The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A well-known manufacturer has warned that all Bahamian businesses have been “damaged” by a 35-40 per cent increase in ocean freight rates in the past 18 months, with fiscal reform uncertainties also undermining employment prospects.

Andrew Rogers, the Nassau Glass and Bahamas Aluminium Manufacturing principal, echoed food retailers and wholesalers in expressing concern about the Arawak Cay port’s charges, plus the duopoly that has emerged in the shipping industry supplying the Bahamas from south Florida.

The Retail Grocers Association recently blamed a 20 per cent increase in freight costs on the “monopoly” created by the Nassau Container Port, and Mr Rogers described the impact of this - and uncertainty related to Value-Added Tax (VAT) and fiscal reform - as “very, very serious” for the private sector.

“One of my biggest concerns is employment in the country,” Mr Rogers, who heads the Bahamas Trade Commission’s manufacturing sub-committee, told Tribune Business.

“The international freight, the ocean freight charges in this country have gone up so much in the last 12 months with this new port, it’s damaging for all business in the country.

“It doesn’t matter if you’re a retailer, wholesaler or manufacturer. I would say they’ve gone up at least 35-40 per cent in the last 18 months,” he added.

“We are down to two main carriers, Tropical Shipping and Mediterranean Shipping Company. All we need is for one to pull out, and we will have a monopoly. If they think it’s serious now, if that happens the Government will have to step in and take control of pricing.”

Over-capacity and weak pricing/rate power has led to the departure of Crowley, Atlantic Caribbean (ACL), Pioneer Shipping and C&G from the Nassau commercial shipping market in recent years.

But Michael Maura, Arawak Port Development Company’s (APD) chief executive, told Tribune Business that the Nassau Container Port had not increased any fees or charges since it opened in 2012.

While fee increases would inevitably come as a result of APD’s ever-increasing operating costs, Mr Maura said the rise in freight charges being experienced by many Bahamian businesses stemmed from the shipping companies trying to offset higher Bahamian taxes and other cost rises.

“The port has not increased any fees since it was opened in early 2012. In fact, in 2013, port fees were reduced by up to 50 per cent for the Bahamian shipping companies (only) calling at the port,” Mr Maura told Tribune Business.

“The port charges for Tropical and MSC have not changed up or down. At some point, however, there will be an adjustment in port fees to make up for the increased cost of operating the port. As an example, the landing fee the port pays to the Government increases each year along with payroll and other operating expenses.”

The APD chief added: “In terms of shipping rates charged by ocean carriers, it is a customary practice for shipping companies to implement what is called a GRI or general rate increase at least once per year, often twice, to cover the rising cost of operating a service to the many destinations they sail to.

“In Nassau, the ocean carriers experienced an increase in costs based on the increase in Customs service fees and the Business License increase. I do not know what specific increases the carriers have implemented thus far this year.”

Mr Rogers, meanwhile, warned that it would be impossible to implement VAT by the target July 1 deadline because no business knew how the system and practicalities would work.

“No one is ready for it,” he told Tribune Business. “I don’t see how we can implement a tax like that in a country that’s never had this imposed on it. I don’t know what we’re doing.

“Going around and explaining what VAT is and how it’s been implemented in other countries, that doesn’t help us at all.”

Mr Rogers said the key question was whether the VAT forms that businesses will have to fill in have been completed, and if the systems were in place to facilitate on-line filing and payments to the Government.

“We have no idea how we’re going to comply with VAT,” he added. “It’s three months away. Normally, within three months of such a critical day in any country, everyone is educated on how they’re going to comply, what forms they will be using, and having seminars on how these forms will be filled out and who will process them.

“That should have been done six months ago. How in hell can we implement something three months from now, and no one knows how it works?”

While Bahamian businesses understood the theory behind it, Mr Rogers said it was the practical implementation elements that were missing.

“With the uncertainty with VAT, because it’s been so vaguely presented to the local business community, there’s all sorts of grey areas,” he told Tribune Business.

“When that happens, the first thing you do is cut costs, and the easiest and quickest way to cut costs is to cut staff. That’s normal. You can’t put costs up because of competition, and you have to control over utility costs and fuel because you have no control over the international oil market.

“Margins are dropping, mark-ups can’t be anywhere near where they were because of competition, whether you’re a retailer or a wholesaler.”