COMMUNICATION
BY
THE RT. HON. PERRY G. CHRISTIE
PRIME MINISTER AND MINISTER OF FINANCE
DEBATE ON THE
2016/2017 BUDGET
CLOSING STATEMENT
WEDNESDAY, 22ND JUNE 2016
Introduction
Mr. Speaker:
In closing the debate on the 2016/17 Budget Communication, I am drawn
to remark that the quality and constructiveness of the contributions that have
been offered by Members of the Opposition are fully consistent with what we
have heard from them in recent years.
These contributions are consistently confused, disjointed or simply and
blatantly erroneous.
Indeed, theirs is a litany of feeble laments, strung together, one after the
other, in no coherent fashion. What is truly lamentable is that one’s mind can be
so disjointed. But I suppose that this merely and fundamentally reflects the
Opposition’s approach to governance. Based on their performance in their last
term in office, it is clear that they have no guiding coherent vision for the future,
nor concrete plans for achieving better economic and social outcomes for
Bahamian citizens.
Instead, they floundered about rather than exercise rigorous and
disciplined husbandry of the public finances. It bears repeating that, during their
recent mandate, they succeeded in producing the most astounding and
explosive increase in the public debt burden in any five-year period in the history
of our nation.
Mr. Speaker:
When we left office in 2007, we left them with a debt-to-GDP ratio of 30
per cent, generally acknowledged to be a desirable and sustainable level. Mr.
Speaker, I think it would be useful to pause here for a moment to explain why it
is important to look at Government Debt relative to GDP, or alternatively, the size
of the economy. That is because the size of the economy essentially reflects the
ability of Government to service its debt in terms of its ability to collect revenues.
It is really similar to borrowers in the private sector where one looks at debt
service ratios, or debt relative to income. In assessing the creditworthiness of
borrowers, lenders will look at such ratios as a measure of the ability of
borrowers to meet their debt servicing obligations. So, in the area of the public
finances, we look at Government Debt to GDP ratios.
To continue, then, when we returned to power in 2012, we inherited their
dismal fiscal structure with a debt-to-GDP ratio that then stood at 55.4 per cent of
GDP in 2012/13.
The burden of debt rose by fully 25.4 percentage points on their watch,
from the base of 30 per cent that we had left them; that is an astonishing 85 per
cent increase in the burden of Government debt.
In marked contrast, in our current mandate, the ratio of debt-to-GDP will,
by the end of the 2016/17 fiscal year, have risen by a more modest 8.7
percentage points, to a level of 64.1 per cent. That’s an increase of 15.7 per
cent over the course of our mandate, as compared to 85 per cent during theirs.
Mr. Speaker:
I also want to emphasize at this juncture that the data to which I have
been referring relates to the Direct Charge on Government. The reason that we
focus on that measure of Debt in the Budget Communication is that it is the one
that relates directly to the GFS Deficit. By and large, the change in the Direct
Charge every fiscal year amounts to the size of the GFS Deficit during that year.
The Government does, of course, also guarantee the borrowings of
certain public bodies and those guarantees represent contingent liabilities of the
Government. When these are added to the Direct Charge, one then gets the
Total National Debt. The size of the Government Guaranteed Debt is relatively
small in comparison to the Direct Charge and it has not varied greatly over the
years. In 2007, it amounted to 5 per cent of GDP; in 2012, 7 per cent and, at the
end of 2015, 8.5 per cent. I would note that both measures of Government Debt
are clearly shown in the Tables that accompany the Budget Communication.
As such, whether one is looking at the Direct Charge or at the National
Debt, the message is the same: Government Debt during our current mandate
has risen by far less than it did during the last mandate of our predecessors.
And, more importantly, Mr. Speaker, our fiscal actions have set the table
for the seemingly inexorable rise in the burden of public debt to finally be
arrested and for the debt-to-GDP ratio to begin falling as of the 2016/17 fiscal
year.
Mr. Speaker:
This brief introduction sets the overall tone for my contribution to the
debate today. More specifically, I will address the following central themes as
they relate to the 2016/17 Budget Communication:
our track record in respect of fiscal responsibility in the context of our
agenda for a modern Bahamas;
our fiscal achievements since 2012 and, in the process, I will correct
some of the glaring inaccuracies in Opposition statements made
during the debate;
our plan for renewed and more vigorous growth of the economy and
job creation; and
within that context, our successes in promoting and supporting new
investments across the breadth of the nation.
Fiscal Responsibility
Mr. Speaker:
I begin with the matter of fiscal responsibility.
When our mandate began four years ago, we were poised to implement
the bold and proactive transformative agenda, set out in our Charter for
Governance, that was specifically designed to address the very grave and deep rooted
economic and social problems plaguing our country.
However, we immediately understood that any and all of our efforts would
be in vain if we failed to redress the fiscal mess that had been created by our
predecessors. Both the fundamental health of the economy and our fiscal ability
to finance our programme of change hinged on our success in bringing order to
the public finances. That would require a plan to gradually eliminate the GFS
Deficit and arrest the corrosive and seemingly self-perpetuating rise in the
burden of public debt.
Mr. Speaker:
Our firm commitment to fiscal responsibility indeed goes back to our very
first days in office. And I am not making this up in retrospect in a fit of revisionist
history merely for the sake of appearances. As early as the 2012/13 Budget
Communication, I stated quite clearly that:
“I will note at the outset that our room for manoeuvre is, at least in the
short-term, severely constrained by the dire fiscal situation that has been handed
to us by the previous Administration. As I will set out in detail below, the
Government’s deficit and debt levels at this time are much worse than we had
anticipated. We have been left with sizeable, ongoing capital expenditure
commitments and a legacy of contracts entered into in the final days of the
former Administration”.
