The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Grand Bahama Port Authority’s (GBPA) ownership should be transferred to an independent trust as a way to eliminate perceived conflicts of interest, “minimise investor risk” and boost the organisation’s transparency/accountability.

The Grand Bahama Chamber of Commerce, via its ‘Vision 2015’ paper, has called for fundamental reforms to Freeport’s governance by ‘splitting’ the Port Authority’s quasi-governmental and regulatory powers from its private, profit-making assets.

The Chamber’s ‘The Future of Freeport - 2015 and Beyond’ paper, which has been seen by Tribune Business, calls for the Port Authority’s joint owners, the Hayward and St George families, to devolve the GBPA’s ownership and management to “an independent trust or similar vehicle”.

This would be majority-owned by the GBPA’s existing 3,500 business licensees, and the Chamber paper said such a move would eliminate the perceived ‘conflict of interest’ that exists as a result of its dual role as regulator and owner of Freeport’s key infrastructure, and major profit-producing, assets.

“The creation of Port Group Ltd (PGL) and its joint venture partners [Hutchison Whampoa chiefly], and the divestment and transfer of assets from GBPA, has created an inherent conflict of interest between regulator/administrator (GBPA) and asset holder (PGL) as it relates to regulating the municipal services provided by PGL and its joint venture partners,” the Grand Bahama Chamber said.

“GBPA often acts in the best interest of the asset holder and its partners at the expense of the consumers and other GBPA licensees.

“The sale of municipal assets without the promulgation of necessary regulations has limited GBPA’s ability to properly perform its obligations under the HCA (Hawksbill Creek Agreement). This lack of transparency has turned off potential investors and stymied growth.”

Concerns over this issue first surfaced during the four-year long ownership battle between the Haywards and St Georges, when various private sector executives suggested that the GBPA had become little more than a ‘regulatory shell’ after all the assets had been devolved to Port Group Ltd.

Whether the GBPA’s two ownership families would agree to the solution proposed by the Chamber is uncertain and, probably, unlikely, given that the regulatory/quasi-governmental functions are effectively the ‘source of their power’.

Yet the expiration of various Freeport investment incentives in 2015 effectively gives the Government an opportunity to push for such a scenario in return for their renewal.

The Chamber paper said transferring the GBPA’s ownership to an independently-owned trust would “eliminate the ‘company town’ perception that the joint ownership of GBPA and PGL creates”.

It would eliminate any conflicts surrounding the two, and ensure the transparent oversight of the Hawksbill Creek Agreement and the GBPA’s municipal functions.

The Chamber added that the proposed structure would ensure the GBPA’s regulatory powers were protected from another ownership dispute, with its Board formed from Port Authority licensees and other Freeport stakeholders.

The GBPA’s financials, licensing fees and requirements would also be publicly disclosed, with a development and marketing plan created for the Freeport and Lucaya areas.

“Risk is the nemesis of investment. By separating the ownership/management of GBPA from that of PGL, the perceived and actual risk to future investment and an administrative burden on existing investors is significantly minimised,” the Chamber report argued.

It said the perception of conflict between the GBPA and Port Group Ltd, plus the protracted shareholder dispute in the wake of the late Edward St George’s death, had created “palpable barriers to significant new foreign direct investment”.

The Chamber added that the GBPA had failed to attract significant new investment to Freeport, complete infrastructure improvements and create the necessary environment to facilitate business development.

“The generally unsatisfactory experiences of potential foreign investors have created a poor image in the international business community. Lack of transparency of licensing requirements causes significant delays and increased costs to new investors,” the Chamber paper said.

“GBPA has developed a dysfunctional (opaque) relationship with its licensees. It has failed to act on behalf of its licensees to protect the essence of the Hawksbill Creek Agreement.

“There is a lack of transparency on operational finances, licensing requirements, annual fees, and licensee lists. It has created division and distrust with its licensees by discouraging collaboration between licensees, [the Government] and itself, and by providing poor customer service. This has hindered the growth of existing investors.”

To help drive Freeport’s development, the Chamber paper said Hutchison Whampoa, Port Group Ltd’s partner in the Grand Bahama Development Company (Devco) and the Freeport Harbour Company, plus the Grand Lucayan and Freeport Container Port’s majority owner, needed to do more.

“Hutchison Whampoa and Port Group Ltd continue to focus on an agenda based on their own business interest to the exclusion of developing the investment climate of Freeport/Lucaya,” the Chamber paper said.

“The real property tax negotiations should be utilised to encourage Hutchison Whampoa/PGL to develop and market the Sea/Air Business Centre, Southeastern Lucaya and the Britannia property, and to relocate the cruise port to Russell Town.

“These should be an integral part of the 2015 exemptions negotiations. International logistics and tourism are two of the cornerstones of the Freeport/Lucaya economy, and are essentially in the exclusive development control of the PGL and Hutchison partnership.”