Rt. Hon Perry G. Christie
2014/15 BUDGET COMMUNICATION
It is my honour to present the 2014/15 Budget Communication.
INTRODUCTION
Mr. Speaker, the 2014 Inaugural World Relays was sold out over the two day period with over 30,000 seats being sold for approximately $420,000 plus. Some 43 countries participated in the event and there were approximately 600 athletes in the meet. Prize money ranged from $50,000 for a first place finish in a race down to $4,000 for eighth place for a total of $1.4 million.
The event was streamed live around the world to over 120 countries via YouTube as well as by many other IAAF affiliated news media. Simply put, the event was seen live on every continent in the World.
The meet saw three new world records being set; two by the Kenyan team in the 4 x 1500 (Men and Women) and one by the Jamaican Men 4 x 200 meter squad. The Bahamian team also set two National Records in the Men’s and Women’s 4 x 200.
The Men’s 4 x 400m team ran a blistering 2:57:59 for second place. This was also the second fastest time run in the world this year and the third fastest time ever by a Bahamian relay squad.
According to Lord Sebastian Coe: “I thought it was fantastic – the noise, the atmosphere,” Coe, an IAAF vice-president, said. “It reminded me of Mo hitting the front and David Weir winning in London. It was really very noisy because they get relays here.
“The IAAF’s faith in the innovative IAAF World Relays, a new event with a new presentation concept and The Bahamas’ ability to deliver a top global sports entertainment product have been richly rewarded this weekend” said IAAF President Lamine Diack. “In the ‘sun, sea and sand paradise’ that The Bahamas markets itself, we have experienced a true sporting paradise which has excelled beyond our expectations. The people have embraced the IAAF World Relays and the noise of their support will be left ringing in our memories for many years to come.”
Lastly Mr. Speaker, the small and medium business opportunities created by my Government as a result of our commitment to hosting the relays were tremendous and heralded by many. Opportunities range from transportation, the creative industries, lodging, food and beverage, various paraphernalia, ICT and security. In short Mr. Speaker, there was an economic uptick prior to the actual event and an economic explosion during the week we hosted several thousand people on our shores.
Honourable Members will recall that, when I presented last year’s Budget Communication, I stated that it represented a pivotal Budget in the history of our nation. With the ongoing though still very gradual recovery of the economy from the Great Financial Crisis of 2008 and 2009, in last year’s Budget my Government set out in detailed and concrete terms an unprecedented Multi-Year Fiscal Consolidation Plan whose ultimate objective is to secure the future for all Bahamians.
As I have recently stated in a number of fora, I have an abiding optimism for the growth of entrepreneurial and employment prospects for the citizens of our country. Within that context, I view addressing the dire state of our public finances and placing the burden of Government debt on a downward path as critical components in support of our strategy for national economic development.
Mr. Speaker, in this Budget Communication, I am reiterating my Government’s steadfast commitment to our Multi-Year Fiscal Consolidation Plan. We will stay the course with the implementation of the various policy initiatives in respect of Recurrent Expenditure, Recurrent Revenue and Capital Expenditure that comprise the core elements of this plan.
Concurrently, we are diligently striving to strengthen the foundations of the economy to secure steady growth and private sector employment creation. In particular we are continuing our push to develop new and expanding private sector investment projects across the breadth of the nation. Honourable Members will recall that I outlined the numerous such projects that are either currently underway or imminent during the Mid-Year Budget Statement in February.
I now wish to provide an update on the further positive developments that have surfaced on the investment front in the last few months. The new and expanding projects are numerous and I will expand on these fully at a later date. At this point, I will merely highlight some of the major developments. I also wish to stress that the strong emphasis that we are placing on new foreign direct investments is directly in tune with the initiatives that we are taking on the fiscal and tax reform front and, more specifically the introduction of a Value Added Tax (VAT). Foreign investments will provide a much-needed boost to our economy at the same time that tax reform is being implemented.
Mr. Speaker,
Key Economic Growth Components in New Providence
The $2.6 billion Baha Mar one-of-a-kind resort, the largest single project ever to be undertaken in the Caribbean and indeed one of the largest in this hemisphere, comes on stream at year end and during this coming fiscal year will have an enormous impact on the Bahamian economy. Apart from the scale and size of this mega resort with its mix of appealing 3,500 plus hotel rooms and 300 plus residences, it will add a number of distinctive and world renowned brands to the Bahamian tourism product including Grand Hyatt, Rosewood, Melia, Mondrian hotel brands, the Baha Mar branded hotel and casino, the largest casino in the Caribbean operated by GGAM casino group comprising top executives drawn from some of the world’s most successful casinos, the largest convention centre in The Bahamas and the spectacular new 18 hole Jack Nicklaus Signature golf course, among many other outstanding amenities including a 33,000 square feet destination spa and 30 unique restaurant and night club offerings.
The economic impact includes the creation of 5,000 new permanent jobs at the resort, hundreds of additional indirect jobs and entrepreneurial opportunities outside the resort. A study by Tourism Economics projects that when the Baha Mar resort is in full operation, the new property will inject some $878 annually million in spending and direct taxes into the Bahamian economy. In addition the study projects some $60 million a year will be paid by visitors to the resort in departure, occupancy and stamp taxes.
Mr. Speaker,
Brookfield Real Estate Financial Partners, the principal owners of Atlantis, our flagship world class resort and entertainment complex, with its 8,000 employees, are aggressively pursuing plans for refinancing, refurbishment, and adding other features, which will further enhance its premier position in the marketplace, all of which will be implemented during this current budget cycle. These initiatives will not only strengthen the position of the property, but also positively impact job creation both at the resort and within the local economy.
My Government has been engaged in fruitful discussions with Brookfield Real Estate Financial Partners and Access Industries, on the purchase, upgrading and expansion of the One and Only Ocean Club and vacant land on Paradise Island.
Government has given its approval for Access Industries to acquire this valuable asset. Access Industries is a New York based group with a global focus on natural resources, chemicals, media, telecommunications, entertainment including Warner Music Group, real estate and several world-renowned high-end, iconic hotels in Florida, France and Argentina. Access has corporate offices in New York, London and Moscow.
