THE RT. HON. PERRY G. CHRISTIE, M.P.
AND MEMBER OF PARLIAMENT FOR CENTREVILLE
GRAND BAHAMA (PORT AREA)
INVESTMENT INCENTIVES BILL, 2016
WEDNESDAY, AUGUST 3, 2016
In my extensive Communication to this Honourable House on May 9, 2016, I indicated that for some two years my Government has been giving intensive consideration to the expiring tax concessions granted under the Hawksbill Creek Agreement (HCA) 1955 and related matters. The review has afforded my Government the opportunity after wide consultation with the public, the Grand Bahama Port Authority Limited (“GBPA”), and principal stakeholders, to conclude arrangements aimed at strengthening and expanding the economy of Grand Bahama, which are set out in a comprehensive Memorandum of understanding (“MOU”) made on 26th April, 2016, by and between
(1) The Government of the Commonwealth of The Bahamas, (“the Government”);
(2) The Grand Bahama Port Authority (“GBPA”)
(3) Freeport Harbour Company Limited (“FHC”)
(4) The Grand Bahama Development Company (“GBDevco”)
(5) Freeport Commercial and Industrial Limited (“FCI)
The MOU was laid on the Table of this Honourable House with my aforementioned May 9, 2016 Communication. Additionally, the Government has also executed a Waiver of Exclusivity Agreement with Freeport Harbour Company Limited which clears the way for the operation of other cruise ports on Grand Bahama.
This extensive review, the first of its kind in 60 years, and the negotiation of the far-reaching MOU represents the collective work of a bipartisan Review Committee, and a Cabinet sub-committee, supported by a Bahamian technical team and consultants, as well as international business advisors (the McKinsey Group). The cooperation and meaningful collaboration should be noted of GBPA and other stakeholders including the signatories to the MOU.
It is most appropriate that I should again recognize the invaluable and painstaking work done by the Review Committee comprising Dr. Marcus Bethel, Chairman; the Hon. Maurice Moore, Sir Baltron Bethel, Mr. James Smith, Mr. Kevin Seymour, President of the Grand Bahama Chamber of Commerce and Ms. Cassieta McIntosh. This is evident by their comprehensive Report previously tabled in this
House, their continuing consultations and ongoing assistance in this major exercise which is so vital to the economic future of Grand Bahama.
The MOU and the Grand Bahama (Port Area) Investment Incentive Bill 2016 which I shall shortly introduce are also the result of the work of the Review Committee, the relevant officials and extensive consultations and cooperation with the Grand Bahama Port Authority, principal licensee stakeholders and their legal teams.
It is helpful that I should recall that by three Agreements dated 4 August 1955, the 11th day of July 1960 and the 1st day of March 1966, collectively known as the Hawksbill Creek Agreement (“HCA”), made between the Government and the GBPA, the Government granted to GBPA and its licensees certain rights powers and tax concessions for the exemption periods specified in the HCA in consideration for GBPA undertaking the development, administration and control of the Port Area in accordance with the terms and conditions set forth in the HCA and in the manner therein prescribed.
The exemption periods of the tax concessions under clause 2 (7), (8) and (9) of the HCA in respect of (i) real property taxes (ii) taxes on capital gains or capital appreciation and (iii) taxes on earnings (the “Expiring Concessions”) expired on 4th August, 1990.
The Government extended the Expiring Concessions for an interim period of 2 years by statute and ultimately by (i) the Hawksbill Creek, Grand Bahama (Deep Water Harbour and Industrial Area) (Extension of Tax Exemption Period) Act and (ii) the Freeport Grand Bahama Act, 1993, the Government extended the Expiring Concessions to the 4th August 2015 in consideration of the covenants on the part of GBPA and GBDevco to fulfill the mandates set out in an Agreement made pursuant to the provisions of the Freeport Grand Bahama Act, 1993.
The extension of the Expiring Concessions came to an end on 4th August, 2015 and the Government had legislated an interim extension of the same to 4th May 2016 to enable it to make a determination as to a further extension or otherwise.
The Government retained the McKinsey Group, international consultants to, inter alia, undertake a study of the economic situation within the Port Area, appointed a Committee (“the Committee”) to review and make recommendations with respect to the impending expiration of the Expiring Concessions and entered into discussions with GBPA, licensees and the wider community of Grand Bahama.
