The Tribune

• ‘Extraordinary effort’ needed on $500m-$600m infrastructure deficit

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The government has likely “not fully accounted” for a key asset after failing to conduct an inventory of crown land holdings during the 21st century, it has been revealed. 

An Inter-American Development Bank (IDB) paper, obtained by Tribune Business, said the amount of crown land detailed in the last audit - which took place in 1999 - “seems rather small at three percent” of the entire Bahamas even though the government is widely recognised as the country’s largest landowner.

The questions over whether the government has properly kept track of one of its, and the Bahamian people’s, greatest potential source of wealth and assets were raised in connection with recently-touted plans to create a fund that will seek to help bridge an annual $500m-$600m national infrastructure gap/deficit.

Discussions have focused on financing the government’s participation in the proposed National Infrastructure Fund (NIF) via the monetisation of its real estate assets, which include government-owned buildings as well as crown land, as the IDB called for “an extraordinary effort” to match this with private investor capital as the only way for The Bahamas to address its infrastructure deficiencies.

The IDB paper, which is effectively a “terms of reference” seeking consultants to advise on how the National Infrastructure Fund and associated sovereign wealth fund should best be structured, suggests taking ten crown land parcels as a means to capitalise the government’s equity stake in these vehicles.

In outlining this plan, the document revealed that the last crown land inventory took place in June 1999 - when the first Ingraham administration was in its second term. “The crown land (as of 1999) represented a total of 3.5m acres (roughly equal to 14,162 square kilometres).

“Using Bahamas total land area from the British encyclopedia (470,000 square kilometers), the total crown land seems rather small at three percent of the total archipelago, particularly when you consider that only the islands of New Providence, and to smaller extent, Grand Bahamas, are urbanised. Perhaps not all of the crown land has been accounted for.”

The IDB paper raises the prospect that the government has been failing to keep regular, consistent track of one of its major assets and sources of potential income for both Bahamians and the country. The fact no inventory has been taken since the 20th century, or more than two decades, covers two PLP and FNM administrations, and risks the loss or potential seizure of such land.

It also suggests that too little attention is being paid to the government’s balance sheet (assets versus liabilities) as opposed to its annual “income statement” or deficit (revenues versus spending).

A greater focus in this area is becoming increasingly critical as the government’s fiscal woes mount amid the economic devastation inflicted by the combination of COVID-19 and Hurricane Dorian, with the ability to secure financing backed by Crown Land collateral a potential funding mechanism to be exploited should an emergency arise.

“Of the total amount of acres, 28 percent has already been granted (in use by a third party), 7 percent is leased, 39 percent is available dry land, and 26 percent is wetland,” the IDB said. “For purposes of the [project] and the sovereign wealth fund, the land that is available for development is around 39 percent of the total, equivalent to 1.35m acres (approximately 5,467 square kilometres).

“There is not a reference as to the market value of the Crown Land assets given their different locations and uses. However, doing an assessment of the potential value of the available Crown Land should not be difficult since 90 percent of the available land is located in only four islands (Abaco Great, Andros, Grand Bahama and Mayaguana). The other 10 percent is scattered around 26 different islands.”

Hundreds of Bahamians have long complained about their inability to obtain an answer to their applications for Crown Land grants and leases, with public officials having previously admitted that the issue has long been used as a political tool by both major parties.

Meanwhile, the IDB paper outlined the plan to use Crown Land to help finance the Government’s equity stake, and financial participation in, the National Infrastructure Fund and sovereign wealth fund. It has been suggested that the former could be a subsidiary of the latter, which would be set up as the so-called “master fund” with other investment funds lying beneath it.

“From the universe of available Crown Land - dry land that has not yet been granted and/or leased - in the islands of Abaco, Andros, Grand Bahama and Mayaguana, the consultants should select a group of ten lots of land together with the [IDB] team working on the project,” the document added.

“These ten real estate assets will be the initial candidates to be capitalised in a Real Estate Investment Trust (REIT) as the Government of The Bahamas (GOB) capital contribution. It is expected that the private sector will also capitalise the REIT with the funds require for further development of the assets.

“The REIT or REITs will be a public-private vehicle that could later on place shares among the Bahamian citizens via public offerings. Shares of the Government of The Bahamas in the REIT would then be capitalised in the sovereign wealth fund.”

Meanwhile, the IDB urged The Bahamas to use the tourism shutdown created by the COVID-19 pandemic to improve critical supporting infrastructure such as airports, ports, docks, roads and bridges, together with health, education and other services, to improve its competitiveness before visitor numbers bounce back in 2023-2024.

“The Bahamas should use this time, between now and 2023-2024, to improve its competitive edge in the tourism market vis-à-vis potential regional competitors,” the IDB argued.

“It should build the required sustainable infrastructure and institutional framework to develop sustainable tourism in the Family Islands, and it should partner with global producers and operators in the food security segment, particularly in aquaculture and fisheries, to exploit unutilised potential in the sector.”

It added: “If we include the infrastructure recovery costs of the Hurricane Dorian impact, and account for the additional investment costs for resilient infrastructure, the future infrastructure gap of The Bahamas to sustain a 3 percent to 4 percent economic growth will be equivalent to $500m to $600m per year.

“These levels of investments are outside the possibilities of a fiscal responsible macroeconomic policy with budget resources. The Bahamas needs to make an extraordinary effort to tap into the mobilisation of private capital resources from both domestic and global sources if it is to reduce in any significant way its current infrastructure gap.”