‘Something is better than nothing’

When the Minnis administration foreshadowed a “master strategic plan designed for Grand Bahama” in its Speech from the Throne, informed observers expected that such a plan would involve the government’s determinations about the way forward for the management of Freeport.

Such a strategic plan, had it ever made the light of day, ought also to have been structured based on the recognition that no individual foreign direct investment project could singularly serve as a magic bullet to reverse Grand Bahama’s fortunes.

Nearly four years into its term in office, Prime Minister Dr. Hubert Minnis has not demonstrated an understanding of the intricacies of Freeport or the needs of Grand Bahama, and has instead sought to hang his hat on the announcement of supposed billion-dollar projects in the absence of a sustainable development plan for the island’s mixed economy.

As a general election looms, it appears as has happened in the past, that announcements of deals and acquisitions will be made in earnest, so that the governing party has something with which to boast in its campaign to seek a fresh mandate from voters on Grand Bahama.

But what Grand Bahama does not need are agreements entered into out of either desperation or a desire to appease voters, but that are either not properly planned and resourced, or that will not deliver the best possible outcome for the island’s economy in the immediate to long term.

Cruise or lose

When the government signed its agreement last year with Holistica Destinations — a joint venture between Royal Caribbean International (RCL) and the ITM Group — for the purchase of the Grand Lucayan resort and redevelopment of the Freeport Harbor, it was heralded as a red-letter day for the island’s economy.

With the signing came the promise of thousands of jobs, millions of cruise visitors, and a rebirth of the Lucayan strip that has been on a protracted state of life support.

Area hoteliers and business owners praised the move, and with a construction timeline of approximately two years for a new and modern resort property, the prospect of a new hotel was welcomed and exciting news for current and would-be workers in the hospitality industry.

But COVID-19 happened, knocking the global cruise industry to its knees, and the Grand Lucayan remains unsold over two years after government’s purchase thereof from Hong Kong-based conglomerate Hutchison Whampoa, via Lucayan Renewal Holdings Limited (LRH), the government’s special purpose vehicle for the purchase.

In its third quarter 2020 report, RCL posted a net loss of $1.3 billion for the quarter, recording an estimated cash burn in the range of approximately $250 million to $290 million per month, during a prolonged suspension of operations.

Tourism Minister Dionisio D’Aguilar indicated last year that RCL and ITM sought to restructure their agreement with the government in the wake of COVID-19’s economic fallout, with LRH Chairman Michael Scott later stating his view that the restructured proposal represented a “bad deal” for Grand Bahama.

Scott indicated that he had no faith in the new deal, citing the extent to which it had been watered down from the original agreement, such that it would result in no immediate benefit in the next two years as was previously envisioned.

D’Aguilar subsequently refuted Scott’s opinion that the current proposal under negotiation was a bad deal, essentially surmising that under the present global circumstances, something is better than nothing.

Notwithstanding how controversial Scott’s comments were thought to have been, the LRH chairman who is also chairman of the Hotel Corporation, has been involved in the process from its inception, and therefore his view deserves to be fleshed out via government’s transparency on where the Grand Lucayan deal stands, and the details of the current proposal.

Scott previously issued a press statement announcing a February 1 reopening of the Lighthouse Point property and some of the Grand Lucayan’s restaurants, but that reopening was shelved by government, with D’Aguilar indicating that it would be Cabinet and not the LRH board, which would make the final decision on when the still-government owned property might reopen until a sale can materialize.

Though Scott advised that the board had been exploring other potential lease or purchase options for the property, the outcome of that process is unknown, with industry observers opining that government might not easily find another viable purchaser in the present climate.

Government signed a heads of agreement with the Carnival Corporation for its self contained port development project at Sharp Rocks, Freeport, but commencement of that project has been pushed back to a date undetermined by Carnival, due to the impact of COVID-19.

Taxpayers have foot the bill for the Grand Lucayan’s purchase and operations to the tune of over $100 million and counting, and accounting firm KPMG was engaged to assess the benefits of the current proposal by Holistica.

While on Grand Bahama last week, Minnis asserted that government will get the best price possible for the Grand Lucayan.

Both the heads of agreement signed with Carnival and with Holistica for Freeport have been withheld from the Bahamian people by the Minnis administration, and it is likely that the recommendations of the KPMG report will also be kept from Grand Bahamians and the nation at large.

In the absence of transparency, it will be impossible for Grand Bahama residents to ascertain whether what government may agree to with Holistica caters heavier to expediency in an election run-up, than to the facilitation of an investment model that would deliver benefits in a timeframe the island’s stakeholders can survive long enough to enjoy.

Though striving to remain optimistic in the midst of uncertainty over the initial timeline for construction of a new resort by Holistica, Bahamian Beachwear proprietor Janette Roberts told us late last year, “If things continue this way for another two years, I don’t know of any business in [Port Lucaya] that will be able survive like this. I doubt we would be able to sustain our business.”

A new airport is
essential

The Grand Bahama International Airport (GBIA) suffered catastrophic damage in Hurricane Dorian, and since then has been reduced to a temporary FBO facility with tents for immigration and customs processing, until additional facilities are completed.

In the aftermath of the storm, a source close to negotiations on a government acquisition of the airport told Perspective that co-owners Hutchison Whampoa and the Grand Bahama Port Authority (GBPA) agreed to transfer the property to government for $1.

Minnis advised last week that government is now prepared to take over the airport, but as D’Aguilar had recently and rightly pointed out, acquiring the airport is one thing, but determining what you will do with it, is another.

After all, the government also acquired the Grand Lucayan, and over two years later the property sits shuttered and deteriorating on the Lucayan strip.

So while government is no doubt planning a fanfare-filled signing ceremony to mark its acquisition of the airport, ribbon cuttings and signings alone will not shore up Grand Bahama’s economy.

What is of critical importance to Grand Bahama is the administration’s outlining of a timeline for the construction of a state-of-the-art airport for the island, where the financing will come from, and who will manage the property.

As we have seen from examples throughout the country, government management of airports is a less than desirable scenario, most especially so for Freeport that is the country’s established industrial hub, and whose airport housed United States pre-clearance facilities prior to Dorian.

In as much as criticisms exist about the usefulness of the ongoing model for Freeport, the island is accustomed to the relative efficiencies that come with private management of essential services — efficiencies that would not exist under government management.

Scott previously told Perspective that the cost of an airport facility which would satisfy US security requirements, and produce a destination worthy and climate resilient gateway, could run as much as $80 million at minimum.

Last month, State Minister for Finance Kwasi Thompson said government has received “high interest” in public private partnerships (PPP) for the GBIA redevelopment.

However, transparency that has been consistently lacking with the administration, is key.

There ought to be full disclosure on the process of both inviting and selecting potential investors to partner with government on a proposed airport redevelopment in Freeport.

Unfortunately, the administration’s track record in negotiating investments for Grand Bahama has left much to be desired, and the last thing Grand Bahama needs is a PPP agreement with unsuitable investors, or which is otherwise mired in controversy that would further injure the island’s already weakened economic standing.

It may be argued that in the midst of a global economic crisis spurred by COVID-19, something for Grand Bahama is better than nothing.

What Grand Bahama can ill afford at this critical juncture, meanwhile, is being prepped for the prospect of something that turns out to be nothing.

The post ‘Something is better than nothing’ appeared first on The Nassau Guardian.

source https://thenassauguardian.com/something-is-better-than-nothing/