Nassau, Bahamas - Communication by the Rt. Hon. Perry G. Christie Prime Minister and
Member Of Parliament For Centreville The Hawksbill Creek(grand Bahama
Deepwater Harbour And Industrial Area) Act Dated 3rd February, 2016:
Mr. Speaker,
On July 22, 2015 I made a communication to Parliament concerning the
Review of certain concessions contained in the Hawksbill Creek Grand
Bahama (Deep Water Harbour and Industrial Area) (Extension of Tax
Exemption period) Act 1993, which had been extended for a period of 22
years and were set to expire on August 4, 2015. In order to provide
further time for the review and negotiation process, the concessions
were extended for a period of 6 months which expires on February 4,
2016, with the enactment of the Hawksbill Creek Grand Bahama (Deep Water
Harbour and Industrial Area) (Extension of Tax Exemption Period)
Amendment Act 2015.
The tax concessions include the following:
i. Firstly, no real property tax or real property levy;
ii. Secondly, no personal property tax and no capital levies or taxes on capital gains or capital appreciation; and
iii. Thirdly, no taxes of any kind on the earnings of the Port Authority or the earnings of its licensees.
Mr. Speaker,
It is important that I should put into historical context that it was
intended in the original Hawksbill Creek Agreement (HCA) in 1955 that
these particular concessions would last for a period of 30 years. By an
amendment to the HCA in 1960, these concessions were extended for a
further five (5) years, thus expiring in 1990. By Act No. 4 of 1992
(which was retroactive to August 1990), the concessions which expired in
1990 were extended for a further three (3) years, thus expiring in
1993. By the Hawksbill Creek Grand Bahama (Deep Water Harbour and
Industrial Area) (Extension of Tax Exemption Period) Act 1993, these
concessions were extended for a further 22 years.
I should point
out that when the last extension was done by the previous administration
in 1992, the concessions had expired in 1990, which necessitated
retroactive legislation being passed. It took two years to complete the
process whereas under my administration the process will be completed
in less than a year from the August 2015 expiry date.
Clearly it
was not intended in the original HCA that these concessions would last
beyond 30 years. The Grand Bahama Port Authority Limited (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,
It is against this background that I
should draw attention to the following excerpts of my July 22, 2015
Communication and I quote:
“ The imminent expiration of these
concessions under the Hawksbill Creek Agreement has provided an
opportunity for the Government to secure a comprehensive set of new
arrangements aimed at spurring economic development in Grand Bahama
while at the same time increasing Grand Bahama’s contribution to net
fiscal receipts on a fairer and more equitable basis having regard to
the interests of The Bahamas as a whole.
“ Accordingly, and with
that aim in mind, the Government retained international consultants to
undertake a study of the economic situation within the Port Area; the
implications of renewing expiring incentives 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,
“ Additionally, the Government appointed a 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 tax
concessions in question are of great importance to the further economic
development of the City of Freeport, and the entire Island of Grand
Bahama.
“ Due to the in-depth and comprehensive nature of the study
and the report of the Committee, which would also require further
consultation and negotiations with stakeholders and the Grand Bahama
community, more time is clearly needed to complete this vital exercise.
“ In the meantime, however, to emphasize the thoroughness of the
review that was carried out, the Committee met with over 100
stakeholders, including civil society, manufacturers, developers,
tourism operators, professionals, and present and former
Parliamentarians drawn from both sides of the parliamentary divide. In
addition, the Committee hosted public meetings with the community.
“
Clearly, there is still a great deal for the Government to digest and
consider before settling the longer way forward based on the study by
the consultants and, more especially, the report from the Committee.”
Mr. Speaker,
The high level bi-partisan Review Committee comprising outstanding
citizens and residents assisted by able consultants and a technical team
as well as an efficient Secretariat took seriously its mandate to
consult with and listen to stakeholders, especially licensees. They
received outstanding contributions from licensees and other
stakeholders.
