The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government’s goal of processing all Grand Bahama-related investment applications within one month “is just the continuation of insanity”, a Freeport-based QC blasted yesterday.

Fred Smith QC, the Callenders & Co attorney and partner, told Tribune Business that the Bahamas was stuck in an “investment recession” because of “arbitrary” government approval processes, rather than bureaucracy and ‘red tape’.

He warned that plans announced by Kwasi Thompson, minister of state, to establish a Bahamas Investment Authority (BIA) unit in Freeport specifically to process investment applications related to Grand Bahama, amounted to “doing the same thing and expecting different results”.

Mr Smith argued that the Government should instead lift the stranglehold it has imposed on the investment approvals process, and instead restrict its role - and that of its regulatory agencies - to the statutory limits set for them by Parliament.

“The main message is less control, more growth,” he told Tribune Business. “The fact of the matter is that the more that central government interferes and tries to control, it stifles; it doesn’t work.

“Doing the same thing over and over again, and getting the same results, is the sign of insanity. Just putting an Office of the Prime Minister in Freeport to review applications within one month is just the continuation of insanity. It just continues the cycle of frustration.”

Foreign investors must currently seek approval for Bahamas-based projects through the Cabinet, and the National Economic Council (NEC) and Investments Board. The latter two entities are effectively the Cabinet, or a sub-committee of the Cabinet, with the former dealing with major multi-million investment projects and the Board handling more real estate purchases.

Mr Smith argued that besides ensnaring the process in bureaucracy and ‘red tape’, requiring approval at the highest levels of government also exposed foreign direct investment (FDI) to arbitrary, politically-related decision-making.

This, he said, was the real reason why the Bahamas is currently attracting relatively few FDI projects, pointing out that agencies such as the BIA, NEC and the Bahamas Environment, Science and Technology (BEST) Commission have no legal basis to exist.

“Everybody now seems to have accepted as a fact that every time a foreign investor wants to come to the Bahamas, a politician with no expertise is determining whether he goes into business by himself or as a joint venture with a Bahamian via a process that is completely arbitrary,” Mr Smith said.

“On what criteria is a politician or bureaucrat deciding a foreign businessman should or should not go into business in the Bahamas, should or should not buy real estate, and should or should not enter into a joint venture with a Bahamian?

“To have every proposal from an investor from abroad be scrutinised on unknown, arbitrary and secretive criteria is the kiss of death for any free market system,” he continued.

“My point is that until the Government of the Bahamas, PLP or FNM, gets out of the business of interfering with investors, we will continue to suffer a recession.

“The element of arbitrary and capricious involvement by people who are not intimately involved in the business deal creates problems for the buyer, seller, financier and economy generally. It also presents opportunities for corruption through the secrecy of the process.”

Mr Smith argued that “it will tremendously lessen the burden for our Cabinet ministers” if they did not have to scrutinise, and approve, every FDI investment proposal that came to the Bahamas.

He especially railed against the use of ‘exchange control approvals’ as a device to push all FDI proposals before the Government, recalling how they were introduced in 1982 as a means to ensure foreign purchases of Bahamian real estate can only be concluded with its backing.

Mr Smith contrasted the Bahamas’ investment approval process with its counterpart in the US, where entrepreneurs just needed to obtain the necessary licenses and permits without the involvement of politicians.

“The requirement for the Office of the Prime Minister to review every business deal by foreigners has created an opportunity for secretive Heads of Agreement, secretive approvals in principle, and ‘a wink and a nod’,” Mr Smith told Tribune Business.

“This is not how you do business in a democracy, where there is accountability and transparency, and you are governed by the rule of law. In the UK, if a foreigner wants to do business, every application is not scrutinised by the Cabinet Office in Downing Street.

“I urge the FNM to get out of the business of interfering with business, and let the regulatory agencies deal with these matters as proscribed by Parliament. Then you have a nation run by the rule of law, not by arbitrary political decisions. Then investors are not kept waiting ad infinitum at the pleasure of a political decision.

“It’s not red tape that’s strangling Bahamian and foreign business; it’s reposing it in arbitrary government decision-making.”