The injection of additional capital into the upgrading and expansion of the Ocean Club by Access Industries, not only assures further direct investment inflows into the Bahamas economy, but additional jobs, the positioning of the Ocean Club as the nation’s premier ultra-luxury resort, and a partnership to leverage other economic expansion opportunities with a worldwide conglomerate.
Mr. Speaker,
I am pleased to report that under the terms of superseding Heads of Agreement recently signed with the owners of Albany, planning and work on their $140 million expansion project is proceeding expeditiously, and will create an additional 1,000 construction jobs and some 300 new permanent jobs, many of which will be realized in this current budget cycle.
The process for the sale and major redevelopment of the South Ocean Beach Resort is proceeding with several substantial proposals under consideration by the owners, The Canadian Commercial Workers Industry Pension Plan and their consultants. Each of the proposals envisions a mixed resort/residential/casino/complex which would significantly expand the local product offerings and brands I remain optimistic about an early successful outcome for South Ocean Beach Resort, which together with Baha Mar, Albany, Holowesko Lyford Cay hotel and the thriving commercial and private residential developments in western New Providence, will have an enormous impact on our economy starting in the next few months and continuing for the next decade.
Mr. Speaker,
Renewal of Downtown Nassau
Much progress will be made in the coming months with the rejuvenation of the downtown area of Nassau into a vibrant, attractive and exciting waterfront city, through several initiatives, as part of an overall Master Plan to be further developed with the input of professional planners, stakeholders, local entrepreneurs and other interested parties including cruise lines and major suppliers.
The main area of focus will stretch from Arawak Cay to Potters Cay, and will embrace public infrastructure enhancements, private investments, public/private sector partnerships, and participation by local and international bodies interested in preserving the city’s rich history, culture and environment.
A scenic boardwalk on reclaimed land, together with a myriad of entrepreneurial opportunities, are envisioned stretching all the way from the Hilton Hotel to Potter’s Cay. The transformation has already started with the sale, renovation and rebranding of the Nassau Palms Hotel, which when completed in December will employ in excess of 100 Bahamians. Nearby the owners of the Hilton property are actively pursuing a buyer with the capacity to refurbish the existing hotel and develop its prime vacant waterfront acreage strategically located in the heart of downtown into thriving enterprises and attractions. At their East Bay Street waterfront property, the Symonettes have already completed a marina and boardwalk. Other waterfront stakeholders are being encouraged to embrace the incentives which are available to develop their properties within the guidelines of the downtown Master Plan.
My Government has started a dialogue with the owners of cruise lines for the renewal and expansion of attractions, tours, shopping, cultural experience and things to do in a pleasant, visitor friendly safe and well landscaped and clean environment, that would improve visitor satisfaction and increase visitor spending to become the highest in the Region.
In the months ahead and in the ensuing period, the downtown area will benefit from new construction and community activities, creating many new jobs, entrepreneurial opportunities and enhanced government revenue.
Mr. Speaker,
Investments in Grand Bahama
I am pleased to indicate that my Government’s focused attention to turning around the faltering economy of Grand Bahama is bearing tangible results, and attracting significant major investments. Tourism which has been in the doldrums for far too long, is now growing at a faster rate than in New Providence, and leading the way in the growth of air arrivals for the entire Bahamas.
As a result of a joint venture between the Government, Sunwing of Canada and Hutchison/Whampoa, a new day in tourism has dawned on Grand Bahama. Since its opening in February the Memories Grand Bahama Beach Resort has delivered much needed stimulus to the Grand Bahama economy, by attracting additional airlift and overnight arrivals from Canada and the United States, resulting in increased hotel occupancy and the creation of hundreds of jobs.
Having successfully completed their six city Canadian winter flight program, Sunwing’s USA subsidiary, Vacation Express in partnership with Bahamasair has introduced weekly 737-400 non-stop Jet service from 8 U.S. Cities into Grand Bahama Island, which started May 1st and will run through October 31st each year.
As a consequence, the number of international arriving passengers at the Grand Bahama International Airport for period January through April 2014 is up by 10,679 passengers, or 25.16%.
The total number of incremental seats to the destination from the U.S. via the Vacation Express/Bahamasair program is 66,000, combined with 34,00 from Canada for a total of 100,000 seats, or a projected increase in visitor arrivals of 71,000 passengers representing 460,450 visitor nights overall and incremental tourism earnings of $57 million.
The Summer program signals Grand Bahama’s return to major gateways in the New York tri-state and Washington DC areas with flights from Newark, New Jersey, Baltimore, Maryland and Richmond, Virginia, as well as other important leisure gateways such as Birmingham, Alabama, Cincinnati, Ohio, Columbus, Ohio, Memphis, Tennessee and Raleigh/Durham, North Carolina.
The addition of the Memories resort brand to Grand Bahama has helped to drive higher hotel occupancy levels overall. The weeklong vacation package has increased the average length of stay for the destination, and visitors on the all-inclusive package illustrate a desire to purchase tour excursions, increasing the demand for additional destination activities.
In addition to the 300 construction jobs created during the remodelling phase, the opening of four-star 491 room resort has generated approximately 700 new permanent jobs, boosting economic activity throughout the local community.
Additionally, Vacation Express will offer 4/7 Nights air-inclusive vacation packages from St. Louis, Missouri, Dallas, Texas, Los Angeles, California and Chicago, Illinois via Delta and American Airlines to Freeport I can also now indicate that a new replacement casino operator has been identified for the casino at Our Lucaya. The Hotel Corporation has issued a certificate of Consent for the new operator to apply to the Gaming board for a casino license. The licensing process should be completed in the next several weeks following the completion of due diligence and the probity investigations.
Mr. Speaker,
The good news for Grand Bahama goes further in that revival and expansion of the Grand Bahama economy is on course to extend to the shipping, industrial and other commercial sectors. This has been achieved as a result of my Government reaching out to the Grand Bahama Port Authority and its major licensees, beginning with the principals of the Grand Bahama Port Authority, Hutchison Ports and Mediterranean Shipping Company, to ascertain whether they would be willing to give an undertaking to proceed with major new developments, if the Government were to reconsider certain 2013 fiscal increases as they relate to the application of customs processing fees, an environmental levy and stamp taxes on remittances or transfers outside The Bahamas. After extensive negotiations the three parties have signed a Memorandum of Understanding with the Government for the development of Phase 5 of the Freeport Container Port at a cost of $200-250 million, and the technological and other upgrades to accommodate the further growth of one (1) million containers annually to be generated by MSC Shipping from the opening date of the late 2015 expansion of the Panama canal. This expansion will create an additional 150 direct jobs, some 450 indirect jobs and substantially increase the opportunity for attracting a large range of ancillary and spinoff businesses.
