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Insight: A Word To The Wise

By MALCOLM STRACHAN

IT has been over a week since the People’s Republic of China through its State Council issued a policy banning and restricting outbound investments by the state and its citizens around the world. The policy, which comes from China’s top economic planning body, the National Development and Reform Commission, is calling for the banning and restricting of investments in sectors including gambling, hotels and film, while encouraging investments in sectors that would enhance the Belt and Road Initiative, such as oil, mining, agriculture, and fishing.

The implications of this policy are staggering, not just on a small island nation like the Bahamas, but also our neighbours in the Caribbean who have also become overly reliant on this one economic partner to build our roads, stadiums, schools, clinics, hospitals, bridges, hotels and harbours.

China’s investments in the Caribbean flows further into the wholesale takeover of industries as they “partner” with vulnerable Governments in their constant promise of “win-win” scenarios to assist these states that are too cash-strapped to either run, or manage these entities any longer.

The result all too often is that China slowly moves in and displaces the native expertise in that industry or sector, by offering below market pricing be it in the construction industry or food retail market as examples. As all these ventures are state-sponsored, they could even operate at a loss to ensure that their competition is driven out of business, often in the span of less than one generation.

Economic Colonialization

This week, Insight focuses its attention on what one Member of Parliament in Jamaica warns has been the economic colonialisation of his country by China over the last 45 years.

Many Bahamians would be familiar with the name Peter Bunting, MP.

Mr Bunting, who is now the Opposition Spokesperson on National Security, boasts an impressive resume for his time as a Member of Parliament, and is also an investment banker by profession. He co-founded Jamaica’s first private investment bank, in addition to a public investment firm, which is currently a top performer in the Caribbean and on the Jamaican Stock Exchange (JSE).

His Facebook video series, “Probe” has gone viral in the Bahamas, being shared and viewed by thousands of Bahamians. In the video entitled, “Chinese Takeover?” Mr Bunting, a former Minister of National Security speaks to the increasing struggles of Jamaicans amid the explosion of Chinese investment in his country in recent years.

Though, Jamaica and China have shared positive diplomatic relations since 1972, the strain of the evolution of China’s foothold is being felt across Jamaica’s construction, sugar, bauxite/alumina and food retail industries.

Having the opportunity to speak to Mr Bunting and learn more of his personal insight, we were both able to see the obvious parallels that exist between our two sovereign countries, and the concerns our countrymen share in respect to the global ambitions of China in our region.

While Bahamians are rightly concerned about the abundance of Chinese investment in our country, it is dwarfed by the footprint China holds in Jamaica.

Currently in Jamaica there are 15 Chinese state-owned companies (SOEs) operating in the construction industry alone – including the infamous China Construction America, who failed to complete Baha Mar on multiple self-imposed deadlines.

Mr Bunting: “We have what’s called a Construction Industry Council, and they have expressed a lot of concerns about an MOU (memorandum of understanding) that was signed between the government and China Construction America. There are about 15 different Chinese companies operating in the construction sector in Jamaica.

“They’re all related. They’re all state-owned enterprises so they all seem to coordinate what they do.

“Some of them do roads. Some of them do buildings. Amongst themselves, they know who bids to do what,” said Mr. Bunting.

In Jamaica, today there is an uproar brewing, after the current Government, led by Andrew Holness signed a MOU with CCA to design the Government’s Parliamentary campus in downtown Kingston.

When this “public-private” partnership was first announced, it was heralded as a free service to the people of Jamaica. However, after public pressure the heads of terms were made public which revealed that CCA would be paid $1 million dollars for this “consultancy”, a job Mr Bunting insists could, and should have gone to Jamaicans.

Sovereignty

In fact, Mr Bunting said many Jamaicans have found great irony in the fact that a foreign entity is being given the task of designing and building its Government Oval, which is home to the country’s Parliament building.

“What is known to be a symbol of a nation’s sovereignty is essentially being designed by foreigners,” said Mr Bunting.

