The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Freeport is a “Singapore or Hong Kong waiting to be used”, the Grand Bahama Port Authority’s (GBPA) chairman believes, warning that it would be a “travesty” if the Bahamas failed to exploit the city’s existing multi-billion dollar infrastructure investments.

Noting that Freeport’s 147 miles of bulkheaded canals represented a $1.3-$1.4 billion investment alone at today’s values, Ian Fair said it would be impossible for the city’s infrastructure to be “replicated” anywhere else in the world today.

Focusing on the positive as the GBPA attempts to reverse eight years of decline, and get Freeport moving again, Mr Fair pledged that it was aiming to negotiate an extension to the city’s Business Licence and real property tax exemptions before they expire in 2015.

Acknowledging that “certainty” was critical for both current businesses and Freeport’s ability to attract new foreign direct investment (FDI), Mr Fair said he was “optimistic” that a favourable agreement could be reached with the Government well before the expiration deadline.

As for potential major investment projects currently on the drawing board, Mr Fair told Tribune Business that the GBPA had heard nothing more from the proposed $200 million World Mart trade/buyers emporium.

Backing the project as the sort that could flourish under Freeport’s logistics/transhipment platform, Mr Fair also disclosed that the GBPA was talking to China State Construction, the lead contractor for the $2.6 billion Baha Mar project, about expanding its activities to Grand Bahama.

Pointing to the major investments undertaken over several decades by the GBPA’s owners, the Hayward and St George families, to maintain Freeport as a functioning city, Mr Fair told Tribune Business: “Yes, the shareholders have made a lot of money over the years, but have also pumped a huge amount back as well.

“Freeport has not developed by accident. We’ve got multiple billions of infrastructure in the ground. There are 147 miles of bulkheaded canals. That would cost $1.3-$1.4 billion. There are 400 miles of road, some two-lane, some four-lane, that would cost $300-$400 million today.

“You couldn’t replicate Freeport today, and yet we have it - at no cost - in our country. We have to take advantage of it. It would be the greatest travesty if we didn’t....... It’s a Singapore or Hong Kong waiting to be used. Maybe that’s a bit extreme, but the anaolgy with Hong Kong is absolutely correct.”

The GBPA is currently conducting a study to determine just how much Freeport’s infrastructure is worth at today’s values. Mr Fair’s reference to Hong Kong comes from his speech last week to the Business Outlook Conference, where he delivered an ‘if it ain’t broke, don’t fix it’ message in the context of Freeport.

He noted how Beijing had avoided tampering with Hong Kong’s commercial environment ever since it regained the former UK colony in the late 1990s, having recognised the enormous profits and benefits it generated.

Mr Fair’s message seemed to be delivered with one eye on Freeport’s Business Licence and real property tax exemptions, which expire in 2015. The GBPA chairman said the negotiating process with the Government for their extension had begun, adding that it was a situation that needed to be resolved as quickly as possible.

“We all know in business that certainty is critical,” Mr Fair told Tribune Business. “The Government clearly recognises they need to get business going and get foreign direct investment in.

“In Freeport, we need to provide investors with certainty, and need to resolve this issue sooner rather than later. Coming back to the Hong Kong model, don’t tamper with it.”

With one eye on 2015, he added that the GBPA was “not going to wait that long” to negotiate the incentives’ extension. “I’m confident,” Mr Fair said, “because the Government does agree with the fact, if you look at what’s been created in Freeport, why would you change it?”

The GBPA chairman said the most “compelling statistic” was that when Freeport’s foundation, the Hawksbill Creek Agreement, was signed in 1955, Grand Bahama had just 3,340 total residents and a fishing-based economy that contributed little to the Public Treasury.

From there, it had grown to a 65,000-strong population and a city/island that was a net income earner for the Government. Mr Fair pointed out that Freeport’s infrastructure, plus maintenance and upkeep, were all financed entirely by the private sector - imposing zero burden on taxpayers - while the Government is estimated to collect $150 million annually in revenue from the city.