The Committee has inter alia recommended and the Government has agreed that the Expiring Concessions be granted for a period of 20 years subject to certain conditions and with a mechanism to monitor performance through periodic review every five (5) years.
The Government is desirous of encouraging and facilitating economic growth and continued development of all sectors of the island of Grand Bahama, and of promoting increased opportunity for significant employment for the overall economic benefit of The Bahama and, is desirous that the Grand Bahama Port Authority and its licensees also assist in this regard.
The Government is cognizant of the substantial contribution made by GBPA, FHC, FCI and GBDevco and other relevant stakeholders to the economy of Grand Bahama and is of the view that the grant of concessions, subject to certain conditions, on like terms as the Expiring Concessions will encourage and facilitate further development on the Island of Grand Bahama with the accompanying creation of employment opportunities on the Island of Grand Bahama.
The GBPA has apprised the Government of its efforts to seek an injection of new equity capital into its Group of Companies through new globally respected shareholders, or equity partners and project specific investors who will further the development of Freeport and Grand Bahama.
It is envisaged that the MOU and agreements to be made with licensees will aim to fundamentally shift the investment climate and economic prospects in Grand Bahama in a dynamic and positive way for all concerned. We have sought to create a new economic development framework that can jumpstart and sustain growth in Grand Bahama. A framework is to be established for the Government and private sector to partner to deliver a wide range of gains for the residents of Grand Bahama and The Bahamas as a whole.
Specific opportunities that will emerge from this framework include:
(a) immediate investments in strategically important industries
(b) the commitment of the GBPA to seek an injection of new equity capital into its Group of Companies through new globally respected shareholders or equity partners and project specific investors who will further the development of Freeport and Grand Bahama.
(c) historic changes in the governance, transparency, and regulatory framework that governs Freeport
(d) Government ownership stakes in prime landholding companies which will allow for enhanced public/private development and partnerships
(e) a commitment to social and infrastructure improvements to enhance quality of life
(f) a new framework for performance-based development concessions that will replace the expiring tax concessions of the Hawksbill Creek Agreement
(g) a focused and collaborative strategy to reshape the approach to attracting, retaining, and expanding investment in Grand Bahama
(h) and a commitment to resolve longstanding issues related to Government deficits in Freeport in a way that protects the Government’s rights but creates a path forward in Freeport.
Underpinning these agreements for change and new investments is a new approach to development concessions in Grand Bahama. The expiring tax concessions as initially provided under the Hawksbill Creek Agreement, and extended on multiple occasions, were designed in a different era and need to be updated. Tax concessions, when used properly, should be an inducement to encourage private sector investment and/or employment. Accordingly, we will be establishing a new framework that will replace and modernize the current framework for tax concessions in Freeport.
A new regime with a new framework is contemplated for the Port area with respect to the tax concessions which expire on 4th May, 2016. The same tax concessions will be granted by the Government for a period of 20 years commencing on the 4th of May, 2016 to existing licensees of the GBPA on an individual basis, subject to certain conditions and under a framework that would provide for the maintaining of performance through periodic reviews every five years. The Government would collaborate with GBPA on the design of the framework. The same framework will apply to new licensees once they submit and obtain approval of their development plans.
In return for the undertakings and assurances by GBPA, Freeport Harbour Company, Grand Bahama Development Company and Freeport Commercial & Industrial Company Ltd., the Government is to take the necessary measures to grant the expiring concessions to these companies, their existing affiliates, subsidiaries and joint venture companies in like terms for a period of twenty years, commencing 4th May, 2016.
We are also taking steps to address an important inhibitor to development in Grand Bahama. The lack of any taxes or carrying costs of undeveloped land means that property holders can simply sit on undeveloped land without recourse. To address this situation, and enhance the revenue base in Freeport, we intend to create a new framework where real property tax would be payable on undeveloped land held by non- Bahamians owning more than five acres.
To give effect to the foregoing, I am pleased with your permission to introduce into this Honourable House the Grand Bahama (Port Area) Investment Incentive Bill 2016. This Bill seeks to introduce a framework for the grant of the exemptions to the Grand Bahama Port Authority Limited and to certain licensees of the Grand Bahama Port Authority Limited as an incentive for economic growth in the Port Area. The Minister responsible for investments is also empowered to make regulations for carrying out the purposes and provisions of the Bill. The regulations are being drafted and after proper consultations will be brought to Parliament in the near future.