Mr. Speaker,
Simultaneously similar discussions were held with several other major licensees of the Grand Bahama Port Authority. As a result the following other companies have committed to significant economic expansion and additional job creation:
1. Grand Bahama Shipyard
2. Pharmachem Technologies
3. Polymer International
4. Bradford Marine
Mr. Speaker,
Bimini
Bimini’s spectacular growth and development continues unabated, fueled predominately by Resorts World with spinoff effects impacting other smaller resorts, businesses and entrepreneurs. Resorts World has already invested some $90 million in its Superfast Ferry, and is spending some $150 million on resort upgrades, a deep water pier, and the construction of a 300 room luxury five star resort. Just under 500 persons are permanently employed between the Resort and the casino, and nearly 350 Bahamians have been engaged in construction jobs. There was a 93% increase in total tourist arrivals in Bimini from 54,036 in 2012 to 104,347 in 2013, making Bimini the fastest growing destination in The Bahamas. Once the deep water cruise pier is completed to accommodate day and night trips by Bimini Superfast, and the new 300 room hotel is opened by year end, we can expect some 500,000 annual tourism arrivals to Bimini. Improvements and expansion to the airport are ongoing and night flights have started. Other infrastructural works and a Master Plan to guide the overall development of Bimini are being undertaken in a public/private sector partnership between the developer and the Government.
Full employment for the residents of Bimini supplemented by a large labour force from other parts of The Bahamas and elsewhere, has created a shortage of housing on Bimini, which is being aggressively addressed by the Ministry of Environment & Housing and the private sector. This will create additional economic activity for Bahamian builders and construction workers.
Mr. Speaker,
Abaco
In Abaco, the Baker’s Bay high end residential resort, golf club and marina serves as a model of success in the Family Islands for ultra-luxury property owners and visitors. The number of Bahamians employed in construction and operations continues to grow, with just under 650 employed in construction and operations. Some 30 Bahamian contractors and sub–contractors find steady employment.
There has also been a positive development which augurs well for the purchase, expansion and operation of The Abaco Club at Winding Bay. The members of the Club have joined with the experienced and successful Southworth Development Company to acquire the asset. There is now a signed Letter of Intent with a sixty day exclusive period to complete the definitive purchase agreement, with closing scheduled for this summer, upon completion of a new Heads of Agreement with the Government. This project will also create additional construction and permanent jobs.
With the opening of the new airport terminal at Marsh Harbour and the construction of the new port in northern Abaco, the Abacos with expanding resort plant, large second home and boating sectors, and enterprising local businesses and entrepreneurs are well poised to become one of the leading resort destinations in The Bahamas, with the real potential to create some 1,000 new job opportunities over the next several years.
Mr. Speaker,
New Cruise Ship Projects
As for new cruise ship projects, on a recent visit with the President of Disney Cruise Lines to their exotic Castaway Cay Island port of call, I was able to witness firsthand the meaningful employment and entrepreneurial opportunities being provided for some 100 Abaconians from nearby settlements. It is a wonderful example of how dredging of a deep-water pier to accommodate cruise ships, and environmental protection and development could co-exist for the greater economic good of a small community. The Office of The Prime Minister and the Ministry of Tourism are in encouraging discussions with Disney Cruise Lines on the creation of an additional compelling port of call and themed major attraction elsewhere in the Family Islands.
At the request of Carnival Cruise Lines, my Government will shortly enter into discussions with Carnival Cruise Lines, Hutchison Ports and the Grand Bahama Port Authority, on the development of a custom designed cruise pier in Grand Bahama, to transform the cruise visitor experience to that Island, increase cruise ship arrivals and create a greater economic impact on the community.
Shortly, I also expect to conclude arrangements with Norweigan Cruise Lines, to enhance and expand their port of call experience for their growing fleet at Great Sturrup Cay in the Berry Islands, and in collaboration with Monuments & Antiquities Corporation to identify, restore and preserve the old lighthouse and other historic sites, as part of the attractions on the Island. Again the additional capital investment, entrepreneurial and job opportunities would be beneficial to the Berry Islands, and North Andros communities well as to other Bahamians.
Mr. Speaker,
The Berry Islands
In the Berry Islands, approval has been given for Chub Cay realty LLC to acquire from Scotiabank and its nominee Fife Ltd the Chub Cay resort and to redevelop it as a mixed use village consisting of hotel facilities, town houses, restaurants, shops, marina and recreational fishing amenities. Conditions have been imposed for recreational fishing to be allowed within the South Berry Islands Marine Reserve with catch limits as set out in the Fisheries Regulations. The developer will contribute to the cost of managing the reserve, inclusive of providing vessels and manpower to ensure proper management and oversight of the Marine Reserve.
This project will provide scores of jobs and entrepreneurial opportunities for Berry Islands and Androsians, and become the anchor property which will attract other developers to the Berry Islands.
Mr. Speaker,
Andros
On Andros, my Government has embarked upon a multi-dimensional approach to the development of Andros. The first component is the establishment of the Bahamas Agricultural & Marine Sciences Institute (BAMSI) on Andros, which signals the embracing by The Bahamas of Agricultural and Mariculture as significant drivers of the expansion of the nation’s economy.
It will be a school to educate current farmers and attract new talent to a career in agriculture and fisheries. It will also be a commercial farm, generating income to keep the school running. It will be a centre for research, allowing us to develop and determine what works best for Bahamian agriculture. It will be part of revitalizing North Andros, providing jobs and bringing positive activity to the area. It will change the way Bahamians think of farming. Farming has often been associated with intense physical work; we have begun the move to one based on and driven by science, technology and skill.
The institute will provide the professional and technical qualifications necessary for various branches of agriculture and marine resources. It will provide strong academic training and extensive hands on orientation in crop and livestock production, farm management, environment conservation, agri-business and Management of Marine resources.
