The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

THE Government will not permit “monopoly pricing” by the private operator of Nassau’s air freight terminal, its top finance official asserted last night, as he pledged to make the deal a “win-win-win” for all.

Simon Wilson, the Ministry of Finance’s financial secretary, told Tribune Business that any predatory pricing by JDL, the company charged with transforming the facility under a $25m public-private partnership (PPP) with the Government, is “a no-no” and will not be tolerated while promising to ensure the arrangement “works out well for all stakeholders”.

Speaking after the Ministry of Finance yesterday met with air cargo operators, freight forwarders and other private sector interests to address concerns with the air freight terminal’s outsourcing to JDL’s management, he conceded that “a better job” should have been done in communicating the plan to stakeholders along with details of how they would be impacted.

Tribune Business was yesterday told that uncertainties surrounding the JDL agreement, and fears that it would significantly increase air freight costs, have resulted in a business slowdown for those in the sector as many Bahamians switched to re-routing their import shipments via ocean freight (see other article on Page 1B).

And this newspaper was also informed that the addition of JDL’s fees and charges, especially the 20 cents per pound air freight terminal handling fee, will likely drive several couriers out of the industry because it will make margins wafer-thin and too narrow to survive when salaries and other costs are factored in.

The air freight terminal handling fee, which is purported to cover costs associated with transporting “shipments/package within the warehouse”, is one of 20 that JDL plans to levy according to a schedule seen by Tribune Business that was due to take effect from Monday, March 18. Fees for frozen storage, morgue storage, pallet wrapping, late pick-up and overtime are among those that can be levied.

The 20 cents per pound handling fee represents a 50 percent reduction on the initial 40 cents charge said to be under consideration. Mr Wilson last night reiterated that “the fee is going to be a lot less than 40 cents”, and conceded that - while an initiative such as the air freight terminal PPP always comes with “growing pains” - it had been made worse by poor communication with industry stakeholders.

“We’re going to work with JDL to make sure things work well for all stakeholders,” Mr Wilson told Tribune Business. “It has to be a win-win-win for everybody. We want a better facility and better controls. We want to encourage the business. We will not allow monopoly pricing by JDL. That’s a no-no for us. We will meet with them later this week to talk about what’s happened in the last couple of days and make sure everything’s going well.”

Confirming yesterday’s meeting between the Ministry of Finance and the private sector, the financial secretary added: “We realised we had to do a better job of communicating with all the stakeholders about what is happening.

“Because the facility is so bad, the current facility is so bad, persons did things to compensate for its poor state, and now with the new approach to operations these things fall away. When people saw the fees, they relate those fees to existing operations and not how it should operate.”

As an example, Mr Wilson said many freight firms had rented space in the air freight terminal “because there was nothing else they could have done” to store cargo when flights arrived late and could not be cleared by Customs. Renting space in a bonded room was the only alternative, but this will now not be required with the JDL-financed upgrades to the facility.

Mr Wilson said many operators had reacted negatively to the end of such practices, fearing their available space would be reduced, when in reality they will now no longer need as much square footage. And few had realised they will also now have “‘x’ amount of free storage” because this had not been properly communicated.

“I think the meeting, in essence, conveyed to us that we have to communicate with all stakeholders,” he added. “I think everybody agreed that the facility needs to be upgraded, and everybody agrees that these facilities globally are a user-paid system. The upgrades have to be paid for by the users. There’s no issue with the model. The issue is we have to communicate what services we offer and so forth.

“There’s always going to be some growing pains, and part of the growing pains is to do a better job of communicating with our stakeholders.”

Private sector operators yesterday agreed with Mr Wilson’s description of Lynden Pindling International Airport’s (LPIA) government-owned air freight terminal with one branding it “a rat hole”. Tribune Business revealed on June 6 last year how the Government was seeking to solve the air freight terminal’s issues via a potential PPP outsourcing arrangement with JDL.

Documents accompanying the 2023-2024 Budget, in an annex detailing private-public partnerships, set out the “justification to design, finance, build and operate a new air freight terminal”.

“The purpose of this proposal is for the Government to transfer the property consisting of the air freight terminal to a special purpose vehicle (SPV) owned by the Government, and then to lease that property to JDL in order to design, finance, build and operate a new air freight terminal,” the Budget documents stated.

Mr Wilson yesterday said JDL has already begun renovations, focusing initially on the restrooms, and added: “We’ll make the facility a place where people feel comfortable working. That, right now, is not the case. The facility is in a poor state.”

The JDL arrangement, though, has continued to come under fire from the Government’s political opponents. Michael Pintard the Free National Movement’s (FNM) leader, yesterday again challenged the seeming lack of competitive bidding that resulted in JDL’s selection and also queried whether the fees it has been levying since Monday need to be given lawful approval by an Act of Parliament.

Mr Wilson, in response, said BISX-listed Arawak Port Development Company (APD) had been levying cargo handling fees for more than a decade and adjusting them accordingly as the operator of Nassau’s major commercial shipping port. “They adjust the fees without any input from anybody. Is there any legislation for that,” he asked.

As for the questions over competitive bidding, and whether JDL’s selection complied with the two Public Procurement Acts, the financial secretary said: “We were searching for the right partner, and seeking partners to help is with the air freight building. The air freight building has been a problem for at least ten years.

“There was a lack of interest from partners. At one point in time we started discussions with APD. The building right now is in poor shape and half the building has been unoccupied for over ten years. Where Customs used to be, they had to move because it was leaking, and unfortunately cargo operators with perishables such as drugs and flowers, it’s very, very difficult.

“There was nobody beating our door down to say: ‘We’ll look at this’. We’ve been up and down looking at options and talking to people to see if they’re interested. They [JDL] were the only group to say they were interested and think they can make this work.”

Mr Wilson said Customs and the authorities will now “be able to tell with more accuracy” the amount of air cargo being imported into New Providence because they will be able to “weigh the manifest”. He added: “We’ll be able to tell with more accuracy haw to spread the costs over the volume of cargo.

“In a couple of months we’ll have a better understanding of the true volume of cargo and that will determine the real financial model. Because we are now weighing the manifest we are seeing the true volume of cargo. If activity levels have fallen, they are much higher than we thought they would be. Before we had no actual control over what was coming in and out. We couldn’t verify.”