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Cyprus

Auditor says minister wrong to drop penalties in port contracts

Auditor-general Odysseas Michaelides

Auditor general Odysseas Michaelides said that Transport Minister Marios Demetriades largely ignored an advice of the Audit Office to include deterrent penalties and guarantees in the contracts for the commercialisation of the Limassol port, which may have averted the current chaos in the container business which threatens the economy.

Προεδρικό Μέγαρο//Presidential PalaceMichaelides, who was commenting on state radio CyBC on Thursday said that the minister’s decision came after the consultants hired by the ministry strongly insisted to avoid including such terms.

In September 2015, six months before the government signed the contracts with the three competition winners, the auditor’s agency sent a letter to the Ministry saying that after “taking into account that the Limassol port is the only commercial port of the Republic of Cyprus, and that the concessionaire is given a guarantee that no other port will be used (to handle) containers, we consider as necessary to introduce key performance indicators for commercial and passenger services and deterrent penalties in case of not meeting these indicators or other contractual obligations concerning minimum level of services and maintenance,” the auditor general said.

This would be in line with a similar approach adopted in the case of the agreement with Hermes Airports, he said.

The ministry responded in writing a month later arguing “that the points raised have been repeatedly discussed with the consultants at meetings chaired by the minister,” Michaelides, known for his no-nonsense approach, continued. “Even though we understand and to a great extent agree with these positions, still after strong insistence of the consultants, the minister gave instructions for a middle ground solution”.

The Cyprus Business Mail understand that Michaelides was referring to the London-based N M Rothschild & Sons Ltd.

Michaelides said that a review of the full text of the agreements with the winners of the competition for the Limassol port, which also include two consortiums led by Dubai Ports, one in charge of the general cargo and one in charge of the marine services, shows that the ministry took the proposals to include penalties, guarantees and indicators in the contracts “to some small extent” into account.

“Our agency cannot impose its views on anyone,” he said. “If the contracting authority insists that the hired consultants with global experience remunerated with some million euros insist that what we are saying are exaggerations, and a more relaxed approach should be adopted, our agency has no instrument to impose” its position.

If a concessionaire can reduce the quality of services and the only countermeasure the government can take is to threaten with the termination of the contract or to send letters pleading for cooperation, “it means that the provisions which were introduced were unsatisfactory,” he said.

After Akel, the main opposition party, blamed Demetriades for the chaos at the port and asked him to step down, Demetriades said on Thursday that he “would have no problem to assume his share of responsibility” adding that dealing with the problems at the port was his first priority.

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