The Tribune

Richard Coulson detects encouraging signs of a renaissance in Freeport.

On a recent trip to Freeport, I felt once again the different atmosphere in our nation’s second city.

Unlike Nassau’s bustle and congestion, I found sweeping, traffic-free boulevards, randomly scattered commercial buildings and handsome residential enclaves tucked away on canal-front lots.

Only in south shore Port Lucaya does a complex of gleaming hotels and convention centre attract a busy inflow of locals and visitors, reinforced by top-grade restaurants and a network of bars and fast-food joints loud with music and teeming with spring-breakers. The commercial harbour and the industrial units, Freeport’s real strength, are dispersed far off across the area governed by the Grand Bahama Port Authority (GBPA).

This makes for a peaceful, stress-free scene, but leaves an economy that even local boosters call “moribund”. The population has hovered around 55,000, and unemployment has risen from 7.4 per cent to 18 per cent in the last ten years as the workforce fell from 26,000 to 21,000. The GBPA has granted about 3,000 business licences, but growth has been static for large ventures.

After nearly 20 years, foreign direct investment is still dominated by Hutchison Holdings (formerly Hutchison Whampoa), the Chinese conglomerate running the container port, the harbour, the international air terminal and (reluctantly) the largest hotel group and still unopened casino, just recently put up for sale. Lawyers, accountants and builders struggle to find new clients, as few business start-ups break ground.

Many fingers are pointed at the GBPA, created in 1955 by American entrepreneur Wallace Groves, taking a 100-year lease of 50,000 acres of Grand Bahama real estate to create a free trade zone under the renowned Hawksbill Creek Agreement, a form of joint venture with the Bahamas Government. The private sector would build a deep-water port and undertake industrial development blessed with major tax and import duty concessions, while Government would handle the usual state services like law enforcement, post, education and immigration.

The concessions have been frequently altered, renewed and extended as the GBPA became the dominant regulator and stimulator of business and commerce. With many ups and downs, it accomplished the pioneer task of creating Freeport as a viable community from a wilderness of swamps and pine barrens. Nevertheless, in the last few years, both its own local licensees and the Nassau Government have criticised it for being sleepy and unimaginative in creating new business, whether foreign or domestic, while the GBPA has riposted that that the main obstacles have been unco-operative red tape and xenophobic immigration restrictions imposed by heavy-handed ministries, combined with the effects of the recession and three back-to-back hurricanes. All sides now accept that a new approach is due.

Structural flaws were not the root of the problem. Rather, Freeport has uffered from the rise and fall - and inevitable clashes - of several strong personalities. During the peak of its success up to 2005, the GBPA was ruled by the triumvirate of Edward St George, a suave English barrister turned consummate business supremo; Sir Jack Hayward, a feisty, risk-taking John-Bull entrepreneur (his father was Groves’ original partner), and Sir Albert Miller, an up-from-the-ranks local constable whose integrity and character created an iron-hand administrator.

Unfortunately, St George, at the top of his powers, died unexpectedly in 2004, with no clear successor. He had been the face of Freeport abroad, shrewdly persuading Hutchison Whampoa to choose Grand Bahama for one of its many huge container terminals and improve the port facilities.

Despite their qualities, neither Sir Jack nor Sir Albert could become a true replacement, and years of drift and in-fighting ensued. The widow and heirs of Edward St George battled Sir Jack over their ownership split of GBPA, and several place-holders held the chairman post, including well-intentioned former Central Bank Governor Julian Francs, soon chewed up between the warring factions; controversial Hannes Babak, an investor from Austria whose aggressive style made few friends and led to the cancellation of his work permit; and dignified British/Bahamian banker Ian Fair, who floated well above the fray.

The two knights tried leadership roles but age was advancing and Sir Jack, Honorary Chairman, died in early 2015 at 91, soon followed by Sir Albert, 89.

When I attended the Grand Bahama Business Outlook Conference last month, I felt a new spirit, as if the title “A Bold Agenda for the Next 25 Years” will not be just fancy words. In early 2015, the Prime Minister finally focused on Freeport’s decline and created the Hawksbill Creek Agreement Committee (HCAC) to chart a new way forward, in preparation for the expiration of tax and duty concessions last August. This was not the typical dozy study group but, led by the energetic physician and former cabinet minister Dr Marcus Bethel, came up with specific recommendations, commissioning an economic study by McKinsey & Co and conducting dozens of interviews with GBPA licensees and other stakeholders.

The expiration date was extended to February 4, when the HCAC report was issued, and a final three months to May 4 to give Government time to digest its content and enact changes.

