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Insight - Chinese Investment: All That Glitters Is Not Gold

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Carey Leonard

“All that glitters is not gold” or “good from afar but far from good” are quotes that appeared appropriate recently.

On March 23, a front-page story in The Freeport News was headlined “DEVCO’s new initiative to assist residents, stimulate economy”. The reporter dutifully reported on a press conference held at the Grand Bahama Development Company Ltd’s head office.

DEVCO is a company controlled by the Chinese-based conglomerate formerly called Hutchison Whampoa.

In the article it stated that DEVCO plans to release 150 lots from inventory at reduced prices, some by as much as 40 per cent, for sale to the local market. This, they said, was part of DEVCO’s commitment to making property available to all Grand Bahamians and to attracting developers to build homes on the island.

The question that comes to mind is ‘who are you really trying to sell to; Bahamians, who you say need help, or developers to come and build homes on Grand Bahama Island?’ Surely, if you were genuinely after developers you would have done more than hold a press conference with the local newspapers?

Since this was done locally, it is probably safe to assume that the true intent is to target the local market, and the idea of developers coming in were words of fluff and nothing more.

The Commercial Manager is quoted as saying, “We are hoping that this will, in turn, stimulate the economy and cause individuals to become lot owners and eventually home owners, and therefore give us a better outcome in the long term for property development here on Grand Bahama.”

The President of DEVCO is quoted as saying, “We are very cognisant of the impact of Hurricane Matthew, as it has had a huge impact on the local economy and a programme of this nature, where we are making land available at affordable prices will, hopefully, stimulate the economy and help people get on the property ladder during these difficult times.”

So let’s break this down.

DEVCO, a company that is controlled by Hutchison, is selling land at discount prices to people who are experiencing a bad economy and little work because Hutchison’s hotel arm and Container Port arm have directly or indirectly, in the case of Memories, laid off hundreds of Bahamians.

How are out-of-work Bahamians supposed to be buying up land and building on them? There was no mention of any very low interest or interest-free loans to help make this happen.

Hutchison’s property arm, now called Cheung Kong Properties Holdings Ltd and ultimate owner of the 50 per cent interest in DEVCO, entitled its Shareholders Interim Report 2016 “Strong Resilience to Market Challenges”. Its profit for the first half of 2016 is HK$8,606 million or about US$114 million in the first six months of the year. They are making almost US$20 million a month or nearly US$1 million for every working day. Yet there is no special offer from DEVCO, whose top management says that it is cognisant of the impact of Hurricane Matthew and “hopefully, stimulate the economy and help people ...”

The whole thing sounds more like some shyster or two-bit stock brokers trying to sell dubious “penny mining stock” in Canada.

One would think that a company that has achieved such global success would be above stooping to such deceptive marketing.

How does getting Bahamians to spend what scraps they have left help the economy?

It will help Hutchison continue to make that US$1 million a day. The only stimulation to the economy will be a further spiral downward as Hutchison takes out of the country its dividend from the sale of the property.

If Hutchison put as much time into promoting the Port Area to Direct Foreign Investment as they have in trying to fool the Bahamian public they may actually “stimulate economy”.

And it does not stop there. DEVCO does not pay Service Charges. This is because before Hutchison purchased a 50 per cent interest in the land owned by DEVCO and the other assets transferred to Port Group Limited, they (the Harbour, the airport, the industrial land, everything) were all owned by DEVCO. DEVCO was the company that promoted the Port Area.

DEVCO sold land and was continually reinvesting profits into capital expenditures and maintenance of the Lucayan area. This is why DEVCO did not pay Service Charges. The new purchasers of land took care of what they purchased with Service Charges while DEVCO continued to take care of what it owned. After all it was, and still is, the largest land owner, and what looked good sold well. DEVCO subsidised flights into the Port Area. Indeed, in the 1960s, one of Bahamas Airways’ turbo prop aircraft was mainly paid for by DEVCO. Later it had a large stake in Laker Bahamas.

All of the above brought tourists, second home buyers and new industry to Grand Bahama.

It must be remembered that all the roads (except for the Queen’s Highway, which includes the Grand Bahama Highway) and verges in the Port Area are private. They are all maintained by the Grand Bahama Port Authority Ltd and, in the Lucaya area, a subsidiary of DEVCO called the Lucaya Service Company Ltd (LUSCO).

This is why anybody who pays Service Charges should not be required by the Government to pay Real Property Tax as they are already paying tax to keep the roads and verges maintained, in an area twice the size of the island of New Providence. To impose Real Property Tax would penalise Grand Bahamians with double taxation.

As DEVCO sold its property, it no longer had the potential to improve its bottom line and any maintenance of the infrastructure would be a financial burden that would eventually bankrupt DEVCO once it no longer had sufficient land to sell. Therefore, it made perfect sense for the purchaser of lots in the Lucaya area to shoulder a reasonable share of the expenses required to maintain the roads and verges there.

