Open Letter to the Liberian Senate on the RIA Project
December 5, 2022
Dear Honorable Senators,
SUBJECT: Open Letter to the Liberia Senate Requesting the Review and Repeal the East International Group Concession Containing the Roberts International Airport Highway Project.
In the interest of our country, I write this open appeal, requesting a prompt review and repeal of a concession ratified two years ago in favor of a Chinese owned company called East International Group. My reasons are provided in the succeeding arguments below.
This concession, ratified in the 2020 session of the National Legislature and which amended a previous community road concession awarded to East International Group to include the expansion and reconstruction of the Roberts International Airport Highway, was done outside the established norms and laws of public-private partnership (PPP) procurement, as the available evidence revealed. And after the painstaking task of piecing together the facts, I can unequivocally say that it is intentionally lined with loopholes that are already being exploited through corruption and the misappropriation of public funds. Furthermore, I'm eager to inform you, honorable Senators, that certain critical information was either intentionally withheld from you or slipped your mind during the ratification of this concession. In view of the above observations, I’m penning this open letter requesting a prompt decision to review the concession and, if found adequate based on the evidence provided, immediate action be taken to repeal the act.
Honorable Senators, the construction of public infrastructure projects such as turnpikes, railways, and even horse-cart tracks by private firms is not a new practice; it has lessons embedded in antiquity that can be reached easily with the use of a single search. To have enacted a concession of a major highway through a PPP arrangement and do so incorrectly, so that it leaves huge room for corruption and is more disturbingly awarded to unarguably the most incompetent engineering company in Liberia, is a misstep, either on the part of our honorable senators, who are given the democratic responsibility of oversight of public affairs, or the entity of government that advises the country on the regulation and implementation of projects in the infrastructure sector. Given that you honorable men and women are at the top tier of our checks and balances system and would laboriously do everything right for this country and its people, my forgone conclusion is you were wrongly advised.
To have enacted a major concession in the amount of $116 million, which in context is nearly 23% of Liberia's average $500 million budget, meant some thorough research and debate must have been held on the floor of the senate. Within the confines of such research, debates, inquiries, etc., the fundamental questions that propel policy and law-making must have been addressed. These questions established the worthiness of any project or concession to be enacted as a law. And I will endeavour to address this letter through the lenses of these questions, as I believe they cover the breadth and depth of the project's concerns. The questions are:
- How does the concession help improve the economy of Liberia?
- How does it align with the established procurement laws of our country?
- What future implications will it have on people, the environment, and culture?
So, let’s examine the concession through the lenses of these established fundamental law-making questions.
How does the RIA Road Concession help improve the economy of Liberia?
When a private company is asked to take on a project or makes an unsolicited proposal to fund a public project through PPP, there are established economic and technical studies, as well as administrative and financial documents prepared by the company or its investment arm, to prove that the project is economically viable, that the company is technically competent to execute the project, and that the administrative procedures, which include the legal processes and its access to private capital from a recognized financial institution, are legitimate, well outlined, and agreed upon by the parties involved.
Now, the issue here is the wanton disregard of these documents and procedures by East International Group and the government entity that fronted for the company to be the concessionaire of the RIA corridor.
It took months and barrage of communications requesting East International Group to present the letter from the financial institution that they claimed had given them a line of credit and to no avail. The Ministry of Public Works did not receive a single document from East International Group. So, what document did East International Group or the Ministry of Public Works present to you, honorable senators, that provided an understanding of the economic improvements the concession in general and the project in particular will have on the economy of the country? I’m keen on this because the economic indicator, just as its name suggests, just doesn’t provide economic dividends from the project; it answers one of the fundamental law-making questions. The economic indicators examine and compare various investment options, and investment decisions are made from the viewpoint of economic returns from the project. It aids in better resource allocation so that investment benefits not only the local and national economies, but also the regional economies. And these are always represented by factors such as:
- The Net Present Value (NPV)
- The Economic Internal Rate of Return (EIRR)
- Cost-Benefit Ratio (C/B)
- Environmental and Social Impact (E&SI)
These are internationally acceptable standards used to examine the economic, financial, environmental, and social viability of the concessions or projects.