Already we have been working with the University of Miami and have begun to negotiate possible collaboration with the Institute of Food and Agricultural Sciences (IFAS) of the University of Florida to strengthen production and to support the innovative ideas that will lead to economic growth. Our relationship with the University of Florida’s IFAS can accrue tangible benefits to BAMSI and The Bahamas through:
Technical and student exchanges
Creation of a pathway for admission to IFAS
Collaborative research
Extension and outreach programmes
Already more than $20 million in contracts have been awarded for the construction of an administration building, classrooms, laboratories, dormitories and world class sporting facilities. BAMSI will be a part of the University of The Bahamas and as such, must have the residential, recreational and cultural facilities fitting for campus life at a university. The construction is well under way, with several buildings almost complete. The campus is beginning to take shape.
BAMSI also represents the Government’s decision to make a concerted effort towards reducing the one billion dollars’ worth of food we import to feed ourselves and our visitors. Already the planting has begun and we look forward to a first harvest. We will also invest in packing houses and canneries to develop full circle economies beginning right in here Andros.
Our agricultural future is in the north, and North Andros will eventually emerge as the Bread Basket of The Bahamas. The Government is fully committed to and investing in the complete revitalisation of our country’s agriculture sector. We truly believe that with the successful launch of this institute, we will have a growing and thriving agriculture and marine sector that will serve generations of Bahamians to come.
As the largest island in our archipelago, Andros has much to offer. It is an island of diverse beauty and with numerous opportunities for tourism developments. In particular, it is well positioned to become a hub for eco-tourism. Andros is the island with the greatest botanical and zoological diversity in The Bahamas. It is home to the Tongue of the Ocean and the world’s third largest barrier reef. There are eco-systems here that are unique on earth; humpback and pilot whales can be seen here; The Bahamas’ only freshwater river is here; there are more than 50 species of wild orchids in Andros; Andros has treasures and wealth that is untold.
We must find a way to harness these gifts and use them to grow the Andros economy, educate Bahamians about the riches we have and find a responsible way to share them with the world. As Andros grows and owns its unique place, we must chart the right course for responsible engagement with these treasures. Such beauty should not and must not be spoiled in the name of advancement. We cannot afford to harm or lose these eco-systems, which significantly impact wild-life, all around us.
No effort will be spared to protect our environment and the bio-diversity found here. The west coast of Andros in particular, is teeming with life new and interesting. Already, vast reserves are under the jurisdiction of the Bahamas National Trust and the purview of the Nature Conservancy.
While the Government will necessarily play a pivotal role going forward, there is no question that dedicated efforts must also be deployed by the private sector to further the development of Andros’ economy and community and the preservation and protection of its unique environment.
Mr. Speaker,
Andros is the bone fishing and fly fishing capital of The Bahamas and we want to promote this much more and grow the business, with lodges welcoming people year-round. Tourism in Andros can also improve with greater emphasis put on marketing bird and seasonal hunting and game lodges.
If we can achieve all of these things and increase the offerings in Andros, we should create a more vibrant tourism economy centered around our natural environment and offerings and a vibrant festival celebrating our culture and cuisine. My Government is committed to improving infrastructure in Andros to ensure that as the economy grows, we are not fighting to catch up.
In Morgan’s Bluff we plan to create a deep water port for both commercial and cruise ships. This will be created through the mining of aggregate and will provide Andros with the opportunity to have tourists access them in yet another way and increase commercial shipping to the island.
But there is another element of this that is worth noting. The enlargement and upgrading of the port at Morgan’s Bluff now creates a direct access between North and Central Andros and the city of Nassau, especially Southwest Nassau. It is estimated that with a fast ferry service persons could make the trip to Nassau or from Nassau to Andros in a little less than an hour. A visitor to Nassau can take a one day trip to Andros to experience the nature preserves of Andros. A business person can travel over to either place for a day.
This will open up both Nassau and Andros and create opportunities that we have turned away from. In brief, Andros must now take full advantage of its geographical position to Nassau. It was long envisioned that there would be a city and a centre of Government in Andros and that dream must be dusted off and brought back to life. The spark for this might very well be the efforts we are now undertaking with BAMSI and the infrastructural work we are committed to in Andros.
To properly plan and guide such diverse and large scale development plans for Andros, my Government is engaging the service of professional planners. In this regard the Inter-American Development Bank has agreed to fund a team from Columbia University to supplement research already done under the IWCAM Andros land use plan in the preparation of an overall Master Plan. Relevant Government agencies, the College of The Bahamas, stakeholders, local residents, the Nature Conservancy and Bahamas National Trust will all be involved in this planning exercise.
The Hotel Corporation of The Bahamas will shortly be concluding arrangements with a purchaser of the Lighthouse Club and Marina at Fresh Creek, which will include refurbishment, expansion and additional job opportunities in Central Andros.
Mr. Speaker,
Eleuthera
The tourism industry in North Eleuthera continues to be buoyant, and the construction of second homes in both North and Central Eleuthera by Bahamians and non-Bahamians continues to grow, thus providing employment and other economic benefits within their communities.
The Symonette family and their partner Mr. Donald Urgo continue with their planning for the expansion of their Cocodamama Hotel near Governor’s Harbour.
Following detailed discussions with Cotton Bay Holdings Ltd and Mine Holdings Ltd, companies owned by Colombian tycoon Luis Carlos Samiento, and representatives of Four Seasons Resorts, my Office is currently reviewing the final draft of Heads of Agreement for consideration by the Government of a $100 million investment for the construction of an upscale Four Seasons Resort in South Eleuthera near the settlement of Greencastle and Wemyss Bight. Phase 1 of the resort will include the following:
A luxury resort hotel of approximately 115 rooms
A residential sub-division comprising 40 cottages which will be used as part of the hotel rental pool
The renovation and re-opening of the Cotton Bay Golf Course and Golf Club
A spa, restaurants, bars, communal shopping area, retail spaces
Recreation and activity facilities and employee housing
Phase II will provide for further expansion. It is projected that approximately 150 construction jobs and some 250 permanent jobs will be created in the Phase I. It is expected that construction would commence during 2015.
