Prime Minister Christie takes the floor to bring communication on the Hawksbill Creek Agreement
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NASSAU, The Bahamas -- Prime
Minister and Minister of Finance the Rt. Hon. Perry Christie said in the House
of Assembly, on August 3, 2016, that his Government’s recent review of the expiring tax concessions granted under
the Hawksbill Creek Agreement (HCA) 1955 and related
matters had afforded his Government the opportunity -- after wide consultation
with the public, the Grand Bahama Port Authority Limited (“GBPA”), and
principal stakeholders -- to conclude arrangements aimed at strengthening and
expanding the economy of Grand Bahama.
"This extensive review,
the first of its kind in 60 years, and the negotiation of the far-reaching Memorandum of Understanding
represents the collective work of a bipartisan Review Committee, and a Cabinet
sub-committee, supported by a Bahamian technical team and consultants, as well
as international business advisors known as the McKinsey Group," Prime
Minister Christie said, during his Communication on the
Grand Bahama (Port Area) Investment Incentives Bill, 2016.
"The cooperation and
meaningful collaboration should be noted of Grand Bahama Port Authority and
other stakeholders including the signatories to the Memorandum of
Understanding."
The "comprehensive" Memorandum of understanding (MOU) was made on 26th
April, 2016, by and between the Government; the Grand Bahama Port Authority; Freeport
Harbour Company (FHC) Limited; the Grand Bahama Development Company
(GBDevco) and Freeport Commercial and Industrial (FCI)
Limited, he said.
He added that the MOU was
laid on the Table in the House with his May 9, 2016 Communication on
the matter.
"Additionally, the
Government has also executed a Waiver of Exclusivity Agreement with Freeport
Harbour Company Limited which clears the way for the operation of other cruise
ports on Grand Bahama," he said.
Prime Minister Christie
recognized the "invaluable and painstaking" work done by the Review Committee,
comprising Dr. Marcus Bethel, Chairman; the Hon. Maurice Moore; Sir Baltron
Bethel; Mr. James Smith; Mr. Kevin Seymour, President of the Grand Bahama
Chamber of Commerce; and Ms. Cassieta McIntosh.
"This is evident by
their comprehensive Report previously tabled in this House, their continuing
consultations and ongoing assistance in this major exercise which is so vital
to the economic future of Grand Bahama," Prime Minister said
Prime Minister Christie said
that the MOU and the Grand Bahama (Port Area) Investment Incentives Bill 2016, which
he shall shortly introduce, were also the result of the work of the Review
Committee, the relevant officials and extensive consultations and cooperation
with the Grand Bahama Port Authority, principal licensee stakeholders and their
legal teams.
Prime Minister Christie
noted that it is helpful that he should recall that by three Agreements dated 4
August 1955, the 11th day of July 1960 and the 1st day of March 1966, collectively
known as the Hawksbill Creek Agreement (HCA), made between the Government and
the GBPA, the Government granted to GBPA and its licensees certain rights
powers and tax concessions for the exemption periods specified in the HCA in
consideration for GBPA undertaking the development, administration and control
of the Port Area in accordance with the terms and conditions set forth in the
HCA and in the manner therein prescribed.
"The exemption periods
of the tax concessions under clause 2 (7), 2(8) and 2(9) of the HCA in respect of (i)
real property taxes, (ii ) taxes on capital gains or capital appreciation and (iii) taxes
on earnings (the “Expiring Concessions”) expired on 4th August, 1990," he
related.
The Government, he pointed
out, extended the Expiring Concessions for an interim period of 2 years by
statute and ultimately by (i) the Hawksbill Creek, Grand Bahama (Deep Water
Harbour and Industrial Area) (Extension of Tax Exemption Period) Act and (ii)
the Freeport Grand Bahama Act, 1993.
"The Government
extended the Expiring Concessions to the 4th August 2015 in consideration of
the covenants on the part of Grand Bahama Port Authority and Grand Bahama Devco
(GBDevCo) to fulfill the mandates set out in an Agreement made pursuant to the
provisions of the Freeport Grand Bahama Act, 1993," Prime Minister
Christie said. "The extension of the Expiring Concessions came to an end on the 4th
August, 2015, and the Government had legislated an interim extension of the
same to the 4th May 2016 to enable it to make a determination as to a further
extension or otherwise."
Prime Minister Christie
pointed out that the Government retained the McKinsey Group, international
consultants to, amongst other things, undertake a study of the economic
situation within the Port Area; appointed a Committee to review and make
recommendations with respect to the impending expiration of the Expiring
Concessions; and entered into discussions with GBPA, licensees and the wider
community of Grand Bahama.
"The Committee has, amongst
other things recommended and the Government has agreed that the Expiring
Concessions be granted for a period of 20 years subject to certain conditions
and with a mechanism to monitor performance through periodic review every five
years," he said.