For instance, when the Japanese Government through its development agency - Japan International Cooperation Agency (JICA) concluded a bilateral agreement with the Government of Liberia to expand and reconstruct the Somalia Drive, now the Japan Freeway, JICA commissioned a renown international consultancy firm called Katahira & Engineers International to conduct a detailed study of the road. After nearly 16 months, the study, which was presented to JICA and subsequently to the government of Liberia, provided the fundamental answers to the questions of the economic benefits of the road as well as the other important determinants of the viability of the project. The stipulated economic indicators that triggered the need for investment in the project were:
NPV of $47.4 million
EIRR of 20.72%
C/B ratio of 3.12
E&SI in Category A
The same approach was considered by the World Bank (WB) before the financing agreement could be signed for the rehabilitation of the Red Light–Gbarnga corridor. The stipulated economic benefits as well as the factors for project viability were:
NPV of $ 48.8 million
EIRR of 23%
C/B ration of 1.5
E&SI in Category A
The same standardized procedure was instituted for the Africa Development Bank (AfDB)-funded roads in the southeast of Liberia. For example, the rehabilitation of the pavement surface of the Harper-Karloken (50 km) Corridor had an
NPV of $ 25.28 million
EIRR of 17.6%
C/B ratio of 1.3
E&SI in category A
On the contrary, the RIA Project, which is the first major mega construction project after the civil war to be solely handled by the MPW without the WB or AfDB procurement and technical support systems, is clothed with inconsistencies and deviates from internationally accepted standards, intentionally so for planned corrupt acts to be carried out.
Honorable Senators, let’s agree that there is a burning desire from your constituents for the Roberts International Airport Highway to be modernized, so you all had cold feet on requesting the necessary documents and asking the hard questions; however, there should be some minimum information or resources that help propel your decisions. So, were you given the individual economic indicators as discussed above? If not, then how? What did you look at to enact the concession? How were you instituting oversight? How were you representing the interests of your people? Because those indicators speak directly to what your people stand to gain.
For the sake of this argument, let's cut the company some slack and agree that its aim is to make profits, since it is a private firm and cares nothing about the economic growth of our country. Even with that, the company still must conduct a financial valuation of the project. The financial valuation estimates the profit accruing to the project operating entity, in this case, East International Group. Even if it decides to temper the financial valuation to lower her profit margins to show the government that the company is daring to undertake the project at little profit to itself, it is still a cardinal requirement that the company present such a valuation. This document wasn’t also presented by the company. For example, when IMC Worldwide expressed interest in obtaining the Kesselly Boulevard–12th Street corridor through a PPP arrangement, it did so with a complete financial valuation of the project and a clearly stipulated profit margin. IMC Worldwide was proposing to construct the road at a capital cost of $80 million and an operating cost of $3 million for 30 years at a profit margin of $1.3 million a year.
So, if East International Group was truly an infrastructure investment and construction firm that sought honest business opportunities with the aim of working in tandem with public sector and government entities to bring to reality its clients’ vision and make a genuine profit, it would have done so with concrete documentation.
How come this company, which, by the way, is owned by an individual Chinese citizen, contrary to the state ownership system of every major company and corporation in China, presented no concrete documents but was awarded a $116 million concession? Not even an unsolicited proposal or letter was written by East International Group to the government requesting to pre-finance the road. The conversation leading up to the previous concession being ratified was all gentlemanly talk at the Ministry of State, with instructions being sent orally to MPW. And I know that the company presented none of these documents because, as the project manager then, I requested these documents a thousand times and received none.
As we all ponder the huge gap left by the company's non-compliance with the necessary requirements, let’s proceed to the second question. How does the RIA Concession fit into the established public procurement and concession laws of the country? As we know, the Public Procurement and Concession Commission (PPCC) was enacted by the legislature to govern and regulate the procurement of public goods, services, and works. This mandate is not limited; it cuts across every sector with a procurement function. And every entity that procures public contracts must do so within the confines of the PPCC Act. However, it is clear that East International Group somehow managed to get into our system and bend our public procurement laws to fit their company. How did they do it, and who helped them? If you senators put forth the fortitudes and moral obligations you have to lead properly, East International Group and its affiliates, as well as individuals from the Ministry of Public Works, should be invited to answer questions, and an investigation should be launched.
On the first count, East International Group did not submit any documentation indicating interest in funding the RIA road, and the Ministry did not distribute any Request for Expression of Interest (REOI) instructing companies to express interest in the road. As I write, neither the Ministry nor East International Group can show any document that they presented as legal procurement documents for the RIA Road Project. There was no legal tender process established by the ministry for the RIA Road Project.
It became obvious when I took over as the project manager that the entire project was initiated through a gentleman's conversation at the Ministry of State. The Liberian fellow, who is identified as the local manager of East International Group, became the well-known liaison between MoS and MPW. How, in a society led by rules and regulations, did we alter a concession to include $116 million in an undocumented manner? And the Ministry of Public Works was pressured to prepare a draft amendment for the East International Group Concession.
