Korean Deal Stinks

Posted: Daily Guide |Wednesday, 30 June 2010

By Charles Takyi-Boadu
THE New Patriotic Party (NPP) has formally registered its displeasure against the $10billion housing deal between the Government of Ghana (GoG) and STX Korea for the construction of some 200,000 housing units for the various security agencies.

Whilst it appreciates the intention of government to put up these buildings, the NPP says the terms and conditions of the deal smacks of insecurity, since according to the National Chairman of the party, Jake Obetsebi-Lamptey, the entire deal is not transparent.

At a press conference in Accra yesterday, he noted that for some strange reason, the financial and implementation details of the deal have been shrouded in secrecy, indicating that not even the agreement, which has been laid before Parliament, answers the most important questions about the transaction.

The NPP National Chairman also noted that the haste with which the Mills Administration wants to push this deal through, before the public is able to discuss its implications on the economy and the country, is most disturbing.

The NPP says it has done independent research into the transaction and that “this particular deal is bad, through and through.”

Mr. Obetsebi-Lamptey said this was evident in the fact that it does not promote the local industry and the economy, since under the terms of the agreement, STX Korea is to borrow an amount of US$1.5 million to finance an initial 30,000 houses out of the 200,000, with government also offering sovereign guarantee to cover the company in the acquisition of that loan.

In the opinion of the NPP and its National Chairman, “what this means is that should STX default in the payment of that loan, Ghanaians would have to pay back the debt,” whilst the company and its expatriate contractors and staff will all enjoy duty exemptions on the things and equipment they import, VAT exemptions on the things they buy locally, and income tax exemptions on their incomes in Ghana.

This is aside the fact that government will be providing free land for the project and an ‘off-taker’ agreement that compels the government of Ghana to buy the houses from STX Korea.

“The New Patriotic Party is of the view that if Government provides guarantee to our local estate developers to secure funding, provides free land, and gives similar goodies and support to our local real estate developers, they can deliver 200,000 houses within the five years at lower unit cost than US$50,000”, Mr. Obetsebi-Lamptey emphasized, noting that “indeed, Ghana Real Estate Developers Association has stated categorically that given the same support, they can deliver at half the cost.”

Furthermore, Mr. Obetsebi-Lamptey said the money to be secured under the guarantee of the Ghanaian tax payer will not be disbursed by any Ghanaian bank because the NDC government has agreed to disburse the funds through the Woori Bank of London, asking rhetorically “why not Ghana Commercial Bank, the National Investment Bank, or any other Ghanaian Bank?”

In addition, the NPP says it is wrong for government to mortgage Ghana’s oil which is yet to be explored. Under the terms of the existing agreement, the entire amount could be converted into crude oil or other petroleum resource trading after the project.

As long as government commits to offering sovereign guarantee to help STX raise funding for the project, the party believes Ghana could still be compelled to use its crude oil resources to pay off the debt if STX fails to pay its lenders, insisting “this part of the deal is dangerous for a country that does not know the real quantities of its oil resources; Especially so when we are still in the process of crafting an oil revenue management policy to guide the use of our petroleum revenue.”
The NPP has asked government to suspend approval for the Supplier’s Credit Facility Agreement for government and Parliament to do due diligence and to explore other options that will ensure greater participation of local real estate industry and better value for money.