In the real world, based on returns on the S&P 500 or the FTSE 100, a return of 15 per cent on a high risk investment more than beats the average risk/reward returns.
The National Insurance Scheme
The national insurance scheme has a fiduciary duty to all its members, and future generations of Barbadian pensioners, which stipulates a cautious liability-driven investment policy.
Nothing about the idea of investing Bds$80m of policy contributors money in a project that at best is highly tenuous and, at its very worst is a huge while elephant already in intensive care, cannot be described as good governance.
In the meantime, the NIS has its own problems, such as bringing its accounts up to date; publishing its investment strategy so we can all interrogate them; publishing a comprehensive and up to date actuarial report; and, a comprehensive and fully audited account of its assets and liabilities.
The irony of the Four Seasons project is that it is aimed at five-star tourists, presumably its business plan has identified a market; and, as we are told, Barbados is a high priority destination for platinum travellers, therefore it can be assumed that the big investors who visit the island already know about the development.
From world famous entertainers, to industrialists such as Bamford and the former kitchen and bathroom manufacturer who came to Barbados, bought an underperforming plantation, and made a fortune.
Why then are these super-rich people, all familiar with the island, not queuing up to invest a small amount of their huge wealth in this high-return hotel project? There must be a simple answer out there somewhere?
In any case, where are the great attractions that make Barbados a five-star holiday destination, apart from sun, sea, rum and sand – and the genuflection of its servant class?
Where are out Michelin star restaurants, our green tourism, our theatres, concert halls, our great public lectures, our historic buildings, our classical architecture, our celebrated cemeteries?
Even the much touted heritage area, the Garrison, is home to a number of dilapidated buildings, of the very colonial architectural style which is now being celebrated by the government; just look at that wonderful, but abandoned building just behind the Caribbean Examination Council complex in the Garrison.
This is not just cultural neglect, but a further example of the fraudulent claims often made by policymakers about Barbadian exceptionalism.
Is Barbados as a five-star holiday destination a myth, created in our over-ambitious minds?
Do we have the capacity and endeavour to make this dream become a reality by creating cultural palaces, a real and effective night time economy?
Finance minister Chris Sinckler has made a high play of a regional development bank taking a serious interest in investing in Four Seasons.
In particular, he emphasised due diligence.
But did they look at the books, the outstanding work to be done, how much it was likely to cost at current costs, and factoring in inflation? Have they looked at the remuneration structure?
Did they meet the senior executive teams and interrogated them? How about the contractors and construction workers?
If reports are true that Dr Persaud received US$4.2 per cent in fees or commission, (about 7 per cent) after as recent deal, then that would need some explaining. Then, if he has not, then his critics should desist in spreading the gossip.
Whatever Dr Persaud’s fees and/or salary, what is perplexing is that as someone of his economic sophistication, knowledge and understanding of major money markets, in particular the City of London, it is rather surprising – and disappointing – that he has not taken his business plan to the secondary Aim market or institutional and retail fund managers in London.
Even more disappointing is that he does not appear to make any public attempt to get Four Seasons listed on Aim, where he would almost certainly raise the required Bds$800m cost of the entire project within weeks, if not days.
Although Dr Persaud may be making all the right business decisions, as he sees it, the reality is that we have a government that is crippled by its own economic and cultural illiteracy.
A government that is prepared to plough Bds$120m in to the carbuncle that is Four Seasons, then is prepared to consider a further $80m, this time through what is surely an improper use of the national insurance scheme assets, yet is prepared to fly an entourage, made up largely of bureaucrats, 10000 miles away to China to beg for a paltry $6m to build a cultural centre.
This is the same government that finds it difficult to bring the Old Empire building in to use; the same government that celebrates the Garrison as being a Unesco heritage site but has turned a blind eye, for over forty years, to the municipal vandalism of the Eerie Great House, which the Goddards lived in and used the grounds so successfully for the training of their horses (even to the extent of importing grass from New Zealand) , while the Chinese, under the guise of aid, mutilated these very grounds to build sub-standard buildings which we now call the Community College.
All the time this was taking place, the so-called National Trust stood idly by.
But a more fundamental question remains: why is it that a hotel that looks destined to be an expensive white elephant, which has little relevance to the short, medium or long-term economic growth prospects of the nation, which at its very best will make a statistically small contribution to employment and which hangs like an albatross over public discourse, should occupy this space?
Like the rest of the nation, I await the answer.
The opinions expressed in this commentary are solely those of Hal Austiin. Hal Austin is a Senior Editor of the Financial Times.