Dr Bethel and his team, including President of the Grand Bahama Chamber of Commerce, businessman Kevin Seymour, produced a dozen recommendations, the most significant being the requirement that within one year the GBPA “secure an international investor to provide majority ownership” enabling it to meet development commitments. Hardly less important was the proposal that Government obtain an equity interest in the GBPA and the associated asset-rich Port Group Companies. These provisions would clearly change the long-standing 50-50 ownership of the GBPA by the St George and Hayward family interests and thus have aroused vigorous debate.

In her lively report at the March 17 conference, the GBPA’s articulate Vice-Chairman Sarah St George (Edward’s daughter) publicised recent new business growth and gave an articulate rebuttal to the claim that Grand Bahama has contributed to a financial “deficit” in central government accounts: quite the opposite she demonstrated with a display of hard numbers, developed with the help of accountants KPMG. Having commissioned investment bankers Morgan Stanley to seek foreign investment, she is clearly open to new participants but defended the management leadership of herself, President Ian Rolle and his fellow executives. She also highlighted the recent addition to the GPBA Board of Rupert Hayward, Sir Jack’s grandson. This marked the final healing of the two families’ rift and brought Rupert’s experience as a successful English merchant banker and Brazilian property developer.

The prospect of new ownership raises many possibilities. The Prime Minister has been having well-publicised talks with the powerful MSC shipping group, who might leverage their dominant traffic in the container port into an equity position in the GBPA itself. Last year two prominent US investment companies, Black Rock and Carlyle, sniffed around, only to back off when the irrepressible Mr Babak complicated matters by proposing a deal during his failed attempt to control the Hayward family trust, resulting in a spate of bitter litigation. It’s not known whether either of these two heavyweights will return to the table.

Whoever may step in, it seems clear that, even with a majority stake and brief to introduce business, the new party should not usurp the management role of the present GBPA leadership. Sarah St George, herself a trained investment banker with the finest Wall Street houses, is clearly well liked and integrated into the Freeport community. Combining her background with Rupert Hayward and her brother, Henry, it’s clear that this younger generation boasts even more professional expertise than their adventurous ancestors Edward and Sir Jack.

In a subsequent conversation with Dr Bethel, he assured me neither his HCAC Committee nor Government has any intention of putting pressure on the present owners to force a buyer down their throats. He believes they recognise the value that a major foreign party can create in international marketing and wants to help in choosing the best one. Doubtless technical issues will arise in setting a price and voting rights, but Chamber President Seymour was adamant that the process not get bogged down in rancorous nit-picking.

An equity stake for Government may be an inevitable move that will be acceptable provided it does not impose time-wasting bureaucratic controls from Nassau or the restrictive work-permit policies pursued by Minister of Foreign Affairs and Immigration Fred Mitchell, the Darth Vader threat to flexible expatriate employment.

The potential for Freeport seems limitless once its wide open spaces are allowed to squelch human differences. The ever-growing forest of travelling cranes at the container port, the tankers and cruise vessels under repair in the shipyard drydocks, the Buckeye Partners’ petroleum tank farm and marine terminal, the anti-HIV drug manufacturer Pharmachem, subsidiary of NASDAQ-traded Gilead Sciences ... all are examples of Freeport’s productivity achieved under the GBPA, representing several billion dollars of capital investment.

Pharmachem already employs 120 Bahamians and on Thursday broke ground on a $120 million production facility, creating another 100 jobs. Gazing at its windowless hi-tech structures, I wondered whether a half-dozen similar non-polluting pharmaceutical operations could spring up, perhaps on the 370-acre lot that Henry St George announced as ready for development.

I found the most encouraging hint of future harmony in the “Addendum” to the on-line version of Sarah St George’s speech to the Conference. After delivering her combative prepared exposition to the crowd, I can only believe she tacked it on after Prime Minister Christie came down from the podium and gave her one of his bear-hug embraces, with a few quiet words into her ear. She wrote: “We are now in active talks directly with the Prime Minister and his HCA Cabinet Committee … We are confident that these talks will result in a practical and measured approach to the Committee’s earlier recommendations. The Prime Minister has assured us that his approach will be fair and non-coercive ... to adopt policies conducive to investment, expansion and new jobs for Freeport and Grand Bahama.”

The winds of compromise are clearly blowing. We shall await the results in an official announcement by May 4.

• Richard Coulson is a retired lawyer and investment banker born in Nassau and from a long line of Bahamians. He is a financial consultant and author of A Corkscrew Life - adventures of a travelling financier.