“We also face the carry-over into 2012/13 of certain recurrent expenditure
commitments of the previous Administration in respect of the promotions
exercise, back pay, salary increases and the payment of insurance benefits”.
“We fully appreciate that it will be imperative to rebuild the fiscal buffers
over time. The significant structural fiscal reforms that I will propose in this Budget
… will be critical in this regard. The stronger, sustainable fiscal position that will
result from these measures will facilitate the full implementation of our agenda for
change and will underpin enhanced confidence and more buoyant growth and job
creation”.
So, Mr. Speaker, we appreciated from the very outset the vital role to be
played by fiscal responsibility in the attainment of our goals. Unquestionably, our
record as a fiscally responsible Government stands in stark contrast to that of
our predecessors who, every year at Budget time, spouted the ritualistic lines
about the need to redress the public finances but failed miserably, year in and
year out, even in the face of a resurgent domestic economy in 2010 and 2011.
For them, fiscal responsibility was nothing but a fashionable slogan with no
credibility whatsoever.
We followed up, in the 2012/13 Mid-Year Budget Statement with a
concrete and explicit medium term fiscal consolidation plan that has guided our
actions to this day. Our steadfast adherence to the tenets of this plan is a further
barometer of the depth of my Government’s commitment to fiscal responsibility
as a critical prerequisite for building a better future for Bahamians. And our solid
track record of fiscally responsible governance has produced the concrete
results that were needed.
Fiscal Achievements since 2012
Mr. Speaker:
This brings me to the issue of the fiscal achievements that we have
secured since coming to office.
In reviewing these achievements, it is vital to explain why they have been
so important to the future prospects for our economy and for employment
opportunities going forward.
Had we done nothing to address the fiscal situation in 2012 and beyond
and simply maintained the fiscal structure left to us by the party opposite when in
power, then a straightforward counter-factual analysis reveals that the burden of
public debt would have continued to swell to levels exceeding 80 per cent of
GDP within the next 5 years. Contrast that with the medium term fiscal outlook
in this year’s Budget Communication, which sees the debt burden reversing its
upward march during the course of the coming fiscal year and falling to under 60
per cent of GDP in two years time.
Now, had we been fiscally irresponsible, with the debt burden trending up
toward 80 per cent of GDP, one can well imagine the economic consequences
that most certainly would have ensued. We most surely would have been
downgraded to junk status and interest rates would be sharply higher. The
economy would be considerably weaker and unemployment would be
commensurately more elevated as well. In the face of a fiscal crisis, the
Government would then have been obliged to impose draconian and deep cuts
in spending, including significant layoffs of public sector workers. Massive tax
increases, including a VAT with a rate well in excess of 7.5 per cent, would also
likely have been needed.
This is not wild and fanciful conjecture on my part, Mr. Speaker. It is
precisely the experience that has been lived by certain countries within the
European Union which, confronted with the urgent need to implement sharp
fiscal redress, have had to suffer deep contractions of their domestic economies,
in some cases in 8 years over the last decade, with unemployment rates at 25
per cent and above.
I am thus amused, Mr. Speaker, to hear Opposition members asking
Bahamians if they find themselves better off today than four years ago. Such a
question is simply irrelevant. The more appropriate question to ask is whether or
not Bahamians find themselves better off today than they might have been if my
Government had continued the fiscally irresponsible fiscal policies of our
predecessors. The answer, Mr. Speaker, is obvious.
So, Mr. Speaker, what has our fiscal plan achieved over the past four
years and going into 2016/17?
Despite the unfounded laments from members across the aisle, the data
speak for themselves. Since coming to office, we have reduced the GFS Deficit
each and every year:
In 2013/14, by $51 million;
In 2014/15, by $107 million;
In 2015/16, by $231 million; and
In the coming fiscal year, by a further $50 million.
Mr. Speaker:
For the benefit of those opposite who, over the course of the debate, have
shown signs of possibly being mathematically challenged, that is a total
reduction in the GFS Deficit of $439 million. Thus, by the coming fiscal year, the
Deficit will have been cut by fully 80 per cent from the all-time record high of
$539 million, or 6.4 per cent of GDP, bequeathed to us by the opposition.
Again, it bears repeating that the GFS Deficit in 2016/17, at $100 million,
will be at its lowest level since the turn of the millennium. And, on current plans,
a GFS surplus is projected for 2018/19, the very first such surplus in at least 40
years.
I am thus amazed and indeed perplexed by the shameful claim made by
the Deputy Leader of the Opposition that my Government has been telling
Bahamians a so-called “GFS Deficit lie”. This bold and admittedly offensive
assertion is based on a simplistic and inaccurate calculation. What he did was to
look at the fiscal results for only part of the 2015/16 fiscal year and then he
produced a forecast for the full year by assuming that the fiscal trends during the
part-year would continue at the same level for the balance of the year. With this
inaccurate and inappropriate approach, he thus came up with a full-year
estimate for the GFS Deficit, which he estimated at $446 million.
That, Mr. Speaker, is a far cry from the Budget estimate of $150 million.
Unfortunately, the estimate presented by the Deputy Leader opposite is pure
fantasy and has no connection to the real world in which we live.
Mr. Speaker:
Allow me to explain why that is the case.
For one thing, the pattern of Recurrent Revenue is rather irregular during
the course of the fiscal year, with a disproportionate share of fiscal year
collections occurring in the second half of the fiscal year. Indeed, in the first half
of the 2015/16 fiscal year, Recurrent Revenue collected amounted to only 44 per
cent of the full year estimate. Over the three previous years, that ratio ranged
from 39 per cent to 45 per cent of the full year total. Simple-minded
extrapolation distorts his analysis and invalidates his conclusion. Had he
factored in the actual pattern of the fiscal flows during the course of the fiscal
year, or waited for the end of the fiscal year, he would have been able to
produce a much more realistic and reliable estimate of the 2015/16 GFS Deficit.
