The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government risks “throwing the baby out with the bath water” on proposed Freeport governance reforms, an ex-Grand Bahama Chamber of Commerce president warned yesterday, amid talk of investors “sitting this one out until the dust clears”.

Dillon Knowles, a former Grand Bahama Port Authority (GBPA) executive, said the Davis administration’s decision that Freeport’s founding treaty, the Hawksbill Creek Agreement, has “outlived its utility” threatens to undermine business confidence by disrupting certainty around the Port Area’s investment regime.

Speaking to Tribune Business after Prime Minister Philip Davis KC unveiled his government’s future vision for Grand Bahama, which includes the potential repeal and reform of parts of the Hawksbill Creek Agreement, and its at least partial replacement by a Grand Bahama Development Act, Mr Knowles warned this is “a death knell” for Bahamian investors and businesses.

He asserted that the Davis administration’s plans threaten to replace regulatory certainty, and the “codified rules, benefits and concessions” afforded under Freeport’s founding treaty, with an unknown regime that leaves them exposed to political whim and “up to the Government to determine who gets what, why and how”.

The immediate past GB Chamber chief also argued that it “makes no sense” to abandon the Hawksbill Creek Agreement, which has underpinned Freeport’s development model for 71 years since its enactment in 1955, adding that its existing framework “provides solutions” for all the problems and issues identified in Mr Davis’s speech.

Describing the address, and the Government’s newly-released ‘Green Paper’ on the proposed Grand Bahama governance reforms, as “a solution looking for a problem to solve rather than a problem looking for a solution”, Mr Knowles added that the Davis administration has yet to define the development challenges it is seeking to address.

He said the Government’s push appeared to be “more a desire to have control” in Freeport, wresting away the city’s quasi-governmental and regulatory powers from the GBPA, but without explaining what it is “going to do differently” to better advance Grand Bahama’s growth, quality of life and standard of living for its residents.

Mr Knowles, disclosing that his position was not swayed by the Prime Minister’s national address, told Tribune Business: “The speech gives no confidence but, more importantly, the speech doesn’t articulate the problem the Government is trying to solve other than this nebulous sovereignty discussion.

“There is no substance to the problem that is trying to be solved or the solution that they is trying to be applied to the problem. It’s more to have a desire to have control than a desire to solve the problem. I’m still waiting on individuals to tell me what the Government is going to do differently than the Port Authority to make Freeport and Grand Bahama more successful.

“At the end of the day, they haven’t articulated what caused the stagnation in Freeport after the first 13 years” of the Hawksbill Creek Agreement. “In my perspective, this is a solution looking for a problem to solve rather than a problem looking for a solution,” Mr Knowles added.

“There’s absolutely nothing in the Green Paper, or the speech, that cannot be accomplished under the existing framework. The Hawksbill Creek Agreement provides solutions for all the things articulated. The Government created processes for changing the rules, processes for changing the administrator.” These, the ex-Chamber chief argued, are already embedded in the Agreement.

Several Bahamian legal sources consulted by Tribune Business yesterday confirmed that the Government cannot change the Hawksbill Creek Agreement unilaterally, meaning by itself, without potentially exposing itself to breach of contract and multi-million dollar legal claims.

These would not just come from the GBPA and its affiliates but, possibly, the former’s 3,500-plus business licensees who enjoy their own rights and benefits under Freeport’s founding treaty. The Hawksbill Creek Agreement stipulates that any change to its construct must be approved by 80 percent of licensees, although this did not happen when the 1994 Freeport, Grand Bahama Act was passed.

“We are talking about throwing the baby out with the bath water,” Mr Knowles told Tribune Business of the Government’s plans. “Do you know what challenges we are going to face if we start pulling on the threads of the Hawksbill Creek Agreement? It’s going to unravel like a knitted sweater when the existing framework already addresses all the things the Prime Minister articulated.

“Just imagine. We are going to go from a situation where we have codified rules and benefits and concessions to a new Act [the Grand Bahama Development Act], which is going to have to deal with the fall-out of benefits and concessions granted under the old Act.

