The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

China’s anti-corruption drive could undermine efforts to secure a speedy Baha Mar resolution, a well-known financial analyst warning this may have “particular significance” for the Bahamas.

Kenwood Kerr, Providence Advisors’ chief executive, told Tribune Business that Beijing’s desire to crack down on graft at home could both deter, and inhibit, potential Chinese investor groups from purchasing the $3.5 billion development.

And he warned that it might increase China Export-Import Bank’s difficulty in exiting the project, given that it almost certainly needs to fully recover its $2.45 billion loan given the political agenda in Beijing.

“China’s slowing economy and current anti-corruption agenda, investigating all its lending agencies, has particular significance to us in the Bahamas, as the China Export-Import Bank is the principal lender to the legally embattled Baha Mar resort,” Mr Kerr told Tribune Business.

“This could be a real reason why the China Export-Import Bank has not been able to speed up any approvals of a buyer or a restructured loan facility on the Baha Mar project.

“This is concerning, since our economic model is primarily based on foreign direct investment (FDI), with a recent preference for China-based investment dollars.”

Efforts to speed up a Baha Mar resolution may already have taken a hit from Beijing’s anti-corruption moves, after the chairman of one potential buyer disappeared for four days to assist an investigation by the Chinese authorities.

Guo Guangchang heads Fosun, the privately-owned Chinese conglomerate that controls the Club Med resort chain, the Cirque du Soleil entertainment firm and a host of global property holdings. The Government had been hoping a Fosun offer for Baha Mar might materialise.

Beijing’s efforts mean that any purchase of Baha Mar by a Chinese-linked group has to be completely ‘clean and above board’, a requirement that may require extra work and does not make for a speedy sale.

Nor does that fit Prime Minister Perry Christie’s political agenda, as time is rapidly running out for a Baha Mar construction completion, opening and creation of 5,000 jobs before he must call the next election.

Mr Kerr, meanwhile, warned the Government not to let the Bahamas become a ‘pawn’ in the competition between the US and China for political and economic domination.

Referring to China’s interests in the Bahamas, he said: “This potential opportunity needs to be weighed against what is perceived to be the US national interest in the Bahamas.”

Mr Kerr also called for the Bahamas to “rapidly pull up our socks”, and improve the competitiveness and attractions of its tourism product before Cuba fully opens up to US travellers.

“While Cuba may be some time away from being a full threat to the Bahamas and our tourism industry, it is rapidly progressing to the forefront as the destination of choice in the Caribbean,” he told Tribune Business.

“Cuba’s current hotel room capacity is pegged at around 60,000 rooms, with an additional 12,000 on stream. Their existing capacity is already four times’ what is available in the Bahamas alone.

“With travel bans being lifted and now more than 120 US-based flights set to come daily to Cuba, the airline capacity into the Bahamas is reduced. The Chinese have now started offering direct flights from mainland China, with a technical stop in Canada before heading to Cuba.”

Mr Kerr said Cuba “has just about everything we need to improve our tourism product”, including a rich history and cultural diversity, plus architecture and a variety of different experiences.

However, he emphasised that a total thaw in Cuban-US relations was still some way off, giving the Bahamas time to improve itself and meet the renewed challenge from its western island neighbour.

“Cuba still has a way to go. Unfortunately for them, the US trade embargo and the restrictions it places on economic growth remain,” Mr Kerr said.

“For all the benefits tourism and the remittance economy provides, there is still an over reliance on these revenue streams. But this will change as US–Cuba relations improve.

“In the meantime, we need to rapidly pull up our socks. We are already known as an expensive travel destination with little new to offer.”

To take the Bahamian economy forward, Mr Kerr argued that Freeport and Grand Bahama “need to be fixed”.

“A complete solution to the challenges of Grand Bahama would be the first prize,” he told Tribune Business. “Freeport is our manufacturing and industrial base.

“Having reliable, low cost energy is absolutely critical not only for existing industry and business but to attract new investment to the island.

“Having certainty about the future of the Grand Bahama Port Authority (GBPA) and business tax environment could go a long way in bringing the Bahamas economy back to a growth mode. Grand Bahama’s still modern infrastructure, skills base and other resources need to be fully exploited to rekindle the spirit of Freeport.”

Mr Kerr also urged the Government to exit commercial farming, which is currently being undertaken at the Bahamas Agriculture and Marine Sciences Institute (BAMSI).

He argued that BAMSI should be a teaching institution only, and placed under the management of the College of the Bahamas (COB), with the campus “significantly reduced or closed”.

“Sir William Allen argued in the early 1990s that we lack economies of scale to produce agricultural products as cheaply as our neighbours, which remains true,” Mr Kerr said.

“Nonetheless, we can concentrate on small scale organic farming, primarily in the areas of poultry and egg production, citrus farming on the pine islands, in addition to vegetable production.”