However, as you know only too well, there is next to nothing between Nadi and Sigatoka, except for the Fijian Hotel at Cuvu. The proposed development will go someway to remedying this situation.
Apart from anything else, Natadola was the area identified by a United Nations Development Programme funded study in the early 70s as the location for integrated resort development. Yet this beautiful area was left completely untouched for well over 30 years. Successive governments simply ignored its unique potential.
I marvel that the French developer who has been coming to Fiji since 1993, clinged on to his effort to develop Natadola, particularly when there appears to be less enthusiasm from those in the best position to assist in the past.
The employment opportunities are substantial. The Four Seasons Hotel and the golf course itself will need almost 500 workers. The Beach Front Hotel, which will follow suit, will need an additional 600 workers. There is scope for the development of a cottage industry geared to service visitors, the supply of foods, on ornamental plants and the provision of traditional and cultural entertainment are also potential for added employment for the people in the surrounding areas adjacent to Natadola.
If all these developments in Natadola take place as envisaged by the developers, I would venture to suggest that we will have the making of a small vibrant town which will require accomodation, office and shopping facilities and a range of other services which will mean additional employment for a large number of people including the landowners in this region.
On that note, I would like to reiterate that it is government's policy to involve the landowners at all levels of the development at Natadola, which will include assigning a portion of government shareholding in International Hotels Limited to them. An appropriate mechanism and structure is also being developed to ensure that the dividends accrue to individual landowners.
The government guarantee will enable one of its state owned companies, International Hotels Limited, obtain a loan from a preferred lender for $21 million for the purchase of 42 percent shares in the Natadola Hotel and Golf Club Limited. The remaining funds of $4 mllion will be used in acquiring the Fiji Development Bank's shares held in International Hotels Limited, together with the Suva foreshore reclaimed land.
There are urgent reasons for buying out FDB shares. This structure will enable International Hotels Limited to become an investment arm of Government in the tourism industry, owning both physical assets, as well as equity investments. It is therefore necessary that Government has full control of IHL and at the same time release the Fiji Development Bank to concentrate on its development role.
The preferred lender is yet to be finalised and government will ensure that International Hotels Limited will obtain the best possible terms and conditions of the loan from both local and overseas sources.
May I add that government is well aware that there are certain risks associated with investment of this nature and it is taking steps to ensure that risks are fully mitigated against by entering into various agreements with the various stakeholders in this venture.
Firstly, the likelihood of the development of the development costing more than the estimated $110 million. If this situation were to rise, then the concern is that IHL would be compelled to provide the additional financing.
In order to mitigate against this possibility, it has been agreed with the project sponsor that the construction agreement to be entered into between Natadola Hotel & Golf Club Limited (NHGC) and the construction company will be a fixed price contract (turn key) with provision for the construction company providing a bank guarantee that it is in a position to provide its own funds to complete the construction project in the event there are cost overruns.
Secondly, there is a possibility of the later phases of the development not being implemented. The impact of this possibility would be particularly significant on the golf course.
The developers, however, have indicated that there is significant support for the second hotel, the 300 room Beachfront Hotel, with expressions of interest being received from Marriott and other reputable hotel resort operators .
Four Seasons' visible presence is considered the 'honey pot' that will attract other resort owners/investors to Natadola.
Thirdly, there is concern that the projected financial returns of the project appear to be very optimistic considering that from past experience all major development projects sustained losses for the first five to 10 years of operation. This particular project is expected to sustain losses in the first year only.
However, the due diligence process revealed that Arhthur Andersen, Sydney, conducted an independent assessment of the financial projections and was satisfied with the assumptions used and the resultant profitability figures.
Colonial, the only other local investor, also commissioned an industry expert to review the projections and confirmed that the projections were reasonable.
Both opinions emphasised that the key element in this project is the involvement of Four Seasons, a highly successful, well renowned high class international hotel operator, which is not expected to tarnish its image world wide by operating the resort below customer expectations and therefore profitable levels.
In any case the Fiji National Provident Fund and other lending institutions would be undertaking their normal due diligence before the loan is approved.
The fourth concern is that IHL, as a corporate entity will not be expected to generate any revenue to cover its debt servicing obligations over the next three years during the start up period.
However, in order to mitigate against this risk, the financier will be asked to structure the debt so that it does not pose any threats to IHL's solvency. We are also not limiting our discussion with one lending institution in the search for the most favourable terms of the loan.
At the same time, Government is just as aware of the enormous benefits in terms of the spin-offs to the economy in the areas of employment creation and the spawning of support service industries. I am positive that the potential to the nation far outweigh the costs of this investment.
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