Progress continues by Cotton Bay Developers Ltd, headed by Mr. Franklyn Wilson, in the development of their mixed use club community at Cotton Bay, Jack’s Bay and Davis Harbour in South Eleuthera. Onsite construction efforts are currently focused on:
Renovation of an existing Ocean front Clubhouse, with restaurant, pool area, spa and sports amenities
Renovation of 24 oceanfront villas
Construction of a Fazio designed oceanfront 18 hole championship Golf course
Roads and infrastructure
The Developer is entering into a management arrangement with Noble House Hotels and Resorts, which owns and operates upper segment boutique hotels.
This project is generating increasing employment for the surrounding communities.
Mr. Speaker,
Cat Island
Over the next year work will progress on the Cat Island Partners resort, residential and PGA Golf Course project, and the airport terminal and runway at the Bight, Cat Island. These works will provide an increasing number of new construction and permanent jobs and stimulate meaningful economic growth in Cat Island.
Mr. Speaker,
The Exumas
The Exuma Cays and the Exuma mainland are poised for the greatest period of sustained economic growth in their history. Investor confidence and interest in Exuma is at an all-time high from both wealthy home owners and resort developers from various parts of the world. I will cite a few examples of projects which are in progress or at an advanced stage of planning.
At Norman’s Cay, Exuma Resort Developers are awaiting permit approval for the 25 key Whale Tail Resort. Work will begin upon receipt of the building permit. The Whale Tail Resort will comprise a series of luxury villas, Beach Club, water sports, spa, cabins and restaurant, scheduled for completion within 18 months.
The existing MacDuff’s resort has been renovated in order to use the property for staff accommodations. A state of the art solar plant has been constructed, and other infrastructure and utility works are being carried out to support the resort and residential sub-divisions. Two ferry docks have been constructed and work has commenced on the reconstruction of the runway to increase its length to 4,700 feet, and a terminal facility which will meet the requirements of the Civil Aviation, Customs, Immigration and Police authorities. Back of the house facilities and staff housing are also to be constructed. Upon completion of the runway, a reconfigured marina will be constructed to provide the best designed product.
In addition to those persons now employed at Norman’s Cay, scores of additional new construction and operational jobs are to be steadily created as the project ramps up for targeted completion dates.
Closer to the mainland of Exuma, CH Twister PTC Limited, has acquired both Children’s Bay Cay and William’s Cay. The Company’s plans are to develop an ultra high end resort for ultra high net worth individuals, and in doing so to create the “jewel of The Bahamas”, offering a one-of-a-kind island experience at the finest resort in The Bahamas. They will invest above $100 million in the project, which would be developed to the highest international environmental standards, including an ecological oriented golf course. Staff housing is to be built at Barateree, which is only a short ferry ride from the cays.
The company’s planners and architects, who have had considerable experience in planning high end environmentally friendly resorts, are engaging the services of Bahamian counterparts to work closely with them. This project which could become a defining one for the Exuma Cays, will provide a significant number of jobs, entrepreneurial and business opportunities for the people of Barateree and adjacent communities.
Sandals has consolidated its position as the anchor resort in Exuma, together with its boutique facility at Fowl Cay. The property’s improved performance and high profile in the market place, have benefitted the whole of Exuma as a desirable resort destination, and second home location. With the owner’s acquisition of additional land, I verily expect that he will soon move forward with further expansion.
Encouraging new investments are taking place in relation to the further development of two nearby strategic properties of February Point and Crab Cay and the surrounding picturesque community of George Town. Both properties are changing ownership to persons who possess the vision, the means to undertake major developments. They have also indicated the willingness to become involved in public/private sector partnerships for the overall benefit of Exuma and to enhance community development.
The Developers have agreed to work closely with the Government to engage professionals for the preparation of a Master Plan to guide both the development of their properties and the surrounding communities. Because of the extensive acreage being acquired by the owners of February Point adjacent to the settlement of Georgetown, the Government proposes to enter into a joint venture through the vehicle of The Hotel Corporation, to facilitate the uses to which the undeveloped land would be put.
The new owners of February point have already started to spruce up the landscaping and proceeding with some preliminary construction work which will involve local contractors and employees. The components of the resort are to include the construction of a community pool, beach club, recreational park and sales reception, 25 condo type units in a hotel rental pool, a boutique five star resort hotel, restaurant and expansion of marina facilities with a marina village.
Five Oceans, a global partnership, is acquiring Crab Cay, certain mainland properties, Little Crab Cay and Augusta Bay Hotel in Georgetown from the Murphy family. Five Ocean’s vision for the development of Crab Cay is to continue the major undertakings for a mixed use upscale residential resort and manor community of the previous owner in their existing Heads of Agreement, with adaption along the lines of the model followed at Albany.
Apart from the primary benefit of the project developments like February Point and Crab Cay, they are attracting home owners and their friends who are persons of wealth and influence, who are willing and capable of making considerable investments themselves in The Bahamas.
My Government will therefore encourage Exumians and fellow Bahamians to take advantage of the many job and business opportunities now at hand.
Mr. Speaker,
San Salvador
Club Med and their partners Sand and Ocean Investments Ltd are proceeding with the planning and execution of the refurbishment works of Club Med, to be followed by new construction of 360 luxury condo-hotel units, staff housing and a 125 room boutique hotel. Club Med and Sand & Ocean are in “Fast Track” mode to develop the renovation and extension project in Columbus Isle.
Mr. Speaker,
My Government’s relationship with the University of Miami factors significantly in education, health, science, tourism and research.
Plans are underway to establish a University of Miami and University of The Bahamas accredited medical school in The Bahamas; to enhance existing relationships and establish new relationships to provide and improve accessibility and affordability of medical services, especially those that are not readily available locally; to establish a stem cell lab; to expand the Marine Biology capacity of BAMSI; to participate with the University of Miami in its research on hurricanes, especially Meteorology — Hurricane Intensity, Air-Sea Interactions, Waves and Clouds and impact on land and coastlines. The Medical School will be significant in health care in The Bahamas and will fuel the growth potential of medical tourism.
Mr. Speaker,
By this time next year, when liberalization is well underway and in reliance on the IT platforms that will be created, I see radiology being performed in the a Mini Hospital in The Bahamas, read and diagnosed by physicians in The Bahamas and at the University of Miami, decisions being made in Miami and The Bahamas about what treatment and where. So it will be possible for a patient in Cat Island to be diagnosed in Nassau or Miami and then decisions be made about treatment.
