The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government was yesterday urged not to grant “a carte blanche” 20-year tax breaks extension for all Freeport businesses, especially the Grand Bahama Port Authority (GBPA) and Hutchison Whampoa entities.

Fred Smith QC, the Callenders & Co attorney and partner, warned the Minnis administration to be especially careful about granting such an exemption to Hutchison, Freeport’s largest investor, due to its failure to meet its real estate and tourism development commitments.

Mr Smith, who was the GBPA’s external counsel, and involved in the deal, said a condition attached to Hutchison’s purchase of key GBPA assets in the mid-1990s was that it would “make a successful go” of developing Freeport’s real estate and the Lucayan strip.

He argued that the Hong Kong-headquartered conglomerate, which recently split into different companies, had “failed miserably” to fulfill both obligations, which was why the Minnis administration needed to be smart in developing Freeport’s new investment incentive legislation.

Mr Smith was speaking out after the GBPA, in a statement following a meeting with Carl Bethel QC, the attorney general, said it was working with the Government to extend the Hawksbill Creek Agreement’s expired investment incentives to all its 3,500 licensees for a 20-year period.

This would ensure equality for all, rather than the discriminatory treatment introduced by the Christie administration’s Grand Bahama (Port Area) Investment Incentives Act 2016, which only gave the 20-year automatic extension to the GBPA and Hutchison.

All other GBPA licensees had to apply to the Government for the renewal of their expired income, capital gains and real property tax exemptions via an uncertain process with no set criteria, and no assurance that they would receive the tax breaks or for how long.

While many are likely to welcome the GBPA’s equality announcement, Mr Smith told Tribune Business: “I don’t think it’s so simple.

“I do not think there should be a carte blanche repeal of the Grand Bahama (Port Area) Investment Incentives Act to give the GBPA, Hutchison and all the licensees a 20-year extension.”

Explaining his rationale, he added: “As licensees we would all welcome that, but the deal with Hutchison was that it should take over the Port licensees and make a success of it.

“Not only does it have the maritime sector, the airport and control of the land, but it was supposed to make a successful go of two things: Development of the land, and development of tourism.

“It has failed miserably in both respects, which is why I am very much opposed to the Government buying the Grand Lucayan hotel from Hutchison, as it’s effectively giving Hutchison a ‘get out of jail free’ card. The big boys have to step up to the plate before we give them carte blanche.”

The various Hutchison entities hold 50 per cent equity stakes in, and have management control of, the Freeport Harbour Company, Grand Bahama International Airport Company, and the Grand Bahama Development Company (DevCo). They also hold a majority stake in the Freeport Container Port.

As a result, Mr Smith said the conglomerate controlled all air and sea access, and transportation, to Freeport, and “the most valuable asset, which is all the acreage in all of Lucaya” via DevCo.

Many observers believed that the Christie administration gave up much of its leverage over the GBPA and Hutchison by agreeing the ‘blanket’ 20-year renewal of their tax breaks.

The threat, or actual imposition, of real property tax on Freeport’s two largest landowners - DevCo and Freeport Commercial & Industrial (the GBPA) - would have introduced significant multi-million dollar annual ‘carrying costs’ that might have forced both to start developing these holdings.

The Christie government, though, is thought to have agreed to Hutchison’s 20-year extension as a ‘trade-off’ for agreeing to waive its port exclusivity to facilitate the Carnival project, and as an incentive for the $300 million Container Port expansion.

However, Mr Smith argued: “They [Hutchison] have failed miserably to develop the land bank, and made promises to expand the Container Port and Harbour, which we have yet to see.

“The international airport’s domestic terminal is operating from an old hangar. It’s a disgrace that the second city’s airport is operating from an old, refurbished hangar. That shows me the disconnect and disrespect that Hutchison and the Port Authority have for licensees and residents in Freeport.”

Describing the Grand Bahama (Port Area) Investment Incentives Act as “an abysmal piece of legislation” that merely removed regulatory authority from the GBPA to the Government, Mr Smith said the Bahamas needed “to carefully consider” what will replace it.

He called for negotiations involving the Government, GBPA, Hutchison and licensees to develop a Freeport (Grand Bahama) Recovery Act 2017, adding: “It’s not just happy days for the GBPA and Hutchison.

“I will not encourage; in fact, I will discourage, the Government from giving them a carte blanche extension. There is a ready-made formula here for the success of Freeport, and if the Recovery Act is ambitiously and imaginatively crafted, it could be so attractive for the overflow of investors, residents and housing from New Providence.

“I hope this administration can somehow negotiate, in an investor friendly way, a miracle for Freeport and, by extension, the Bahamas.”