Grand Bahama: A Role Model For Privately Funded Infrastructure Development?
- Grand Bahama, the deepest harbour along the East Cast of the United States, is preparing to capitalise on the doubling in capacity of the Panama Canal due in 2014.
- The Jones Act bans non US registered ships from docking more than once at US ports, but Grand Bahama can act as a transhipment hub servicing the US, Latin America and the trade lanes to Europe, the Far East and Australasia.
- The Bahamas has applied to join the World Trade Organisation (WTO), but a reduction in existing custom duties, which with excise taxes, accounts for nearly 60% of total tax revenue means new revenue sources are urgently required for fiscal health.
Bahama, the deepest harbour along the East Cast of the United States, is set to
enjoy a major boom in its economy as it prepares to capitalise on the doubling
in capacity of the Panama Canal, a development due to open later next year.
ramifications of this infrastructure upgrade were discussed at an international
conference held in Freeport, Grand Bahama on 20th & 21st
February. The event attracted a large number of delegates from the global
financial, commercial, property and shipping communities.
Grand Bahama Port Authority (GBPA) operates a free trade zone with special
powers conferred by the Bahamian government under the Hawksbill Creek
Agreement. GBPA provides a model for how one can privately fund and develop a
thriving commercial and residential centre which offers the latest in terms of
fully digital telecommunications, modern utilities and a sophisticated
operates a full service container port facility, operational 24 hours a day,
seven days a week. It can handle the world’s largest container vessels – highly
significant given the impending doubling in capacity of the Panama Canal which
will enable the canal to be used by ‘post Panamax’ vessels. Freeport is one of
only a few ports along the East Coast capable of accepting such container
a Fortune 500 company and one of the largest firms listed on the Hong Kong
Stock Exchange, has invested substantial sums in Grand Bahama.
Through its subsidiary, Hutchison Port Holdings Trust, the
group is responsible for the management of Freeport Harbour & Container
Port; significantly, it is also the manager of the Panama Canal.
Consequently, investment in these facilities forms part of Hutchinson’s global
will play a pivotal role in supplying goods to the East Coast of the United
States since US legislation – in the form of the Jones Act 2004 – bans non US
registered ships from docking more than once at US ports. Grand Bahama is
poised to capitalise on this regulation since it can act as a transhipment hub
for the world’s shipping, servicing the US, the rapidly developing economies of
Latin America and the trade lanes to Europe, the Far East and Australasia.
port also operates the Grand Bahama International airport, which boasts a
11,000 foot runway capable of handling the largest aircraft in service and
within easy reach of all major US destinations. It also offers US Customs
& Immigration Pre-Clearance, which is a considerable attraction for many
Bahamas is now one of the top five centres in the world for ship registration.
Building on this base, it plans to develop as a centre of excellence for
shipping arbitration. The Bahamas is also home to more than 250 banks,
financial institutions and trusts. Financial services represent the second
largest sector of the economy and accounts for 15% of GDP.
the Bahamas has been hit by a downturn in earnings from tourism, exacerbated by
storm damage caused by Hurricane Sandy. While the cruise ship market has
remained relatively robust, passengers do not spend much when they venture on land.
Hotels are not operating at full capacity and there is a lack of variety,
particularly in terms of boutique hotels. Innovative thinking is required,
especially with regard to special interest vacations.
residential property market is also on the slide although there are plans for
new developments. Yet much of Grand Bahama is remarkably unspoilt and there are
significant opportunities for mixed use development and residential
construction across the price spectrum. But one of Grand Bahama’s problems is
that relatively few people visit it: Nassau tends to attract far more visitors.
downturn in the tourist industry together with an ambitious government public
expenditure programme has put pressure on the country’s fiscal health. The
Government had planned to plug the gap with a levy placed on hitherto illegal
online gambling, a popular pastime for locals in so called “number houses” or
“web shops”—legal internet cafés that offer illegal bets on the side. But the
voters rejected the idea in a referendum held on January 28th. This
was embarrassing for the government even though Prime Minister Perry Christie
claimed he had “no horse in the race”.
there are now plans to introduce in July 2014 a sales tax set – initially at
least – at 15%. The Bahamas has applied to join the World Trade Organisation
(WTO) and it hopes to complete this goal by the end of 2014. Yet the immediate
result of membership would spell a drastic reduction in existing (hefty) custom
duties, which, along with excise taxes, accounts for nearly 60% of total tax
revenue. The onus is therefore on raising new sources of revenue and
improvements to the anaemic level of tax collection evident over the last
the financial pressures are on the Bahamas to capitalise on its natural assets
and its status as a jurisdiction which charges no income tax, corporation tax
or capital gains tax. However even these considerable attractions are bound to
come under intense pressure from OECD countries and the G8 – one of whose key
goals this year is to address the question of offshore financial centres and
the tax treatment they afford international investors.
Bahamas is set for a bumpy economic ride but the opportunities for shipping,
finance and tourism remain considerable. There is also an urgent need for more
investment in agriculture. Currently, the country has to import nearly all the
food it serves to tourists as well as residents. If it attracted investment
from major agri-business concerns, its balance of payments would dramatically
improve and the choice afforded to visitors may also be transformed.