But here is the problem. Hutchison stopped promoting and selling to foreign investors and Bahamians alike. They also stopped pumping in their share of the cost of the upkeep of the Lucayan area. This meant that the local landowners, foreign and Bahamian alike, were now burdened with the upkeep.

Yes, Hutchison has abused its position to take a free ride on the backs of the hard-earned wages of Bahamians. It has Bahamians paying to take care of the roads and verges to all the unsold thousands and thousands of unsold DEVCO lots.

In addition, DEVCO owns and manages LUSCO so that Hutchison decides where the money paid by hard working Bahamians is spent. The sole purpose of LUSCO‘s existence is to maintain the Lucaya roads, parks, bridges and verges. As stated earlier there is only one public road in the entire Port Area and that is the Queen’s Highway and Grand Bahama Highway.

In 2014 The Freeport News carried an article about the construction of a bridge to cross the Grand Lucayan Waterway joining the Grand Bahama Highway. What was significant about the article was that LUSCO was included and mentioned. Since then there have been rumours to the effect that LUSCO paid for the construction of the now completed Sir Jack Hayward Bridge. That had better not be the case.

First of all, Service Charges are not paid to LUSCO so that they can be used to improve the only Government road going through the Port Area. This is the one and only road, in the Lucaya area, that LUSCO has no responsibility for at all.

Is it possible that the multi-billion dollar company, Cheung Kong Properties Holdings Ltd (read Hutchison) which made about $1 million a week profit in the first six months of 2016 - that’s profit, not turnover - has decided to use the hard earned money of hard working Grand Bahamians to pay for a bridge that will ultimately fatten Hutchison pockets by substantially increasing the value of the DEVCO land on the eastern side of the Grand Lucayan Waterway? Guess who owns most of the land on the eastern side of the waterway? DEVCO, 50 per cent owned and controlled by Hutchison, of course.

No wonder DEVCO wants Bahamians to buy more lots. That means more money to maintain the Lucaya area at no expense to the Hutchison entity.

The March 23 press conference report described above had nothing to do with stimulating the economy in the Port Area - and the Bahamas in general - and everything to do with fattening the bank accounts of the shareholders.

Hutchison has set out to drain what little money is left in the pockets of Bahamians and put it in their own pocket. Remember, they have to keep that US$1 million a week profit machine going. The Chinese don’t care about the Bahamians or the Bahamian community. The Bahamian community and the Bahamas are faceless to Hutchison, whose only purpose is to make money in accordance with their own plans. If Bahamians are put out of work and starve as a result of their corporate ambitions, it is of no concern to them.

There is a lesson here: the dichotomy between the Chinese reputation for “saving face and honour” and the way the Chinese do business, in an “amoral way”. It is clear that when it comes to business the Chinese companies, like Hutchison, are completely lacking in a moral sense as they are unconcerned whether something is right or wrong.

Nassau has experienced the same thing with Baha Mar. From the newspaper reports, it is clear that the Chinese State-owned China Construction Company has no moral compass. This has resulted in the shoddy construction and delays in construction.

Had Baha Mar been up and running in 2014, as it was supposed to, but for China Construction Company’s amoral behavour, 5,000 to 7,000 Bahamians would have had jobs three years ago, thousands of tourists would have spent money here with the resulting Customs Duty, VAT receipts and National Insurance payments because of all the extra employees paying into the system. If Hutchison had properly marketed the Grand Lucayan/Our Lucaya hotel complex and DEVCO, there would have been thousands, maybe tens of thousands of jobs for Grand Bahamians, such as construction, hotel, retail, transportation, maintenance etc, additional taxi rides and tours all contributing to the Public Treasury and National Insurance.

The effect of this amoral behavour of Chinese foreign direct investment is that the Bahamian people have not got the thousands and thousands of jobs that they should have had years ago and are now in a very desperate financial position. The effect has, in no small way, contributed to the dire financial straits that the country finds itself in today.

To date, the Bahamas has yet to see any benefit from Chinese investment, Baha Mar or otherwise. If anything, such investment has inflicted an almost fatal blow to employment of Bahamians and the nation’s economy by the constant delays.

We have been hearing about the planned expansion of the Freeport Container Port for four or five years and have got nothing. Nothing means no employment for Bahamians. Nothing means no additional revenue for the Public Treasury and National Insurance. Nothing means no excitement generated to encourage other investments in the Port Area.

Clearly, any investment, especially any new investment in the Bahamas by a Chinese company, be it Chinese state-owned or just owned by Chinese citizens, needs to be looked at with great scepticism as it is fraught with very real economic danger and financial pain to Bahamians.

When it comes to Chinese investment, all that glitters is certainly not gold.

• Carey Leonard is a commercial lawyer and an associate in the law firm of Callenders & Co, Freeport.

Comments

paul_vincent_zecchino 6 months, 1 week ago

The chicoms know exactly what they are doing. Thank you, sir, for illustrating this with great clarity.

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