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Viewing cable 06BRIDGETOWN1165, ST. VINCENT AIRPORT PLANS RELY ON FOREIGN AID AND

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Reference ID Created Released Classification Origin
06BRIDGETOWN1165 2006-07-07 13:06 2011-08-24 01:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Bridgetown
VZCZCXRO2017
PP RUEHGR
DE RUEHWN #1165/01 1881306
ZNR UUUUU ZZH
P 071306Z JUL 06
FM AMEMBASSY BRIDGETOWN
TO RUEHC/SECSTATE WASHDC PRIORITY 2864
INFO RUCNCOM/EC CARICOM COLLECTIVE
RUEHCV/AMEMBASSY CARACAS 1465
RUEHKL/AMEMBASSY KUALA LUMPUR 0035
RUEHIN/AIT TAIPEI 0115
RUMIAAA/HQ USSOUTHCOM J2 MIAMI FL
RUMIAAA/HQ USSOUTHCOM J5 MIAMI FL
RUEHCV/USDAO CARACAS VE
UNCLAS SECTION 01 OF 02 BRIDGETOWN 001165 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
SOUTHCOM ALSO FOR POLAD 
 
E.O. 12958: N/A 
TAGS: EAID EAIR ECON EFIN EINV PGOV PREL CU MY TW
VC, VE, XL 
SUBJECT: ST. VINCENT AIRPORT PLANS RELY ON FOREIGN AID AND 
DEBT 
 
REF: A. BRIDGETOWN 609 
 
     B. BRIDGETOWN 368 
     C. 05 BRIDGETOWN 1867 
 
1. (SBU) Summary:  The ambitious plan put forward by the 
Government of St. Vincent and the Grenadines (GOSV) to expand 
two of the nation's existing airports and construct a major 
new international airport will rely on substantial foreign 
aid and runs the risk of miring the country in debt.  These 
projects are to be financed through a combination of public 
funds and assistance from regular international donors 
Taiwan, Cuba, and Venezuela.  Malaysia may also be involved 
in financing and possibly managing the new airport.  Should 
this strategy succeed, it could elevate St. Vincent into a 
major tourist destination but also add further financial 
burdens to a country that was recently warned by the IMF 
against taking on new public debt.  End summary. 
 
------------------------------- 
New Airports to Develop Tourism 
------------------------------- 
 
2. (U) St. Vincent and the Grenadines plans to expand two 
existing airports and construct a new international airport 
in an attempt to develop its tourism sector.  Like other 
Eastern Caribbean island states that have witnessed the 
erosion of their once agriculture-dependent economies, St. 
Vincent sees its economic future in tourism rather than 
bananas.  Limiting the country's ability to attract more 
tourists is the diminutive size of its existing airport that 
cannot accommodate large jets and receives only small 
regional carriers.  A lack of direct flights from North 
America and Europe has restricted tourist activity to those 
travelers who will take the time to transit through third 
countries or can afford to fly on small, private jets 
directly to exclusive resorts in the Grenadine islands. 
 
------------------------------------- 
Improve One Airport and Build Another 
------------------------------------- 
 
3. (U) In the near term, the country's main airport, the 
small, outdated E.T. Joshua Airport, will be improved through 
the construction of a new terminal and related facilities. 
Estimated at US$10 million, this project was set to begin in 
June but has been delayed by the GOSV's inability to identify 
a suitable contractor.  The improvement of E.T Joshua Airport 
is considered a temporary fix, and St. Vincent is making 
preparations to construct an international airport that can 
accommodate large aircraft flying directly from North America 
and Europe. 
 
