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The 'Holy Grail' for kickstarting Freeport

Terence Gape, senior partner at the Dupuch & Turnquest law firm, unveils his strategy for getting the Bahamas’ second city moving again.

I WANT to start by applauding the Government for its proposed 20-year extension of tax concessions to all Freeport licensees, including homeowners where appropriate (the same concessions as previously granted to the Grand Bahama Port Authority (GBPA) group and Hutchison Whampoa). This will provide certainty to present and future investors, and residents, going forward.

I also applaud the Government's intention to reduce the minimum investment threshold for permanent residence applicants for Grand Bahama to $350,000, rather than the $750,000 proposed for burgeoning locations such as Paradise Island, New Providence and the like. This will incentivise investment to the Port area, especially when the proper marketing mechanisms are in place.

MoU of 2016

There is a little-noticed provision in the legislation to repeal the Grand Bahama (Port Area) Investment Incentives Act 2016, which states that the Memorandum of Understanding (MoU) of April 26, 2016, between the Government, Port Group and Devco et al will be re-negotiated.

This MoU covers what I consider to be the 'Holy Grail' for the future of Freeport, and contains half-hearted (and probably unenforceable) covenants by the Port's ownership families, Hutchison and DevCo (Grand Bahama Development Company). They are, respectively:

1) Clause 1 (1.16)

"Collaborate with the Government in the establishment of a world-class investment promotional entity to attract domestic and foreign direct investment (FDI).

2) Clause 3 (3.1)

"In consideration of fulfillment of the undertaking by the Government to grant further concessions, and to grant the releases, implement policies and provide the support as more particularly set forth in Clause 5 of the MoU, GB DevCo agrees to use its best endeavours to provide the Government with a 20-year Master Plan in respect of the landholdings of GB DevCo within up to 12 months." A similar commitment is made by Freeport Commercial and Industrial Ltd, a member of the GBPA group.

3) Cause 1.2

Commitment by the families (Haywards and St Georges) to market and sell their ownership interest in the GBPA group.

So far as I am aware, none of these three commitments have been complied with, and the 12-month deadline for producing the DevCo and Freeport Commercial and Industrial master plans has now lapsed.

That this MoU now needs to be re-negotiated and made enforceable is probably the understatement of the year, and I applaud the Government for this stance, which is critical to the future of Grand Bahama.

I hope the Government will make this re-negotiation an absolute priority once the Grand Lucayan hotel is sold and re-opened.

Grand Lucayan Hotel

I am disappointed that the most the Government has said recently about any pending purchase of the hotel is that they have an "offer on the table". I am disappointed because, presumably, after three months of negotiation with Hutchison (Cheung Kong Property Holdings), the parameters of a deal would have been fleshed out and the Government would have been in a position to either fly out to Hong Kong or cause Hutchison to fly here to cut the deal.

Everyone agrees that the reopening of this hotel is the essential first ingredient to restoring the tourism and investor-interest market to Grand Bahama, which is now essentially at rock bottom.

Such a 'turn' cannot start without the Grand Lucayan being opened.

As I have said before, Hutchison have been a very naughty investor as far as this hotel is concerned, and their obvious "couldn't-care-less" attitude about its closure has been destructive to Freeport and its economy. Of course, this situation has been building for years and stems from the failure of the Port Group and Hutchison together to develop and market the Port Area in accordance with their duties under the Hawksbill Creek Agreement.

Hutchison, by virtue of its 50 per cent ownership in, and management control of, DevCo, the Harbour and Airport can easily be seen as a successor party to the Port Authority's covenants in the Hawksbill Creek Agreement. Devco has directly made renewed covenants in this same regard under the 1992 Act and since.

It is thus easy to argue that Hutchison and the Port's ownership families are in breach of their obligations under the Hawksbill Creek Agreement.

Accordingly, I would respectfully suggest that the Government would be well within its rights to take a strong-arm attitude to Hutchison with respect to the hotel (which could be classified as an 'essential service' in Freeport's context), and insist that it make an immediate decision on the sale offer, and that the same be sealed and done on an urgent, critical basis.

GB International Airport

This is the next asset, currently also 50 per cent owned and managed by Hutchison, that needs to be owned by the Government (the people of the Bahamas).

Bright Future

With the hotel re-opened and eventually in the hands of a competent investor/hotelier; the families' GBPA interest sold to an imaginative, monied developer; and with Hutchison's interests concentrated only in the Container Port and the Harbour, I am convinced Freeport and Grand Bahama can look forward to a bright future in a more unified Bahamas.

But all these steps have to take place first.

Comments

scampi75 6 years, 8 months ago

Well said with very interesting points, I hope the Government is reading/listening

Economist 6 years, 8 months ago

The Harbour should also be taken from Hutchison. Their performance has been very poor especially right after the hurricanes. They are a heartless group of people.

sheeprunner12 6 years, 8 months ago

Why do we believe that the "freeport" concept of 1955 is economically beneficial in 2017????? Those two GBPA families have literally raped the economy of Grand Bahama........... any contract can be broken ......... The HCA is obsolete ..........If GB is to move forward as an integrated part of The Bahamas, the GRABACO bridge should be the first step in creating an economy of scale to give those two islands the capacity to flourish in manufacturing, agriculture, tourism, finance, technology, skills training ......... a bridge will be a good investment and will pay for itself.

Gotoutintime 6 years, 8 months ago

Well said Mr. Gape---I wish you and the people of Grand Bahama the best of luck!

The_Oracle 6 years, 8 months ago

The H.C.A. has greater potential for the Bahamas than it ever has, or as originally envisioned by Wallace Groves. That it has been horribly managed and mangled by the Government and shareholders does not diminish that, but it has wedged Freeport directly into the fix it are in. The Government buying Our Lucaya or "strong arming" Hutchinson is a double edged sword, They may decide to strong arm you later! Actually, Government (Ministry of finance/Customs) has been strong arming G.B. for years as is, but they have been beaten back on at least 8 occasions. No doubt Government can get Our Lucaya refurbed and open, (finding the money where?) but if they staff it in the traditional Hotel Corp manner we may as well set it alight now. We shall see.

birdiestrachan 6 years, 8 months ago

We shall see what we shall see. Time will tell, Mr. Gape seems to have all of the answers, how very simple it all seems according to him.

dickiek 6 years, 8 months ago

The HCA is an asset to the success of GBI recovery AND restoration of growth. Many Bahamians and their long time residence have grown numb to just how poor things are currently. They seem to have forgotten what GBI once was and how it's come to be where it is today. Although tourism has been a staple GNP in the past it is only part of the equation for GBIs future and STABILITY.

I have a concept that WILL work if anyone is truly serious about recovering GBIs economy. A stimulus that will not only grow the economy but sustain it as well... and tourism will simply be a side effect of this growth. I have a plan that will create jobs, education and industry for anyone willing to do so... it's rather simple.

The Bahamas is the wealthiest nation in the Caribbean per capita... that being said, how long will it be and what will it take for Bahamians to take an honest look at their Government and current share of wealth among ALL its people?

Forward, Upward, Onward, TOGETHER.... does that ring a bell with anyone? God Bless the Bahamas and its People! I am thankful for my life experience growing up in The Bahamas. I am here to help repay that gracious gift.

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