Awkward timing by Palace Resorts

NO SENSIBLE Jamaican, regardless of the circumstance, can be callous about an investor’s decision to abandon a project that would create jobs and contribute to economic growth, as Mexico’s Palace Resorts is about to do with their planned big hotel development in Ochos Rios, whose construction was to start in a few months.

At the same time, no country should, or ought to, surrender the right of its watchdog agencies to review agreements for the utilisation or disposal of state assets so as to ensure that public officials behave with probity, exercise proper fiduciary responsibility, and act in the best interest of taxpayers. So as disappointing as the Palace decision is, their action ought to be analysed in the context of these considerations. The timing of the move/announcement, too, is surprising, if not curious.

Palace Resorts, operated by Mexico’s wealthy Chapur family, already own a hotel in Ocho Rios, on Jamaica’s north coast. Nearly a year ago, it emerged that the former contractor general, Dirk Harrison, had investigated a 2016 decision by the Government’s Urban Development Corporation (UDC) to sell to Palace, through its Jamaican subsidiary Caribe Properties, two bits of real estate adjacent to the group’s Jamaican hotel.

The sale price of US$7.2 million, Mr Harrison concluded was based on independent valuations, between 39 per cent and 47 per cent below the market price for the properties. The UDC, he argued, didn’t stick out for a better deal because of the intervention into the negotiations by Daryl Vaz, the de facto minister for job creation and economic growth.

By the time Mr Harrison’s report came to public notice, his office had been subsumed into the new Integrity Commission, whose commissioners questioned ‘the validity of certain substantial conclusions” in it. Mr Harrison held fast to his findings, but the commissioners allowed Mr Vaz, and other persons against whom adverse comments were made, to respond to the conclusions, which were appended to the final document for submission to Parliament.

Mr Vaz insisted that the decision on the sale, and the price of the transaction, was entirely the UDC’s, which acted in accordance with government policy, given its ability to take action to facilitate development. That, in this case, included US$500 million in hotel investments in two phases: the creation of several hundred jobs during the property’s construction, and when the hotel was up and running, the payment of millions of dollars in taxes to the Government; and Palace Resorts’ undertaking to spend on Ocho Rios’ physical development.

Not surprisingly, at the height of the controversy, there were questions about probity of the deal and calls by the political Opposition, including a call by the leader of the People’s National Party, Peter Phillips, for an audit of the arrangement. However, little to nothing has been in the public domain about the deal for almost a year until Mr Vaz’s disclosure this week that Palace Resorts was ending the agreement, and seeking to retransfer the properties to the UDC. Claiming that the controversy had caused them much discomfort, Palace Resorts said they had to “rethink whether or not Jamaica is a suitable place to make a substantial, or, indeed, any investment”. That is not an easy pill for any country with minimal growth and hungry for investment to swallow.

IN GUESS MODE

It is not clear, however, whether Palace Resorts’ questioning of Jamaica’s suitability as a place to do business means that it also intends to pull up stumps on its existing Jamaican investment and why it took them so long – almost a year – to arrive at the decision. It is, perhaps, purely coincidental that the disclosure coincides with the COVID-19-induced downturn in the global travel and tourism industry.

Palace Resorts may well be justified in feeling peeved and picked on in the furore. That, however, should not weaken Jamaica’s commitment to transparent anti-corruption and good governance mechanisms. Neither should a society be willing to barter principle of accountability for expected economic gains. For, both ideals are not mutually exclusive. Of course, all parties to any arrangement should expect fairness.

Further, Dirk Harrison’s adverse findings were not against Palace Resorts, but of Mr Vaz’s alleged interference. As a private-sector company, Palace Resorts would, rightly, have pursued its own interests, which it says it did, in accordance with the law and best practices. The company believes that a fair deal was struck. The controversy was about whether taxpayers fared as well.

The opinions on this page, except for The Editorial, do not necessarily reflect the opinions of The Gleaner.