Wednesday, November 14, 2018

Border security tax is bad for Gambia's economy, bad for tourism and bad for Barrow's government

Sidi Sanneh 
The persistent and flagrant violations of the open tender process, otherwise designed to encourage and promote competition among prospective bidders, is proving to be the bane of the Barrow administration. 

We have seen recently such tender violations in the SEMLEX case, the CHINA BRIDGE AND ROAD CORPORATION and now with the SECURIPORT contract for the provision of border security services at will impose a $20 security tax on arriving as well as departing airline passengers passing through Banjul International Airport.  This means that every tourist visiting The Gambia will see an additional cost of $40 every time they visit the Gambia.

There is no evidence that the award of the contract to SECURIPORT was tendered.  And if exempted, no proof exists that the rationale for the exemption.  The lack of transparency in the tender process almost always results in the wrong company being selected at greater cost to the public treasury than when the project is tendered in an open and transparent fashion.

The impact of the proposed tax is devastating because the demand for air travel is highly sensitive to air ticket prices as well as incomes.  For instance, a 10% increase in the ticket price can result in a 10% reduction in the demand for travel for international long haul leisure flight (elasticity -1.0).  It is therefore important for government to plan well in advance for a series of consultations and to engage an air travel consultant, if necessary, with stakeholders, airlines, tour operators, hotel owners and local tourism-based enterprises.

Obviously, the process that the government adopted lacked transparency and was deliberately exclusionary.  Not only were tour operators excluded from the process that resulted in the border security tax, even government departments such as the Ministry of Finance responsible for all fiscal matter of the Government, the Ministry of Works which is the line ministry of the Gambia Civil Aviation Authority responsible for managing Banjul International Airport and as far as be ascertained, the Tourism Board.

As we have reported recently, the contract was negotiated and signed by the Minister of Interior, Director General of Immigration and the Cabinet Secretary for Government and The General Manager of SECURIPORT (Gambia).  Conspicuously absent from the tender award and negotiations process were the Ministry of Finance responsible for all fiscal matters of the Government, the Ministry of Transportation, Works and Infrastructure,  Gambia Tourism Board and the Gambia Civil Aviation Authority.  It is evident that government's preferred process lacked transparency and was deliberately exclusionary.

The Head of Operations of Meeting Point, The Gambia, a subsidiary of Germany's FTI one of the world's largest tour operators regrets to confirm that there was no consultations and as far as he can ascertain no one from the industry was involved in the process of assessing the new tax.  According to Meeting Point, "not even Gambia Tourism Board and the Gambia Hotel Association were consulted prior to publishing this [meaning the tax] and as far as I am informed, are adamantly opposed to this border tax."

The subsidiary of FTI believes that the border tax will probably discourage many from travelling to The Gambia for the following reasons: (i) the demand for air travel is price sensitive (ii) for many tourists, especially from new markets, Gambia is often not the first choice and when the price is high, prospective visitors will choose another destination  and (iii) the very existence of what is labeled as a "security tax" gives the feeling of insecurity i.e. the feeling that The Gambia is an insecure place; its a bad PR job. 

FTI finds the introduction of such a huge tax increase in the middle of the season is something unheard of in any of the markets they operate in. Although FTI has not altered its plans for the Gambia, the same cannot be said of some of its partners where the Gambia is a new product.  In such markets, they are seriously considering withdrawing because the manner in which the tax was being introduced suggests that the Gambian market is unpredictable and cost planning difficult.

Imposing such a tax will  affects FTI's plan to promote summer tourism because, unlike winter months, there are many destinations Europeans can select from at that time of the year.   

The mere fact that government is thinking of implementing a security tax "may deter foreign investments because it shows how unpredictable the government can be and gives the impression they focus on short-term potential gain instead of long-term sustainable growth for the benefit of the Gambian economy and its people," the Head of Operations opined. 

