Nation for sale, pt.3
PHILIP C. GALANIS
Published: Sep 30, 2013
“The social object of skilled investment should be to defeat the dark forces of time and ignorance, which envelop our future.” – John Maynard Keynes
In part one of the “Nation for Sale” series, we questioned whether The Bahamas has become a nation for sale to the highest or best positioned foreign bidders. In part two, we considered the legacies of our prime ministers, past and present, to determine whether by their policies regarding foreign investors, we have been and continue to be a nation for sale. This week, we would like to Consider This... do we need to urgently adopt a modern, progressive investment policy for the 21st century if we are going to finally realize the dream of empowering Bahamians in a more meaningful way?
The anchor project template
In his first term as prime minister, Perry Christie accentuated the benefits of his government’s anchor project policy. The plan was to have a substantial investment, anchored on each major island of The Bahamas with the tripartite objective of (1) expanding the economic activity on that island, (2) encouraging residents to stay there instead of migrating to islands where greater employment opportunities existed and (3) encouraging persons who had left their island to return because of the jobs and other economic prospects that would be created by such anchor projects.
The government felt that anchor projects could be achieved by offering foreign investors large tracts of Crown land for which, in some cases, the government would receive an equity position in the project. The thinking was that the government would provide the land for the investment, and the foreign investor would offer shares to the government. The application of this policy would conceptually present a mutually beneficial result, and, in the fullness of time, there would be cumulative benefits to our citizens. Few would challenge the rationale of such a policy, but there were some unanswered questions.
A more progressive variant of this approach would entail a government policy that ensures that the residents of the island on which the anchor project is situated receive concessions for the ancillary Bahamian-owned enterprises that will inevitably flow from such anchor projects. Hence, local entrepreneurs would know that the government policy would ensure that the businesses related to the primary investment, including transportation, watersports, artists and artisans, restaurants, night clubs, laundry facilities and other related services that would spin off from the primary investment, would be available only to them. It is not enough for a government to focus only on the primary anchor investor; it is equally important to engage urban planners, architects, environmentalists and others to ensure that a holistic approach to development is undertaken from start to finish.
Another enticement to foreign investors is the granting of concessions by the government, usually in the form of financial benefits, including, for example, a tax holiday for a certain period of time. Perhaps the “mother of all concessions” was that granted to the Grand Bahama Port Authority, which to this day is the beneficiary of enormous tax and other advantages. Similarly, the hundreds of millions of dollars granted to Kerzner International were as breathtaking as they were mind-boggling for a company that landed on our shores only with the promise of raising the sunken city of Atlantis from the ashes of a dated, lackluster and tired property that had changed ownership several times in a single decade.
The granting of concessions is a practical tool used by governments the world over as an inducement to foreign investment. However, the larger consideration is whether the country is really getting value for the concessions that it bestows on foreign investors and, if so, to what extent? The answer to the question is that we really don’t know.
The reality of this approach is that the foreign investor wins coming and going. They benefit by having considerable taxes waived, often for lengthy periods of time, with the justification that they create jobs, which is a noble objective. But they also win by not being required to pay any taxes when they repatriate the profits that they earn in The Bahamas.
If we are going to be more discerning in our approach to foreign direct investment, we need to be able to better quantify the benefits that accrue to the country before we offer and grant concessions to such investors. The simplistic and politically expedient approach to obtaining jobs in return for concessions is no longer enough. While this template might have worked in the past, this model fosters a country of servile workers who own little or nothing, who are not empowered through ownership and whose only benefit is a salary at the end of the week or month. In addition, it is long overdue to seriously consider imposing a withholding tax on repatriated profits that are earned here. Otherwise, the investor benefits both ways, at our expense.
Just as we openly welcome foreign investors here, we should consider what kind of concessions would enhance our own citizens’ chances for success, and we should grant them to those Bahamian enterprises that satisfy certain threshold parameters.
The long-term development needs of our country
It becomes increasingly obvious and immediately important that we need to have a long-term plan for our country. It is imprudent for successive governments to approach governance of a small country such as ours without more clearly defined and generally agreed upon approaches to national goals and objectives, such as what we want The Bahamas to be and a time frame for achieving those objectives. It is virtually impossible to grow our country in the short term without a clearly defined long-term horizon as to the nature of investments that will benefit our country.
Every Bahamian is an investor
We often hear about the plethora of consultants who are constantly hired by the government, often where there are qualified Bahamians to perform contracted assignments. We need a renewed commitment to Bahamianization regarding consultants engaged by the government. Bahamians are alienated and disconnected from their government for several legitimate reasons, one of which is the absence of a deliberate determination to ensure that, wherever possible, Bahamians are provided the first opportunity to participate in the engagements that successive governments hasten to distribute to foreign consultants – another symptom of a nation for sale.
Furthermore, if the government is thinking about privatizing our national assets, Bahamians should be afforded the first opportunity to invest in such privatization exercises, and be seriously considered for the opportunities that we love to bestow on foreigners – yet another clear example of selling our patrimony.
Therefore, when foreign investors come knocking at our doors, an enlightened and progressive government would advise that such investors are expected to either (1) find Bahamian business partners with whom to invest or (2) offer shares in their enterprises to the Bahamian public, or even better, both of the above. Other countries do it. Why shouldn’t we?
The time has come for our political leaders to understand that they will be judged not only by the jobs that they create, but now also by the Bahamian owners in our economy who they facilitate. Bahamians are tired of successive governments giving away our land and economic opportunities to foreigners, at our expense. If we do not radically alter our thinking about ownership and greater participation in our economy, we will be thrown back into a new form of slavery, once again being nothing more than servile workers whose patrimony has been pillaged and whose bodies and minds have been enslaved.
Properly formulated and adeptly executed, Christie’s legacy could entail an administration whose primary objective is one of Bahamian economic empowerment. It is now time for a reversal of a policy, which for too long has had at its core a subliminal message that we are a nation for sale. It is now time for the establishment of an economic culture that is inclusive and beneficial to all who call The Bahamas home and who wish to build our nation for generations yet unborn.
• Philip C. Galanis is the managing partner of HLB Galanis & Co., Chartered Accountants, Forensic & Litigation Support Services. He served 15 years in Parliament. Please send your comments to email@example.com