As well, through ongoing monitoring and prudent fiscal management, we
are able to manage evolving fiscal pressures during the course of the year,
particularly in respect of Recurrent Expenditure, in order to stay close to our
fiscal objective. Every responsible government around the world exercises this
type of responsible husbandry of the public finances and we are no exception in
this matter.
For the record, in one of the fiscal tables contained in his contribution, he
also made simple errors, such as forgetting to deduct Debt Redemption in the
calculation of the GFS Deficit for 2014/15. He also forgot to extrapolate Debt
Redemption in 2015/16, instead using the partial year result to represent the fullyear
outturn.
Mr. Speaker:
This is not rocket science and I must say that I am at a loss to explain
how such simple errors could be made.
More damning to his argument, however, is that he then goes on to
question, on the basis of his defective analysis, the numbers that underlie the
Budget estimate of a GFS Deficit of $150 million in 2015/16. He goes so far as
to suggest that we are intentionally trying to mislead Bahamians.
Mr. Speaker:
Let me reassure this House and Bahamians that great care and prudence
are exercised in the preparation of the national Budget. As members opposite
know full well, the fiscal projections presented in the Budget Communication
every year are subjected to careful and meticulous scrutiny, both at home and
abroad. In its annual Article IV assessment of the state of, and prospects for, the
Bahamian economy, the IMF engages in intensive discussions with officials and
Ministers, and the Executive Board of the Fund reviews and comments on the
evaluation prepared by IMF staff. The international credit rating agencies, for
their part, pore over our fiscal numbers with a fine-tooth comb.
Accordingly, we see to it that the projected outturn for the current fiscal
year and our projections going forward are backed up by prudent assumptions
about the growth of the economy, as well as conservative estimates of the
impact of revenue policies. Thus, the projections for the GFS Deficit that are
presented in the Budget Communication this year are fully supported by, and
fully consistent with, the projections for Recurrent and Capital Expenditure, as
well as Recurrent Revenue that are laid out in plain view in the Communication.
It is simply ludicrous and irresponsible to suggest that any Government could
imagine it possible to try to fool anyone about the nation’s fiscal situation.
Of course, fiscal matters are complex and are influenced by any number of
developments during the course of the fiscal year. As such, it does occur on
occasion that outturns may differ from Budget estimates, whether because
economic developments have evolved somewhat differently than had been
expected or because the timing of projects and expenses has varied. However,
in the event, we do go to great lengths to explain such variances for all to see
and understand.
For instance, in this year’s Budget Communication, we readily
acknowledged that the outturn for the GFS Deficit in 2014/15 was somewhat
higher than had originally been projected. That year’s Deficit is now estimated at
$381 million, up $95 million from the Budget projection of $286 million. The
Communication went on to explain the major factors that account for that Deficit
deviation, namely:
a $100 million increase in Recurrent Expenditure reflecting an
additional $84 million for Debt Redemption;
a $42 million shortfall in Recurrent Revenue due to a lower level of
current dollar GDP than forecast; and
a $41 million increase in Capital Expenditure due to the acceleration
of the RBDF vessel project, with four ships completed and delivered
during the fiscal year, to the tune of $66 million.
Mr. Speaker:
While the Deficit in 2014/15 was thus higher than projected, I would note
that the outturn still represented a decline in the GFS Deficit of $107 million from
the previous fiscal year.
Similarly, this year’ Communication also explained the $9 million increase
in the GFS Deficit in 2015/16, from $141 million to $150 million. Again, a
number of factors were at play in this development. Recurrent Expenditure was
up by $57 million, which incorporated increases of $33 million for Debt
Redemption, $35 million for interest payments and $13 million for the CLICO
payments, to name a few. A lower than expected level of nominal GDP led to a
shortfall of $37 million in respect of Recurrent Revenue. And Capital
Expenditure was $52 million lower than projected due to the timing of projects.
Mr. Speaker:
Clearly, our approach in the presentation of fiscal outturns and forecasts
speaks volumes to our solid record of sound, transparent and responsible fiscal
management.
Mr. Speaker:
Prior to moving on, I believe I would be remiss if I did not also take a
moment to correct a few other glaring inaccuracies in the Opposition’s
contributions to the Budget debate.
They state that the Government has supposedly surreptitiously changed
the presentation of the Budget documentation in order to hide both the
misappropriation of public funds and the purported existence of a so-called
election slush fund. That is untrue. Members opposite quite obviously have not
taken the time to properly read and study the detailed Budget documentation
that accompanies the Budget Communication. One will readily find there all of
the details of public expenditure, whether in respect of the Recurrent or the
Capital account. Every single dollar expended is presented.
Take, for example, the $223 million increase in Recurrent Expenditure
proposed for 2016/17. In passing, for the benefit of the member opposite who
failed to adequately look into the matter, I would clarify that this increase is from
the amount budgeted for the previous fiscal year. The increase of $166 million
to which I referred in the Communication was from the projected outturn for the
previous year.
Be that as it may, I would stress that the Budget documentation clearly
reveals where that spending will be allocated by individual Head. So, a careful
reader will be able to note that, of the $223 million increase in Recurrent
Expenditure in 2016/17, we will spend $135 million more on Debt Redemption
and $6 million more on interest payments. The major items that account for the
remaining increase include: $15.7 million for the Department of Education and
the Ministry of Education, Science and Technology; $14.5 million for the Public
Parks and Beaches Authority, $7.5 million for the National Drug Plan, and so on.
The details are there for all to see. Mr. Speaker, the alleged slush fund is the
figment of an overly active, and dare I say distorted, imagination.