The Hawksbill Creek Agreement Review Committee’s
extensive and far reaching recommendations to the Government include
extension of the expiring tax concessions for a period of 20 years in
exchange for the following with a mechanism to monitor performance
through periodic review every five (5) years, with a view to ensuring
the best economic outcome for all parties:
1. 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;
2. 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;
3. 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, licensees to be
able to elect a Director to the GBPA Board;
4. 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;
5. GBPA / PGL must
establish and capitalize an independent investment promotion agency
(IPA), with expertise in retaining, expanding and attracting businesses;
6. To introduce a process which gives the right of appeal for GBPA’s licensing decisions;
7. 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;
8. Agreement
to modernize the Grand Bahama International Airport and pursue options
to lower cost of airlift (e.g., under a public/private partnership
arrangement);
9. 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, licensees 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.
Mr. Speaker,
Having
listened carefully and received visionary recommendations, it is clear
that further work needs to be done to enable the design of a strategic
plan and its implementation. The Government will also need further time
for consultation with relevant stakeholders as to whether it should
acquire an equity interest in the GBPA.
It has transpired that these
far reaching recommendations of the Review Committee have necessitated
the requirement for gathering of additional information by the Committee
from the GBPA and certain licensees to support the consultation,
negotiations and decision making process by the Cabinet. This has
proven to be more time consuming than originally contemplated as
required information has not always been readily forthcoming. It has
become necessary, in addition, to the McKinsey Report, a copy of which I
lay on the table of Parliament, for the Review Committee to commission
an economic impact study which has just recently been completed.
The results are awaited of an accounting exercise which will better
inform the Government on revenues and expenditures in the Port Area over
the last several years, and a report on undeveloped land holdings of
licensees within the Port Area, are being prepared by two Bahamian
professional firms.
Meanwhile, in order to fully inform the public
on the review process and the extent of its work, the Review Committee
has launched a website (www.hcareview.org) which is now available to all.
While the Review Committee gathers and analyses further information, a
Committee of Cabinet led by myself is engaged in discussions and
negotiations with GBPA and with stakeholders on pertinent issues and
recommendations.
Mr. Speaker,
It is the clear intention of the
Government not to place those existing stakeholders in Freeport with
major investments that are contributing significantly to the economy of
Grand Bahama and will continue to do so, at a tax disadvantage. On the
other hand, we face the reality that significant new development is not
taking place in Freeport in the same manner as other Islands in The
Bahamas that have neither the tax nor infrastructural advantage of
Freeport. Unemployment is also higher in Freeport and Grand Bahama than
in these other islands. We must therefore question why these conditions
exist and set about to address them.
The visionaries and driving
forces of the GBPA, the late Sir Jack Hayward, the late Edward St.
George and the late Sir Albert Miller, are no longer with us. The
Hayward and St. George families of shareholders have until recently been
mired in dispute.
The Hawksbill Creek Review Committee and the
world renowned McKinsey Group of advisors, along with the local
community and international business interests, strongly believe that
Freeport needs new investors with capital and expertise to execute a
vision that will lead to growth and prosperity for Grand Bahama.
Mr. Speaker,
It is now sixty years since the HCA and its enabling legislation came
into being. The world and The Bahamas have changed a lot since then,
and so have competition and international best practices. No longer can
an entity like GBPA be licensor and licensee, regulator and investor
with no rights of appeal by licensees, without inherent conflicts and
dissatisfaction. What may have served Grand Bahama well in the past, no
longer obtains.
To bring long-term certainty and confidence among
investors and the public, the Government although not interested in
management, must have a seat at the table of the GBPA, and put measures
in place that would not allow internal shareholder fights. Those
measures would also expedite decision making, create a dynamic,
professional world class promotional entity and ensure an overall
environment that keeps Grand Bahama on the cutting edge of competition
and ensure compliance with world class best business practices.
Mr. Speaker,
I believe that we can collectively between Government and the private
sector make Grand Bahama soar again to new heights of economic and
social development. We shall be judged by this generation, the next
generation of Bahamians, and all persons of goodwill by what we shall do
in respect of these expiring concessions in Freeport and related
relevant issues for the next 20 years.
In order for the Hawksbill
Creek Agreement Review Committee and the Government to adequately and
successfully address all of the foregoing issues more time is needed. In
the circumstances I shall be seeking a further extension of three
months to maintain the status quo on the expiring tax concessions under
the Hawksbill Creek Grand Bahama (Deep Water Harbour and Industrial
Area) (Extension of Tax Exemption period) Act 2015.