The Scarlet Pimpernel Blog
Thursday, 07 April 2011 02:31
By The Scarlet Pimpernel
Our Humpty Dumpty Economy - Notwithstanding the growing number of countries, including small, vulnerable economies, that have experienced economic growth over the last few years, whenever the UPP’s dreadful failure to effectively revive the economy is called into question, the ill-prepared government’s ministers, imported mercenary advisors and party loyalist continue to seek sanctuary in the global economic downturn.
They need not feel singled out for ridicule by this trite observation, because none of “speakers” of the Antigua Labour Party (ALP), local non-governmental organisations (NGO), professional fraternities, or emerging political parties have offered any public document on stimulating the economy that is worthy of mention.
While the fringe parties struggle to get a foothold in the closed bipartite political arena, ALP leaders gain political mileage by peddling the dream of a brighter future for Antigua & Barbuda once the electorate hands over the keys to the “national store,” meantime the UPP government continues to teach the nation, by experience, the belly-burning lessons of economic stagnation associated with the heart-wrenching reality of social decline.
In a brilliant and timely Caribarena article titled, Invest in the Best, scholar and patriotic son of the soil, Dr Isaac Newton, makes the case that the creative ideas necessary to resuscitate the economy, create jobs, and consequently reduce the current high levels of unemployment and poverty, reside in our local talent, who must be given an opportunity to make a meaningful contribution in their birthplace. As true as that may be, creative ideas for the creation of new jobs seem to have been removed from the government’s agenda in somber preparation for the severance of thousands of civil servants, as mandated by the IMF debt obligations.
Judge for yourself whether the UPP’s “bright idea” of paying a British information technology company thousands of our scarce dollars to develop yet another website to market Antigua & Barbuda’s tourism is really the answer to repairing our piss poor performance in tourism, which resulted from our overall lack of proper planning. Indeed, the UPP’s “wrong and strong” approach to governance, coupled with its proven unwillingness to learn and grow, must not be allowed to continue to hurt thousands of innocent poor people who depend on government for survival.
A Taste of Reality
Antiguans and Barbudans need to wake up and smell the bush tea. Why does the UPP government keep showing us the bleak macro-economic outlook occasioned by the global economic decline? It is not the only picture we need to look at. What about the positive side; why no mention of the myriad opportunities upon which we need to capitalize? The plain fact is that we are living in the time of the greatest creation of personal wealth the world has ever seen. Concurrently, global philanthropy is at an all-time high. The world is full of billionaires and multi-millionaires who are donating (giving away) sizeable fortunes in order to fix the gravest problems in the world. Moreover, the same foreign direct investment (FDI) the government and opposition often claim we need so desperately is only a call and a negotiation away for the “local talent” who really know the ropes.
I tell you with the authority of experience that in spite of Allen Stanford’s stain on our already tarnished name, private and institutional investors want to invest real money in development projects in Antigua & Barbuda, which will create jobs, provided they can be convinced that the government will abide by its promises, honour its commitments, and allow the investors to realise worthwhile profits from their investments.
Furthermore, international lenders literally have billions of dollars available in the credit market in which creative development ideas and a sovereign guarantee can be used to gain access. I regularly witness firsthand, poor African and Latin American countries access low interest international development loans; and then I tune in and hear government and opposition leaders expound on how tremendously difficult it would be for Antigua & Barbuda to qualify for the same. Nothing could be further from the truth.
Brothers and sisters, we are living in the post global financial crisis era and the old boys and girls in the government and opposition leadership are just not equipped with the requisite knowledge to navigate these waters. The truth of the matter is that the economy of Antigua & Barbuda can be easily revived and the nation put on the course to prosperity, but it requires the existing political albatrosses of the ALP and UPP to clear the way for fresh ideas and competent, visionary leadership.Using Construction Projects to Jump Start the Economy
Large scale construction projects have been effectively utilized to stimulate the economies of many countries throughout the world, including the United States (The New Deal Projects of the 1930’s), Japan (after World War II) and even Jamaica (today). Antigua & Barbuda is not a special case; surely, construction can be effectively utilized as a means of jump starting our ailing economy. The UPP government received this memo, but obviously did not understand the details. You may have noticed that the government has attempted to stimulate the economy by constructing a couple of housing projects, but has not experienced any success in that connection. The particular construction approach was doomed from the start, because the backward, “old-school” idea that “if you build it they will come” is an utterly retrogressive strategy that should be condemned to the “night soil” tubs of Antiguan history.
These new housing failures just add to the growing number of wasteful projects around Antigua & Barbuda, which stand as monumental proof of a country desperately in need of new leadership. Not “the better of two evils,” which represents capitulation to EVIL, but the embracing of new leaders from among our “local talent”. We need bright, competent, patriotic, young men and women with the requisite maturity, self-confidence, international experience, and knowledge to navigate the new global economic environment. More of the same or the popular alternative “new wine in old wineskins” cannot move our beloved nation forward; we need GENUINE CHANGE.Affordable Housing Projects
For starters, if we are going to use construction projects to help jump start the economy, creative financing techniques and strategies must be devised to deliver meaningful benefits to the working poor, who need genuine government support to own homes.
Hon Gaston Browne, who has a fairly good understanding of both economics and construction, proposes to build 500 “affordable” houses in 500 days in order to stimulate the economy. The problem with his plan is that the thousands of working poor people in Antigua & Barbuda who are desperately in need of affordable housing would not qualify for his affordable housing in the price range of $150,000; potential buyers need to have a ten percent deposit, legal fees, insurance fees, government taxes and monthly income of at least $2,830 to qualify. These onerous requirements place the dream of home ownership beyond the reach of the majority of workers in Antigua & Barbuda.
