Nassau, Bahamas - Communication by The Rt. Hon. Perry G. Christie Prime
Minister and Member of Parliament for Centreville on The Hawksbill Creek
Grand Bahama (Deep Water Harbour And Industrial Area) Extension of Tax
Exemption Period Amendment Bill 2016 on Wednesday, February 17th, 2016:
Mr. Speaker,
At the outset of my contribution to
the debate on the Bill now before us to extend for three months the expiring
concessions under the Hawksbill Creek Agreement I should point out that this
extension will allow my Government the time needed to conclude a set of
important arrangements to further strengthen and expand the economy of Grand
Bahama.
When my administration took office
less than four years ago, the economy of Grand Bahama was depressed with high
unemployment and resultant economic hardships. From then until now we have put
in place a series of initiatives and created the environment not only to turn
the economy around but to secure future growth.
Tourism was in severe decline with
low hotel occupancies a number of 8 hotels had closed and there was inadequate
airlift. With the cooperation of Hutchison, the largest hotel owner in Grand
Bahama which have been sustaining heavy losses over the years, we were able to
enter into arrangements with Sunwing of Canada, to renovate and re-open the
closed Reef Hotel, and turn it into a Memories brand, and put in place direct
flights to Freeport from more than a dozen Canadian and US cities. We were able
to do this by cutting in half the $29 million being spent annually in subsidies
and marketing support. More recently Hutchison renovated and reopened its Lighthouse
Point Property. All of this has resulted in a significant turnaround in tourism
and the creation of more than a thousand jobs. Not only has airlift been
expanded, but many Grand Bahamians are now being employed as cruiseship crews.
Mr.
Speaker,
Other initiatives including the
following:
- Negotiations with Hutchison and
MSC to expand the container terminal and to provide them with the
necessary assurance of continuing the concessions;
- Proposal now under
consideration from Carnival for the construction of a new cruise port in
East Grand Bahama;
- Re-negotiation of the
exclusivity granted in 1994 to Freeport Harbour Company for the
construction and operation of container and cruise ports in Grand Bahama;
- $110 million investment in
expansion and development of a Six Sense Resort at Deep Water Cay;
- Enacted Stem Cell legislation
and secured the completion and operation of Okyanos Treatment Center;
- Actively encouraging new investors
for the Ginn project in West End;
- Major expansion of Pharmachem.
Mr. Speaker,
Parliament has before it for debate
and enactment the Hawksbill Creek Grand Bahama (Deep Water Harbour and
Industrial Area) Extension of Tax Exemption Period Amendment Bill 2016, which
will extend for a further period of three months from February 4th,
2016 concessions of real property tax, real property levy, personal property
tax, capital levies or taxes on capital gains or capital appreciation, and no
taxes of any kind on the earnings of the Grand Bahama Port Authority (Port
Authority) or the earnings of its licencees.
To put this matter into proper historical context, the
Hawksbill Creek Agreement (HCA) in 1955 envisaged that these particular concessions
would last for a period of 30 years, but by an amendment to the HCA in 1960 an
extension was granted for another five years, thus expiring in 1990. In 1992
the concessions were extended retroactively to 1990 and in 1993 the concessions
were extended for a further 22 years.
It is germane to this whole review exercise to bear in mind
that the GBPA and by extension its licensees, received the benefits and land
grants for carrying out the development and other relevant obligations set out
in the HCA.
Mr.
Speaker,
This three month extension in addition to the six month
extension already granted will enable the full and proper consideration of
these concessions and related matters which do not obtain elsewhere in The
Bahamas. They have far reaching economic consequences for the people of Grand
Bahama, the Port Authority investors and licensees and by extension for the
rest of the country for decades to come. So this is why in this major exercise
the government retained as advisors the internationally renowned Mckinsey Group,
to undertake a study of the economic situation within the Port Area, the
implications of renewing expiring concessions of the kind in question; and the
adoption of new measures aimed at accelerating, broadening and sustaining
economic development in Freeport and Grand Bahama generally; and to consult
with the Grand Bahama Port Authority and other stakeholders. In my
Communication to Parliament on the 3rd of February 2016, I laid on
the table a copy of the Mckinsey Report.
