STX Brouhaha Bounces Back...DI Queries Funding

Posted on: www.dailyguideghana.com

By William Yaw Owusu

Friday May 13, 2011.
Danquah Institute (DI), a policy analysts group says the Minister of Finance & Economic Planning should go back to Parliament for the house to scrutinize the terms and conditions of the multi-million dollar agreement reached between the Government of Ghana and STX of Korea for the construction of housing units across the country.
DI is raising red flag over the implementation of the project because of what it calls “the government’s ambiguity, changes and re-arrangements with sources of funding of the project”.
Last year, the government reached an agreement with STX of Korea, through its subsidiary in Ghana, for the construction of 200,000 houses in Ghana within a period of five years estimated at $10billion and in August 2010, parliament approved an initial off-take agreement for 30,000 housing units for the security agencies at a proportionate cost of $1.5 billion.
It says it is calling on the Ministry of Finance to send the agreement back to parliament for review because of statements purportedly made recently by Minister of Works and Housing, Alban Bagbin that the government has reached another agreement with three international banks to fund the same project.
“We have learnt in the Tuesday, May 10, 2011 issue of the Daily Graphic that Standard Chartered Bank (a UK-based bank), one of three banks (the other two American) named by Mr. Alban Bagbin, the Minister for Works, Housing and Water Resources, in an earlier interview with Joy FM, has now been contracted to fund the project in tranches.”
The DI continued: “We wants Parliament to satisfy itself with the consistency of the current state of the agreement with what it approved in August 2010 and to further satisfy itself on the current propriety of the exorbitant and inessential $264 million political risk insurance originally demanded by the Koreans.”
It said the new development raises fundamental issues about the terms and conditions of these purported “new arrangements” and the need for the three separate credit agreements (or singular agreement if such) to be brought to Parliament for their terms and conditions to be scrutinized for consistency with what was originally approved by the legislature.
It said In September 2010, a Deputy Finance Minister, Seth Terkper, defended the STX deal, claiming that the agreement came with identified sources of financing, including the South Korean government.
“Nearly 10 months after Parliament approved this controversial agreement we are being told the government is now sourcing for funds. Credit facility agreements are ordinarily not presented to parliament for scrutiny and approval without an identified source(s) of funding and it is dangerously speculative and suspicious to present any such agreement with specific terms and conditions when sources of funding are yet to be identified.”
It said such a practice compromises “the government’s leverage to negotiate a good deal on behalf of the country and that is what we are afraid has happened in this STX case.”
DI said in his recent attempt to explain the delay in construction, five months after President John Evans Atta Mills cut the sod for the commencement of work, “Mr. Bagbin mentioned some preparatory works, including the identification of land, now being done and engineering and procurement details being finalized, all of which, as we argued last year, ought to have been done before any proper calculation of the estimated cost of the project could have been competently reached.”
They say the government should let Ghanaians know for example, if Stanchart is demanding to be paid political risk insurance adding “we are also aware of the active role played by the Government of Ghana in going on an international road show with officials of STX sourcing for funds as against the original expectation that was to be the responsibility of STX and the Korean Government.”
“Danquah Institute is calling on the government to bring back the US$1.5 billion suppliers’ credit facility agreement with STX (Gh) Ltd. for the construction of 30,000 housing units to Parliament since subsequent difficulties with efforts to raise funding and the ambiguity, changes and re-arrangements with sources of funding have altered fundamentally the integrity of the terms and conditions of the agreement which Parliament approved last year.”