“And the new Act may only partially codify rules, benefits and concessions, leaving it up to the Government to determine who gets what, why and how. We’ve seen how that plays out in the rest of The Bahamas, and it’s not something Freeport wants or needs.”

Mr Knowles said that, under the existing Hawksbill Creek Agreement regulatory model, the “rules are codified in law, everything is in concrete, and applicants know what they are entitled to regardless of who’s sitting in the seat”.

And he warned that the uncertainty created by the Government’s ‘Green Paper’, and the Prime Minister’s accompanying speech, could have a potentially chilling effect on fresh investment in Freeport and Grand Bahama - at least in the short-term - until there is clarity on how the new regulatory model and permitting/approvals process functions in practice.

“We are already hearing potential investors saying they will have to sit this out until the dust clears,” Mr Knowles told Tribune Business. “If we are going to take a year-and-a-half to clear the dust because we have to redo the whole framework that makes no sense to me. It makes more sense to change what we need to change in the existing framework and move on.”

The reference to 18 months comes from the Government’s plans to complete draft legislation on its proposed Grand Bahama reforms by year-end 2027, and then move this through Parliament and into law by the 2028 first quarter, which is around a year-and-a-half away allowing for the public consultation process.

The Government’s latest Grand Bahama reform proposals come after its bid to “bankrupt” the GBPA, and force the exit of the Hayward and St George families, foundered when its demand for $357m said to be owed to it by Freeport’s quasi-governmental authority was rejected earlier this year (see other article on Page 1B).

Mr Knowles, though, said the new move creates “an even more ambiguous situation than we were in before. Arbitration was one level of ambiguity. This brings a whole different strata to the equation and investors hate ambiguity”.

Asked whether this will deter both Bahamian and foreign investment in Freeport, he replied: “In my heart I hope it doesn’t, but my mind tells me it can’t help but do so. We are not clear on what happens for the rest of this year and next year.

“Who will commit significant funds until they know what’s going to happen, what the rules are going to be, who’s going to advance those rules, and how those rules will be applied? Are they going to be codified, so that there is a fair level playing field and everyone gets the same benefits, or will it be like candy where it is given to some and not to others?

“All these questions are on the table for discussion. The question in my mind is why. Why are we going to throw the baby out with the bath water and start afresh?”

Mr Knowles, again arguing that The Bahamas has to “first identify the real issue of what has caused the stagnation” in the Port area over the past two decades, added: “What is it we are trying to fix? What are we going to do differently that will allow Freeport to reach its potential?

“A change in ownership, as we’ve seen with Grand Bahama Power Company, is not the answer. A mere change in ownership does not change the operations.”

Mr Knowles, in an earlier statement issued prior to the Prime Minister’s Wednesday night address, said the Government’s move is the exact “opposite direction” that it should be taking with Freeport’s development as it threatens to undermine the 230 square mile Port area’s investment regime.

“The replacement of codified rules and concessions puts investors at the mercy of the Government. The codified rules and concessions were non-discriminatory. Bahamian, foreign, small, medium and larger investors alike were guaranteed the same benefits,” he added.

“The certainty of the rules encouraged Bahamians and foreigners to invest. Thirteen years into the development, the Government started breaching its own codified rules. This triggered a foreign investor exodus. The ongoing breaches deterred new investors. The Government now wants to do away with the codified rules and concessions completely.

“The exact opposite direction than the one it needs to take. This is a death knell to small and medium Bahamian investors. As with the rest of the country, it is likely that concessions will typically only be granted to large foreign investors. And nothing assures the large foreign investors that the concessions that they are granted will not be whisked away when convenient to the Government.”

Noting that it is open to the Government to negotiate the return of administrative responsibilities and oversight for Freeport, Mr Knowles added: “I don’t see this as a challenge as long as the codified rules and concessions are the ones that are administered. There is no need to repeal the Act to do this.”