By NEIL HARTNELL
Tribune Business Editor
An outspoken QC yesterday warned that the Commercial Enterprises Act is “too restrictive” and needs to be expanded if Freeport is to become a true “technology hub”.
Fred Smith QC, the Callenders & Co attorney and partner, told Tribune Business that the Act’s incentives were confined to businesses and industries that “are hopes for the future rather than the present”.
Describing it as “promising on paper” yet too limited in scope, Mr Smith argued that expanding the Commercial Enterprises Act to industries present in The Bahamas - combined with a “one-stop shop” investment approvals process and “relaxed” Immigration controls - were essential to capitalising on the “greatest economic energy” Freeport has seen for 15 years.
“The Commercial Enterprises Act, although promising on paper, has unfortunately proven to be restrictive in practical application,” Mr Smith told this newspaper. “The reality is the extent of the the scheduled businesses are a hope for the future as opposed to hope for the present.
“The ‘technology hub’ idea is brilliant for Freeport but will get nowhere unless the Commercial Enterprises Act is expanded and the Grand Bahama Port Authority (GBPA) is made the one-stop shop licensor so investors do not have to go through ‘Know Your Customer’ from every government agency. Immigration must also relax its constipated hold on Freeport’s economic sphincter.”
The Commercial Enterprises Act was among the first tangible signs of the Minnis administration’s desire to liberalise and deregulate key elements of the Bahamian economy to drive greater GDP growth and job creation, while sending a message to investors - Bahamian and foreign - that the company was open for business.
It is designed to remove the bureaucracy and “red tape” investors encounter when attempting to obtain work permits from the Immigration Department for key management and skilled workers, signalling the Government’s commitment to improving the “ease of doing business”.
The Act attempts to introduce certainty and predictability to the work permit regime by requiring the director of immigration to make a decision on their approval within 14 days of the application’s receipt. Applications from businesses covered by the Act must be submitted within 30 days of the worker’s arrival in The Bahamas.
The legislation, though, does not apply to all - only businesses listed in its schedule, and these have to be approved by the Government before they can access the incentives. The Commercial Enterprises Act is largely focused on industries not present in The Bahamas, but which have the potential to create high-earning jobs and be major foreign currency earners.
Financial services leads the way with reinsurance; captive insurance; investment fund administration; arbitration; wealth management; international trade and international arbitrage included in the ‘fast track’ work permit sectors.
Also covered by the Commercial Enterprises Act are technology-related industries such as computer programming; software design and writing; bioninformatics and analytics; nano technology; and biomedical health facilities.
“Boutique health facilities”; data storage and warehousing; aviation registration and ‘approved’ aviation maintenance operations; ‘call centres’; and manufacturing and assembly/logistics businesses round out the sectors targeted by the Government.
Despite Mr Smith’s call for the Act’s coverage to be expanded to other industries, several companies have entered The Bahamas and established a physical presence/operations using it, including GIBC Digital, which is viewed as the “flagship” for the “technology hub” ambitions.
The Callenders & Co partner, though, argued that further reform is necessary if Freeport is to build on the optimism created by the $100m Carnival cruise port and other proposed investments and realise “an overwhelming avalanche of development”.
The planned ITM/Royal Caribbean venture, which includes the Grand Lucayan’s potential purchase, together with the revival of the medical school concept and ongoing technology industry interest, have all contributed to what Mr Smith branded “a general positive energy that is permeating Freeport for the first time in many, many years”.
“Freeport is now facing potentially an overwhelming avalanche of development,” he told Tribune Business, “and frankly, given the many years of human resources, financial services and brain drain that has occurred during the depression we have experienced, the resurgence of Freeport is essentially going to be the reconstruction of Freeport.
“In reality, the International Bazaar looks as if it’s going to be demolished because it’s in such a dilapidated state. So too buildings like the Princess Hotels and casino and, regrettably, most of the golf courses are dead. Freeport looks in terrible shape.”
Mr Smith said the increased co-operation between the Government and the GBPA had to go “hand in hand” with “a political commitment to opening the Immigration doors and simplifying the one-stop shop investment process for Freeport” if the city’s recover is to be truly sustainable.
Pointing out that Freeport had lost banks, financial services providers, accountants, attorneys, architects, surveyors and other qualified professionals during its 15-year demise that followed the Royal Oasis closure, Mr Smith said the city faced a “catastrophe” when it came to the ease of doing business because of the difficulties experienced in opening bank accounts.
He revealed that it took eight years for his law firm, Callenders, to add a partner as a signatory to the firm’s bank accounts, and blasted: “The banks are the modern Spanish inquisition.
“To the financial services industry of The Bahamas, everyone is assumed to be guilty and doing nefarious things. There is not a minimum that the banks will respect in carrying out the most tedious, exacting and unnecessary inspection. It’s very challenging to do business.
“The mood in Freeport is buoyant, but it’s going to take a big political commitment to revert back to the one-stop-shop construct and opening Immigration’s doors to allow Freeport to capitalise on its huge economic potential for the benefit of the entire Bahamas.”
Freeport already has the planned infrastructure and capacity to absorb a significant population increase, and Mr Smith said that reviving the city’s economy would create another growth driver to ease the pressures and overcrowding on New Providence.
“I think it’s critical to promote and energise the economy of Freeport so as to attract employment, growth and tax revenues for the Government,” he added. “As an additional stimulus to the Freeport economy the Government should stop continuing to approve the development of subdivisions in New Providence which are eating more and more into the forests, the wetlands and the lakes.”
Mr Smith said the Government had the ability to provide the necessary tax incentives, and work with the Grand Bahama Development Company (DevCo), to provide housing and real estate options. He pointed out that a lot “in a desirable subdivision” in Freeport currently costs an average of $30,000-$50,000, compared to $160,000-$200,000 in Nassau.
“Freeport has always thrived on a level of hope,” Mr Smith told Tribune Business. “Hope is always what has kept Freeport positive, buoyant and forward looking despite all the challenges which central government has put in its way.
“If the Government would embrace the potential of Freeport it would become a powerhouse of economic growth for The Bahamas and, once again, provide positive inflows of tax dollars at minimal expense for the Government, dramatically reduce unemployment, and provide economic and social opportunities for Bahamians.”