Tuesday, September 22, 2009

FG, Bi-Courtney and the General Aviation Terminal

As we know, in 2003 the Obasanjo regime signed a Build, Operate and Transfer (BOT) Public-Private Partnership (PPP) contract with Bi-Courtney Aviation Services Limited (BASL) for the construction of the second terminal at Murtala Mohammed Airport (MM2). The new airport terminal was opened in 2007. However following the approval of the PPP agreement, the status of the General Aviation Terminal (GAT) – whether or not it’s part of the agreement - has been subject of controversy. But after years of argy bargy and legal fireworks, the FG finally handed over the General Aviation Terminal of the Murtala Mohammed International Airport to BASL.

Stakeholders in the Aviation industry have expressed their concern on the government decision. According to the National Union of Air Transport and Engineers (NUATE), the handover of the terminal by the FG to BASL was undertaken without regard for “rule of law” and “due process”. In protest, the Union threatened to shut down the terminal, noting that the handover will inevitably result in job losses. In the same vein, Arik Air through its Counsel Chief Assam E. Assam, told newsmen that the airline – who operates 50% of domestic flights in Nigeria - might stop operation because it could not operate in any facility that is “under the control and monopolistic management of Bi-Courtney Aviation Services”. FAAN on its part is had held the position that GAT was not part of the property given to Bi-Courtney in the PPP agreement it has with the organization and had sided Arik Air in the struggle to retain GAT as FAAN entity as it has been the major source of revenue to the agency. According to FAAN, the handover of the GAT would result in about 40% shortfall in revenue for FAAN.

Based on the foregoing, it is evident that all is not well with the MMA2 PPP Agreement. I have always expressed my concerns about how PPP contracts are negotiated in Nigeria. I have specifically queried the purpose of the exclusivity clause in the MMA2 PPP Agreement –which is also been contested by FAAN, - that prohibits development of an airport in Lagos for 36 years. Many have disagreed with my viewpoint on this issue. Some have argued that it is in the “commercial interest” of BASL to have such a clause (i.e protect its investment). Some even insinuated that I have a personal grouse with BASL. Firstly, l will state categorically that I do not have any personal issue with BASL. I respect and appreciate BASL position as a commercial entity that is looking to maximise its opportunities and protect its financial investment. And if I were in their shoes, I would probably be seeking the inclusion of such a clause, if not more. However, my criticism is directed to the government for their ignorance and short-sightedness in agreeing to such a clause. The inclusion of such a clause in contractual agreement does not encourage competition. It only creates a private monopoly, and does not offer consumers “value for money”. The role of the government is to make sure that public interest in protected in signing such contracts. The clause also does not offer any incentive for BASL to be innovative. With guaranteed income for 36 years and no other competing airport, passengers and airline operators can be expected to be at the mercy of BASL.

Also, such a clause makes mockery of the government so-called Vision 2020. How can nation that intends to be one of the world’s top 20 economies prohibit airport development for 36 years? How can an aspiring G20 nation prohibit airport development in a city predicted to emerge as the third largest city in the world with a population over 20 million people by 2015? Whatever anyone thinks, I’m of the view that this sort of arrangement cannot be right.

In terms of the GAT handover and threats from Arik Air and NUATE, there are few questions which need to be answered by the FG. FAAN denied that GAT was part of the PPP contract, and its handover means loss of revenue. My question is, as a major stakeholder, what was the role of FAAN in the contract negotiation? Was the decision to concession GAT as part of the MMA2 contract taken unilaterally by the FG without following due process? Who were the government advisers on the contract? Arik Air also threatened to halt its operations. But since the PPP agreement predates the commencement of Air Arik operations, was Arik Air not advised of the PPP agreement and imminent transfer to BASL? As for NUATE, did the FG consult with the Union during the contract negotiation?

Whatever be the case, there are important lessons to be learnt from the MMA2 Agreement. One of the keys to success of any PPP is “communication”. It is inevitable that more people will be affected by a partnership than just the public officials and the private-sector partner. Affected employees, the portions of the public receiving the service, the press, appropriate labour unions and relevant interest groups will all have opinions, and frequently significant misconceptions about a partnership and its value to all the public. It is therefore important to communicate openly and candidly with these stakeholders to minimize potential resistance to establishing a partnership. If the FG has taken its time to educate all stakeholders, then the reported protest by Union wouldn’t arise. Also, there would not be the need for the threats from Arik Air.

The government should also implement mechanisms that will guarantee transparency at all stages in the tendering process. These mechanisms must include setting procurement specifications, open public hearings for major government contracts, and the final selection of contractors; and Involvement independent agencies to oversee the bidding process. Unfortunately most of the PPP contracts in Nigeria are announced on the front pages of newspapers. The process of awarding these contracts is shrouded in secrecy. A classic example is the Lagos-Ibadan Expressway N89billion concession contract. Up till now, the public is yet to be advised of the process that led to the selection of Bi-Courtney Ltd. Where was the tender for the procurement advertised? How many companies bidded for the contract?

Interestingly, the notion of public-private partnership has been touted in some government circles as a magic formula that will fix the country’s infrastructure blockages. The complexity of PPP contracts and the high costs involved means care should be taken in the way it is approached. PPPs are not a panacea for development. The principles that underlie successful PPPs are affordability, cost effectiveness, value for money, transparency and risk management.


Isioma said...

Without meaning to sound like a cracked record, who is to blame for all this? Obasanjo, Obasanjo and Obasanjo. All these deals were at least begun during his time as President, what is happening now, is merely signatures being appended to deals that were sealed over plates of amala and ewedu(apologies to the yoruba nation). While i respect BALS, i have a very big problem with the agreement that precludes the development of any Airport in Lagos for the next 36years. That is rubbish!

pappyk said...

Seyi, we will keep pushing till our voices are heard.
God will continue to strengthen you as one of the voices of our generation. The change will come

For the love of me said...

Reading this in bits, will state my opinion when I am done.

Seyi said...

@Isioma, I can't agree with you less. These were some of the "criminal" attrocities committed by the OBJ regime under the guise of privatisation/private-sector participation.

@PappyK, thanks jare my brother. We just have to keep talking.By God's grace we will get there!

@FTLOM, I await your comments/opinion.

Akin said...

Certainly The PPP arrangement agreed between the FG and BASL on behalf of Nigerians is clearly not a win-win position; rather a win-lose with BASL as the clear beneficiary of the deal. If you look closely at these arrangemnt you shouldnt be surprised to discover that our rights and potential benefits were traded away to BASL in exchange for some corrupt gains by our leaders who are supposed to be protecting our interests.

They know the benefits of getting all stakeholders involved in the negotiation but they would never tow that line because of thier insincerity and ulterior motives.

Therefore, we must support all actions that would lead to the removal of the strange clause that encourages private monopoly that precludes development of other airports for 36 years in Lagos State.

This strange clause is absurd, anti-people, anti-development and stands the logic of economics on its head.The relevant House Committee should also be petitioned to act now in the interest of the people!