Secondly, and most egregiously, East International Group deceived the entire Senate with its false claim that it had the resources to cover the pre-financing of the RIA corridor. After a thorough review of the company’s previous concession, it was clear that the company had no unused or unassigned financial capital to cover the RIA Highway Project. It waited for the ratified concession and a signed contract agreement to use in the financial market to obtain funds. Even with the contract in her possession, she has not been able to raise the capital needed to fund the project, which has forced the government to fund the project as a traditional EPC contract, making payments directly from government revenues. while companies such as CSE, Michigan Global, etc. wanted to finance the project through the tolling system, which could’ve led to the road paying for itself.
This is a deception led by East International Group through its Liberian manager and cronies who lied to the entire government and twisted our procurement process, and none of you senators find this a gross violation of our procurement law? While there were legitimate companies that had shown the Ministry viable alternatives to funding the project without incurring capital costs for the government, but instead the Senate enacted a concession for the company that presented no legitimate documents and lied in the procurement process.
While we stared in the face of the manipulation of our procurement process, it will interest you to note (if you are not aware already) that the amended concession indicated that a small Liberian company called Imperial 88 should be the consulting firm for the approximately 50-kilometer dual-carriageway Roberts International Airport Highway. But wait, that is not even the annoying part. The annoyingly corrupt act was that the same Liberian fellow who is the Managing Director of East International Group and has served as the liaison between Ministry of State and MPW during the concession preparation is the owner of Imperial 88, the consultancy firm inserted into the act as the RIA Project consultant. How come the same individual who represents the contractor and is a legitimate employee of the contractor (East International Group) is selected as the consultant? In the construction industry, there is a serious check and balance system. That is why consultants work on behalf of clients and inspect the contractor's works.
Interestingly, the small Liberia company in question was registered the same year the previous concession was awarded to East International Group. Under the procurement of the previous concession, it was clearly indicated that MPW, which is the technical arm of government, is responsible for hiring the consultant who is to represent the government in quality assurance, contract management, supervision, etc. But in the ratified concession, on the contrary, the Senate inserted a small Liberian company with no more than five employees to be the consultant for the nearly 50-kilometer RIA Corridor. It was after several months of internal disagreements and many more advisories written to the then Minister from the Project Management Unit about the improper project management structure, that a decision was single-handedly made by the MOS instructing the MPW to hire the Korean firm Ilshin E&C. And even with that, the Korean firm was recruited through an illegitimate procurement process considering that it cost the works was above the threshold establish by PPCC for single sourcing.
In the months leading up to the commencement of the works on the road, the owner of the small Liberian company became the most influential individual in the ministry and on the project. He was so prevalent in the ministry’s decisions that he was coded like the ministers are in the ministry. He was called M12 (fun fact). A private businessperson treated as a government official. The inclusion of a small Liberian company whose technical capacity is nowhere near that required of an industry consulting firm to supervise such work as the Ministry's consultant on the RIA Project opened the door to corruption in the project. These are inconsistencies that warrant the Senate’s attention and a review of the concession.
In the third and final lens of this letter, I would like to reveal what is most egregious. The implication of the increase in the cost of the project when an increase in cost cannot technically be justified. And if logic or maybe just common sense is anything we use in this country, East International Group, Imperial 88, and its cronies will be nowhere near a project as unique as the RIA Highway.
The Ministry of Public Works had been accumulating options that could’ve been used for the construction of the road. And I personally think the Ministry refused to present those options to you, Senator, because of the corruption that has been planned within the project. which I believe is the most important reason why the concession must be repealed. Because these options are still available and can be triggered to action immediately, they will save the country millions of dollars that can be shifted to other equally significant projects.
Honorable Senators, there are a number of private companies that have expressed interest in obtaining the RIA road through a legitimate PPP arrangement. While being presented with the East International concession option, were you shown the alternative options of private firms that had expressed interests and conducted scoping studies, pre-feasibility studies, and feasibility studies on the RIA at their own expense?
I’m sure certainly not, and therefore I believe the Ministry of Public Works misled you honorable senators into believing that East International Group was our best option for the PPP, not telling you that in fact the company was the least attractive option in comparison to all the PPP proposals submitted for the RIA Highway Project over the years. And the difficult question and obvious task at hand is to find out how the company with the least attractive PPP proposal was awarded the concession.
Well, honorable senators, I worked with the Ministry of Public Works for 10 consecutive years. And my last position before my resignation was manager of the RIA Project. So, I believe I’m better positioned to uncover some facts that are needed in reviewing, repealing, and instructing a retendering of the RIA project.
