The Tribune

By RICHARD COULSON

The destruction, flooding and profound commercial dislocation wreaked by Hurricane Dorian on Grand Bahama has awakened the long-simmering debate about how the island is governed.

Way back in 1955 the Hawksbill Creek Agreement gave virtually sovereign power to foreign-owned Grand Bahama Port Authority (GBPA), which carved out Freeport and the Free Trade Zone for control across the island’s waist. Since neither the Crown Colony nor the parent United Kingdom then had the resources for development, this neo-colonial scheme was accepted for importing foreign capital and expertise.

Later, ownership of GBPA shifted from the original American entrepreneurs to two adventurous English families, the St Georges and the Haywards. In a complex partnership with the powerful Hong Kong conglomerate Hutchison-Whampoa (H-W), these families have run the show for many years to the present day.

This arrangement has come under fire from several parties intimately involved in the post-Dorian revival and growth of Grand Bahama. Carey Leonard, prominent attorney and former General Counsel of GBPA, has gone on record with the assertion “Dorian makes it imperative that the Government of The Bahamas make a compulsory acquisition of the Grand Bahama Port Authority”. His views are shared by Michael Scott, Chairman of The Bahamas Hotel Corporation, who has been negotiating the Government’s purchase and re-sale of the shuttered Grand Lucaya Resort hotel complex, essential for any tourism revival.

Even before Dorian, there were demands for change. In May this year Dr Marcus Bethel, Freeport civic leader and former Cabinet Minister who headed a committee on Grand Bahama restructuring, wrote that “Grand Bahama has the anachronistic GBPA and partner Hutchison-Whampoa which have been unable to move Freeport forward.”

A Tribune editorial of May 2015 quoted then Minister CA Smith (now Governor-General) speaking about GBPA: “The performance of the present leadership in continuing the economic development of Freeport leaves much to be desired. . . will have much difficulty in pointing to a single significant investment in Freeport under their watch.”

Messrs Leonard and Scott can cite many examples of deficiencies in the present arrangement. The responsibility of GBPA to act as a regulator/city manager and business licensor is poorly executed. Mr Scott compares GBPA with the stately unreality of last century’s Downton Abbey depicted in the popular TV drama.

The original joint venture between GBPA and H-W was negotiated in 1996 by the late GBPA chairman Edward St George and resulted in the creation of the Freeport Container Port, now one of the world’s largest cargo trans-shipment terminals. But since his untimely death in 2004, Freeport has been in recession and the link with H-W has been problematic. One example is the Freeport Harbour Company, 51 percent owned by H-W (now named Hutchison Port Holdings), which is landlord not only for the container facility but also all the marine passenger and freight terminals, ship-repair companies and dry docks. It charges rents and fees that are skewed to the detriment of GBPA and the Bahamas Government. It also manages the International Airport which has long been criticised for excessively high landing fees that deter the growth of tourism and business travel.

Since Dorian, repairs to terminals and hangars, including the crucial US departures wing, have proceeded at a snail’s pace.

Over 700 jointly-owned acres between the harbour and airport remain vacant instead of being developed as a specialised warehouse and marketing centre for international duty-free products. Worse, 70,000- acres of prime Freeport property owned by DEVCO, a partnership of the families and H-W, have never been subdivided and sold as business or residential lots.

When the Grand Lucayan Resort suffered serious hurricane damage in 2016 and had to be closed, the owner H-W lost interest in reopening and simply walked away taking the insurance proceeds, then drove a very hard bargain in selling the complex to Government for $65m.

These factors suggest strong justification for removing GBPA and H-W from their dominant role in managing Freeport and the surrounding Free Trade Zone. Naturally, the present principals think differently and would strongly resist any such measures. In March 2015, GBPA vice chairman Sarah St George (there is no current chairman) made a detailed presentation of the many ways GBPA acts as a non-profit “Centre of Administration” for Freeport, paying no dividends to its shareholders and contributing an average $10m annually to the economy. She went on to describe all the industrial ventures that GBPA has persuaded to invest in Freeport, from Pharmachem to Polymers. I saw no mention of H-W.

A year later, I received a long letter in the same vein from active GBPA Director Rupert Hayward. While open to accepting equity capital from investment groups in the form of joint ventures or specific project finance, he was distinctly negative about GBPA or the family owners selling out: they know much more about the needs of the Freeport economy than any large corporate groups with short-term financial objectives, he claimed.

These opposing views cannot be reconciled. Only Government can make the final decision which will prevail and only it has the sovereign authority to assume ownership and control from the two families and H-W - provided that fair compensation is paid for this forced acquisition. There would be no mass dismissal of the talented, hard-working Bahamians and foreign specialists presently employed. The only changes would be at the level of the directors or senior executives representing the previous owners. Government would not need to acquire any physical assets or direct operations, simply the controlling equity shares, which would then permit a complete reorganisation.

Any re-structuring could end the long illogic situation of one island being divided geographically into two jurisdictions, with Government negotiating the new Carnival cruise port in East End, while GBPA controls the Royal Caribbean linkage between the harbour and Lucaya in the heart of Freeport. Also, legalistic wrangling could be brought to an end about whether URCA or GBPA should regulate utilities.

Proponents of a regime must think about answers to hard questions: What is a rough estimate of fair compensation? Will a combination of foreign and domestic capital be found to help Government meet its obligation? Who will be the new owners of the harbour, the airport and undeveloped land? Who will provide strong municipal management working with modern efficiency for the benefit of Freeport and its thousands of business licencees? In short, what will be the shape of a true public/private partnership?

Answer to these questions can fall in place once Government announces a firm decision to take back Grand Bahama from control by the two families and H-W. As soon as this decision is publicised, offers of financing, investment, management expertise and technical services may soon pour in.

As a first step, to overcome normal inertia when facing major change, a strong delegation of Grand Bahama stakeholders must descend on the Prime Minister and his Cabinet with a detailed brief showing why this reorganisation is essential, for the good of Grand Bahama itself as well as the whole national economy. Grand Bahama must become fully integrated into the Bahamian story.