The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A former Grand Bahama Port Authority (GBPA) attorney yesterday urged the next government to initiate “a proper review” of Freeport’s future, arguing that the Christie administration’s deal would produce “an even worse” economy long-term.

Carey Leonard, addressing a Bahamas Institute of Chartered Accountants (BICA) seminar, said the recently unveiled Memorandum of Understanding (MoU) was inadequate for transforming Freeport’s medium and long-term economic fortunes.

The GBPA’s ex in-house counsel argued that the MoU failed to amount to “a long-term business plan” for Grand Bahama, meaning that the island - and Freeport - were likely to revert to the economic ‘status quo’ in the medium term.

While projects such as the $300 million Freeport Container Port expansion, and Carnival cruise port in east Grand Bahama, might produce s short-term boost, Mr Leonard said that - much like Baha Mar - there was still a “believe it when we see it” element attached to both.

He added that the MoU included no firm commitments, timelines and investment sums from any of the parties involved, nor penalties for failing to meet obligations.

Instead, Mr Leonard - like many other observers after careful study - suggested that it was full of vague, non-binding pledges, and added: “There is nothing in the 2016 extension that we can get excited about.”

He later told Tribune Business on the MoU: “As far as I’m concerned, it was absolutely nothing.

“The Government have been to London, they’ve been to Geneva, talking, talking, talking, and there’s nothing concrete to report.”

Mr Leonard said Dr Marcus Bethel, head of the Government’s Hawksbill Creek Agreement Review Committee, who was a presenter at the same BICA seminar, informed him that the MoU’s contents were supposed to be adopted into a more-binding Heads of Agreement.

The Government is also expected to move to give effect to portions of the MoU, particularly the 20-year extension of Freeport’s real property tax, capital gains and income tax exemptions, during Wednesday’s upcoming Budget debate.

Mr Leonard, implying that the MoU represented another missed opportunity, called for the next administration to employ provisions in the Hawksbill Creek Agreement to conduct a more thorough review.

He said: “The current Hawksbill Creek Agreement extension will provide, in the short-term, some uptick; in the mid-term, same old flat economy and, in the long-term, an even worse economy unless we do a proper review after the next election.

“All is not lost. The Hawksbill Creek Agreement has provision for either party to request a review at any time....

“Elections are now less than a year away, so it is unlikely that anything can be done between now and then. But Hawksbill Creek Agreement Clause 3(8) means that whoever wins the next election can ask for a review in order to prepare a 10 and 20-year plan for the Port area.”

Mr Leonard said such a review should encompass a SWOT (strengths and weaknesses, opportunities and threats) analysis that looked at both the Port area and Grand Bahama as a whole.

And he called for the Government to seek advantages for Freeport’s industrial area in the ongoing World Trade Organisation (WTO) accession negotiations.

“A new and proper review could look to take advantage of a more rigid international tax environment,” he said.

“It may be that the SWOT indicates that one of the Port area’s strengths is its land mass that would allow companies to have a viable physical presence in compliance with home country tax laws. The Port area may be one of the few places with adequate infrastructure to support their business.”

Mr Leonard, who together with fellow Callenders & Co partner, Fred Smith QC, brought the successful Judicial Review action challenging the consultation leading to the MoU, again hit out at what he described as “a flawed process”.

Arguing that this stemmed from “a myopic view” of Freeport, and the wider Bahamas, Mr Leonard blasted: “The lack of transparency that has prevailed over the recent Hawksbill Creek Agreement review is without precedent in the history of the Hawksbill Creek Agreement.

“In 1993, the licensees had a much greater participation and input. Before that, all the licensees were kept abreast of the negotiations as their approval was going to be sought and, indeed, required.

“From the very outset [this time], the GBPA licensees were left in the dark. If you were not one of the largest licensees, neither the Government nor the GBPA was interested in you.”

Mr Leonard said this was not totally the Government’s fault, as the GBPA had “lost touch with the majority of its licensees” - the very people whose interests it was supposed to safeguard.

“Transparency in negotiations, such as the extension and review of certain provisions of the Hawksbill Creek Agreement, which affects the livelihood of the tens of thousands of residents and licensees of the Port Area, is critical,” Mr Leonard charged.

“Sadly, no proper consultation has taken place and, as a result, the end product does not provide a path to long-term economic growth.

It is ironic that one of the strengths of the Hawksbill Creek Agreement is its transparency. The Agreement, and its amendments, are online for all to see.

“Secrecy makes investors nervous. This new approach does not bode well for the long-term economic wellbeing of the Port area or Grand Bahama.”

Mr Leonard also criticised the report produced by international consultants, McKinsey, which he argued focused primarily on ways to extract more tax revenues from Freeport than growing its economy.

He added that McKinsey had mixed data on Freeport with that for the whole of Grand Bahama, and neglected the impact of both impending WTO membership and Cuba opening up to US tourists and investment.

Nor did Mr Leonard have a good word to say about the economic impact analysis conducted by Oxford Economics.

He said its Freeport study appeared “hurried”, and employed dated tourism data from 2003 while also ignoring Cuba. Challenging its assumptions, he described it as “all but useless”.