As well as construction jobs, we look forward to the numerous and diverse jobs that will be created in medical research and treatment and from Medical Tourism and the growth of research labs.
I encourage Bahamians to prepare for these jobs by deepening their focus on science and technology.
Ministers will speak more of this during their contributions.
Mr. Speaker,
The Government will be establishing a business office in Greece to facilitate the growth and development of the Ship Registry and maritime industry. The establishment of this office will also provide opportunities for the further development of the financial services industry. This business office will operate to attract family offices and shipping management offices to be physically present in the Bahamas, establishing linkages between our shipping and maritime industries and the financial services industry.
Addressing the Crime Challenge
We remain resolute with respect to our commitment to address the serious crime problem in our nation. Over the past year, we have invested in additional manpower for the Police Force and in material resources needed to carry out our strategy of saturation patrols in hot spot areas. We are also investing $232 million for the acquisition of new vessels for the Royal Bahamas Defence Force. The RBDF is actively engaged in assisting the Police cooperatively and collaboratively.
Our intention is to meet the challenge resolutely, whatever it takes. I call on members of the community to cooperate with the Police in providing information that will assist in reducing crime throughout New Providence and the Family Islands.
In our fight against transnational crimes the government has invested 232 million dollars in a new fleet of vessels the first of which was delivered one week ahead of schedule last week, the HMBS Arthur D. Hanna.
In order to accelerate court proceedings we have constructed four new Supreme Courts which are expected to be brought into use shortly and to further effect speedier trials.
We expect this to go a long way to get criminals off the road and behind bars where they belong.
Mr. Speaker,
Following the Budget debate, my Government intends for Parliament to proceed to debate the comprehensive Gaming Bill 2013, designed to update our casino gaming legislation to bring it into line with leading competing jurisdictions. As foreshadowed in my closing remarks during the mid-2013/2014 Budget debate, my Government will propose further amendments to the Gaming Bill with respect to casino gaming and the regularization and licensing of gaming in web shops. I said at the time “Given the economic realities and other reasons outlined, I hope and believe that Parliament will support the comprehensive and necessary reforms to Gaming Legislation which will be put before you shortly for consideration”.
It is expected that these comprehensive and necessary reforms will result in considerable benefits to the public purse and the Bahamian economy, the creation of many new jobs, a controlled number of web shop gaming operations as is the case with casino operations, and upholding of laws and international obligations in accordance with best practices.
During the Mid-Year Budget Statement, I also expanded on the various targeted policy initiatives that my Government is pursuing to enhance the business environment and promote stronger economic growth. More specifically, we are working to:
strengthen our key tourism industry;
promote additional foreign direct investment across the country, and particularly in Grand Bahama and the Family Islands;
explore avenues for further diversifying our economy, especially in the agricultural area through science and technology to improve our competitiveness in food production;
further diversify our financial services sector;
further develop and expand our yachting, shipping and aircraft registries;
expand our investments in education; and
strengthen national training through the National Training Agency.
Mr. Speaker, in our efforts toward the promotion and further diversification of economic activity, my Government has made amendments to the Forestry Act. The establishment of the national forest estate this year will not only allow us to manage and sustainably use our forests but also provide new potential revenue sources from resin extraction, timber harvesting, the creation of a hunting industry and expansion of our eco-touristic product.
In addition, my Government will review potential revenue associated with the sustainable use of our natural resources, including sand, aragonite, aggregate and salt. The Government must ensure that the people of The Bahamas get fair compensation for the use and exploitation of our natural resources.
In a nutshell, our plan consists of four key parts: growing the economy; restraining expenditure; enhancing revenue administration; and securing new sources of revenue. Through this plan, and in combination with our actions to strengthen economic growth, we are fundamentally and, in a balanced way, reforming the structure of our public finances in such a way that these are returned to a position of sustainable viability. And we are doing so responsibly and gradually, fully mindful of the need to sustain the forward momentum of our economy.
To that end, both Recurrent and Capital Expenditure will be reduced relative to the size of the economy over the medium term, to levels more in line with historical norms. I will expand further, in this Communication, on the measures that will be implemented to achieve these goals.
I would, however, wish to stress at this time the important role that I see for public-private sector partnerships in facilitating new public infrastructure projects in an effective way that minimizes the costs and risks to Government. This is an area to which we will be directing focused attention in the future.
On that score, I would highlight that we are advancing the national housing programme through an aggressive private public partnership arrangement. Through this PPP, we will begin the construction of hundreds of homes, whereby the government will provide the land and private developers will partner with the Government to fund and develop infrastructure and fund and construct affordable homes. The Bahamas Mortgage Corporation and other approved private lenders will participate in the programme, by providing mortgages to deserving and qualified homebuyers.
This, Mr. Speaker, will create additional employment and entrepreneurial opportunities for Bahamians and boost the domestic construction industry. PPP housing initiatives will be advanced in New Providence, Grand Bahama, Bimini and San Salvador this year.
I will stress again that our actions in respect of Recurrent Revenue are multi-faceted and comprehensive, not focused solely on new taxation sources. Indeed, these actions are targeted, in the first instance, at strengthening the administration and collection of existing taxes, such as Real Property Tax and Customs Duties and Excise Taxes. To complement these measures, we also remained focused on enhancing the revenue yield of our tax system through revised fees and charges that are more in line with the costs of providing public services. Finally, we are proposing the introduction of a new source of revenue, in the form of a Value Added Tax (VAT), that will secure the desired and necessary enhancement in the revenue yield of our revenue system.
The mix of measures will allow us to move progressively to:
- eliminate the untenable structural imbalance between Recurrent Expenditure and Revenue by the 2015/16 fiscal year;
- sharply reduce the GFS Deficit by 2016/17; and
- arrest the growth in the Government Debt burden and move it onto a steady downward path to more sustainable levels.
I want to emphasize, at this point, that we are in no way engaged in unrealistic, pie-in-the-sky, wishful thinking on the score of fiscal redress. With a keen eye on the state of our economy and mindful of the need to maintain and support its upward, forward momentum, we are embarked on a mutually-reinforcing plan of national development and fiscal consolidation that is balanced and measured. As such, our aim is set on gradual, though assured, progress on the fiscal front.