Mr. Speaker:
They state that we have also reduced transparency and accountability by
removing information on interest payments and debt redemption from the Budget
documentation. That is untrue. It was, in fact, decided beginning last year to
include these expenditure items under the Treasury Department Head 22 as it is
that organization that is responsible for those payments. The data are there, Mr.
Speaker, in plain view. Our stellar record of transparency and accountability
remains intact.
They state that the Government cannot tell Bahamians how much
revenue is collected from each source. That is untrue. In the detailed
documentation accompanying the Budget Communication, revenues collected
from all sources are clearly revealed.
They state that the Government has been spending like drunken sailors.
That is untrue. As the Minister of State for Finance so ably demonstrated during
his opening contribution to the Budget debate, of the 7.4 percentage point
increase in Recurrent Revenue relative to GDP between 2012/14 and 2016/17,
fully 77 per cent has been allocated to a critically needed improvement in the
primary fiscal balance. Such an improvement is vital to halting the growth of the
public debt burden and getting it onto the downward track going forward that we
are projecting. Only 23 per cent of the revenue enhancement has been
allocated to somewhat higher primary spending in respect of both Recurrent and
Capital Expenditure.
They state that my Government has failed to modernize government
services. That is untrue. From the very beginning of our mandate we have
pursued the implementation of comprehensive reform and modernization
programmes in a number of areas, including Customs, Real Property Tax,
Business License and internal tax administration through a new Central Revenue
Administration. We are also actively striving to modernize our public financial
management system. Our progress in respect of these initiatives is reported
regularly in both Budget Communications and Mid-Year Budget Statements.
Mr. Speaker,
They state that, in accelerating the VAT filing period to 21 days after
month-end, we fail to appreciate how businesses work. That is untrue. In fact, if
one takes the time to examine general VAT practice around the world, it will be
obvious that a 21-day filing period is not unreasonable. Such a filing period is
found in Barbados, with 20-day filing periods in effect in the Dominican Republic,
Grenada, Dominica and Swaziland. In some cases, 15-day filing periods are
mandated; for example in St. Kitts and Nevis, some Brazilian states and in
Jamaica if the cash method is used. Chile imposes a 12-day filing period.
They state that we have not provided mortgage relief. That is untrue. In
fact, it was announced in this year’s Budget Communication that, as part of the
effort to modernize this country’s financial infrastructure, the Government has
been successful, in collaboration with the Clearing Banks Association, in
designing a comprehensive Mortgage Relief Programme to assist borrowers
negatively impacted by the financial crisis.
I would note that, building on experience with the previous programme,
several features of this new programme go beyond that programme in ways that
are specifically designed to provide greater relief to more borrowers. For
example, the new programme expands the scope of the eligible borrower pool to
reach more borrowers in true distress. The programme also contemplates
permanent loan modification as opposed to only forbearance, i.e. time-limited
relief. As well, the new programme provides for a so-called “waterfall” of steps to
be taken to achieve a target level of affordability, rather than just one general
relief option. As for the execution strategy, the programme also features a
strong focus on borrower outreach, which is critical to the success of the
programme.
A mortgage relief programme in the U.S. with many similar features
has met with a good level of success and I am confident that this new
programme will also be successful in providing meaningful relief to a significant
number of borrowers in financial difficulty.
Mr. Speaker,
They state that my assertion, in the Communication, that there was an
increase in mortgage loan disbursements for new construction and renovations
last year is inconsistent with the realities observed by the Central Bank. That is
untrue. In fact, if one takes the time to review the Central Bank’s contribution to
this year’s Budget Communication, which is part of the documentation
accompanying the Communication, one will readily note that that assertion is
made by the Central Bank itself. Moreover, it is a statement of fact, and not an
opinion.
Mr. Speaker,
They state that, under my Government, there have been higher job
losses. That is untrue. In looking at the hard data published by the Department
of Statistics, I note that they have been reporting labour force data for Abaco
separately since 2014. But they have done so consistently across the board,
reporting on all major labour force components on that island, including the size
of the total labour force, total employment and total unemployment. The data
show that, between May 2012 and November 2015, the total labour force of The
Bahamas has grown by 23,885. Over the same period, total employment in the
economy grew by 20,170. While the number of unemployed rose by 3,720, the
national rate of unemployment was relatively stable, registering at 14.8 per cent
in November 2015 as compared to 14.7 per cent in May 2012.
So, Mr. Speaker, based on the facts, the reality is that employment in
the country has grown appreciably over the past four years, but unfortunately not
rapidly enough to absorb the somewhat stronger growth in the labour force. My
Government has readily acknowledged that that is a particular challenge that
confronts policymakers in this country; it is imperative that we achieve
significantly higher rates of real economic growth to both absorb the significant
new numbers of entrants into the labour force each year and sharply reduce the
rate of unemployment. I will shortly turn to a discussion of my Government’s
approach to boosting economic growth in the period ahead.
Mr. Speaker,
I could go on with additional examples of inaccuracies espoused by
members opposite in their contributions to the debate. However, I believe that I
need not further belabour the point at this time. For the sake of brevity and time,
I will move on.
More Buoyant Economic Growth
Mr. Speaker,
I therefore turn to my Government’s approach to bolstering the growth of
our economy and job opportunities.
Since the deep global recession of the last decade, it has been estimated
that the potential growth rates of economies generally have declined on account
of a number of factors. In the advanced economies, this reflects a slowing in the
rate of physical capital accumulation as well as the effects of population aging.
In the emerging economies, lower potential growth is due primarily to a
slowdown in the growth of multi-factor productivity.
In its most recent Article IV report, the staff of the IMF concludes that
potential real growth in The Bahamas has declined to between 1 per cent and
1.5 per cent per year, down from close to 3 per cent at the start of the century.