Additionally my Government appointed
a high level bipartisan Review Committee to review and make recommendations
with respect to the impending expiration of the tax concessions in question
under the Hawksbill Creek Agreement, and to recommend other measures that might
be taken to promote and sustain economic growth in Grand Bahama.
The Hawksbill Creek Review Committee
has carried out an in-depth and comprehensive study. The Committee has met with
over 100 stakeholders including civil society, manufacturers, developers,
tourism operators, professionals, present and former Parliamentarians from both
sides of the political divide. In addition the Committee has hosted public
meetings in various parts of Grand Bahama. In order to fully inform the public
on the review process and the extent of its work it has launched a website
which is available to all at www.hcareview.org
Mr. Speaker,
The far-reaching recommendations of
the Review Committee have necessitated further consultation with the GBPA and
stakeholders, an economic impact study and the gathering of accounting and land
inventory information by independent professionals, while the committee
continues time consuming work. Its extensive report to date is under
consideration by Cabinet and will be presented to Parliament at the appropriate
time. The main recommendations of the report as set out in my recent Communication
is to extend the expiring tax concession for a period of 20 years on certain
performance and other conditions with a view to ensuring the best economic
outcome for all parties. These conditions include:
- Within one (1) year of
extension, secure an international investor with the capacity to purchase
majority ownership of GBPA to enable it to properly meet its obligations
and development commitments;
- Submission by the Grand Bahama
Development Company Ltd. of a specific master development plan within six
months of the extension, focused on the key sector opportunities above and
including detailed development plans and concrete evidence of financing;
- Change to the governance structure
to allow for the Government to participate in GBPA and PGL through
Directors/members appointed to the Board with a clear role and
responsibility around development. Further, licenses to be able to elect a
Director to the GBPA Board;
- An equity interest for the
Government in GBPA and PGL companies in consideration for the value of the
concession extensions, the value of any unmet obligations under prior
extensions, as well as any obligations of the GBPA not met under the HCA
(e.g. any deficit in the Port Area, any unmet maintenance and operations
responsibilities) following an independent audit by an accounting firm to
be mutually agreed;
- GBPA/PGL must establish and
capitalize an independent investment promotion agency (IPA), with
expertise in retaining, expanding and attracting businesses;
- To introduce a process which
gives the right of appeal for GBPA’s licensing decisions;
- Reaching mutually agreeable
terms relating to the exclusive rights of Freeport Harbour Company to
container ports, cruise ports, etc. on Grand Bahama, which would allow for
exclusive right on container ports for a fixed period, and the development
and operation of cruise ports within and outside the port area by other
parties;
- Agreement to modernize the
Grand Bahama International Airport and pursue options to lower cost of
airlift (e.g. under a public/private partnership arrangement);
- Specific commitments around
quality of life investments (e.g. hospital, sports centre upgrades,
bridge/road upgrades etc.);
10. Transparency by providing to the
public information on revenue and expenses for municipal services;
11. Work in collaboration with the
Bahamas Government and the Grand Bahama Port Authority to secure suitable
partners and arrangements which would secure the economic viability of Hutchison’s
hotels, casino and tourism assets, and curtail unsustainable losses and large
Government subsidies;
12. The possible introduction of real
property tax on undeveloped land as a stimulus for development and the
provision of the necessary revenue to meet the rising cost of government
services and infrastructure costs in Freeport , or some alternative form of
contribution from the GBPA and its licensees to meet such costs.
In
parallel to recommending changes to the current ownership and governance on the
island, the Committee also recommends that certain other changes be made to
increase the competitiveness of Grand Bahama as a location for global
investment. Those changes are as follows:
1.
Create
a one-stop-shop to manage all GBPA and governmental approvals, with specific
guidelines, and, where matters need to be referred to the Central Government, a
period of no more than twenty-one (21) days be fixed for approval/determination
(as the case may be);
2.
Move
certain regulation currently overseen by GBPA to independent public bodies
(e.g. energy regulation to a public regulator, environment to the Ministry
responsible, airport fees and charges to the Ministries/Agencies responsible.);
3.
