The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Grand Bahama Port Authority (GBPA) licensees strongly believe that Freeport’s regulation cannot be left to “the purview of a couple of families”, the island’s outgoing Chamber of Commerce president says.

Acknowledging that the proposal contained in the Chamber’s ‘The Future of Freeport - 2015 and Beyond’ paper had caused the GBPA, and its two shareholding families, “some concern”, Barry Malcolm emphasised that it was their licensees who believed the Port’s regulatory/quasi-governmental functions needed to be split-off from its profit-making assets.

The Chamber paper called for fundamental reforms to Freeport’s governance by transferring the GBPA’s ownership from the Hayward and St George families to an independent trust that would be majority-owned by the Port’s existing 3,500 business licensees.

Concerns over such a proposal were raised in a press release issued by Peter Adderley, of Creative Works, who questioned how such an independent trust would be financed and governed.

Yet Mr Malcolm said both GBPA licensees and the wider Grand Bahama business community felt that such a structure was essential for Freeport’s regulation to be seen as “transparent and fair” by existing - and future - investors.

While not saying he was responding directly to Mr Adderley, whose press release read a little like a Port Authority statement, Mr Malcolm’s comments seemed designed to rebut some of its contents.

Mr Adderley, in stating that there was “absolutely no need for alarm bells or panic” over the impending August 2015 expiration of several key Freeport investment incentives, said there was much common ground between the Chamber paper and Port Authority.

However, when it came to the proposal for ‘splitting off’ the Port Authority’s regulatory functions, Mr Adderley added: “It seems despite the GBPA making its licensee listing, fees and regulations available online for years, the Chamber is calling for greater transparency.

“While the GBPA’s regulator role and corporate model with its group of companies was structured from the inception of the Hawksbill Creek Agreement, and has contributed to much of Grand Bahama’s success, the Chamber sees this as an issue.”

Mr Adderley then wrote: “What has created much buzz and a frenzy of questions is the Chamber’s proposal to establish an independent trust made up of the 3,000 licensees.

“But who will cover financial short falls? How will 3,000 persons operate such an entity, and how could a selected few licensees head a trust and be asked to regulate themselves and not present a clear conflict of interest?”

He is quick to add, though: “We have no doubt this is a well intended idea and thought being worked out by the Chamber.”

Mr Malcolm, acknowledging that this proposal caused the Port Authority and its shareholders “some concern”, told Tribune Business that it was based on the views of Chamber members.

“They suggested very strongly that they feel the GBPA should operate as the quasi-local government entity supposed to be,” he explained.

This required that the Port Authority and its functions needed to be overseen by “a wider swathe of licensees and investors, providing regulatory guidance for Freeport transparently”.

Mr Malcolm likened the situation to that which used to exist in the telecommunications industry, when the then-Bahamas Telecommunications Corporation was both operator and regulator - a major conflict of interest.

This resulted in the creation of the Utilities Regulation and Competition Authority (URCA), to remove regulation from the hands of both BTC and the Government.

And, in the same way, Mr Malcolm said the private sector felt the Port Authority should be separate from Port Group Ltd, which holds all the major assets and for-profit investments. In so doing, it would end the potential conflict caused by the Port being investor/owner, regulator and potential competitor.

“The regulator by law is the GBPA,” Mr Malcolm told Tribune Business. “There’s a strong view among licensees that that regulatory function has to be seen to be transparent, has to be seen to be fair, and can’t be the purview of a couple of families. That’s what they want.”

Mr Malcolm also took issue with the inference that the Chamber report was just the product of himself and his directors, and that as an organisation in only represented a minority of Freeport businesses and licensees.

“Nothing could be further from the truth,” he added, explaining that the Chamber’s 400 active members covered 85 per cent of the Port area’s workforce.

And Mr Malcolm said the views of a wide cross-section of non-Chamber members had been obtained through various forums, all of which were used to form the ‘Freeport 2015 and beyond’ report.

Elsewhere, the Chamber president warned that Freeport would not attract any foreign direct investment of “significant size and consequence” until a final decision was made on the fate of the city’s tax exemptions that expire in August 2015.

Reiterating his call for the Government and Port Authority to recommit to Freeport’s original vision as a free trade zone, Mr Malcolm also urged them to enhance the ‘ease of doing business’ in the city so it could be used as a “jumping off point” for international commerce.

Describing the work carried out by himself, the Chamber and its Board over the past two years as “a long slog”, Mr Malcolm said the goal had been to obtain a consensus view from both members and Port licensees on the strategy that should be employed for Freeport’s future development leading up to 2015 and beyond.

This effort, which was designed to ensure the private sector had a ‘voice at the table’ as decisions were being made over its future, culminated in the ‘Future of Freeport’ paper and its recommendations, which were presented to both the Government and Port Authority.

The key suggestion was for a return to the Hawksbill Creek Agreement’s original ‘free trade zone’ mandate as the model for Freeport’s growth and development, Mr Malcolm reiterating that numerous other countries had used the “model pioneered in Freeport in the 1960s” to move ahead of the Bahamas.

Mr Malcolm, who demits office next month, added that apart from recommitting themselves to this strategy, the Government and Port Authority needed to also “do the kinds of things that make it easier for business - both domestic and international - to do business and use Freeport as a jump off point for international business.

“It’s not rocket science, but good common sense, based on us doing the things that ease business being conducted from Freeport, both internationally and domestically.”

Mr Malcolm said feedback from Chamber members/Port licensees showed they were unable to accept the “status quo of the last few decades that just benefited a select few”.

The solution, he added, was for the Government and Port Authority to work together to foster a stable, growth-friendly environment for Freeport’s private sector, with Customs, Immigration, taxation and investment/labour policies all working in harmony for a ‘free trade zone’.

But, warning that investor confidence in Freeport had already been shaken by the new taxes imposed in the 2013-2014 Budget (now largely lifted by the Government after it was suggested they were illegal), Mr Malcolm warned that the same uncertainty was being caused by the tax incentives that expire in 2015.

Freeport’s real property tax and Business Licence exemptions are the main incentives that will be impacted, and Mr Malcolm told Tribune Business: “The absence of clarity on what is happening post-2015 creates a huge level of uncertainty, both internationally and domestically.

“We won’t get any foreign direct investment of size, consequence with this uncertainty. We need to make the decision, decide the strategy and move on.”