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Tuesday, November 13, 2018

French aid to Gambia comprises entirely of grants, says Gambia's Finance Minister

Mamburry Njie -  Gambia's Finance Minister 
The international press reported last week that France's aid package to The Gambia signed last week in the Gambian capital may have gone against IMF warnings to the government that 50% or future financial aid package must be in the form of grants. 

The claim implies that the Euro 50 million French aid package - significantly more than the Euro 30 million press reports - did not meet this criteria and thus will not meet the approval of the IMF.**

Ignoring the Fund's warnings may result, not only in the derailment of the country's Staff Monitored Program but may also affect its standing with other development finance institutions such as the World Bank and the African Development Bank. 

The Gambian Minister of Finance in an email to us confirmed that the French aid package signed recently in the amount of Euro 50 million was the pledge made by France soon after the conclusion of the 2-day Donors Conference on the National Development Plan held last May in Brussels. 

He also confirmed that the entire package, contrary to current reports, is in the form of grant and therefore does not contravene any agreement and its is within the IMF guidelines as it relates to the proportion of grants to loans in any future aid package the country will be contracting.

The Euro 50 million French aid will go towards the financing of access to water in the urban areas to improve and develop sustainable public services and agriculture with the objective to increase food self-sufficiency and develop commercial crops.

Additional financing from the aid package will go towards budget support, the financing of the special audits of state-owned enterprises, support negotiations with external creditors to help the country restore debt sustainability and also to help government ensure that specific health expenditures voted in the 2018 budget are committed and spent before the end of 2019.

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**The difference between the reported figure (Euro 30M) and actual grant figure (Euro 50M) remains unexplained.  As soon as we receive clarification either from government or the French Development Aid Agency (ADF), we will be happy to report back.     

Monday, November 12, 2018

Airport/border security tax contract signed with SECURIPORT

The decision by the Barrow administration to impose a $20 airport/border security tax on passengers going through Banjul International Airport has attracted immediate negative response from IATA and the tourist operators. 

The fact that negotiations have already been concluded and a contract signed with SECURIPORT, a Washington-based security firm has further complicated matters and has posed a real threat to the country's tourist industry.

The contract between Government and SECURIPORT was signed on 21st September, 2018 with the Minister of Interior, Mr. Ibrahim Mballow,  Director General of Immigration, Mr. Buba A. Sagnia and Cabinet Secretary - Office of The President, Mr. Ebrima Ceesay, all three signing on behalf of the Government of The Gambia and General Manager, Securiport Gambia, Mr. Luc Keppens, as the sole signatory for SECURIPORT. 

The contract is for a period of 5 years, according to sources. The profit sharing formula or any financial aspect of the contract, for now, remains unknown. 

Under Addendum IV, the contract is for the provision of Civil Aviation and Immigration Security services and E-Visa Management System services for the Government of The Republic of The Gambia under the Build-Maintain-Transfer modality.

 In view of the threats posed by international terrorist groups in the sub region and in order to identify other dangerous individuals such as drug traffickers and other criminals that would use the Banjul International Airport, the government decided to upgrade its system for the screening of arriving and departing passengers to ensure the safety of the air transportation industry. 

To pay for the cost of the system upgrade, "government has decided to request the airlines to charge a fee to the direct beneficiaries of the system which are all the air passengers arriving and departing the national territory through the international airports."   

The border control fee will be $20 for each arriving and each departing passenger which shall be collected directly by all the airlines operating in The Gambia.  The Addendum made reference to ICAO's Doc 9082 which provides the framework within which charges and taxation to aid in the decision making process for government and airlines to arrive at mutually acceptable conclusions based on the four principles of non-discrimination, transparency, cost relatedness and consultation with users.

Effective 15th January, 2019, the scheme is expected to be operational with "airlines being 100% responsible for fee collection and its payments made monthly to the Gambia Civil Aviation Authority (GCAA). A late payment fee of 5% will be levied against airlines that will include the impoundment of aircraft and/or the cancellation of landing rights.