The State of the Nation Report corroborated the finding that, as in the emerging
economies, a negative growth of multi-factor productivity in this country has
acted to negate the positive contributions to growth of additional inputs of labour
and capital.
As such, it is clear that our policy focus must be on enhancing the supply
side of the economy in order to boost the rate of real potential growth. Through
our agenda for a modern Bahamas, we have recognized this priority and are
acting to ameliorate the various critical determinants of stronger growth. We
have done this by, for instance, strengthening our education and training
programmes. We have also been pursuing an aggressive campaign to promote
and support new investments across the breadth of the nation, a topic to which I
will return shortly.
In its conclusion to the annual Article IV exercise, the Executive Board of
Directors of the IMF succinctly recapped the growth challenges that we confront
and concurred with my Government’s approach to the development of a National
Development Plan. The NDP will contain a programme of structural reform that
will be needed to improve the competitiveness of our economy, boost potential
real growth and reduce high structural and youth unemployment.
It is expected that key features of the plan will include raising human
capital and reducing skill mismatches; strengthening the business environment
and reducing costs, including energy and other utility costs; and investing in
growth-enhancing infrastructure, especially through productive public-private
sector partnerships.
Mr. Speaker,
After many failed attempts on the part of various administrations over the
years, it is evident that the development of a comprehensive plan such as the
NDP and the implementation of the various structural reforms that it will advance
will be critical to a significant and durable increase in the productive potential of
our economy. That, in turn, will be indispensable to a lasting and appreciable
reduction in our national rate of unemployment. Piecemeal and short-term
programmes geared to the political cycle, as under our predecessors prior to the
last election, are ultimately ineffectual and a waste of taxpayer resources. My
Government has, over the past four years, and will continue in the period ahead
to focus on our transformative agenda for a modern Bahamas – that is the true
key to a brighter future for all Bahamians.
Doing Business Indicators
Mr. Speaker:
The Bahamas is taking full ownership of its rankings in the various
competitiveness indices and as a Government, we have vowed to become a
Smarter, more Competitive jurisdiction. We have committed to enabling
business, small and large to succeed within our markets. We want to promote
entrepreneurship and innovation. For this a strong business culture and a
healthy sense of cooperation with the business sector is required.
Mr. Speaker:
I am pleased to have been advised that this is also a key area to be
addressed in the National Development Plan. The National Development
Planning Secretariat has met with a number of experts in the area to identify the
changes necessary to allow The Bahamas to retain its leadership in the business
development.
Mr. Speaker:
Our focus over the next year will be to ensure that we make starting a
business easier by upgrading our ICT infrastructure and processes. We are
working to ensure that the time it takes for businesses to connect to electricity is
reduced through greater coordination between the electricity company and the
Ministry of Works. Our innovative solutions include a mix of initiatives focused
on reducing the cost of inputs, improvising efficiency and management,
rationalising the use of the resources in the family islands and utilising sound
financial instruments to reduce future costs.
Mr. Speaker:
The Bahamas ranks 183 out of 189 for registering property. We
understand that the ranking is heavily predicated on the challenges faced by
attorneys in making checks for encumbrances at the Registry and in lodging
conveyances. Significant improvements can be made through the use of
technology to facilitate full online searches of the registry, reducing the time to do
a search from the current 1- 2 months to a few days. Improving the technology is
only part of the answer as we also need to improve the service provided by the
various government departments. The initiative to strengthen the public service,
to create more accountability and improve staff performance will have long run
benefits as it will remove a number of the bureaucratic hindrances that adversely
impact business in The Bahamas.
Mr. Speaker:
The recent undertaking of the Central Bank of The Bahamas and Bankers
Association to introduce a credit bureau has been critical as it provides a
mechanism by which banks can improve their data and better understand the
risk profiles of potential borrowers but it will take some time before the database
is fully populated and all of the benefits can be realised. This single initiative
alone has the potential to considerably improve our ratings.
Finally Mr. Speaker:
We look at the issue of Protecting Minority Investors. Here we were
ranked 111. We know that we need to modernize our legal framework for
companies.
Mr Speaker:
My government is committed to improving the business environment here
in the Bahamas but we do not seek to do this blindly. We seek to be informed by
the experts on the best course of action and the vision and desires of the
Bahamian public.
It is easy to stand up here and talk about all that is wrong. It is easy to
criticise. It is a much harder job to listen to the needs and wants of the people; to
listen to the advice of the experts and to commit the required resources and
make the necessary hard institutional changes.
Mr. Speaker:
My government is prepared…. No… dedicated to doing this and
making The Bahamas the best country in which to do business.
Buoyant Investments Across the Nation
Mr. Speaker,
As indicated in my Budget Communication, my Government and private
sector investors through the focussed efforts of my administration are engaged
in buoyant investments and infrastructure developments across many Islands in
the Commonwealth of The Bahamas. Some projects have been completed
during our term in office, others are ongoing, and others are in the advanced
stage of planning, so as to ensure future economic growth, with more and more
employment, entrepreneurial and ownership opportunities for our growing
population. During the debate the Minister of State for Investments as well as
other Ministers, have also in their contributions provided a vivid account of
numerous developments, manpower training and the policies, programmes and
systems being put in place to foster economic, human and social development.
Mr. Speaker:
As hard as the side opposite is trying both in this House and in an
incessant public campaign to deny or belittle the reality of the many investment
projects being attracted to our country, they are not able to hold back progress
which is unfolding right before their eyes. The attraction of some $7.8 billion in
foreign direct investment since the commencement of my administration in 2012
is significant by any measurement and its continuing impact over the next
decade is estimated to create over 8,000 construction jobs and a minimum of
5,000 permanent jobs as new projects come on stream.