I would also emphasize at this juncture that our determined and focused fiscal actions are not merely motivated by pressure from the international organizations and ratings agencies. It is simply the case that maintaining our nation’s investment grade credit rating matters in very real terms for the health of our economy and the prospects of more jobs for Bahamians. That is because a rating below investment grade would have serious implications for the balance sheets of participants in our financial system and the capital adequacy of our financial institutions. Such a downgrade would also negatively affect the ability of investors to raise capital for investment projects in our country. These are outcomes with real economic consequences for The Bahamas. In addition, the Government can ill afford to add more fuel to rising interest costs which could rise further if the attractiveness of holding public debt is diminished.
While we will have succeeded in getting the burden of Government debt to lower levels by the end of our current mandate, it will be necessary to get that burden to yet lower levels in the period beyond. However, I am confident that, by taking action now and through the medium-term to eliminate the fundamental and structural imbalance in our public finances, we are establishing the framework for sustained and ongoing reductions in Government debt as a share of the economy.
That, in turn, will both provide support for more buoyant economic growth and secure an expansion in our fiscal room to maneuver with which to finance the Government’s proper and rightful role in modern society. With public debt interest draining some $260 million of our annual Budget and potentially trending yet higher if we fail to act, we will reap the true fiscal dividend of our fiscal plan by reducing the burden of debt and thereby the annual exorbitant burden of interest payments. It is that fiscal dividend that will be critical in underpinning the sustainable financing of the Government’s bold agenda for stronger economic growth and enhanced employment opportunities.
As is usual practice in the presentation of Budget Communications to this Honourable House, I will now turn to a brief review of international and domestic economic developments and prospects. In this context, I wish to acknowledge the Central Bank of The Bahamas for its analysis which I now summarize. I invite Honourable Members to peruse the Bank’s analysis in more detail in the Annex.
THE GLOBAL ECONOMY
The global economy has continued to strengthen this year and is expected to firm yet further through 2015, largely reflecting enhanced buoyancy in the United States and other major advanced countries. Growth in a number of the emerging market economies has slackened somewhat on the basis of renewed concern over economic fundamentals which has affected confidence and led to a tightening of financial conditions. However, these countries should benefit from expanded export opportunities from strength in the advanced economies. On the whole, then, it is estimated that downside risks to the global outlook have diminished and that the balance of risks has improved.
In its latest World Economic Outlook of April 2014, the International Monetary Fund (IMF) projects the world economy to expand by 3.6 per cent in 2014, up appreciably from the 3 per cent growth rate last year. Growth is estimated to expand further to a rate of 3.9 per cent in 2015.
Within the advanced economies, our major trading partner, the U.S., is expected to register the strongest growth in 2014, at roughly 2.8 per cent, well improved from 2013. Further strengthening is projected for 2015. The expansion in the U.S. has led to a significant reduction in the rate of unemployment in that country, which fell to 6.3 per cent last month. That represents a decline of almost 4 percentage points from the recessionary peak, with some 8.5 million payroll jobs having been created during the recovery to date. These positive developments augur well for prospects of future growth in this country, and especially for our important tourism sector.
Guarded optimism about U.S. economic prospects was also expressed at the most recent meeting of the monetary policy committee of the U.S. central bank, that is the Federal Open Market Committee of the Federal Reserve System, on April 30 of this year. The following week, at a meeting of the Joint Economic Committee of the U.S. Congress, the Chair of the Federal Reserve stated that she expects economic activity to grow at a faster pace in 2014 and that the rate of unemployment will continue to decline steadily. While that will justify the decision of the Fed to not have to inject further direct credit stimulus into the U.S. economy, the Fed is expected to maintain the official Federal Funds interest rate at its current low level, to support ongoing progress toward stronger employment growth.
The IMF projects positive growth in the euro area this year and next, following two years of contraction. That growth, however, is expected to be varied across the region with strength in the core countries and weakness in nations with high private and public debt. Germany is expected to lead the way with growth of 1.7 per cent and 1.6 per cent this year and next. Expansion in France should come in slightly below those rates. Elsewhere in Europe, the IMF sees the U.K. economy posting relatively strong growth in 2014 and 2015, at 2.9 per cent and 2.5 per cent, respectively.
China and India are expected to continue registering above-average real growth through 2015, though at rates somewhat lower than in the recent past.
The external environment confronting the Bahamian economy going forward thus appears, on balance, to be propitious for further expansion and employment creation. The challenge for policymakers is therefore to set the appropriate economic, fiscal and regulatory policy framework within which the private sector can flourish and readily capitalize on emerging opportunities.
THE BAHAMIAN ECONOMY
I now turn to recent domestic economic developments and prospects for the future.
Real growth of the Bahamian economy in 2013 has been estimated by the Department of Statistics at 0.7 per cent, down significantly from the 2.7 per cent rate that had been projected by the IMF and which we factored into last year’s Budget Communication. One important factor in this weaker-than-expected performance relates to some softness in tourism activity last year. It is estimated that tourist expenditure declined by some 3 per cent in 2013, as the number of stopover visitors fell by 4 per cent, from 1.42 million to 1.36 million. These developments reflect persistent weakness in several key source markets, modest reductions in airlift and room capacity, as well as ongoing regional competitive pressures.
Similarly, there was softness in the investment climate with the falloff in residential construction and the winding down of major public works projects such as the Airport Development Project and the New Providence Road Project. Non-residential construction continued to be buoyant with an increase of 21 per cent in real terms in 2013, on the basis of several foreign financed projects in the tourism sector including the Baha Mar project in New Providence.
The tourism and investment climate also carried over to less robust private consumption.
With reduced international oil and commodity prices, the rate of inflation domestically rose by only 0.4 per cent in the twelve months to December 2013. One factor which contributed was the fall in domestic fuel and energy prices. In particular, the average price of gasoline fell by 2 per cent while the price of diesel declined by 1.2 per cent. Moreover, the average fuel surcharge of the Bahamas Electricity Corporation decreased by almost 3 per cent last year and by nearly 9 percent more in the first three months of this year.