Although it is quite easy to see how this would cause major discontent in the Jamaican’s construction community, Mr Bunting said many of the local professionals were still scolded by the Chinese Ambassador to Jamaica Mr Niu Qingbao who told them to “stop complaining”. He even went further and challenged local stakeholders to “prove whether they can do a better service.”

In the Bahamas, our own construction professionals have also experienced their fair share of difficulties in an industry where they at best can only hope for a role as a sub-contractor on large scale tourism projects.

Bahamas Construction Association President, Leonard Sands, in an interview last week, stated that had it not been for the numbers industry, many people in the industry would be out of work. This, while hundreds of Chinese are still to this day labouring away at Baha Mar to complete a resort that they had projected to have opened for winter 2014!

We asked Mr Bunting, in light of what the Chinese Ambassador to Jamaica had said, could Jamaican architects and construction engineers have done the job, to which he emphatically said, “absolutely!”

“We have a school of architecture at one of our universities in Jamaica. We have over 100 different architectural firms in Jamaica. There is absolutely no reason why this could not be done by a Jamaican firm or a consortium of firms,” he said.

Mr Bunting noted that his central concern is that what the Chinese SOEs have used to “get their foot in the door” is financing from China Export Import Bank or China Development Bank, which lends funds on a conditional basis. Per their conditions he said, “You have to use their firms, they bring hundreds of Chinese nationals on the projects so we don’t have much hope for, particularly, the higher-end Jamaicans who have degrees in engineering or technical vocation.”

Locals are only hired in a menial capacity, which allows governments to “save face” on these projects under the guise that their people are being employed. However, there is little to no knowledge transfer and over the long-term, the status quo is certain to put many local firms out of business.

Firms like CCA are able to secure contracts on projects across the developing countries of the world and amass a plethora of concessions along the way which allow them to bring in their own equipment under concessionary terms, and oftentimes, even the equipment manual is in Mandarin making it impossible for anyone outside of Chinese technicians to operate.

Unfair Competition

Mr. Bunting gave us insight to what has been a turn for the worse in the prospects of Jamaican construction firms.

“Firms, on completion of the national development projects that they got the concessions for, which are typically government or infrastructure projects, they now use the same access to compete for private sector projects where they are bringing no funding.”

Mr Bunting stated that the Chinese already control 50 per cent of the construction projects in the private sector and are now expanding their horizons to residential projects as well.

In recent years, they have witnessed the torpedoing of their sugar industry by the Chinese, which the government is now stuck trying to keep afloat. They are also beholding the monopolization of their construction industry, the crippling of locally-owned food retail businesses and a Chinese “metals giant” has just made a $2 billion investment in a local alumina plant last year.

In the Bahamas, we must be mindful that partnership is built on principles where mutual benefits can be derived from an association of two separate entities. China’s promotion of partnership in developing countries, whether throughout Africa or in the Caribbean, all contain a similar narrative.

They come in bearing gifts, but their eyes are fixated on a goal that is much vaster. In the end, there are a few thousand-people employed, but the burden placed on taxpayers and professionals in industries where they no longer can compete far outweighs the marginal gains.

Unquestionably, Mr. Bunting has come under some fire for speaking out against the status quo, but he knows that is a small price to pay.

“We in the Caribbean,” he said, “have to do a serious cost-benefit analysis because the Chinese SOEs have enormous capital and a very long-term horizon.

“They can come in and invest low-cost type pricing until they get into a position of exclusivity and a few years down the road when we have no local sector to compete, we’ll just be price takers.”

As much as we may want to close our eyes we should take a lesson from what is happening in Jamaica and chart a path towards a more stable, and diversified investment horizon.

As we speak, Chinese businesses, conglomerates, or the state itself, collectively control more than 50% of our hotel inventory in New Providence alone.

This, along with their other investments in Grand Bahama and Abaco leaves one nation with tremendous leverage over us. It would be wise for this new FNM administration, which came in on a wave of tying the previous PLP government to the Chinese, to take a careful look at this Chinese relationship before we place anymore eggs in their basket.

We should begin now to strategize how we decouple ourselves before this “Belt and Road” becomes a noose around our necks.

Next week, we will publish part two of our exclusive interview with Mr Bunting as he continues on his crusade to educate and inform.

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