The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government was yesterday urged not to “act on desperation” over Baha Mar, the Opposition’s deputy leader warning: “Don’t give away the house for the sake of one roof.”

K P Turnquest expressed concern that Prime Minister Perry Christie and his government, in their haste to resolve the $3.5 billion impasse and get the resort complex completed, might strike a bad deal with the Chinese government entities controlling Baha Mar’s fate.

In particular, he questioned why the Christie administration appeared to have usurped Baha Mar’s Deloitte & Touche receivership team, now that it appeared to be playing the lead role in negotiations with Beijing.

Mr Turnquest was referring to the Government’s hope that the China Export-Import Bank, Baha Mar’s secured creditor, can reach an agreement with fellow Chinese state-owned entity, China Construction America (CCA), to complete Baha Mar’s construction.

Senior government officials are currently in Beijing hoping to finalise the details of such an arrangement, but Mr Turnquest warned that the Government was “operating from a position of weakness” - and the Chinese knew it.

“It’s an interesting development that the Government is now seemingly taking the lead in finding a solution for this situation when there’s court-approved receivers and liquidators already engaged. That’s unusual,” Mr Turnquest told Tribune Business.

“It points to a very serious desperation on behalf of the Christie administration, and acting on desperation is never a good idea.”

The Opposition deputy leader was alluding to the purported Chinese demands, aired on the radio at the weekend, for resuming Baha Mar’s construction.

Prime Minister Perry Christie, in a statement released late last night, said it was an “absolute lie” that the Government had agreed to grant 500 Bahamian citizenships to Chinese investors in return for Baha Mar’s resumption.

However, this was the only specific ‘demand’ that the Prime Minister denied in his statement, although he pledged to address the “misleading information” circulating on Baha Mar in tomorrow’s Budget communication.

Apart from the 500 citizenships, the Chinese demands supposedly include that Baha Mar’s original developer, Sarkis Izmirlian, be out of the picture completely; and that the $3.5 billion development be ‘tax free’ for 30 years.

Such demands, if true, envisage that the Government earn not a single cent from Value-Added Tax (VAT), real property tax, casino tax and a host of other taxes for three decades - essentially a ‘tax holiday’ across several generations of Bahamians.

The Chinese were also said to have demanded a 25 per cent increase above the value of the investment incentives granted to the Government by Mr Izmirlian. Given that the Christie administration previously valued these collectively at $1.2 billion, this amounts to a $300 million increase to $1.5 billion.

There is nothing to suggest that the Christie administration has agreed to these terms, or that they are accurate, but Bahamian social media has exploded with anger at the mere suggestion.

In response, Mr Christie said: “Bahamian citizenship is not for sale at any time at any price to anybody. This is a non-negotiable position of my government.

“Moreover, it is for me personally a matter upon which no compromise is possible. I can therefore assure the Bahamian people, without any equivocation whatsoever, that no deal offering Bahamian citizenship in return for an investment in the Bahamas will ever be entered into while I head the Government of the Bahamas.

“I find the very idea of citizenship-for-sale to be repugnant to all that I believe in, and to all that I stand for as a Bahamian. It will never happen on my watch.”

Mr Christie added that such arrangements were also legally impossible, but did not address the other claimed Chinese demands.

“If the terms alleged are true, it almost amounts to a selling our of our sovereignty,” Mr Turnquest told Tribune Business.

“The idea that they can be exempted from real property tax and VAT for 30 years appears to be incredibly generous, given the concessions already given to this project under the Hotel Encouragement Act and other incentives, including the land.

“It’s unreasonable to expect ordinary Bahamians to pay the cost of this investment for 30 years, while it receives a return tax free at the Bahamian people’s expense,” he continued.

“We have got to change the way we approach foreign direct investment (FDI). It’s got to be a partnership; a win-win for both sides.”

Tribune Business sources confirmed that the China Export-Import Bank did indeed send a letter to the Government last week, setting out its terms and conditions for restarting Baha Mar’s construction and moving it towards completion. However, they were unable to confirm the contents.

This is not surprising, given that Baha Mar’s secured creditor has given every indication that it does not want to invest a single cent more in the Cable Beach project.

However, it would have to finance CCA in completing construction, and would likely seek generous concessions from the Government in so doing - especially since the Prime Minister last year applied a $600 million price tag to the work.

The alleged incentives demanded, while perhaps not benefiting the bank or CCA directly, would certainly ‘sweeten the pot’ for any Baha Mar purchaser (likely Chinese), and result in a higher acquisition price - a key Chinese goal.

Tribune Business revealed last week that the Prime Minister is getting increasingly eager for positive movement at Baha Mar, both for tomorrow’s Budget address and the economy’s prospects with a general election now less than a year away.

This newspaper reported that Mr Christie and the Government were pinning their hopes on being able to announce that an agreement has been reached for CCA to resume construction at Baha Mar.

Allyson Maynard-Gibson, the attorney general, and Sir Baltron Bethel, the Prime Minister’s senior policy adviser, are both in Beijing to negotiate and try and finalise such an agreement with both CCA and the China Export-Import Bank.

Mr Turnquest, though, expressed concern that the Government - over-eager, and with no leverage - might agree to a deal that was not in the interests of the Bahamas or its people.

“I am very concerned, because they are desperate to get this project going,” he told Tribune Business. “While these jobs are worthwhile, and we may have to put more skin in the game, I don’t envisage giving away the house for one roof.”

Mr Turnquest questioned whether the Government was operating a “schizophrenic policy”, given that it was seemingly debating whether to increase Baha Mar’s investment incentives at the same time as it was scaling back those for Freeport.

And he queried how Chinese demands could be reconciled with the ‘Most Favoured Nation’ clause in Atlantis’s Heads of Agreement, which requires that the Paradise Island resort be treated no less favourably than any rival.

Granting any Chinese request would mean Atlantis had to be treated the same, which Mr Turnquest warned could see the Bahamas’ two largest resorts becoming “tax free”.