Airline crew and staff, children 0 - 2, passengers whose transit time does not exceed 24 hours and passengers whose flights are diverted to the Banjul International Airport re exempt from paying the border security tax. 

As we noted previously, tour operators and IATA are all opposed to the border security tax based on the principles outlined in ICAO's Docs 9082 and 8632 (on taxation) which would require extensive consultations with stakeholders.  The airlines are also demanding the cost bases of the tax, supported by breakdown of costs and revenues as well as traffic forecasts and airport activities, documentation that has been absent up to this point.

This is a developing story.... 
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In subsequent blog post, we will take an in depth look at SECURIPORT, its track record, the manner in which the contract award was handled and why only the Interior Ministry and the Office of The President appears to have been the only one involved in the procurement process, if there was one.  What legal advice was provided, why the Finance Ministry appears to have been left out of the process when the project has huge fiscal implications.  What of the Tourism Ministry?  What about GCAA that runs the airport? Does the threat warrant the huge cost to the economy, to tourism.  This issue is more than a security problem.  

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Airport/border security tax will result in D167m decline in GDP and approximately 2,000 job losses, says IATA

The International Air Transport Association (IATA), the trade association of the world's airlines has issued a stern warning to the Government of The Gambia against its decision to introduce what the Barrow administration labeled as border security tax, if levied as is, will have a devastating impact on tourism and air travel into the country. 

It is a $20 tax schedule to take effect on the 15th January, 2019.  Initially, the proposal was for a $40 tax  subsequently halved to its current level which will still going to impact both the economy and tourism negatively, according to industry experts.

Based on industry figures, the introduction of the border security tax will result in 8,500 fewer passengers departing from Banjul International Airport.  The impact will be shared between those travelling within Africa (- 4,200) and those travelling to/from Europe (- 4,000).

The impact to the economy will be equally devastating.  Based on the UN's World Travel Organization (WTO) estimates, 35% of visitors to The Gambia arrive by air and the percentage of those coming from outside West Africa is assumed to be 100%.  The World Travel and Tourism Council (WTTC) on the other hand estimates that total travel and tourism account for 20.1% of Gambia's GDP, generating D9.8 billion and supporting 107,500 jobs.

Consequently, a 5% reduction in demand would lead to a reduction of D167 million in GDP and a reduction of 1,835 in the number of jobs supported by aviation.

IATA's warning to the Barrow administration was accompanied with a reminder to its international obligation as member of International Civil Aviation Organization (ICAO) whose regulatory functions include policies on charges and taxation for decision-making processes, based on these four principles namely: (i) non-discrimination (ii) transparency (iii) cost relatedness and (iv) consultation with users.

As regards to cost relatedness, IATA is yet to be convinced that adequate consultations took place between government and airlines.  They are, therefore requesting that airlines operating in the Gambia be provided with information on the cost bases of the tax, supported with a breakdown of revenues and costs as well as traffic forecasts and airport activities.

In the absence of user consultation and transparent financial information, IATA and its member airlines will not be in a position to evaluate and appreciate the cost relation of the immigration/security services that will be provided and the level and structure of the related user charges.  IATA is thus requesting that a proper consultation mechanism be established so the requested information can be jointly analyzed.

IATA's letter to the Hon. Lamin Jobe, Minister of Transport, Works and Infrastructure dated 6th November, 2018, is recommending the suspension of the border security tax based on the issues raised therein that includes what is referred to as "a meaningful consultation and proper discussions with the airlines."

As regards the introduction of the new immigration/security measures, performance indicators - such as waiting time in security queues, passenger satisfaction, number of security staff, number of passengers screened per hour etc. - must be put in place to measure the quality of service, productivity and cost effectiveness of the new measures.

Government has yet to respond to the IATA letter and the threats by local tour operators to withdraw from the Gambian market or scale back their operations.  The Government has suddenly find itself in yet another dilemma that threatens the country second biggest foreign exchange earner - tourism.  It appears that the government has committed yet another infraction of standard procurement rules and procedures by entering into a contract with SECURIPORT without inviting proposals from other companies that could provide the same service. * 

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* The subsequent blog posts we intend to take a closer look at the SECURIPORT contract, the procurement process and related issues. 

