The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Grand Bahama Port Authority (GBPA) director yesterday argued "Freeport needs $10bn, and could attract $100bn if we get the model right" amid a peace offering from the deputy prime minister.

Rupert Hayward, the late Sir Jack's grandson, told the Grand Bahama Business Outlook conference there were "four pillars" in a model he believes can finally unlock the city's true potential and eliminate the "false dawns" that have blighted efforts to revive its economy over the past two decades.

He nevertheless argued that, despite having a population that is 20 percent or one-fifth the size of Nassau's, the city of Freeport remains a "huge net positive contributor" to the Public Treasury by pouring $200m annually into its coffers via taxes and fees.

"Compared to the widest conceivable estimation of government’s annual expenditure in Freeport, Freeport is already a huge net positive net contributor to The Bahamas economy and The Bahamas' Treasury," Mr Hayward said, adding that the sums sent to Nassau will increase significantly if some $2bn worth of "pipeline" investment projects come to fruition.

The Government, though, has signalled its desire to launch arbitration proceedings against the GBPA and its shareholders, the Hayward and St George families, on the grounds that Freeport's quasi-governmental authority has not paid cumulative bills - alleged to be around $150m - to cover Nassau's costs in providing public infrastructure and services over and above its tax earnings from the city.

This is disputed by the GBPA, and Chester Cooper, deputy prime minister and minister of tourism, investments and aviation, yesterday seemingly used the same conference to signal the Government's desire to avoid a confrontation with the city's governmental authority and 3,000 business licensees.

"I came here today to convey several messages," Mr Cooper said. "First, I want it to be known that our administration is your friend. We care deeply about Grand Bahama and her people. The Government is not the adversary of Grand Bahama or anyone living or operating in it.

"The success of Grand Bahama is the success of The Bahamas. For too long, progress has been delayed in Grand Bahama because of political polarisation, partisanship and territorial attitudes. Let me also say that, for the sake of Grand Bahama and her people, we must collaborate.

"Even where we have differences as stakeholders we must remember as leaders that we have a collective mission to get positive results for the people of Grand Bahama. We must work together. That is the only way we will succeed and move forward – together. We must listen to each other and respect each other. And we must understand that compromise is often the key to progress."

That will have fitted nicely with Mr Hayward's "four pillar" economic model, in which he described the "most important" as being a close, collaborative relationship between the GBPA and the Government. "The success of Freeport, the prosperity of Grand Bahama and the positive economic impact on the entire Bahamas could be multiplied many times over if we could unlock the full potential of our second city," he said.

"But I'm convinced we cannot sit back passively and wait for the change we require to happen. The last 20 years have provided crucial lessons. They have exposed the fragilities of Freeport’s economic value proposition in light of the large storms and global economic shocks, and I think it would be remiss of us to simply expect the issues of the past to disappear on their own.

"We have all seen false dawns before here in Grand Bahama. We have heard about big plans, grand visions that sadly haven’t materialized. There is understandable scepticism when I talk to people on the streets because we’ve heard it all before and the truth is that even at the best of times, the windfall from Freeport’s successes has failed to trickle down to the average Bahamian," Mr Hayward continued.

"We all have to be realistic as to why this happened and learn from our failings and commit to change, so that the last 20 years will never happen again. Now I believe the future success of Freeport and our ability to build a robust economic model and world class value proposition rests on four key pillars."

Describing the cornerstone as a close relationship between the Government, and the GBPA and its licensees, Mr Hayward explained: "Freeport was originally conceived as a groundbreaking public-private partnership – emphasis on the third P, our partnership – where government and GBPA worked hand-in-glove, tapping into global financial markets to deliver considerable economic benefits to Grand Bahama and the country as a whole.

"We must return to this foundational idea, this time creating a true PPP between the Port Authority, its licensees, the Government of The Bahamas and every resident of every community on the island; a partnership characterised by broad representation, integration and above all deep collaboration."

Mr Hayward identified the others as an upgraded, competitive regulatory regime and a commitment by the GBPA's owners, directors and management to operate the quasi-governmental authority as a "bona fide world-class institution" that is not solely run for the benefit of its shareholders but attracts "blue chip foreign investment" to make the city an "elite player" locally and internationally.

"The rules governing Freeport are 70 years old, and the rules have been significantly diluted since the signing of the Hawksbill Creek Agreement in 1955, precisely when they desperately needed to be strengthened and updated to cope with economic shocks, stronger storms and a more competitive global environment," he said.

"It is past time for a comprehensive overhaul –one that allows the city managers to perform their caretaker role more effectively, with supercharged bylaws that facilitate world-class city development. One that takes into account the realities of 21st century commerce and grants the Port Authority the tools necessary to be able to offer investors and local businesses a seamless route to profitability.

"One that prioritises flexibility, dynamism and ease of doing business, removing red tape, bureaucracy and a two-speed licensing and approval process between Freeport and Nassau that has plagued Freeport for too long."

Noting that Freeport now faces major competition from rival free trade zones, Mr Hayward added: "When the Hawksbill Creek Agreement was signed in 1955, Freeport was one of only two free trade zones around the world. Today, 70 percent of countries around the world have a free trade zone – most with a considerably more competitive regulatory regime and ease of doing business than ours.

"We live in a highly competitive international environment, and despite our proximity to the US and our infrastructure it is still not easy to attract the quantity and quality of foreign investment needed for Freeport to reach its full potential."

Mr Hayward said it frequently takes "a Herculean effort" to get investment projects approved and moving, adding that the GBPA and government "run against the clock" for fear a major storm or negative economic impact could deter investment.

"Crucially, the new regulatory regime must resolve uncertainties concerning current and future tax obligations, a grey area that causes a great deal of anxiety among prospective investors and our current business owners and residents," he said. "I know this because I hear it all from you on a daily basis. As the old adage goes: 'Nothing kills investment like uncertainty'."