The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Freeport’s failure to “turbo charge” its business model has seen it bypassed by countries it should have left “in the dust”, a top Chamber executive warning it will now “take decades” to catch up with rivals.

Speaking at the Grand Bahama Chamber of Commerce’s installation banquet this weekend, its president, Barry Malcolm, said the investment incentives offered by Freeport’s rivals were the same as those first brought in by the Hawksbill Creek Agreement 60 years ago.

Emphasising that Freeport, and the entire Bahamas, had failed to properly exploit the benefits of an Agreement “decades ahead of its time”, Mr Malcolm said this nation had to ‘give to get’ when it came to attracting foreign direct investment (FDI).

“Regrettably, our policy makers for generations have struggled to wrap their heads around the concept that was meant to be Freeport,” Mr Malcolm said.

“I struggle to understand why we have not turbo-charged and ridden our model of the Hawksbill Creek Agreement to leave [other] countries I have named in the dust.

“Instead, those countries, having come to the game decades after us, have surpassed us so far that, with best efforts on our part, it will now take decades for us to catch them up.”

Among those named by Mr Malcolm as having “bypassed” Freeport are the likes of Panama, the Cayman Islands, Costa Rica, Dubai, the United Arab Emirates, Singapore and New York state - all key competitors in the logistics, transhipment and distribution business.

“All have put in place economic models that have leaped ahead of Freeport and the Bahamas in their success in enabling domestic investment and attracting new international investment,” the Grand Bahama Chamber of Commerce’s president added.

“These states are presenting to the world models of engagement that say: ‘Come! Here I am! Here is what we will do! Here is how we can welcome and accommodate you. Here are the compelling reasons why you should choose us over all others’.”

Emphasising that the business advantages offered by the Hawksbill Creek Agreement were critical to attracting many companies to Freeport, Mr Malcolm said this had been undermined by the 2013-2014 Budget’s amendments to the Customs Management Act.

Referring to the 1 per cent Customs administrative processing fee, which the Chamber plans to challenge via Judicial Review, Mr Malcolm said this had caused some firms to “reassess and, in some case, make decisions to scale down or pull back”.

Tribune Business previously revealed that the 1 per cent Customs fee was the main factor behind Mediterranean Shipping Company (MSC) deciding to downzise its back office presence in Freeport.

Polymers International also decided to place expansion plans on hold, while a key aspect of VTrade’s business model was wrecked.

Mr Malcolm said those decisions were made because of what these companies “perceive to be growing uncertainty as to reliability of the rules of engagement in Freeport – particularly relating to development leadership and increasing exposure to new taxes”.

He added: “In their mind the deal that was made under the Hawksbill Creek Agreement is the deal that was made - by the country and its regulators- and, until the provisions of the deal as originally made are appropriately renegotiated or expire, the deal is the deal.

“It is the considered view of licensees that any fundamental change to those provisions requires the consensus of multiple parties, including: Government, Grand Bahama Port Authority and licensees. This simple concept drives the thinking and actions of Licensees. A fundamental, and in their view, legally entrenched principle of the Agreement.”

And Mr Malcolm said further: “Most of the companies that have a presence in Freeport are here because of the value of benefits they enjoy under the Hawksbill Creek Agreement.

“They were sold on those benefits and came here largely because of those benefits. Those benefits factor heavily into the value proposition for their businesses. Without those values their operations, in most cases, are less economically viable.......

“History also confirms that when businesses face uncertainty in the form of the abrogation of the basic deal under which they took on the risks of investment in the first place, they pull back or they run. Such uncertainty produces a level of business risk that is simply unacceptable to business.”

Suggesting that the private sector ignore those suggesting that it “simply be silent and accept reality such as it is”, Mr Malcolm said it had also been “unsettled” by issues such as “the uncertainty of leadership for Freeport”.

That is a not-so-subtle reference to the Grand Bahama Port Authority (GBPA), and other concerns identified by the Chamber president included “the depth and sustainability of new investment” and the 2015 expiration of Freeport’s existing Business Licence and real property tax exemptions.

The “apparent shrinkage rather than growth” of Freeport was another issue, but Mr Malcolm ended his address with a call for Freeport and the wider Bahamas to look to the future.

“It is the Chamber’s view that we should all be about the mission of making Freeport, and by extension, the Bahamas, the most investor friendly (Bahamian and international) business centre on the planet,” Mr Malcolm said.

“How do we credibly and consistently make the case to new investors – local or foreign - when current investors are uncertain?”

And he added: “Freeport, Grand Bahama Island, the Bahamas.... We need a vibrant, thriving, world-standard international business centre in our country. We need a Freeport.

“Tourism and banking are sectors in which the challenges will not abate. Even if one day we discover the right niche in those sectors, we will face, in the case of tourism, fierce, brutal competition. And, in the financial services sector, we are likely to be forever constrained by Big Brother to the North and OECD to the East.

“International business, leveraging the rapid, ever-changing knowledge-based- enterprises of today, is the way to go,” Mr Malcolm said.

“We either jump in hard and fast or we fall behind. We either focus and move forward, engaging in a way that brings opportunity. Otherwise, the world continues to move on with or without us. Them there are the facts.”