IN business parlance, the “loss leader” term is used to explain a situation where a business sells an unprofitable product of high demand, solely to attract customers to the business premises. The business then benefits from the presence of the customers because they invariably also purchase profitable products.
In the supermarket business in Saint Lucia, bulk purchased- repacked flour, sugar and rice are generally considered to be “loss leaders” in the food section. Imagine a profitable supermarket business sells those products to attract customers, loses money on them and then imagine the government uses tax payers dollars to compensate the supermarket for the loss. Another way of looking at it is to assume a situation where those unprofitable products in the supermarket belong to the government; they are sold at a loss for the government, while the supermarket makes good money on the other products.
Well, you may say no right thinking government would get involved in such practice! That it doesn’t make any sense to you. Right? Well fact is; this is exactly what is happening with the Horse Racing Track in Vieux fort. Let me explain.
Teo Ah King the Malaysian born, Chinese Developer came to Saint Lucia to offer us, a US$2.6 billion D.S.H. Project phased out over 25 years. The current Prime Minister signs the agreement and fondly refers to it as “delivering southern hope” with the intention to ridicule the opposition. The D.S.H. agreement states that the development is not a partnership; it will be a privately owned enterprise, with zero ownership stake by the government of Saint Lucia. But interestingly, both the Prime Minister and the Developer have publicly admitted that the implementation of the US$2.6bn D.S.H. project is predicated on Phase 1; a horse racing track to attract investors for subsequent phases. They have further admitted that the horse racing track is a money losing business enterprise. A “loss leader”.
What does that mean? It’s the same concept as the supermarket products mentioned earlier on. The developer needs the horse racing track to make his privately owned D.S.H. project succeed but he does not want to own it, since it will be losing money.
He strikes a deal with our Prime Minister to lease 400 acres of land at a very cheap price. He mortgages our land to raise an estimated US$10 million to build the race track. He gets the Prime Minister to agree upfront for the government to purchase the race track from him on completion. As part of the deal, he secures a profitable management contract to operate the money losing facility for the government. Those arrangements were confirmed by the Prime Minister himself during an appearance on Rick Wayne’s talk show programme.
While our health care is in a mess and the Prime Minister chooses to get excited over the prospects of a horse race later this year, the reality is that, the Developer has been able to get his horse race track built with our resources. He will be paid to operate it, to attract his profit making investments, at our expense. The “loss leader” will cost our country thousands of millions of dollars over time but the Prime Minister, as part of his secret deal with the developer, will not willingly disclose the cost of this financial burden to us.
So, Mr Prime Minister; how much did you agree to pay to purchase the “loss leader”? How much have you agreed to pay the Developer to operate it? And since both of you know that it will be losing money, what is the estimated loss per day to operate this facility when it is fully operational?
Fellow Saint Lucians, if you think that this unbelievable, one-sided deal in favour of the Developer was badly negotiated, it gets even worse.
Initially, the oval shaped horse race track was designed for a north/south layout. This means that the longer sides which run parallel to each other were pointing in a north/south direction and joined together by the curds at each end. The road from the National Stadium to La resource/Grace was on the east side of the track. In that position there would have been a huge track of land between the horse race track and the airport perimeter. Reliable sources indicate that the Developer wanted his horse race track to be closer to the airport. The government agreed to facilitate his wishes. The Developer repositioned his track closer with an east/west layout to utilize most of the additional lands to the east and thus got the track closer to the airport perimeter.
To assist the Developer, the government agrees to reposition the new H.I.A. terminal further west, towards the horse race track; a huge deviation from the initial master plan location. He would also build a new road to the east of the race track to replace the national stadium to La Ressource/Grace road which had now become an obstacle in the way of the horse race track. That new road would suddenly emerge as the road to and from the repositioned new terminal.
The repositioning of the race track and the new airport terminal is intended to incorporate the DSH development into the HIA redevelopment, as far as is practicable. This unnecessary new DSH road has cost the tax payers $13 million. More money spent on creating a “loss leader” for Teo Ah King. When the cost of relocating the new terminal further west and closer to the Vieux Fort river is factored into the equation, those exorbitant expenses to support the Developer’s grand scheme will again be borne by the tax payers of our country. But we will not share in his profits, as it is not a partnership. We will be left with the non-profitable “loss leader”. We will be left holding the horse shit.
It begs the question: in whose interest is the Prime Minister negotiating? It seems to me that the Developer is having a field day, at the expense of the tax payers of this country.
Don’t be shocked when you hear who is paying for the horses. Stay tuned.