The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

An outspoken Government critic has urged it to stop using Freeport’s expiring investment incentives as leverage to “unlawfully break the Hawksbill Creek Agreement”.

Fred Smith QC, the Callenders & Co attorney and partner, told Tribune Business that the Christie administration was using the ‘tax breaks’ issue to force amendments to other Hawksbill Creek Agreement provisions that are due to last until 2054.

“It is very incongruous, and appears to be an attempt at nationalisation on the part of the Government, to be pressing so hard for restructuring the entire concept of the Hawksbill Creek Agreement just because a couple of tax exemption provisions are expiring,” Mr Smith told Tribune Business.

The QC, one of Freeport’s most prominent advocates and defenders, added that it was “short sighted to try and force other situations that are embedded in the construct of the Hawksbill Creek Agreement, and exist for another 40 years”.

The Government’s Hawksbill Creek Agreement Review Committee has submitted 12 recommendations they believe should be acted upon in return for renewing Freeport’s now-expired real property tax, capital gains and income tax exemptions for a further 20 years.

Some, such as a right of appeal against the Grand Bahama Port Authority’s (GBPA) licensing decisions, are likely to be ‘quick wins’. Others, such as the creation of an independent marketing/promotions agency to showcase Freeport to the world, are also achievable.

However, Mr Smith warned that recommendations seeking to strip the GBPA of its quasi-governmental powers are likely to be met with resistance.

The Committee has called for the Utilities Regulation and Competition Authority (URCA) to replace the GBPA as utilities regulator in Freeport, while also recommending that the likes of environmental regulation and airport charges also be handed back to Nassau.

But, according to the Hawksbill Creek Agreement, such changes to its terms will require the support of 80 per cent of the GBPA’s 3,500 licensees.

And the Committee’s proposals also seemingly ignore the governance change road map set out in the Agreement, namely the devolution of the GBPA’s regulatory powers to a newly-created local government body run by the licensees.

“The Government are trying to do indirectly what they cannot do directly,” Mr Smith told Tribune Business. “The Government’s behaviour is unconstitutional, and tantamount to a breach of the Hawksbill Creek Agreement.

“They are breaking the agreement. All that’s happening now is the expiration of certain provisions. To attempt to rewrite the agreement and change the next 40 years is to do indirectly what they cannot do directly, which is to break the agreement.

“The Government is going to find that the continued attacks on the Port Authority and rights of licensees will produce a lot of litigation against them and, ultimately, it is the poor Bahamian citizen trying to eke out a living in Freeport who is going to suffer,” he added.

“My admonishment to the Government is to back off, be mature and approach this issue with kid gloves.”

The Committee is also recommending that the tax breaks’ renewal be contingent on the Hayward and St George families selling the GBPA within one year.

It is also calling for the Government to receive an equity stake in, and Board seats on, the GBPA and its Port Group Ltd affiliate in direct proportion to the value of the investment incentives and the Port’s unfulfilled obligations.

The latter demand ignores the fact that the Government, via the Treasurer, is shown by corporate records to already hold a 7.5 per cent stake in the GBPA.

Still, Mr Smith called for a rapid ‘change in tone’ by the Government towards Freeport and the GBPA.

“My continual lament and complaint as a licensee is the contempt with which the central government approaches Freeport’s affairs,” he told Tribune Business.

“It requires delicacy, it requires finesse, it requires sophistication, and it requires intelligent and balanced engagement, as opposed to demagoguery and brute political force.”

Mr Smith added: “The entire economic environment of Freeport is a very fragile construct under the Hawksbill Creek Agreement.

“I urge the Government to remember that 60 years ago, the second city did not exist. It was a pine barren, a lumber yard, and almost overnight the Bahamas was blessed with the magic city.”

The Callenders & Co partner added that the Government needed to approach Freeport like a parent helping their child to grow and develop.

“If they allow Freeport to develop into a strong adult and a mature adult, it will boom as an economic engine for the Bahamas,” Mr Smith told Tribune Business.

“If the Government wants a seat on the Port Authority Board, if they want to obtain shares, if they want MSC to develop the harbour and cruise lines, and enable licensees to have more involvement in Freeport’s affairs, there are all sorts of ways it can do so without being abusive and wielding these now expired tax exemptions like a Sword of Damocles over Freeport’s head.”