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Environmental Impact Statements Need Financial Teeth

Posted on November 14, 2007

One of the criteria for approving a resort development on small islands is — or should be — the economic viability of a project.In 40 years of observing development projects around the Caribbean, and other island areas, it is clear that even worse than a BAD development is a FAILED DEVELOPMENT. I am less upset about the impacts of most of the recent project proposals in the British Virgin Islands — as grotesque as some of them are — if they are successful than I am about the consequences of a FAILED project, with unbuilt or dysfunctional infrastructure, lack of economic returns to the BVI, and failed maintenance for critical pieces of the plant and equipment.In permitting major projects in the BVI I think it is important that:1.) Government make a much more thorough examination of the financial viability factors for any significant project (including those at the scale of Little Bay Lambert). These overall project plans should include interim performance milestones that would permit a determination that a project was failing. Such performance factors might include number of units sold by a given date; financing guarantees for future phases under X terms secured by a given date; or construction completion schedules;2.) Developers need to provide legally binding evidence of the availability of financing sufficient to complete the project (this consideration should include an examination of cash flows, since major projects are very front-end loaded);3.) The provision of major guarantees or bonds by the developer to ensure that Government can quickly and easily access the full costs of recovering or restoring a project that does fail because of the inability of the developers to deliver on their promises.Given tightening global financial markets, and the likelihood that they will remain tight for several years, careful examination of, and stricter requirements for financial viability guarantees should be a useful tool in preventing failures of development projects in the BVI. The underlying idea in development proposals in the BVI is a contract between Government and the developer that in return for the use (increased stress) of community resources, that the developer will produce measurable benefits. It’s time to enforce that with money.

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