So, let’s examine the options we had for the RIA Highway Project. Firstly, I would like to give you a detailed list of some of the firms that applied to fund the RIA Project and their investment options, and lastly, I will explain the implications of the extra amount added to the current project cost. Some of the notable firms that submitted proposals to fund the RIA Highway Projects are:
- Michigan Global Investment, an American-based global infrastructure investment firm in partnership with Whychan, a tier-one Korean construction firm, presented a package to the Ministry of Public Works. Their proposal estimated the cost of the civil works at $80 million. Management, supervision, consulting, and coordination were estimated to cost $ 20 million. This brought the total cost of the RIA Highway Expansion and Reconstruction to $100 million. The company's proposed arrangement was a PPP, with all investment capital covering the construction and management coming from the private consortium. Its proposed mode of repayment arrangement was the installation of a toll collection system and a profit-sharing option with the government. The initial term of the toll management agreement was 35 years.
- Sino-Hydro Corporation Limited, a state-owned Chinese company, did a complete feasibility study of the RIA road and proposed a $94 million complete project envelope. Interestingly, this company's proposed cost for civil works was $ 83 million, and the supervision, coordination, and management cost was $11 million. Its funding arrangement was a proposed grant from the Chinese government and loans from the Chinese Exim Bank. The repayment period was 20 years, with a 1.5% interest rate. This also included the option of tolling the highway to cover the loan portion.
- CAMC - another Chinese company that did a scooping study of the road. It was the only company with a price totally outside of the price range. Its cost was $ 260 million. However, the proposed arrangement for financing was a tolling system with a 40-year operational term and payment structure.
- Broad Vision Engineering, a Korean firm, submitted an unsolicited proposal with a $81 million civil works cost and a $ 17 million management, consultancy, supervision, and coordination cost. The tolling arrangement with the special purpose vehicle (SPV) being setup to fund the project was part of their proposal. This arrangement will require a minimum financial contribution from the government.
- China Harbor Engineering, a state-owned Chinese company, conducted a full feasibility study of the RIA Highway. It proposed a civil work cost of $84 million and a management cost of $12 million. While it proposed financing as a loan from the Chinese government, it also suggested the tolling system as a possible financing alternative.
- ILSHIN E&C - a Korean firm, did a complete scoping and feasibility study of the project. Its proposed cost was $83 million, covering civil works. The initial management and consulting at the time of the validation workshop held in Korea was estimated to be $ 16 million. Interestingly, the Korean company's proposal is being used for the management and supervision of the construction, which were inflated because it was the document being used by East International and its conglomeration to construct the project.
As we can see from the proposals presented by all the reputable firms that conducted studies on the corridor, civil works costs have remained fairly accurate around $ 80- 84 million. The management cost costs have fluctuated among companies because the variables for management were different. However, the overall cost of the project had remained clearly below $100 million. How come in the current contract being implemented by East International Group, there is more than $ 16 million added to current cost of the project. What justified the additional $16 million, understanding there is a demand for financial resources for other equally important projects.
For instance, a primary healthcare clinic serving a catchment of 3,500-12,000 people can be built for less than $ 2 million, according to the Ministry of Health Standard for Health Infrastructure. Given this, the $ 16 million added to the RIA project cost, which cannot be justified technically, could have provided more than 7 additional health care facilities in areas such as Moore's Town in Rivercess, Mendikorma in Lofa, Grandcess in Grand Kru County, and so on. Based on rural and renewable energy estimates, $26 million can build a mini solar grid for a community of 5,000 households. Paynesville is rapidly expanding without centralized sewer facility. $ 26 million can fund a comprehensive feasibility study for the city's sewer system. There are a lot of infrastructure demands, and our leaders should lead with an understanding of these pressing issues.
Finally, and most importantly and as we have seen, the PPP arrangement for road funding is a glorious opportunity for every government, especially if the project is a greenfield investment that is targeted to bring external capital into the domestic economy. The RIA Project was a perfect opportunity, and I still believe that with your intervention, Honorable Senators, we can salvage this road project and get it paid for completely by the private sector. The proposals presented to the ministry contained clauses for a tolling system that could generate the money needed to pay back the investors who will invest in the project.
Using a road toll system as a prudent and innovative financing mechanism for investment in major public infrastructure projects is not new. It has been in use for years, especially in developed countries, and most recently in developing countries. Examples can be found in Brazil, China, Mexico, South Africa, etc. most notably in Senegal, the successful completion of the Dakar – Diamniadio toll road was funded through private capital. In fact, the Dakar – Diamniadio toll road had become a model for PPP in Africa.
So, why are we paying for this unique greenfield potential private sector investment project with traditional means? Is it because our Senate has refused to provide proper oversight? Your question to answer, your call to make.
Eric Gabriel Jenn-Judgges, M. Eng, M. Sc, B.Sc. CE
A Patriotic Citizen