THE EDITOR, Sir:
Dawn Ritch's column of Sunday, February 25, 2001 raised several issues with respect to the development of Jamaica's first toll highway.
These issues include source of financing for Highway 2000, land acquisition, traffic studies and the level of acceptability from prospective users.
The structure of funding for Highway 2000 is predicated on a partnership between the Government of Jamaica and the successful bidder in a Build Operate and Transfer (BOT) basis for construction phased over two distinct periods. The indicative cost for Phase I is US$300 million of which the successful bidder, through equity and bank debt, is expected to contribute approximately US$200 million, and the remainder coming from the capital market.
As a partner, the successful bidder through a concessionaire agreement will be party to an investment of equity and commercial debt amortised over 35 years and 12 years respectively at rates that will provide an economic rate of return with no repayments required until 2003.
With respect to accessing funds from the capital market to assist in developing Highway 2000, two important points are to be noted: Firstly, an acknowledgement that local investment funds are heavily skewed towards short-term investment and Pension Fund Managers' need for longer term instruments which are appropriately hedged. Pension fund is but another form of savings, and savings, as is well known, is utilised to fund investments, including infrastructure projects. The investment opportunity that this instrument provides to the capital market includes appropriate matching of the maturity profile of assets and liabilities and a reasonable rate of return.
Secondly, experiences in other countries, which have used pension funds to invest in national development, should also be a guide. In Chile, 33 per cent of pension funds are invested in infrastructure projects. Malaysia has utilised its pension funds, which is called the Employers Provident Fund to fund significant highway and infrastructure projects.
Good responses
Price Waterhouse Coopers and Dehring, Bunting and Golding, after undertaking numerous presentations have reported good responses to our proposals from local Pension Fund Managers to the concept of a long-term instrument.
It is certainly desirable that potholes must be fixed as part of ongoing maintenance to existing roads. However, proper road maintenance must not be confused with the objectives of Highway 2000. Highway 2000 is not just building a road, but opening up opportunities for growth, employment and sustained national development.
With respect to land acquisition, the Government of Jamaica has the responsibility of making the necessary land available to the contractor at a mutually agreed period before the start of construction. Highway 2000 will pass substantially through Government-owned properties, and where land has to be acquired from privately held owners, there are well-established approaches that will be followed throughout the life of this project.
Importantly though, the developer will not own land in the proposed BOT scheme and, therefore, would not be placed in a position to sell any property.
All documents produced by our advisors and distributed by the Project Development Unit of Highway 2000 have repeatedly stated that based on traffic studies, Phase I (Kingston to Mandeville) is more viable in terms of normal benchmarks.
Digestible morsels
Phase II is regarded more a developmental project that will attract induced traffic after Phase I has been substantially established. This is why Highway 2000 is being phased in digestible morsels.
A significant amount of traffic research and modelling was conducted to establish traffic characteristics and to estimate the travel demand on the proposed Highway 2000 corridor. The international traffic advisors of Steer Davies Gleave used the data to forecast the travel demands and establish the potential revenues generated by the toll highway. All studies have confirmed that there are substantial benefits in time saved, lower vehicle operating costs and safety with the establishment of this highway.
There is an estimated 10 per cent growth in traffic (particularly in Phase I) for the first five years. Another market survey was conducted in 2000 to ascertain the level of acceptability and possible use of this new motorway. The survey results showed an acceptance level of 83 per cent. Truck drivers, other motorists and residents recorded high levels of support for the construction and their eventual use of Jamaica's first toll highway.
I am, etc.,
GLADSTONE WILSON
Head, Communications
Project Development Unit
Highway 2000