"The Government is
desirous of encouraging and facilitating economic growth and continued development of all
sectors of the island of Grand Bahama, and of promoting increased opportunity
for significant employment for the overall economic benefit of Grand Bahama
and, is desirous that the Grand Bahama Port Authority and its licensees also
assist in this regard."
The Government is cognizant
of the substantial contribution made by GBPA, FHC, FCI and GBDevco and
other relevant stakeholders to the economy of Grand Bahama and is of the view
that the grant of concessions, subject to certain conditions, on like terms as
the Expiring Concessions will encourage and facilitate further development on
the Island of Grand Bahama, with the accompanying creation of employment
opportunities on the Island of Grand Bahama.
"The GBPA has apprised
the Government of its efforts to seek an injection of new equity capital into its
Group of Companies through new globally-respected shareholders, or equity
partners and project-specific investors who will further the development of Freeport
and Grand Bahama," Prime Minister Christie noted.
He continued, it is
envisaged that the MOU and agreements to be made with licensees will aim to
fundamentally shift the investment climate and economic prospects of Grand
Bahama in a "dynamic and positive" way for all concerned.
"We have sought to
create a new economic development framework that can jumpstart and sustain
growth in Grand Bahama," Prime Minister Christie stated. "A
framework is to be established for the Government and private sector to partner
to deliver a wide range of gains for the residents of Grand Bahama and The
Bahamas as a whole."
Prime Minister Christie
pointed out that specific opportunities that will emerge from that framework will
include the following: immediate investments in strategically important
industries; the commitment of the GBPA to seek an injection of new equity
capital into its Group of Companies through new globally respected shareholders
or equity partners and project specific investors who will further the
development of Freeport and Grand Bahama; historic changes in the governance,
transparency, and regulatory framework that governs Freeport; Government
ownership stakes in prime landholding companies, which will allow for enhanced
public/private development and partnerships; a commitment to social and
infrastructure improvements to enhance quality of life; a new framework for
performance-based development concessions that will replace the expiring tax
concessions of the Hawksbill Creek Agreement; a "focused and collaborative"
strategy to reshape the approach to attracting, retaining, and expanding
investment in Grand Bahama; and a commitment to resolve longstanding issues
related to Government deficits in Freeport in a way that protects the
Government’s rights, but creates a path forward in Freeport.
"Underpinning these
agreements for change and new investments is a new approach to development
concessions in Grand Bahama," Prime Minister Christie said. "The
expiring tax concessions, as initially provided under the Hawksbill Creek
Agreement, and extended on multiple occasions, were designed in a different era
and need to be updated."
Tax concessions, when used
properly, should be an inducement to encourage private sector investment and/or
employment,"he added. "Accordingly,
we will be establishing a new framework that will replace and modernize the
current framework for tax concessions in Freeport."
A new regime with a new
framework is contemplated for the Port area with respect to the tax
concessions, which expire on 4th May, 2016, he noted.
The same tax concessions
will be granted by the Government for a period of 20 years commencing on the
4th of May, 2016 to existing licensees of the GBPA on an individual basis,
subject to certain conditions and under a framework that would provide for the
maintaining of performance through periodic reviews every five years, Prime
Minister Christie said.
He added that the Government
would collaborate with GBPA on the design of the framework. The same framework, he said, will apply to
new licensees once they submit and obtain approval of their development
plans.
"In return for the
undertakings and assurances by Grand Bahama Port Authority, Freeport Harbour
Company, Grand Bahama Development Company and Freeport Commercial &
Industrial Company Ltd., the Government is to take the necessary measures to
grant the expiring concessions to these companies, their existing affiliates,
subsidiaries and joint venture companies in like terms for a period of 20
years, commencing on the
4th May, 2016," Prime Minister Christie said.
"We are also taking
steps to address an important inhibitor to development in
Grand Bahama," he said.
"The lack of any taxes or carrying costs of undeveloped land means that
property holders can simply sit on undeveloped land without recourse.
"To address this
situation, and enhance the revenue base in Freeport, we intend to create a new
framework where real property tax would be payable on undeveloped land held by
non-Bahamians owning more than five acres."
To give effect to the
foregoing, Prime Minister Christie said that he will be pleased with the House
Speaker's permission, to introduce into House the Grand Bahama (Port Area)
Investment Incentive Bill 2016, at the appropriate time on the agenda.
"This Bill seeks to
introduce a framework for the grant of the exemptions to the Grand Bahama Port Authority
Limited and to certain licensees of the Grand Bahama Port Authority Limited as
an incentive for economic growth in the Port Area," Prime Minister
Christie said. "The Minister
responsible for investments is also empowered to make regulations for carrying
out the purposes and provisions of the Bill.
"The regulations are being
drafted and, after proper consultations, will be brought to Parliament in the
near future."