By Shurna Robbins
GEORGE TOWN, Cayman Islands (Reuters) - The Cayman Islands are hoping to stem a loss of cruise passenger business by completing a controversial deal with a Chinese firm to build a $300 million dock to accommodate modern megaships.
Famed for its coral reefs and duty-free shopping, Grand Cayman Island is alone among the top 10 Caribbean destinations without a cruise ship berth, industry experts said.
Tourism is the second biggest driver of the Cayman economy after the financial industry and a big source of income and jobs for small businesses.
During the busy winter cruise season, when four to 10 ships can be anchored off the British territory's capital of George Town on the same day, passengers who had gone ashore stand in lines that stretch for blocks, sweating under the tropical sun as they wait for tender boats to ferry them back to the ships.
As the ships have grown much larger to carry more passengers, tendering has grown more unwieldy. Some cruise lines have been sending their biggest ships to other ports, where they can dock and allow passengers to walk ashore at their leisure.
The Caymans have seen their cruise passenger volume drop by 26 percent over the last few months while overall numbers throughout the Caribbean have held steady.
Earlier this year, Royal Caribbean left the Cayman Islands off the itineraries for its two megaships, Allure of the Seas and Oasis of the Seas, which can carry more than 6,000 passengers each, and reduced the number of port calls to the islands for its other ships.
"Twenty years ago with significantly smaller ships, tendering may have been charming, but it is not charming anymore," said cruise industry expert Hugh Treadwell.
"The worst part of an often great overall cruise vacation is usually getting on and off the ship. Getting 4,000-plus people off a ship and then back on just isn't fun."
FINANCING IS CRUCIAL
The situation will only worsen as more big, new cruise ships come on line in the Caribbean and smaller ships get redeployed to the Mediterranean and Pacific.
At a cruise industry conference last week, Cayman Premier McKeeva Bush said a pending deal with a Chinese developer could be finalized next month, allowing construction of a dock facility to begin by the end of the year.
Under the proposal, China Harbour Engineering Company Ltd, a subsidiary of China Communications Construction Company Ltd, would pay to develop a dock and retail complex, estimated to cost up to $300 million. The state-owned Chinese company would manage it for 49 years to recoup its investment.
The proposed deal has proved deeply controversial.
The Caymans signed a framework deal last year with GLF Construction Corp. to build the cruise ship dock. The premier canceled the deal in April, claiming the company had failed to secure financing for the project.
GLF, a U.S. subsidiary of Italy's Grandi Lavori Fincosit SpA, disputes this, saying it believed it had funding lined up and was preparing to close the deal when it was canceled.
"We were ready to move forward and we were disappointed that the (Caymans) premier took the position that he did," a spokesman at the company's Miami offices told Reuters. He declined to comment on whether GLF was taking legal action.
The chairman and deputy chairman of the Cayman Port Authority board, who wanted to continue negotiating with GLF, were pushed out after Bush made the deal with China Harbour.
Bush said he had nothing against GLF but had no choice but to form a partnership with a developer who will provide financing. With $763 million of debt, the territory is forbidden by the United Kingdom Foreign Office from borrowing more money.
"China Harbour is doing billions of dollars of business throughout the region," he said.
Contractors Association President Rayal Bodden disputed that the Caymans needed China Harbour to finance the dock.
"Investment managers of hedge funds are looking for these kind of projects," Bodden said. "It would be very easy for a reputable company to raise this kind of money."
LOCAL WORKERS FEAR BEING SHUT OUT
The proposal with China Harbour has fanned fears it will import thousands of Chinese workers who would stay in camps and send their earnings home, depriving the local economy of stimulus. Local construction workers, already hurt by the recession, fear they would be shut out of subcontracting work.
There have also been concerns over China Harbor's cost overruns on a project in neighboring Jamaica, and over the recent conviction of the son of Bangladesh's former prime minister for taking bribes from China Harbour.
Cruise line executives are taking a wait-and-see approach because previous elected officials have said a berthing facility was in the works and none materialized.
Tourism promoters say the Caymans cannot afford further delays in building a cruise ship dock.
Some 1.6 million cruise passengers called in the Cayman Islands in 2010. Retail shops, restaurants, tour operators and taxi drivers have all reported a drop in business this year with fewer passengers.
"Every day that goes by that we are not building our pier it is really setting our destiny for the next 18 to 24 months," said Tourism Association President Trina Christian. That is because cruise lines book their ports of call up to two years out.
"By not building a pier there is going to be certain limitations on how may tourists we are going to have and what that means to our economy."
(Additional reporting by Pascal Fletcher in Miami, Editing by Jane Sutton and Philip Barbara)