By NEIL HARTNELL
Tribune Business Editor
Baha Mar’s creditor committee has given “a strong indication” that the Government granted greater-than-normal investment incentives to the Chinese in return for payouts to Bahamians.
Gowon Bowe, the Bahamas Chamber of Commerce and Employers Confederation’s chairman, agreed that the language employed by the committee appeared to tie the funding of promised creditor payouts directly to the investment incentives granted to the Chinese for completing Baha Mar.
The creditors committee, in an expanded ‘question and answer session posted on its website, said: “Priority will be given to Bahamian creditors on the basis that the fund[s] has been provided in consideration for concessions and consents from the Government, which must benefit the Bahamian people.”
Prime Minister Perry Christie previously told the House of Assembly that the Government was restricted, both by Atlantis’s ‘Most Favoured Nation’ style treatment and laws such as the Hotels Encouragement Act, in terms of the type and value of the incentives it could grant the Chinese.
As a result, he and others connected to the Government’s agreement with the China Export-Import Bank have argued that the latter received incentives (tax breaks) no greater than the norm for resort developments such as Baha Mar.
However, Mr Bowe said the creditors committee’s statement indicated that “additional concessions” had been given to the bank and China Construction America (CCA), the project’s main contractor, to “facilitate” the payments to Bahamian contractors, vendors and former Baha Mar employees.
“If some of the payments are being made in return for some of the concessions received by the Chinese, the public has every right to know what concessions were granted,” Mr Bowe told Tribune Business.
Confirming that he had read the ‘question and answer’ responses posted by the creditors committee, he added: “It’s a strong indication that additional concessions were granted to facilitate this process [of Bahamian creditor payouts].”
The creditors committee’s statement is likely to revive concerns as to whether it is the Bahamian public, via the Treasury, who will ultimately be responsible for compensating local creditors via the ‘tax breaks’ given to the Chinese.
Contacts close to the Baha Mar construction completion agreement, speaking to Tribune Business on condition of anonymity, have refuted this, echoing the Government line that the investment incentives do not go beyond what is typically granted under the Hotels Encouragement Act, such as Customs duty and ‘border’ VAT exemptions on building materials, fixtures and furnishing.
But, due to the uncertainty, Mr Bowe argued that the Bahamian people needed to be “very demanding” of the Government’s handling of the Baha Mar impasse, and particularly the investment incentives that have now been granted.
He also called for a “timeline” to be published, detailing when various aspects of the Government’s agreement with the China Export-Import Bank are to be publicly revealed.
These documents were ‘sealed’ by the Supreme Court, at the request of the China Export-Import Bank and its Deloitte & Touche receivers, an action that was supported by the Government.
Mr Bowe acknowledged that such ‘sealings’ were “not unusual” in multi-billion dollar transactions such as Baha Mar’s, so that an orderly sales process can be maintained and sensitive commercial data withheld from the public domain.
“There has to be a timeline as to when details are released,” Mr Bowe told Tribune Business, suggesting that aspects of the Baha Mar agreement be ‘unsealed at intervals such as three and six months later, when the need for confidentiality had passed.
“That should be set out so there’s a a reasonable expectation, and we can see whether the benefits [creditor payouts] are justifiable given the level of concessions granted, and vice versa; that the concessions are justifiable by the benefits received,” he added.
“It’s not necessarily an easy equation: A - B does not always equal C. It’s going to come down to people’s perceptions; whether it would have been cheaper for the Government to pay [the creditors] than offer the concessions granted. That’s a very real concern that will have to be addressed in due course.”
Tribune Business previously revealed that the China Export-Import Bank is making “about $100 million” available to pay Bahamian creditors of the Baha Mar group of companies at least a portion of what they are owed.
However, the decision to ‘seal’ all details, coupled with a general lack of trust in the Government and the Chinese, has created considerable public scepticism about the Baha Mar deal and whether it is ‘for real’.
K P Turnquest, the Opposition’s deputy leader, also backed Mr Bowe in arguing that the creditors committee’s statement was effectively an admission of a ‘trade-off’
“It does imply that there’s quod pro quo,” he told Tribune Business. “That line clearly says the Bahamian people are paying. That the bank has allocated whatever dollars they’ve agreed to allocate in return for an agreed amount of concessions to the Chinese.
“That amounts to the Bahamian people bailing out this project again. No matter how you cut it, the Bahamian people are being asked to pay.”
Mr Turnquest added that rather than rescue Baha Mar’s original developer, Sarkis Izmirlian, the Bahamian people were being asked to perform this act for the China Export-Import Bank, an institution owned by the Chinese government.
“Forget Sarkis at the moment; we’re being asked to bail out the China Export-Import Bank,” he said, in reference to the likely investment incentives being offered.
“It’s incredibly important for the Bahamian people to know the value of these concessions being offered quid pro quo, and whether these concessions would receive the approval of Parliament.”
Others, such as Fred Smith QC, have argued that details such as the investment incentives, plus Crown and Treasury land involved in the Baha Mar deal, should have been made public given that they are assets belonging to the Bahamian people.
However, given that the China Export-Import Bank is under no obligation, legal or otherwise, to compensate Bahamian creditors, the Government - and by extension the country - probably has little choice but to go along with its demands to an extent.
James Smith, the former minister of state for finance, one of the five-person committee’s members, also confirmed other disclosures by this newspaper, namely that creditors owed $500,000 or less would likely recover 100 per cent of what they are owed.
He indicated that those owed greater sums, likely less than 10 per cent of Baha Mar’s creditors, may not be ‘made whole’, but would likely receive more than 50 per cent of the amounts due.