The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas is close to covering 50 per cent of the $2.1 billion infrastructure gap identified five years ago by a leading accounting firm, a senior executive yesterday saying it will be impossible for this nation to meet all its needs without private investment capital.

Simon Townend, a Bahamas-based KPMG partner and managing director of its corporate finance arm in the Caribbean, said that while this nation had “come a long way” and invested almost $1 billion in key infrastructure assets over the last five years, much more remained to be done.

And he warned that it was “critical” for the Bahamas to meet its infrastructure needs via private capital and Private-Public Sector Partnerships (PPPs), as without this financing the country would “not be able to do what we want”.

Noting the Government’s fiscal position, which effectively prevents it from undertaking any major capital expenditure projects, Mr Townend said the Bahamas had progressed well in tackling the $2.1 billion worth of infrastructure needs that KPMG identified back in 2007.

“Since then we’ve come a very long way,” he told Tribune Business. “If you’re looking at the total numbers we were looking at at that time, half of that $2.1 billion has largely been spent.”

Among the infrastructure ‘successes’ to-date have been the $409.5 million Lynden Pindling International Airport (LPIA) expansion, with its second stage set for an October 16 opening, and the $83 million Arawak Cay Port.

The $206 million New Providence Road Improvement Project is set for imminent completion, while the $52 million Princess Margaret Hospital (PMH) critical care block expansion is underway. Another $40 million in bank financing to fund equipment/technology for that expansion is also being sourced.

And the former government also entered into $83 million and $50 million programmes with the Inter-American Development Bank (IDB) to revitalise the water and air transportation sector.

“There’s a little more work to do, like on the airport infrastructure in some of the Family Islands, and hopefully they’re looking at how to bring things together and better manage them,” Mr Townend added.

“You’ve got the education system, because I still think there’s a huge need there to improve school infrastructure in the public schools.

“And I still think the internal infrastructure of the Government needs major, major work. There’s got to be a more efficient way of doing things. There’s still a lot to do.”

The KPMG executive added, though that the firm’s previous $2.1 billion estimate was not ‘set in stone’. It increased, or decreased, as new infrastructure needs were identified or existing assets maintained.

“It’s a moving target and new things come up,” he explained. “Things get older and don’t get maintained. We haven’t looked at those numbers today and said what they might be.”

While the Bahamas was no different from other Caribbean nations when it came to its infrastructure needs, Mr Townend said major capital projects were now unlikely to get off the ground “unless they’re done through a PPP structure”.

The LPIA redevelopment was effectively a PPP, though without the airport’s ownership being transferred to the private sector, as was the Arawak Cay port.

Describing PPPs as “critical” to meeting the Bahamas’ infrastructure needs, Mr Townend told Tribune Business: “I don’t think we’re going to be able to do what we want to do without it.

“Given the state of the country’s position right now, and without a pic-up in the economy, without private capital much of the infrastructure we’d like to see in the Bahamas would not be there.”

Structuring them correctly, though, was key to unlocking not just the support of foreign capital but Bahamian institutional and high-net worth investors, too.

“There’s a lot of liquidity in the Bahamas, pension funds and so on. If the structure is right, PPP infrastructure is a fantastic investment for them and for individuals in the Bahamas,” Mr Townend said.

“These projects can be great investments. But they’re not going to invest in it unless they believe the underlying structure is sound and they believe it’s going to be successful.

“If the Government wanted to go ahead with several new schools, it would have to come up with quite a lot of money to do that,” he added.

“There are ways you can fund schools with private capital. It doesn’t get the Government off the hook, but it changes the cash flow profile while creating investment opportunities for Bahamians.”

Suggesting that the Bahamas needed to develop a medium and long-term infrastructure plan, Mr Townend said the Government also needed to ensure it had the “capacity” to move such projects forward at “a reasonable pace”.