Mr. Speaker:
Since presenting to this Honourable House of Assembly the 2016/17
Budget Communication on 25th May, 2016, two wonderful opportunities have
presented themselves to witness the amazing progress on two developments,
one at Highbourne Cay in the Exumas, and the other at Bimini.
I have previously touted the design, ambiance and success of the
Holoweskos; Bahamian owned and operated Island House at Lyford Cay – a
model which I would like to see replicated throughout The Bahamas. I was
finally able to accept Mr. Mark Holowesko’s invitation to visit his Highbourne Cay
project, and to witness first hand its elegance, beauty and comfort set in a
natural environment, and professionally managed staffed by Bahamians. I was
surprised to learn that this project which is still under development, attracted
some 40,000 visitors last year.
Mr. Speaker:
Two Saturdays ago, along with a large number of guests from Nassau,
Bimini, Grand Bahama and the United States, I participated along with the
Chairman of Genting and Resorts World and his partner Mr. Gerardo Capo in the
official opening of the new five star Hilton branded hotel operated by Resorts
World. Apart from the beauty of the resort, I was most impressed by the quality
of service and the pride and satisfaction displayed by the staff as they carried out
their various functions.
Mr. Speaker:
Genting Resorts World and RAV Bahamas have proven to be invaluable
development partners and investors in Bimini, where the development paradigm
is that much more challenging than in New Providence or Grand Bahama Island.
Resorts World has used its considerable clout to attract the premier global Hilton
brand to the destination, supplemented by its uniquely designed world class
casino, which is already attracting a mix of regular and high end customers. This
superb new hotel will offer a world class spa and meeting facilities and other
wonderful amenities with breath-taking views, unique swimming pools at the
ground floor and roof top levels, surrounded by attractive villas and the largest
marina in The Bahamas and with the advantage of close proximity to South
Florida.
Mr. Speaker:
It was just three years ago that the Government was negotiating plans for
a $150 million resort project with The Genting/Resorts World Group. For those
unfamiliar with the Resorts World brand, it is one of the international leisure
brands of the Genting Group, the multi-billion dollar conglomerate based in
Southeast Asia with over $15 billion in leisure and hospitality assets operating
under the direction of Chairman and Chief Executive Tan Sri Lim. Genting has
partnerships with leading global brands such as Hard Rock, Universal Studios,
Maxims, Star Cruises and Norwegian Cruise Lines which is also expanding its
footprint in The Bahamas at Great Stirrup Cay in the Berry Islands and adding
new luxury cruise ships on calls at Nassau and Great Stirrup Cay. Genting
Resorts World recently acquired the ultra-luxury Crystal Cruise Line which
operates exclusive cruises in various parts of the world, and is slated to call at
Bimini in 2017.
Mr. Speaker:
Resorts World Bimini Limited, in conjunction with its partners, RAV
Bahamas Limited, initially settled on construction of a 300 room hotel as part of a
Master plan for development of the Island of Bimini; a Master plan
encompassing public private investment in infrastructure development and air,
sea and ground transportation coupled with entertainment products and
attractions to stimulate entrepreneurial activity and job creation for residents.
The result has been the transformation of Bimini’s tourism sector from a
seasonal to a year round destination.
Mr. Speaker:
Resorts World’s investments in Bimini’s infrastructure have included a $12
million investment in North Bimini’s airport expansion, lengthening of the runway,
upgrade of the terminal and flight facilities, construction of a deep-water jetty and
water taxi terminal, construction of over 400 employee housing units, paving of
the King’s highway, improvements to local attractions and investment in various
economic, social and educational community projects in Bimini.
I am advised that more than 33 new businesses have been established in
Bimini since the introduction of Resorts World to the Island and that the Bimini
Chamber of Commerce was recently formed to assist residents to take
advantage of the opportunities ahead.
Mr. Speaker:
Since 2013 the developers have injected $660 million in capital and
operating cash flow into the development. Its employee count rose from 158 in
February 2013 to 657 in May 2016 and is expected to stabilize at 720 employees
over the next 12 months as the developer carries out further capital investment.
In the area of transportation to service Bimini from the United Stated and
to connect with the rest of the world, the Resorts World Bimini Team have
introduced daily, non-stop commercial air service via from the United States with
flights to Bimini by Cape Air and Silver Airways, code sharing with major US
carriers, including Jet Blue and American Airlines. Additionally, five (5) luxury
private aircraft service high rollers visiting the resort. There is now capacity to
transport 500 people daily over Miami and Ft. Lauderdale with seamless transfer
of baggage to the Resort on airline check-in.
The company is committed to the provision of fast and efficient ferry
service for guests and will soon launch and improved ferry service from Port
Miami utilizing the new jetty constructed by Resorts World on Bimini.
Chub Cay, The Berry Islands
Mr. Speaker:
The Extensive update on development projects in my earlier
Communicationg did not include among others, Chub Cay in the Berry Islands.
The new Clubhouse is substantially completed and is slated to have a soft
opening around 4th July next month. It will also include indoor/outdoor bars,
restaurant, swim up pool bar and eleven very nicely appointed hotel rooms
located on the second floor with views overlooking the pool and beach. Also to
open next month are eight new beach cabanas with one bedroom which are
located directly on the beach.
The developer has also completed ten new villas from two bedroom to
four bedrooms pricing from $800 to $1600 per night, with luxurious amenities
and furnishings.
Work has been carried out on brick paving sand and dirt road, and
finishing the power and water plant. Some 190 Bahamian construction workers
and 53 operational staff are employed at the Club. Further development is
slated in the upcoming months.
In addition to the $25 million for the purchase of Chub Cay Club, the
owner has invested another $25 million on construction so far.