Hon Hilson Baptiste also recognizes the need for “affordable housing” in Antigua & Barbuda and has spearheaded housing projects at Follies
and North Sound on behalf of the government. These projects are financed through a $40 M low interest (3%) loan from the socialist Republic of Venezuela. Some of the houses are completed, but the majority remain unoccupied, mainly because none of the houses in question costs less than $200,000.
Obviously, these projects suffer from the same problems as Gaston Browne’s idea
, but to a greater degree and with substantially more devastating consequences. While Gaston’s housing project is a figment of his imagination, MP Baptiste has committed millions of dollars of loan money to these “stillborn” projects, for which he has had more press conferences than actual houses sold.
The Prime Minister would be well advised to halt further spending of the remaining loan proceeds and immediately transfer MP Hilson Baptiste from his present post to a position more suited to his qualifications, aptitude and abilities, in the Ministry of Health, in charge of inspecting the health and sanitary standards of local restaurants.
It gets worse. In an interesting twist, the minister of Finance, Harold Lovell informed the nation that the government endorsed a proposal from Nicholas Hadeed for the government to grant tax breaks, exemptions, incentives, and concessions to enable the construction and renovation of houses for the upper class, which will somehow have the side effect of stimulating the economy. The “Hadeed Proposal” relates to houses and buildings above $650,000. It does not require extensive investigation or analysis to realise that the only thing that would be stimulated under this proposal is Nicholas Hadeed, his friends, and family. The benefits of this proposal to the Hadeed Empire’s real estate holdings cannot be overstated.
In short, the construction ideas proffered for the stimulation of the economy are either constipated or diarrheic. The projects mentioned were all conceived in personal and political self-interest, and have no chance of successfully stimulation anything but righteous indignation.Affordable Housing Solution
Neither the government, the opposition, nor the private sector proposals are endowed with genuine interest in poor People, so they were not creatively structured as a means of reaching out to the thousands of working poor People in Antigua & Barbuda and giving them a helping hand. Many of the working poor that are the most in need of affordable housing have laboured their whole lives in a low-paying government job, and are entitled to the esteem of home ownership.
In this vein, I will outline an Affordable Housing Strategy that can actually jump start the economy of Antigua & Barbuda, while providing support and bringing dignity to the working poor.Ownership Strategy: “Lease to Own”
In the solution I am proposing, the potential homeowner will not need a loan, because the ownership concept will function just like the lease of a car, furniture, or personal computer, with an option to buy for $1 at the end of the lease period. Affordable houses should be constructed for the poor who qualify for them under this “lease to own” concept, but since many of the working poor will not qualify for affordable houses, this concept allows them to buy into affordable apartments, which can be constructed on a cheaper cost per unit basis than houses.
To help the working poor become homeowners, the unaffordable aspects like mortgage, deposit, insurance, taxes and legal fees are bundled into the “lease-to-own” format, where each monthly lease payment is applied towards eventual ownership, and property taxes are avoided until ownership eventually passes from the government to the new homeowner. Potential homeowners would be required to make regular monthly lease payments directly to the government in a manner similar to how payments are made directly to the government to acquire crown lands.Construction Cost
To ensure the homes are truly affordable, we must creatively cut costs in every possible aspect without sacrificing minimum standards of durability, infrastructural integrity, and overall quality. Plus, the government must be equally willing to approve the same tax breaks, exemptions, incentives, and concessions Nicholas Hadeed said are needed. For example, my model apartment building (13,600 sq. ft.) will have 24 apartments: 12 on each floor. The four corner apartments (800 sq. ft.) will have three bedrooms, one half and one full bathroom; while the other ten apartments (600 sq. ft.) on each floor will have two bedrooms and one bathroom.
Considering a construction cost of $135 per square foot, each building can be built for $1,836,000. Affordable houses can be constructed on the same value per square foot basis. Projected Income from Monthly Lease Payments
If for each two-bedroom apartment the government receives $500 per month and collects $625 per month for each of the three-bedroom apartments, each building will have a potential revenue stream of $12,500 per month or$150,000 per year.
If each building is financed with a three per cent loan, and all of the new homeowners made their payments timely, the loan could be repaid in 183 months (15.25 years). In this light, the government may find it practical to offer leases of 20 years, and collect $2,253,886.43 over the lease period. This level of revenue collection would be sufficient to service the construction loan, compensate for defaults, and pay for the required land and infrastructure, with enough left over to provide each home with a new, basic duty-free refrigerator, stove, and washer-dryer. The same basic financing rules of this apartment building example apply to affordable houses.
My intention is not to present a definitive proposal, but to outline a model that can be embraced as a starting point for further discussion and manipulation of the numbers to reach the best possible situation that will help the working poor of Antigua & Barbuda realise the dream of homeownership. The project should start with at least four of the model apartment buildings in both Rural West and City West simultaneously.Take a Hint
A business school buddy (Paulo) who is a senior credit manager at the Republic Bank of Beijing (main branch), assured me that with the dedicated income stream from the lease payments and a sovereign guarantee, his bank will provide a low interest (3%) loan to the government of Antigua & Barbuda for this kind of project. Thank you for your time.
The Scarlet Pimpernel is the nom de plume of an Antiguan born “knowledge broker” whose intercontinental exploits involve work as a university founder and educator, military strategist, international legal consultant, United States prosecutor, published author, trade advisor in Latin America and international investment counselor.
The inimitable acuity of the “Pimpernel” is sought after by entrepreneurs, investors and governments from Dubai to Brazil. Recent work, created for Latin America, which speaks to the conjunction of technology and education to reduce cost, motivate students and improve testing results will be translated and introduced to school systems across the Caribbean later this year. “Employing anonymity to domesticate the ego ...”