Domestic labour market developments during 2013 were positive, with the national rate of unemployment falling to 15.4 per cent in November, from 16.2 per cent in May. Not only did the number of employed persons increase by 2,600 over the six month period, but the number of discouraged workers also fell by 1,205.
In the estimates of balance of payments trends, both the effects of softer net tourism receipts and larger payments for foreign construction services contributed to an expansion in the current account deficit by $132 million to $1.6 billion in 2013.
Meanwhile net inflows into the Bahamas on capital and financial account declined by approximately one quarter to $990 million, due to some reduction in direct investment inflows as well as lower net funding of public sector works.
As for monetary and credit developments in 2013, the ongoing softness in domestic economic activity and high levels of loan arrears led to relatively subdued private sector credit growth and further buildup of bank liquidity.
Mr. Speaker, characteristic of the external pressures, during 2013 the Central Bank’s foreign reserves fell by $68.6 million to $741.6 million, This reflected, in part, ongoing demand to meet current payments as well as higher-than-average bank profit remittances. During the first four and a half months of 2014, reserves recovered to stand at $990.5 million at the start of this week, capturing largely the proceeds from the Government’s foreign currency bond issue.
Mr. Speaker, as the foregoing illustrates, the performance of the Bahamian economy in 2013 continued a trend of muted growth over the last four years, following the two recession years of 2008 and 2009 when the GDP posted contractions in real terms. The rate of economic expansion has yet to return to pre-recession and more desirable performance levels.
As I have stressed earlier and elsewhere, my Government has been working diligently on a number of fronts to bolster the growth of our economy, not only in New Providence but also across the Family Islands. I am pleased to note that, as a result of our efforts, we now see new and expanded investment projects across the nation that promise concrete hopes of better days ahead for the economy and employment opportunities for our citizens.
To buttress my optimism for the future, I would note that the IMF staff mission that visited our country last November for the annual Article IV consultations, concluded that growth is expected to pick up over the medium term, reaching 2.8 per cent in both 2015 and 2016, following real growth on the order of 2.3 per cent in 2014.
Tourism is expected to be boosted by the ongoing recovery of the U.S. economy and investment activity is projected to remain strong. The coming on stream of the Baha Mar operations as well as other projects underway will further elevate growth prospects for our economy. While downside risks are present, the IMF team did assert that upside potential clearly exists over the medium term.
In its review of the Article IV staff report in January of this year, the Executive Board of the IMF endorsed the key findings and stressed that the risks to the economic outlook highlight the critical need for the Government to implement, in a timely fashion, its plans for economic diversification and fiscal consolidation.
REACQUISITION OF MAJORITY
BAHAMIAN OWNERSHIP IN BTC
In January this year, the Government and Cable and Wireless Communications (CWC) signed an MOU for the transfer of 2% of CWC’s 51% shareholding to a foundation to be called “The BTC Foundation” for the benefit of the Bahamian people through various designated Bahamian social investment programmes that “increase and improve access to and enjoyment of telecommunications technology, as well as other civic projects of national importance, in The Bahamas”.
I should add that agreement was also reached for a CWC team to collaborate with relevant Government agencies to implement agreed CWC “Social Telecoms” programmes including but not limited to the areas of health, security, education and e-government solutions.
This MOU will be formalised by appropriate revisions to relevant transaction documents negotiated during the sale of 51% to CWC. The 2% shares that are the subject of the transfer will be non-voting shares. Under the MOU agreement was also reached for CWC to maintain management control of BTC.
Additionally agreement was reached for the majority of directors on BTC’s board to be Bahamian nationals. This will be accomplished by CWC appointing a Bahamian as one of the CWC directors.
Let there be no doubt that once the documents containing the definitive agreement are executed, majority economic interest in BTC will be returned to the Bahamian people.
CELLULAR LIBERALIZATION
As for cellular liberalization, I will stress that our emphasis is on further positioning the telecoms sector as a facilitator of growth, with competition that drives down costs and improves service quality.
One of the main outcomes of the negotiations for the sale of 51% majority stake in BTC to CWC back in 2011, was that the Government guaranteed that BTC would have a monopoly on cellular mobile services for a period of 3 years commencing 6th April 2011. Emphasis is placed on the word guaranteed because there was no reasonable possibility for the Government to introduce, or even start the process to introduce, a second cellular mobile operator before the end of the monopoly period. Such a possibility of competition in cellular mobile services was decisively and unequivocally blocked, and eliminated altogether, by a combination of calculated actions in 2011 on the part of the previous administration.
The specific actions that blocked competition as well as any preparation for competition were:
1) the amendment to the 2009 Electronic Communications Sector Policy which expressly prohibited the Government from starting ANY process whatsoever (including any engagement with URCA on the matter) for the award of a second cellular licence before 6th April 2014;
2) the amendment to the law itself, i.e. the Communications Act 2009, which again expressly prohibited the Government from engaging in any process for the award of a second cellular licence before 6 April 2014; and
3) the grant of contractual undertakings to CWC in the Share Purchase Agreement signed and tabled in this Honourable House on February 8 2011 that no cellular licences would be issued prior to 6 April 2014; which undertakings were further reinforced with the threat of significant penalties on the Government in the event any violations.
The evidence is clear, supported by the record, that the intention at the time the 51% was negotiated and agreed, was to ensure that the issue of competition in cellular mobile services was so legislated that competition would be unequivocally denied to Bahamians de jure until April 2014 and de facto until, essentially, 2015; having regard to the logistics for introducing competition.
In a nutshell, this denial was accomplished by reserving to the Minister with responsibility for the Electronic Communications Sector the right, in the Communications Act, to allocate and award premium spectrum for cellular services, and then by subsequent amendment to the Communications Act, making it illegal under the same law for the Minister to make such an award or even start the process for such, before the end of the monopoly period.
Concurrently, the Electronic Communications Sector Policy was amended to provide for the same prohibitions as those placed in the law and contained in the Share Purchase Agreement.
Against this backdrop of facts that show how the Government’s hands were tied with respect to introducing competition in cellular services before 6 April 2014; I am now pleased to report that following the expiration of the monopoly, the Government moved swiftly to mobilise a team in the form of a Task Force to prepare for the award of a second cellular licence in the shortest possible time.
That team consists of a cross-section of professionals having a range of experience