Economist suggests Govt’s buy-out of Berbice River Bridge for public good

By Samuel Sukhnandan

As the time draws closer to the date set for the imposition of fare increases at the Berbice River Bridge, there continues to be great worry over whether this could in fact take effect, or whether the Government would step in and reverse the decision.
Overseas-based economist Professor Tarron Khemraj feels that Government should buy over the bridge in its entirety. He told Guyana Times International on Sunday that the bridge is now financially unsustainable, as compared to when the proposal for its construction was implemented.
“As I said, the demand was not there then; hence the need now for high tolls. Berbice has suffered from depopulation in the past 15-20 years. Therefore, I support buying out or nationalising the bridge,” Khemraj noted.
He said that once the Government owns the bridge, some decisions would have to be made to address the high operating costs of this type of bridge. According to him, decisions would have to be made with the objective of motivating private sector employment in Berbice.

A former advisor to the Alliance for Change (AFC), Khemraj is also opposed to increasing the bridge tolls, especially because the traffic flow to accommodate the higher tolls is not there.
“This is why they have to increase the price to make up the revenues,” he explained, adding that the Berbice Bridge Company Inc (BBCI) seems to have forgotten the concept of price elasticity.
“The higher price will contract demand — even though they tried to curtail all substitutes, like the private boat operators and the ferry — and therefore compound the pressure on an already vulnerable region…The BBCI is caught between a rock and a hard place,” he said.
No vision
The economist spared no effort in chastising the coalition Government for appearing not to be certain about what they are doing.
“They rolled up village economies, free markets, green economy, petro-based economy, small business, etc., all in one,” he said.
At this stage, Khemraj said, it is clear the bridge has a dimension of higher public good than the private aspect. Therefore, he recommended, Government should buy out all of the shares.
“That’s a solution, albeit it can’t be the sole policy action; it will have to be followed by other actions. When you have a public good, the Government has to provide a subsidy. Otherwise, the private sector does not have the incentive to do so,” he explained.
While the BBCI is ultimately responsible to its shareholders, the economist told this publication that BCCI officials have to bear in mind what the demand response is going to be if they take the price too high.
“These are clearly exorbitant proposed increases. I can see some kind of a strategic tit-for-tat occurring. The Government can respond by allowing the private boat operators to do business, which will further hurt the investment return. The Government will be more willing to finance any shortfall in the National Insurance Scheme (NIS), but unlikely BBCI,” he added.
He called it ‘unfortunate politics.’ However, Khemraj said he is under the impression that the BBCI is falling for the ‘sunk cost fallacy’. “If you don’t cover your operating costs, you have to let the investment go. You can’t let sunk cost guide future actions,” he opined.
The new fares the BCCI proposes to impose for use of the bridge stipulate that cars and minibuses will now be charged G$8040; pickups, small trucks and four-wheel-drive vehicles, G$14,600; medium trucks, G$27,720; large trucks, G$49,600; Articulated trucks, G$116,680; freight, G$1680; and boats passing through the river will be charged G$401,040.
Government has outrightly rejected the proposed toll increases, but has simultaneously stated its non-support for a buyout. Public Infrastructure Minister David Patterson had told the media that the proposal to buyout the shares of the BBCI is not on Government’s agenda at this time.
The proposed increases are scheduled to take effect on November 12.