The Tribune

By NEIL HARTNELL

TRIBUNE Business Editor

nhartnell@tribunemedia.net

THE GOVERNMENT, in a shot at Freeport’s founding treaty, is pledging that the replacement Grand Bahama Development Act will face a legally-required review every five years so as not to become a governance framework that “no longer serves” the island.

The Davis administration’s ‘Green Paper’, unveiling its proposal to reclaim governance and management of Freeport from the Grand Bahama Port Authority (GBPA), and consolidate it into one island-wide regime, contrasted the 99-year Hawksbill Creek Agreement, which is not due to expire until 2054, with its plans to constantly update the regulatory framework.

“The Development Act itself would be subject to a statutory review every five years, so that Grand Bahama and surrounding cays are not again governed for decades by arrangements that no longer serve them,” the paper proposes, adding that tax breaks and investment incentives will be subject to review by the Ministry of Finance with recipients required to make productive use of them.

This, the ‘Green Paper’ signalled, will prevent investors and businesses simply pocketing investment incentives and then doing nothing to expand employment or economic activity - a frequently voiced complaint about Freeport’s existing concessions structure under the GBPA. The Ministry of Finance’s involvement will address the impact of any tax breaks on the Government’s revenue base.

“Concessions affect public revenue and consequently require fiscal examination as part of their design. The Ministry of Finance would assess the likely revenue effect, administration and material associated obligations before recommendations are settled,” the ‘Green Paper’ said.

“The examination would distinguish the stated value of relief from its expected effect on public finances, allowing for changes in activity which the scheme may induce and uncertainty about uptake.” It added that the planned Grand Bahama Development Act “could provide defined award periods” for when incentives are offered and subject these to periodic reviews.

“Review would examine delivery, Bahamian participation, geographic reach and unintended effects, including whether eligibility or procedures create avoidable barriers for the enterprises intended to benefit,” the ‘Green Paper’ said.

“Conditions and remedies would be communicated before an award is accepted, with a fair opportunity to respond to alleged material non-compliance. The framework would distinguish deliberate misrepresentation, a remediable reporting failure and interruption caused by events beyond reasonable control.

“Hurricanes and other serious disruptions require explicit treatment, including the evidence necessary to establish their effect on an undertaking.” The ‘Green Paper’ also warned that recipients of tax breaks and investment incentives, whether in Freeport or outside, will have to make use of them under the proposed new regime.

“Concessions will be tied to measurable, verifiable commitments rather than asserted benefits. Relief should be linked to productive use and should not reward the passive holding of land or other assets,” it added.

“The Government considers transparent and equal governance compatible with differentiated incentives directed to different development conditions. Enhanced provision for East and West Grand Bahama could address the imbalance identified in the policy case and accelerate the extension of opportunity beyond Freeport.

“Geographic differentiation would require a published rationale, defined boundaries and consistent administration, accessible to eligible Bahamian enterprises as well as other qualifying investors…  Particular exemption rates, award periods, tax exemptions and entitlements will be considered only after consultation,” the ‘Green Paper’ continued.

“Consultation will examine the constraints a concession is intended to address, the activities to be supported and the arrangements necessary for effective operation. The analysis will distinguish support throughout the island from the additional case for enhanced treatment outside Freeport. It will also consider whether differing conditions require a differentiated response rather than a more generous version of the same instrument.”