4. (U) The GOSV has made some progress since August 2005, 
when Prime Minister Ralph Gonsalves first announced his 
intention to build Argyle International Airport at a cost of 
US$180 million (ref C).  The SVG International Airport 
Development Company has been established and engineers 
provided by the governments of Cuba and Venezuela have 
reportedly studied the airport site and drawn-up preliminary 
plans.  Both governments have also pledged to provide 
substantial in-kind construction assistance to the project. 
(Note:  Cuba and Venezuela are providing similar assistance 
to Dominica's airport improvement project (ref B).  End 
note.)  Mexico and Canada have reportedly expressed an 
interest in assisting St. Vincent with the project as well 
(ref C). 
 
---------------- 
Asian Assistance 
---------------- 
 
5. (U) Taiwan will give St. Vincent a US$15 million grant and 
US$10 million soft loan for construction of the new 
international airport, plus another US$10 million grant for 
other GOSV projects, PM Gonsalves announced following his 
June trip to St. Vincent's most reliable foreign donor. 
While in Asia, the PM also made his second trip of the year 
to Malaysia (ref A), where the Government reportedly pledged 
to assist with St. Vincent's new airport.  According to 
Gonsalves, Malaysian Prime Minister Datuk Seri Abdullah Ahmad 
Badawi agreed in principle to provide between US$10 and US$15 
 
BRIDGETOWN 00001165  002 OF 002 
 
 
million in equity to the SVG International Airport 
Development Company.  The leaders also discussed a proposal 
to have Malaysia Airports Holdings Berhad, the company that 
manages the Malaysian airports, assist with management of St. 
Vincent's new international airport. 
 
---------------------------- 
Exclusive Airport in Canouan 
---------------------------- 
 
6. (U) The GOSV is also set to improve and expand the 
existing airport on Canouan, a high-end tourist destination 
in the Grenadine island chain that is the site of the 
exclusive Raffles Resort and Trump Island Villas.  The 
management of these resorts, plus American Airlines, which 
currently flies its small American Eagle planes to Canouan, 
are pressing the GOSV to make the airport capable of 
receiving larger planes, a Government official explained to 
Poloff.  In order to keep well-heeled travelers returning to 
the island, the GOSV will provide US$20 million for the 
project, set to begin in September 2006, with other financing 
to come from the private sector. 
 
--------------------------- 
IMF Warns Against Borrowing 
--------------------------- 
 
7. (U) The combined cost of St. Vincent's airport projects is 
currently projected to be US$220 million, more than half of 
the small, economically troubled country's annual GDP.  To 
complicate matters, St. Vincent already has substantial 
public debt.  In its June 2006 report, the International 
Monetary Fund (IMF) noted that increases in public 
expenditure during the 1990s led to a rise in St. Vincent's 
public debt from less than 50 percent of GDP in 1997 to 
almost 80 percent in 2004.  The IMF recommended that the GOSV 
reduce public borrowing to restore fiscal balance.  "The IMF 
is not running this country," was the response from PM 
Gonsalves. 
 
----------- 
How to Pay? 
----------- 
 
8. (U) St. Vincent's already high public debt would appear to 
preclude the Government from undertaking large public works 
such as the three airport projects.  The GOSV claims, 
however, to have a plan to finance the Argyle International 
Airport that includes, in addition to relying upon foreign 
assistance, selling substantial amounts of Government owned 
land.  This proposal has met with an outcry from many 
Vincentians who fear that they will lose much of their 
country to wealthy expatriates wishing to build vacation 
homes.  Exactly where the money will be found to improve the 
existing airports is unclear, although GOSV officials 
recently assured Poloff that the funds are available. 
 
------- 
Comment 
------- 
 
9. (SBU) If the GOSV limited itself to upgrading the existing 
airports it could, with foreign assistance, potentially make 
necessary improvements without incurring substantial new 
debt.  The ambitious plan for a new international airport may 
be one airport too many for such a small country to afford 
and the project could fail to get off the ground.  If it does 
move forward, the GOSV will need to display extraordinary 
diplomatic and managerial skills to coordinate the various 
forms of aid coming from several different donors. 
Considering the limited capacity of the Government, a failure 
to do so could ultimately be the international airport's 
undoing. 
KRAMER