The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Freeport’s expiring investment incentives should be extended for at least 20 years, a senior private sector executive said yesterday, adding that such a move would be “a win-win for everybody”.

Kevin Seymour, the Grand Bahama Chamber of Commerce’s president, acknowledged, though, that any extension to the expiring real property tax, capital gains and income tax exemptions would have to involve “a quid pro quo”.

This, he suggested, should involve commitments by the Grand Bahama Port Authority (GBPA) and its joint ventures with Hutchison Whampoa, together with other Freeport businesses and licensees, to invest in further corporate expansions and development of the city.

Mr Seymour added that should the Hawksbill Creek Agreement’s expiring tax incentives be extended, it would facilitate the attraction of new industries and greater diversification of the Bahamian economy, which Freeport is better placed than any other island to deliver.

And he warned that many GBPA licensees would not be prepared to “tolerate” tax increases at a time when a possible economic revival was in the offing.

“At present the country is over -reliant on tourism, banking and financial services,” the GB Chamber president told Tribune Business.

“I suggest that Government place greater emphasis on the promotion of shipping and value-added logistics, medical tourism, light manufacturing, large-scale farming and agribusiness, and the development, through collaboration with notable institutions of higher learning, specialised research facilities.

“The island of Grand Bahama is well-suited for such industries and can easily facilitate most, if not all, of the aforementioned,” he added.

“The first step, however, requires a favourable decision by the Government with respect to the expiring exemptions under the Hawksbill Creek Agreement. These exemptions should be extended for at least another 20 years.”

Mr Seymour said the “prevailing sentiment” among the GBPA’s 3,500 licensees in Freeport was that the expiring tax exemptions should be extended.

“When they made their investment decisions years ago, built into that were these incentives,” the Chamber chief explained.

“While we understood these incentives would be expiring, something like that - when you do your cost modelling - you continue to operate in the hope that an extension will be negotiated at the end of the term.

“Most people have gone through the direct effects of the great recession, and knock on impact on the island, cannot tolerate a situation where taxes are heaped on them when they are starting to see a glimmer of recovery on the horizon.”

Mr Seymour added that it, in common with GBPA licensees, it was the Chamber’s “hope and position that these extensions should be granted, albeit with some form of quid pro quo and commitment from the major stakeholders”.

“That decision has not been made yet, and ultimately it’s the Government’s decision to make that call,” he said.

“If anything should have been learnt from the Baha Mar situation, it’s that we really need to diversification, so that if one thing goes down there are other industries to keep the economy going.”

It is now just over one month to the February 5, 2016, expiration of Freeport’s real property tax, capital gains and income tax exemptions.

These have already been extended by six months from the original August 5, 2015, deadline, ostensibly to give the Government time to make a considered decision. Yet it appears no closer to making one.

However, Hutchison Whampoa, Freeport’s largest investor, with more than $1 billion in the ground, has warned it wants “certainty” that Freeport’s expiring investment incentives will be extended before committing to the $250 million Container Port expansion and other potential projects.

Obie Wilchcombe, minister of tourism, in updating the House of Assembly on the Government’s meeting with the Hong Kong-based conglomerate, said: “In committing to further investment in Grand Bahama, including the Phase V expansion of the Container Port, in pursuing the development of a logistics centre and the development of their extensive real estate holdings, Hutchison Port Holdings and CK Property Holdings indicated that such further investment would require certainty on the extension of the expiring real property tax, capital gains and income concessions.”

Hutchison Whampoa would be the greatest loser if the Government elects not to renew the real property tax exemption, as it is Freeport’s landowner via its 50/50 joint venture partnership with Port Group Ltd, the GBPA affiliate, in the Grand Bahama Development Company (DEVCO).

The Christie administration has yet to reveal whether it intends to renew these incentives, and many observers believe it will attempt to make this conditional on obtaining certain concessions from the GBPA and its shareholder families.

Hutchison’s two umbrella groups are no different, though, from any other investor in wanting business climate certainty, a demand that echoes the cries of multiple Freeport-based businesses.