Create
transparency and fiscal stability for Grand Bahama Island by conducting
one-time and on-going audits of government deficit on GBI, performed by a
mutually agreed public accounting firm. Moving forward, the Government should
present such accounting to GBPA annually to determine whether a deficit exists;
4.
Improve
efficiency of dealing with labour and immigration matters. The ministries
responsible for immigration and labour should establish a system to efficiently
deal with work permits on an expedited basis, (
within 21 days), and, where
earlier approvals are needed,
within 48 hours, recognizing that there may exist
a need for specialist skills which are not readily available in The Bahamas;
5.
Improve
skills training and recruitment. Establish an ongoing multifaceted training
programme suited to the skills needed in Grand Bahama, involving Ministries
responsible for Education, Training and Labour, the College of The Bahamas, the
National Training Agency, principal licensees, the GB Chamber of Commerce and
the GBPA;
6.
Improve
data collection on Gross Domestic Product (GDP) such that progress is able to
be tracked;
7.
Improve
communications between Government and GBPA, licenses and public prior to any
major policy changes;
8.
To
the extent that it has not done so, GBPA and Dev Co. to ensure that land
transactions (historical and moving forward) are duly recorded at the Registrar
General’s Department.
Simultaneously with the ongoing
work of the Hawksbill Creek Agreement Review committee, a Cabinet Negotiating
Committee led by myself has been engaged in direct discussions and negotiations
with the shareholders of the GBPA, and principal investors on pertinent issues
and recommendations. This has involved separate sessions with full
representation of both the Hayward and St George families as shareholders of
the GBPA, and the Port Group of Companies, the principals of Hutchison Group
the largest investor in Freeport in the Port, hotel and property operations and
shareholders along with the Hayward and St. George families in the Port Group
of Companies. Meaningful progress is being made in full and frank discussions,
which are continuing.
It has
become abundantly clear that in order for the economy of Freeport to grow and
develop in line with the original vision and purpose of the Hawksbill Creek
Agreement, large sums of new capital and top level management and promotion
expertise are required to drive expansion of existing businesses and the
introduction of new ones. Towards that end the Cabinet Negotiating Committee
has been engaged in very encouraging and fruitful discussions with Mediterranean
Shipping Company principals who are already major investors in Freeport. Last
week we held successful meetings at their Geneva Headquarters with MSC Group
Chairman, the President, the Executive Chairman of MSC Cruise and the Head of
Global Port Development.
MSC
which is already contributing significantly to the Freeport economy is moving
ahead quickly to create a one of a kind cruise port at Ocean Cay, which will
employee over 200 Bahamians. It will clean up what is now a derelict dump and turn
the island and its surroundings into an environmentally sound and pleasant
resort which environmentalists will applaud, and provide a pleasant experience
for its upscale European cruise passengers. MSC is not only a leader on cargo
ships with 193 vessels in its fleet but is also one of the fastest growing
cruise lines in Europe with the most modern fleet of cruise lines and a large
network of travel agencies. Both Nassau and Ocean Cay will be included on the cruise
lines Caribbean itinerary.
We held positive
talks with MSC regarding the container port expansion in Freeport, the
establishment in Grand Bahama of one of their network from training academies
expanding opportunities for Bahamian crews on their ships, providing hundreds
of new jobs in the short term and many more as they expand their fleet which
will require an additional 20,000 crew. We discuss other major investments in
Grand Bahama which we expect to finalize in the near future.
The
visit to MSC headquarters enabled me and my colleagues to obtain a great
appreciation of the magnitude, financial standing and stature of the company
and to become better acquainted with its principals.
My
Government particularly recognizes the long term commitment of both Hutchison
and MSC to the economy of Grand Bahama and is seeking to encourage and provide
for them strong partnership in the further investment in Grand Bahama.
We shall
keep fully engaged in further negotiations in the ensuing months. With the
assistance of our advisors and cooperation of stakeholders, we remain confident
that we shall be able within the three-month extension contained within the
Bill before us to bring the exercise to a successful conclusion, leading to
sustained long-term growth and prosperity for Grand Bahama, within a sound
democratic environment and in conformity with international best business
practices.