Hawksbill Creek Expiring Concessions Review
Mr. Speaker:
I went to some length both in my Budget Communication and my earlier
Communication dated May 9th, 2016 to report to this Honourable House the
outcome of the review of expiring concessions contained in the Hawksbill Creek
Grand Bahama (Deep Water Harbour and Industrial Area) Extension of Tax
Exemption Act, 1993. Opportunity has also been taken by my Government to
conclude arrangements aimed at strengthening and expanding the economy of
Grand Bahama after extensive consultations and negotiation with the Grand
Bahama Port Authority and key investor/stakeholders and the public. These
arrangements follow upon an in depth and comprehensive study being
conducted by the Hawksbill Creek Review Committee.
Mr. Speaker:
As an outcome the Government has inter alia
(i) Entered into a Memorandum of Understanding (“MOU”) with the Grand
Bahama Port Authority Limited (“GBPA”) and key entities controlled by
GBPA, Hutchison Ports, CK Property Holdings Limited, and the Port
Group, namely GBPA, Freeport Harbour Company Ltd, Grand
Bahama Development Company Ltd, and Freeport industrial and
Commercial Ltd.
(ii) Executed a Waiver of Exclusivity Agreement with Freeport Harbour
Company Limited with respect to the operation of cruise ports on
Grand Bahama.
The MOU sets the stage for specific arrangements which must be entered
into with licensees.
Meaningful progress is being made in settling with the Grand Bahama
Port Authority a list of social and infrastructural commitments which will deliver
tangible contributions to the quality of life for resident of Freeport. In fact one of
these items which include reopening of portions of West Sunrise Highway is
already the subject of discussions between the principals of the Grand Bahama
Port Authority and the property owner. Discussions are also taking place
between the Office of The Prime Minister and the GBPA relative to
Government’s administrative expenses in the Port Area.
Mr. Speaker:
A new regime with a new framework is contemplated for the Port area
with respect to the tax concessions which expired on 5th 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 assurance 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.
A Bill to give effect to these new measures is in the final stages of
preparation and will be presented for consideration by Parliament within the
coming days.
Baha Mar Development Project
Mr. Speaker:
As you are aware I provided to this House in my Budget Communication
factual background information on the stalled Baha Mar project, the current
status and measures being taken by the stakeholders, the Receiver Managers,
the Provisional Liquidators and the Bahamas Government to achieve early
remobilization and completion of the project, as well as the bid process to secure
a new investor. I provided the House with the Joint Statement dated 24th May,
2016 issued by the Export Import Bank of China, China State Construction and
Engineering Corporation and the Government of The Bahamas, following two
days of successful meetings in Beijing regarding remobilization.
Mr. Speaker:
Since such time, however there has been much talk and serious allegations that
require an urgent and serious response. I begin with some significant history.
When the FNM Government announced that it was giving consideration to
a multi-billion dollar proposal by Mr. Sarkis Izmirlian for the financing and
construction of the Baha Mar Resort and that it could involved up to 8,000
Chinese construction workers, I appointed a Committee chosen from our
Members of Parliament and chaired by the Member of Parliament for Bains and
Grants Town. The Member of Parliament for West End and Bimini was a
member of that Committee.
The Committee was asked to review the newly announced Baha Mar
development, meet with representatives of the developer and the Government
with a view to making a recommendation with respect to the position we should
take in our Parliamentary Caucus.
Mr. Speaker:
We did not rush to judgment. We made strong efforts to arrive at the right
decision. After a full set of consultations including with the Cabinet Committee of
Tommy Turnquest, Dion Foulkes and Desmond Bannister, a report was
prepared and published as to our position.
Mr. Speaker:
After the debate on the Resolution moved in the House of Assembly, I
made it a point to attend the groundbreaking functions hosted by the FNM
Government and the Developers. That is where I saw the officials of both the
Chinese Construction Company and the China Eximbank for the first time.
We were guided by the fact that we supported the first proposed
development when we won the Government 2002 -2007. And notwithstanding
that the proposed contract required a reversal of the ratio of Bahamian Labour
from 70% Bahamians to 70% Chinese.
Mr. Speaker:
We were truly impressed and in admiration of Mr. Izmirlian for his
perseverance in overcoming difficult circumstances and being able to secure an
extraordinary multibillion dollar loan facility for the construction of the Baha Mar
Resort from the China Export and Import Bank.
Towards ensuring that Bahamians fully understand the history and extent
of the Chinese involvement in the economy of The Bahamas. We should not
overlook the important investment of Hutchinson Whampoa in Freeport – hotels,
airport, Harbour and Container Port.
We should also recall that the Ingraham Government awarded to the
same Chinese Company under the New Providence Road Improvement
Programme to rebuild the roadways from the Lynden Pindling International
Airport along JFK Drive. The works were ultimately subcontracted to Knowles
Construction Company.
Also the award of a major contract to a Chinese company to build a new
port in North Abaco
Why then in such circumstances Mr. Speaker should anyone try to argue
or suggest some special out of the ordinary relationship between my
Government and the Chinese Construction Company and the Financing Bank.
As history would have it, it was an Ingraham FNM Government that brought
about diplomatic relations between The Bahamas and the People’s Republic of
China. It was the right thing to do.
But let us go further on our examination of the unfortunate use of
prejudice that has become a part of the discussion on Baha Mar.
Mr. Speaker:
I am grateful for the recall and research of the Member of Parliament for
West End and Bimini who used the words of a former FNM politician uttered
during the debate on the FNM Government sponsored a Resolution seeking the
support of the House of Assembly for the deal that politicians admonished us
and the country to be aware of the nature of our economy and the danger to it of
xenophobic utterances.
