Subsidizing profits

In their story about MPs calling for certain state-owned corporations to be privatized, Kuensel quoted me as saying that the government was giving too much subsidies to the corporations. “As if providing land was not enough, the government is even generous enough to provide them subsidy, which meant extra burden to the government”, I supposedly said.

The quote is correct. But the context is wrong. I didn’t complain about subsidies that corporations receive. In fact, I believe that we must do a better job of ensuring that corporations that provide a public service – BBS, for example – have access to more predictable and sustainable subsidies without having to put up with political interference.

What I did complain about, and what I objected to, was the Nu 144 million earmarked as subsidy for the Education City. The subsidy, we were told, covers costs for constructing ancillary infrastructure including road, telecommunications, water supply and bridge.

I objected to the Education City subsidy because the government is already supposedly allocating 1000 acres of prime land for the project. If so, that would be a huge contribution by the government. So the investors – DHI and their FDI partner – should pay for the rest, including the ancillary infrastructure.

Otherwise, the government may end up subsidizing the profits of the Education City investors.

Not so fast

What do you make of this?

The cabinet has reportedly “further ratified” the Education City project bid, and awarded the bid to a consortium of bidders (infinity Infotech Parks Ltd., and Infrastructure Leasing and Financial Services Ltd.) It appears that a contract agreement will be signed this month following which work on a detailed project report will begin.

Good? I don’t know. I still have serious misgivings about the size and feasibility of the project. True, education is a viable business, and we must harness its potential to service both local and foreign demand. But planting a bunch of education institutions in one location, like industries in an industrial estate, is not the way to go.

The Education City could easily become a white elephant. Or, worse still, it could become a breeding ground for large scale, low quality education catering to tens of thousands of foreigners. Instead, it will be easier, and much better, to encourage investors – local and foreign – to build international schools and colleges in various parts of our country.

But there’s another reason why we should be worried. The Education City Bill has not yet been passed by the Parliament. The National Assembly approved it during its last session. Now it has to be approved by the National Council. And then it has to be submitted for Royal Assent.

So why has the government ratified the Education City project bid? And why have they awarded the bid? The government will have the authority, by law, to proceed with the Education City project only after the Parliament passed the Education City Bill. That, after all, is the whole purpose of the Education City Bill.

The Bill is still under discussion in the Parliament. The Parliament may pass it. Or it may not. Either way, the government does not have the legal authority to proceed with the Education City at this time, not until the Parliament passes the Education City Bill.

Education city

Today, yet another concerned person asked me about the education city. And he too wanted to hear my views on the 1 billion dollar project.

Some of you may have seen my views in Tenzing Lamsang’s story. But, it appears that many others haven’t. So, with the permission of Business Bhutan, I’m reproducing their entire story….

Billion $ education city under scanner

US$ 500m foreign exchange a year and around 30 international universities on 1,000 acres: this is what the prime minister’s pet project, the planned education city, aims.

If MediaGlobal, a United Nations-based news agency, is to be believed, the ground breaking ceremony for the city is just a year away.

“While anchor universities should start operating initially, it is likely to be 10 years for the entire city to be in place gradually,” MediaGlobal quoted Kushal Sengupta of Infinity InfoTech Parks, the agency that is proposing to implement the project at a site yet to be identified.

But critics of the project say the manner in which the country’s biggest foreign investment plan is being pursued is not proper.

Opposition Leader Tshering Tobgay said that he is ‘very concerned’ about the project by its lack of transparency. [Continue Reading…]