Thursday, November 8, 2018

Gambian economy expected to grow at 6.6% this year, Finance Minister informs cabinet colleagues

Sidi Sanneh 
The Gambian Finance Minister reveals that the Gambian economy is expected to grow at 6.6% in 2018, which is 2 percentage points higher than the growth registered in 2017.

The convening of the cabinet session was part of the 2019 budget preparation process to prepare cabinet ministers for, what will likely be, the introduction of stringent belt tightening measures designed to lift the economy from its anemic state.

The Finance Minister stated intention, according to the official release, is to instill the ever illusive fiscal that has been promised to our development partners over the years with little success.  As part of the new austerity policy, a temporary freeze has been placed on recruitment into the civil service "unless extremely necessary".

We particularly welcome the rationalization of Gambia's representation abroad.  We have too many missions and embassies in far-flung countries that must be downgraded or closed.  In fact, this should have been implemented by the Jammeh regime back in 2016 as part of the Staff Monitored Program.  We hope that this time, the government will garner enough courage to bite the bullet for once.

Other austerity measures include strict adherence to the travel budget limits imposed on sector ministries.  The release is silent on presidential travel and we hope during the budget exercise, the overall budget of the Office of the President and the Office of The First Lady will be subject to the same prudent allocation and management going forward.

On the government revenue side,  effective January 2019 no physical cash disbursement will be allowed at service points as government initiate the digitization of the payment system to reduce level of cash transactions in the system.

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Tuesday, November 6, 2018

Gambia Government wins a one year temporary reprieve from paying Carnegie Minerals $23 million

The contract dispute between the Australian mining company Carnegie Minerals and the Government of The Gambia in 2008 that resulted in a judgement in favor of Australian company is back in the news.

The arbitration at the World Bank's International Center for Settlement of Investment Disputes (ICSID) resulted in an award worth $22 million plus interest and arbitration costs. 

According to African Intelligence newsletter, the ICSID has decided to grant the Government of The Gambia a one year reprieve.  Government, represented by the law firm of Mayer Brown, sought to have the judgement annulled via arbitration and has stalled on its payment to Carnegie in the hope that the court will rule in its favor.

The ICSID's three arbitrators, Canadian lawyer Donald M. McCrea, Nigerian Dorothy Udeme Ufot and Spanish national Bernado Cremades, agreed to stay enforcement of the award against the Gambia for a period of one year on the strength of the argument that for the government to pay the $23 million award could further jeopardize the country's fragile economy.   

Gambia to pay Carnegie Minerals over US$ 22 million for breach of contract

This is a re-publication of a blog post first published in July 2015
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Astron/Carnegie, the Australian mining giant has, in a company news release announced that the World Bank's International Center for Settlement of Investment Disputes (ICSID) has awarded damages in its favor.  Carnegie (Gambia) Ltd took The Gambia government to arbitration in 2008 for breach of contract.

For background information leading up to the decision by the ICSID, check hereand here.  You may also want to check this blog, as well, for a complete picture of the story which will end up costing The Gambia several more million before it is all over with.

Total damages awarded to Carnegie Minerals (Gambia) Ltd, a subsidiary of Astron/Carnegie of Australia is in the region of US $ 22 million of which about $ 18 million is for breach of the mining licence by Yaya Jammeh, plus interest and arbitration costs of roughly US$ 1.5 million.

According to the Astron/Carnegie release, there is an expiry date by which a party must lodge an appeal.  It is uncertain how long the Jammeh regime has to lodge an appeal, if the government will pursue the option.  If not, the execution of the ICSID judgement which will certainly bankrupt an already financially distressed regime.

As regards Astron/Carnegie, it says in its release that "Astron will consider its options for enforcing the judgement against the Gambian government,"

One more reason why the Jammeh regime MUST GO and NOW.