Mr. Speaker:
The rhetoric and false accusations coming from the side opposite and
other sources are astounding and not helpful to say the least in achieving an
overall solution, that would permit the project to be completed and successfully
operated not only for the benefit of the stakeholders, but more importantly
thousands of Bahamian workers, scores of Bahamian sub-contractors and
suppliers who are in dire financial straits, and the economy of The Bahamas for
the benefit of all our citizens. The orchestrated anti-Chinese rhetoric does not
bode well for the friendly relations which exist between The Government of The
Bahamas and The People’s Republic of China as well as the two state owned
entities Eximbank of China and China State Engineering & Construction
Company and its subsidiary China State Construction Company who have
invested heavily in The Bahamas. The Government of China has also been a
generous donor and good supporter of The Bahamas within the international
community.
Mr. Speaker:
It is a very dangerous and damaging assertion to state and warn that the
FNM reserves the right to void Government agreements relating to the
completion of Baha Mar. It is damaging not only in relation to Baha Mar,
Chinese stakeholders and the Government of China, but to the international
reputation of the Government of The Bahamas as a country which relies so
heavily upon Foreign Direct Investment. I must ask is this really the position of
the FNM leadership? I should also advise all who have ears to hear for a final
time that it was the former FNM administration led by the then Prime Minister,
which approved and negotiated the Chinese involvement in Baha Mar, and the
terms of the Amended and restated Heads of Agreement with the developer,
which was to permit the employment of up to 8,000 Chinese workers at the
project. It was the FNM Government which agreed to the loan arrangements
with the China Eximbank and the general contractor and equity partner China
State Construction a subsidiary of China State Engineering & Construction
Company.
Mr. Speaker:
The accusation that my Government is conspiring with the Chinese
against the previous developer is totally false. The record will show that while I
was acting as an intermediary with the Eximbank at the request of Mr. Izmirlian,
he without notice to the Bahamas Government, the Eximbank and the general
contractor filed for Chapter 11 bankruptcy in the United States. It was upon the
advice of the Government’s Bahamian, US and UK attorneys that the
Government of The Bahamas resisted in the national interest the Chapter 11
proceedings and recognition of same in Bahamas courts. Even after these
unfortunate events my Government joined in two protracted rounds of
negotiations in Beijing and one in The Bahamas in seeking a negotiated
arrangement between Mr. Izmirlian the former developer, the Eximbank and the
general contractor, during which the Bank and the general contractor offered
terms to the former developer to finance and complete the project, but he did not
agree to the terms. Ultimately under the terms of the loan agreement Receiver
Managers with the consent of the Bahamas Supreme Court took possession of
the property.
With your leave Mr. Speaker I will now read and then lay on the Table a
Memorandum dated 20th June, 2016 from the Government’s US attorneys
Hogan & Lovells and a Memorandum dated 20th June, 2016 from the
Government’s UK attorneys CharlesRussell Speechlys, providing a summary of
the advice tendered to the Government regarding the Chapter 11 proceedings,
and the prudent actions taken by my Government in the national interest and in
the best interests of the project.
(Read Hogan Lovells & CharlesRussell Speechlys Memorandums)
Mr. Speaker:
Meanwhile following upon the joint Press Statement dated May 24th on
funding and remobilization, Eximbank, the Receiver Managers and CSCEC and
CCA are currently in Beijing where they are negotiating a construction contract in
order to remobilize and complete the project as soon as possible. My
Government is committed to remain engaged with the stakeholders and the
Government of the People’s Republic of China, the Receiver/Managers,
Provisional Liquidators and the Bahamas Supreme Court to achieve not only
completion of Baha Mar project, but its successful operation by world class hotel
and casino partners.
Mr. Speaker:
The side opposite has raised the question regarding concessions which
the Government is being asked to consider in relation to the completion of the
Baha Mar project. This is a matter which will require negotiations primarily with
the new investors in the project, who are yet to be decided by China Eximbank
following the international bid process being conducted by the
Receiver/Managers. The concessions will depend upon the plans and level of
investment by the new investors. The criteria and terms and conditions of the
former Heads of Agreement will also be taken into consideration. To facilitate
the remobilization, the Government will give consideration to such concessions
as are normal and necessary having due regard to the arrangements for
settlement of legitimate amounts owing to Bahamian sub-contractors and
suppliers.
Conclusion
By way of a very brief and succinct conclusion, Mr. Speaker, I would
simply reiterate that, over the course of our mandate, we have remained faithful
to our overriding agenda of change whose focus is the transformation of The
Bahamas into a modern and more prosperous nation with buoyant and lucrative
employment opportunities.
That is our vision for the future. We have assiduously moved to make
that vision a concrete reality and will continue to do so through the
implementation of the National Development Plan that is in preparation.
I am proud to assert that vision and action are the hallmarks of my
Government. I am also confident that we will succeed in transforming our vision
into fact. My optimism is unwavering; the future is bright indeed.
I am confident, Mr. Speaker, that we will succeed in transforming our
vision into reality so that the greatest good can be wrought on a sustainable
basis for the greatest number. The optimism that I share with my Government
and Party in this regard is unwavering. Though we are clearly beset by
challenges on many fronts, we draw inspiration from the fact that we have been
able to weather many diverse challenges already and that we are now firmly on
course to overcome the challenges that lie before us still.
Mr. Speaker:
This is not a Government that rests on its laurels. On the contrary, we rise
each day to go forward into the world to do the unfinished business that
summons us with its cries of anguish and of urgency. We are always about the
people’s business. No matter the nonsense that may issue from the lips of the
foolish or the blind, the people of the Commonwealth of The Bahamas can rest
assured of one thing, and it is this: this Government of the Progressive Liberal
Party remains the one and only Party that has the vision, the compassion, the
philosophical conviction, the Plan and the cohesive team and the talent needed
to bring peace and prosperity to all our people.
That is our mission. That is our purpose.
And from that mission and from that purpose, we, in the Government of
the Progressive Liberal Party, shall not shirk – not now, not ever!