As for investment projects targeted at Freeport, Mr Fair said the GBPA was unaware of the status of the World Mart development being spearheaded by Bahamas-based investors, Ken Hutton and Joe Thompson.

“We’ve heard nothing,” Mr Fair said. “We’re very supportive of a project of that nature; it plays very much to the type of business we think could, and should, succeed in Freeport. We’ve given them all the support we can, but have no idea where it is.”

Mr Hutton declined to comment when contacted by Tribune Business, but this newspaper understands that the World Mart team has been working over the past few months to refine their investment proposal and ensure it is ready. Their position is understood to be that they are waiting to hear from the GBPA and the Government.

Mr Hutton previously told Tribune Business that World Mart had been estimated as having a $400 million annual economic impact, and creating between 6,000-8,000 total jobs in Grand Bahama.

Disclosing that there would be two full-time Bahamian employees for each of World Mart’s planned 1,600 stalls, which manufacturers from Asia would use to showcase their products to potential buyers and partners in the Western Hemisphere, Mr Hutton told Tribune Business that the one million square foot facility would create between 3,000-4,000 direct jobs. The project’s build-out was projected to create 600-800 construction jobs

Mr Fair last week confirmed to Tribune Business that the GBPA was incurring consistent annual losses, as the various licence and maintenance fees it received were less than what it cost to maintain and develop Freeport.

This requires the Haywards and St Georges to subsidise the GBPA to the tune of several million dollars per annum. These sums likely come via their earnings from Port Group Ltd, the affiliated company that holds their investments in Freeport’s key, productive infrastructure assets - 50 per cent stakes in Grand Bahama Development Company, Freeport Harbour Company and Grand Bahama Airport Company, plus the likes of Bourbon Street Ltd (owner of Port Lucaya Marketplace).

Still, Mr Fair told Tribune Business that Freeport and, by extension, Grand Bahama, “represents the solution to most of the problems” the Bahamas currently has.

He added that its wealth of undeveloped land, combined with existing infrastructure and a properly planned city layout, could help end the population drift to New Providence - and the island’s overcrowding and myriad social problems - if the right environment for economic development was created.

Noting that many Grand Bahamians had moved to Nassau seeking work, Mr Fair told Tribune Business: “Freeport was designed for 250,000 people, and 65,000 currently live there.

“It’s unrealistic at this stage to think 250,000 people will live there, but if we could just create the environment, it could solve a lot of the social problems in Nassau - the congestion, the noise.

“If we could just take 15,000-20,000 out of Nassau, we would relieve the congestion there, and the Government having to pay for social services for them.”

The GBPA chairman conceded, meanwhile, that no intensive promotion of Freeport - and its business and investment opportunities - had occurred since Edward St George’s death in 2005. He added that the post-2008 recessionary environment had also acted as a barrier to marketing the city, as investors were not expanding in their home countries - let alone abroad.

But the GBPA had judged the time was now to relaunch its investment promotion via a new brand identity. “Freeport’s got an incredible story to tell,” Mr Fair said. “People have been bemoaning Freeport’s problems, but the reality of the last five years is that no one was investing in their own countries, let alone abroad.

“Now the landscape is very different, hence why we’re rebranding and out there promoting again. We’ve already got a good pipeline of business, a lot of which is coming out the other end.

“Freeport’s already commercially successful; it just needs to be marketed. We need to talk it up. We have so many opportunities, we need to get out there on a more consistent basis and promote it again.” The GBPA is heading to Panama this month, and Brazil in April, to further promote Grand Bahama on joint trade missions. Visits to London, Hong Kong, China and Australia are planned for late January and early February, with a European trade mission -targeting the UK, Norway, Germany and Italy - scheduled for mid-2013.

Mr Fair added that the GBPA is targeting businesses and investment in areas such as medical tourism, executive educational programmes and tourist product development.